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Clark Packard

Mustafa Akyol

Once in a while a new book in religious studies comes out with a bold thesis, challenging old assumptions and raising some eyebrows. The Islamic Secular, a thick, dense, and elaborate monograph by Sherman A. Jackson, distinguished professor of religion at the University of Southern California, is one such book that deserves attention—by both Muslims and others who are interested in the destiny of Islam.

For many people, including Muslims themselves, the terms “Islamic” and “secular” appear contradictory, and their amalgamation would coin only an oxymoron. But Jackson carefully makes sense of what he means by “the Islamic Secular”: that Islamic law, namely the Shari’ah, does not cover all the vast areas of human experience and knowledge, leaving many spaces that are “secular,” where Muslims can still act and think with a religious ethos.

Now, that is an important argument. But it still leaves us with many questions about the Shari’ah itself, such as religious coercion. Could this actually be a good thing, as Jackson seems to argue in a provocative chapter of his book? Or should we separate Islamic law from the state, so religion is based on free choices of individuals, as another scholar of Islamic studies, Abdullahi Ahmed An-Na’im, has argued?

I probed these questions in a book review I wrote for Religion & Liberty Online, a publication of the Acton Institute. I fully agree with An-Na’im that the best medium for practicing Islam is not an “Islamic state” but a secular state that grants religious liberty. And while I disagree with Jackson on that big question, I appreciate that his book points to some “seeds of freedom” that can help us make that argument. 

You can read the whole review here: “The Islamic Secular and the Seeds of Freedom”

David J. Bier

President-elect Trump is promising to slash both legal and illegal immigration during his second term in office. He also wants to deport millions of immigrants who have entered the country illegally, as well as those who have come legally in recent years (through a lawful process known as parole). In this post, I review the data on what we know about America’s new immigrants.

As of March 2024, the Current Population Survey Annual Social and Economic Supplement (ASEC) records that 7.6 million immigrants who entered since January 2020 were living in the United States (excluding those in “group quarters”). Although it is not possible to exclude the 2020 cohort, this group primarily includes immigrants who entered during the Biden administration. Nearly half of these immigrants, 3.7 million, were already employed by that time, while 4 percent were unemployed. Another 21 percent were children or in high school, and 6 percent were in college. The rest were split between homemakers (8 percent), elderly (4 percent), and other groups (8 percent).

Compared to US-born Americans, immigrants were slightly more likely to be employed and more likely to actively look for a job. They are significantly more likely to be enrolled in college and much more likely to be homemakers while being much less likely to be retired. Remember that for many new immigrants, working in the United States is actually illegal, so it is remarkable that they nonetheless find jobs at such a high rate.

The share of immigrants who find jobs grows over time. By March 2024, 54 percent of immigrants who arrived in 2020 and 2021 were employed, compared to 46 percent of those who arrived between 2022 and March 2024—which was the same as the employment rate for the US-born population. According to the survey, new immigrants accounted for 78 percent of all employment growth from 2019 to 2024. On average, new immigrants are about seven years younger than the US-born population, and a majority (53 percent) are between the ages of 25 and 54, compared to only 36 percent of the US-born population.

New immigrants over the age of 25 are somewhat more likely to have college degrees than the US-born population: 44 percent versus 39 percent—but they are also less likely to have a high school degree (81 percent versus 95 percent). This bifurcation means that they are even more likely to be complements rather than substitutes for US workers. Furthermore, employed immigrants had about the same average wage and salary income as their US-born counterparts.

New immigrants tend to work in different jobs compared to the US-born population. For instance, they are 511 percent more likely to work in production jobs and 95 percent less likely to work in legal jobs. Although they are equally likely to work in construction and extraction, they are 565 percent more likely to work as construction laborers rather than occupying more skilled positions within those fields. Again, this means more complementarity between immigrants and US-born workers. New immigrants are choosing to settle in the states and industries where there are job openings.

Immigrants are also moving to states where jobs are being created, so immigrant job growth is moving up alongside increased employment for Americans. Of course, a decline in US-born employment does not mean that immigrants have displaced US workers. Instead, it is more likely that fewer US workers were entering the labor force than were retiring, thanks to America’s low fertility rates and aging population. As of 2024, the US-born prime-age employment rate has risen to near all-time highs. Americans are not being displaced by other Americans.

Immigrants are working for the United States. According to the Congressional Budget Office (CBO), just the increase in immigration from the “illegal” or semi-legal population (like asylum seekers and parolees) will increase US gross domestic product by a cumulative $8.9 trillion over the 2024 to 2034 period. It will also reduce the US deficit by a considerable $897 billion over that period—with the reduction reaching $117 billion annually by the end of the period. Remember that this group is much less skilled and has lower earnings than the entire group of new immigrants. The CBO only estimated the economic impact of those entering the country without a visa; had it included all new immigrants, the overall effect would have been even greater.

I recently extended the CBO’s analysis in a paper published this week, showing that recent illegal immigrants will likely be a net fiscal benefit to the federal government of about $4.9 trillion over their lifetimes in net present value (meaning discounting costs and revenues in the future). The average immigrant—both legal and illegal—is likely to be positive over half a million dollars over their lives in net present value.

The United States would suffer if immigration were greatly restricted or if there was an effort to remove those immigrants who are already here. The United States is about 35 million workers short of what the Social Security Administration says it will need to fund its liabilities in the 2030s. Labor force growth has fallen by two-thirds since its highs in the 1960s. To return to the labor force growth rate of the 1980s, America would need a net increase of 50 million more workers. In contrast, the last decade saw a net increase of just 7 million—with almost all of this growth coming from immigrants.

The United States would benefit from more immigration, not less. 

Andrew Gillen

You can’t go long reading about higher education before coming across a lament about cuts in state funding for higher education, often called state disinvestment. There’s just one problem—as documented in a new Cato briefing paper, states have been increasing funding over the past few decades, not cutting it. The figure below shows inflation-adjusted state funding per student over the last 43 years (the black line) as well as the long-term trend as given by the regression line (the blue line). The long-term trend line shows that state funding increases by $48 (±$18) per student per year. This increase in funding over time means that state disinvestment is a myth.

But while state disinvestment at the national level is a myth, there is some variation by state. The figure below shows the estimate of the long-term trend by state. There is statistically significant evidence that 24 states have increased funding over time (green), that 6 have decreased funding over time (red), and that there is no convincing upward or downward trend in 20 states (grey). So while there are six states for which state disinvestment is real, for each one of those, there are four states that have increased funding and more than three states that have seen essentially no change in funding over time.

The main damage caused by the myth of state disinvestment is a misdiagnosis of why tuition has increased. State disinvestment provides a plausible reason for higher tuition—as states cut funding for colleges, the colleges have no choice but to raise tuition to fill the financing hole.

But there are two main problems with this argument. First, there is no state disinvestment since states have been increasing funding, not cutting it. This implies that colleges should have been cutting tuition, not raising it.

The second problem is that it assumes a $1‑to-$1 relationship between changes in state funding and changes in tuition with tuition rising by $1 for every $1 cut in state funding. But the data contradict this assumption. The figure below shows the change in state funding and change in tuition revenue per student by year. If the 1‑for‑1 relationship were true, then each year should fall along the red line, but most years do not. The actual relationship is given by the blue regression line and shows that a $1 cut in state funding is correlated with an increase in tuition from $0.03 to $0.29, not $1.

The new briefing paper goes into more detail on these and related topics (including a possible beneficial change in the trends in tuition). Remember, state disinvestment in higher education is a myth, and it doesn’t explain increases in tuition. 

Adam N. Michel

The goal of the 2025 tax extensions should be to keep tax rates low and meet calls for additional pro-growth tax cuts, such as a lower corporate tax rate and permanent investment expensing. To do this within the constraints of the reconciliation budget process, Congress will also need to cut spending and find additional tax offsets.

The Tax Cuts and Jobs Act of 2017 (TCJA) increased revenue by approximately $4 trillion through base broadening and other one-time changes. These changes allowed Congress to cut taxes by $5.5 trillion, for a net tax cut of about $1.5 trillion over 10 years. This model of pairing base broadeners with tax cuts should be a road map for 2025.

By offsetting more of the 2025 package, Congress can make a larger share of the tax cuts permanent, improving on one of the TCJA’s biggest weaknesses. The following are 12 revenue-raising reforms that would improve the tax base, close loopholes, and cut special-interest subsidies.

Green energy subsidies. The Inflation Reduction Act (IRA) of 2022 dramatically expanded tax subsidies for politically popular energy sources. Congress should repeal the entire IRA and end the many failed pre-IRA energy tax programs. A clean break with these programs could raise more than $1 trillion over 10 years, allowing consumers to drive the energy sector forward.
Corporate SALT deduction. In 2017, Congress put a $10,000 cap on the state and local tax (SALT) deduction for individual and pass-through businesses. Repealing the deduction for corporations and cracking down on state workarounds would help level the playing between business types and eliminate an inefficient federal subsidy for state and local governments. Zeroing out the individual SALT deduction could, combined with other SALT changes, raise as much as $2 trillion over 10 years. Whatever size Congress decides the deduction should be, the cap should be evenly applied to all business types.
Muni bond interest. The interest income on state and local government bonds issued to finance infrastructure investments is generally tax-free for the lender. As described by Cato’s Chris Edwards, this exemption encourages excessive government borrowing, stacks the deck against private infrastructure alternatives, and fuels special interest lobbying. Scott Greenberg also notes that the subsidy primarily benefits high-income taxpayers and delivers a highly inefficient subsidy to state and local governments. Repealing the exemption could raise more than $350 billion over 10 years.
CHIPS and Science Act. The CHIPS and Science Act combines direct subsidies, tax incentives, and research grants to support domestic semiconductor manufacturing. Acknowledging the bill’s failures, both President-elect Donald Trump and House Speaker Mike Johnson have indicated they are open to repealing or reforming the $79 billion bill, which includes $24 billion in tax credit spending. Congress should repeal the entire CHIPS Act.
Education tax subsidies. The tax code includes hundreds of billions of dollars in subsidies for post-secondary education, which contribute to inefficiently high spending levels, significant student debt burdens, and, in turn, demand for additional government subsidies. To reign in the out-of-control US university system, Congress should repeal—or shrink and consolidate—the American opportunity tax credit, lifetime learning credit, student loan interest deduction, and parental benefits for full-time students younger than 24.
State tax subsidies. The TCJA required the inclusion of state and local government subsidies in gross corporate income. This change ensures direct taxpayer support for private industry is treated like private investments. Congress could raise billions of dollars and improve the TCJAs reform by expanding the definition of state contributions to include indirect subsidies, such as tax abatements, tax credits, tax increment financing, and other in-kind contributions.
Fringe benefits. Many employers compensate employees with health insurance, meals, parking, transportation, education assistance, and childcare because fringe benefits are often not subject to the income tax. This creates an incentive to compensate employees with tax-free benefits, which tend to help higher-income workers. While limiting the employer exclusion for health insurance may be beyond the scope of 2025 tax reform, including other fringe benefits in taxable income could raise tens of billions of dollars.
Tax-exempt economy. As Scott Hodge recently detailed, the “majority of tax-exempt organizations today are business-like in form and function, including credit unions, hospitals, utilities, insurance companies, universities, professional athletic associations, golf clubs, and consulting firms.” As I also described earlier this year, reining in these abuses could raise as much as $400 billion over 10 years.
Rum cover-over program. A little-known program sends approximately $700 million a year in excise tax revenue from the US Treasury to Puerto Rico and the US Virgin Islands. In addition to subsidizing a large share of the rum consumed in the United States and worldwide, it is fiscally destabilizing for the US territories. Congress should end the rum cover-over program.
Employer tip reporting credit. Congress should repeal the restaurant industry’s employer-tipped income reporting tax credit. At a cost of $26 billion over 10 years, the Obama administration recommended repealing the credit because it “costs far more than any positive effect on tax compliance.”
Itemized deductions. Only about 10 percent of Americans itemize their deductions instead of taking the simple standard deduction. Congress should expand the TCJAs limits on itemized deductions, such as the mortgage interest deduction (MID), or repeal them entirely. Most itemized deductions are poorly targeted to meet their policy goals. For example, as I’ve written before, the MID “is not associated with additional homeownership. Instead, it tends to subsidize larger houses for older, higher-income taxpayers.”
Low-income housing tax credit. The low-income housing tax credit is a lucrative subsidy awarded with political discretion, making it overly complex and corruption-prone. Due to the credit’s design and supply constraints, it is ineffective at inducing additional low-income housing, and the benefits are primarily captured by financial companies and developers. Repealing the credit could raise $150 billion over 10 years.

Many of these reforms are also included in the Cato tax reform plan, which outlines more than $14 trillion of tax loopholes and subsidies that Congress should repeal to offset lower tax rates. The 12 highlighted here represent about a quarter of the tax expenditures that should be on Congress’ chopping block.

Congress can and should also cut spending. Chris Edwards lists 10 spending cuts for President-elect Trump that should also be part of a congressional agenda to lower inflation and streamline government. 

Nicholas Anthony

After President Joe Biden signed an executive order instructing the government to research and develop central bank digital currency (CBDC), nearly every agency responded with public reports. The one outlier was the Department of Justice (DOJ), which opted to withhold its legislative analysis from the public eye.

I’ve had a Freedom of Information Act request pending for two years now in hopes of making the DOJ’s analysis public, and I’m not the only one seeking answers. Members of Congress have noticed the missing analysis as well. Representative French Hill (R‑AR) and ten other members of Congress wrote to Attorney General Merrick Garland in October 2022 when it became clear that the information had been withheld.

In the two years that have passed since our initial queries, neither my Freedom of Information Act request nor Representative Hill’s letter have been answered. When we discussed the matter, Representative Hill said, “I have pressed the DOJ for two years to receive a copy of their memo on CBDCs yet have received nothing but silence.” He further said,

The House was clear when it passed the Emmer-Hill CBDC Anti-Surveillance State Act to prohibit the Federal Reserve from issuing a CBDC and Chair Powell has publicly stated the Fed would not proceed on a CBDC without Congress—it should not be so difficult for the White House and DOJ to say they agree. The Biden-Harris Administration’s efforts to exert broad and untested executive authority by forgiving student loans give Americans every right to fear the same expansive executive power being abused once more with the creation of a CBDC. I applaud Cato’s FOIA request to obtain this information. If the White House and DOJ have nothing to hide, they should make this memo public and respect Congress’ constitutional authority to coin and regulate the value of money.

Representative Hill is right: it should not be difficult for the DOJ to make this information available. At the end of the day, the information in question is not on the location of witnesses in ongoing cases or the details of undercover agents. Rather, the DOJ was only asked to explain “whether legislative changes would be necessary to issue a United States CBDC” and to provide “a corresponding legislative proposal.” That’s it.

Yet despite the efforts of myself and Representative Hill, the only publicly available information about the DOJ’s analysis appears to be in the footnote of a press release announcing the publication of other reports related to President Biden’s executive order.

Perhaps it’s notable that out of the many reports required by executive order, the question of CBDC legislation was the only one that went to the Assistant to the President for National Security Affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) instead of to the president directly. Still, this information should have been made publicly available once it became clear the public was interested in it.

Given how the rise of CBDCs has increasingly become a public concern, the American people deserve to know what the DOJ and the White House think needs to be done to create a CBDC. 

David J. Bier

Just before the election, the Manhattan Institute (MI) released a report titled: “Lifetime Fiscal Impact of Immigrants.” MI claims that the recent surge in immigration under President Biden will cost the federal government $1.15 trillion over the lifetimes of these new immigrants and that “mass deportations would significantly reduce the national debt.” Expect this analysis to be cited by the incoming Trump administration.

Today, the Cato Institute has published my response as a working paper, detailing serious errors that, when corrected, reverse MI’s central conclusion. In fact, after corrections, MI’s model predicts enormous fiscal benefits from the recent influx of illegal immigrants: a deficit reduction of $4.9 trillion over the immigrants’ lives. This is consistent with the recent findings of the Congressional Budget Office (CBO). 

Here are the nine major issues my paper identifies:

MI assumes that immigrants cause large, immediate increases in military spending;
It excludes significant tax revenues from corporations employing the immigrants;
It inaccurately attributes the costs of the child tax credit solely to parents;
It assumes that low-skilled immigrants are just as unlikely to leave the US before retirement as high-skilled immigrants;
It doesn’t account for how immigrants reduce interest payments on the debt;
It assumes new illegal immigrants are as uneducated as those from a decade ago;
It assumes recent illegal immigrants are as old as other immigrants;
It assumes illegal immigrants are just as likely to use entitlements as other groups; and
It fails to account for interest costs on deportation spending.

Even if you correct only the last item on this list, MI’s estimated deportation costs jump to $1.6 trillion, which exceeds the supposed benefits of mass deportation. The report’s author helpfully shared the model so I could reevaluate its results precisely. 

#1 Military spending: MI states that military spending will increase because more people will mean more military personnel, but military personnel has actually halved since the 1950s. Moreover, defense spending has decreased both per capita and per US-born person since the 1950s. MI’s assumption about defense spending is also bizarre when applied to deportation because it implies that Congress will cut defense spending by $40 billion if the recent immigrants are deported—which is unrealistic, to put it mildly.

#2 Tax revenues: MI excludes about $771 billion in tax revenues from its analysis, primarily from corporate income taxes. It is well-established that wage earners create a proportional increase in corporate income (which is why they are hired), yet MI simply leaves out all this revenue. MI claims that it cannot determine the exact percentage of corporate income taxes that should be credited to employers versus workers. The Tax Foundation assesses that most should be credited to workers. Instead of making its own estimate, MI takes the extreme position that all new immigrants generate no additional corporate tax revenue, which is not true.

#3 Emigration: MI assumes that immigrants without a high school degree are as likely to stay in the United States permanently as those with a college degree. This assumption is wrong and critically skews the analysis because most costs accrue during retirement. My suggested adjustment is really an understatement for illegal entrants because many illegal entrants are deported, leading to even higher emigration rates.

#4 Interest costs: To calculate the cost of interest, MI projects future interest costs from new debt and distributes these costs among the fiscally negative people. Two problems here: 1) some new debt is from public goods (like military spending), which immigrants don’t cause; and 2) immigrants who are fiscally positive throughout their working lives accrue a fiscal surplus that reduces the debt in their retirement. Handling this issue correctly flips some immigrants from a fiscal net negative to a net positive. 

#5 Tax credits: MI allocates 100 percent of the cost of the child tax credit and the earned income tax credit to the tax filer. This is legally and factually inaccurate and inconsistent with MI’s stated methodology, which apportions all other government benefits for children to the child and distributes household benefits to the whole household. MI could have expanded to calculate the costs and benefits of immigrants’ descendants. But it is biased to include some costs and no tax revenues, especially when the 2nd generation workers are the highest-earning Americans. Finally, MI’s choice here implies that deporting the immigrant tax filer head will zero out these payments when, in reality, it may just shift them to a different tax filer because the US citizen child or spouse cannot be deported and is entitled to these benefits.

Here are how these adjustments affect the results for young, low-skilled immigrants. MI’s results aren’t plausible if any of these changes are made.

These first five issues are all things that affect immigrants in general. But then MI takes the results of its profile of the average immigrant—legal and illegal—and tries to apply them to the recent illegal entrants to the United States. 

#6 Immigrant education: The report cites an estimate of the educational attainment of illegal immigrants from 2015, even though we now know that recent illegal immigrants are much more highly educated than the cohort a decade ago. Since education is an important predictor of income, this decision decisively reduces tax revenues from new immigrants.

#7 Immigrant ages: MI inaccurately estimates the age profile of recent illegal immigrants by failing to use the publicly available data that come directly from the Border Patrol. It overstates the number of retirees crossing the border, inflating the share of border-crossing retirees (65+) by a factor of 13. Retirees are much more costly than young immigrants. 

#8 Immigrant welfare use: MI assumes that recent illegal entrants will be just as likely as any other immigrants with their demographics to use welfare and entitlement programs like Social Security and Medicare—even though they are legally prohibited from accessing those benefits. Of course, some will receive asylum, but it’s a small minority. This assumption is perhaps the least understandable. MI admits that this inaccurate assumption biases the result, but still uses the $1.1 trillion cost in its headline results.

#9 Deportation interest costs: MI accounts for the interest costs on debt incurred by fiscally negative immigrants over 100 years. But when it is estimating how much cheaper it would supposedly be to deport them, it doesn’t account for the interest costs on that spending, which implicitly assumes a “deportation tax” is used to pay for roughly $500 billion in spending (imagine that!). Once interest costs are accounted for, deportation costs $1.5 trillion, which is more costly than even MI’s fatally flawed $1.1 trillion estimated cost from the immigration surge.

Altogether, MI’s revised analysis shows that mass deportation would cost the US government about $6.4 trillion—$1.5 trillion from the deportations themselves and $4.9 trillion from the lost tax revenue. My paper provides more detail and explanation behind these numbers, and people with an interest in this subject should read the whole report. However, unlike CBO’s results, MI’s results (even after my corrections) do not account for the indirect economic growth effects of immigration, so they should be seen as the minimum possible benefit. 

If the purpose of the paper was really to produce the most economically efficient immigration policy, MI should suggest letting immigrants come or stay without benefits. Indeed, restricting welfare benefits makes many low-skilled immigrants more fiscally positive than high-skilled immigrants with benefits. But MI never suggests this policy, focusing more on deportations and exclusions. That doesn’t make sense. Immigrants would happily trade benefits for the right to stay here without fear of deportation, and Americans would benefit from their presence. It is a clear win-win. 

MI did take the time to produce an interesting model, but because it incorporates many inaccurate assumptions, its results are flawed. MI’s model—after corrections—reveals significant fiscal upside to immigration—legal and illegal, low-skilled and high-skilled. It should accept these corrections, implementing a more accurate fiscal effects model in the future.

Walter Olson

California voters decisively defeated an attempt to expand rent control, voters in eight of ten states looked favorably on abortion rights, school choice fared poorly, and Coloradans voted to impose an excise tax on firearms but not ban trophy hunting. Those were some of the notable results of last week’s crop of ballot measures around the country. I discussed them with Caleb Brown at the Cato Daily Podcast here. 

Some more details: 

It was not an especially good day for advocates of drug freedom. Dallas voted for de facto marijuana legalization and Nebraska for medical cannabis. But Florida’s big marijuana measure, while earning a majority, fell short of the supermajority required (as did the state’s abortion rights measure). Massachusetts declined to legalize psychedelics. And in California, where Proposition 36 restored many of the higher crime penalties reduced by a 2014 initiative, drug crime penalties were among those affected. 
It was a downright bad day for those of us who’d like to reform the way we hold elections. Primary reform, in particular, went down to defeat in at least five states, with the Alaska result still waiting on absentee ballots. For ranked choice voting standing on its own, it was more of a mixed bag, with Washington, DC, and several smaller municipalities saying yes but the state of Oregon declining. I’ll have more to say in another post. 
Massachusetts voters went along with a measure meant to herd rideshare drivers into unions. The Service Employees International Union plowed $7 million into the campaign, against no organized opposition. A remarkable bit of background, via Ballotpedia: in June of this year Uber and Lyft agreed to settle a lawsuit brought by the state of Massachusetts over employment practices, and as one of the terms of the settlement they agreed to drop support for an initiative campaign that would have strengthened the rights of independent contractors against regulation in the state. Legally strong-arming private entities into giving up their right to petition for redress of grievances—no dangers to civil liberties there at all, am I right? 
At the same time, Bay State voters said no to a plan to eliminate the tip credit on the state minimum wage. Restaurant workers in many states have spoken out against such schemes, which by discouraging tipping can actually reduce servers’ income. Arizona voters, on the other hand, declined to expand a tip credit. 
Minimum wage laws remain popular, and left organizers have also found that voters in even conservative states like Alaska, Missouri, and Nebraska may look favorably on costly private employer mandates if sweetened with the term “earned,” as in “earned leave.” 

Arizona voters missed a chance to do something genuinely useful, rein in their governor’s emergency powers by giving the legislature more of a say on them. Since the COVID-19 pandemic, about 10 states have moved to check emergency executive powers in this way, a reform which also has parallels at the federal level in debates over Presidents’ emergency powers. 

Romina Boccia

For nearly 90 years, a widespread misconception has shaped how Americans view Social Security. Many believe that their payroll taxes are saved in a trust fund, to be drawn down when they retire. But in reality, Social Security has never operated as a savings system. Instead, it functions as an income transfer program, where the taxes collected from today’s workers immediately fund the benefits for current retirees. This misconception about how Social Security works continues to distort the debate around its future.

Social Security was designed to transfer income, not to save it. The first recipient of Social Security, Ida May Fuller, perfectly illustrates this. Fuller paid less than $25 in Social Security taxes (about $500 today) before retiring in 1940. Her first check nearly matched what she had paid in, and over the next 35 years, she collected $23,000 in benefits—nearly 1,000 times what she contributed (or roughly $500,000 in today’s terms). This arrangement worked out great for earlier generations, but today’s workers aren’t so lucky. They are paying high taxes for a benefit that’s far lower than what they could earn if they invested the money in a balanced portfolio of stocks and bonds instead.

These issues are echoed in my new Cato paper, The Social Security Trust Fund Myth, which was published on November 13. The paper offers helpful analogies to explain how Social Security is financed, from illustrating its accounting realities in terms of a household budget to explaining the difference between real savings and IOUs and why IOUs in an intragovernmental “trust fund” provide no actual funding mechanism for paying future benefits.

The political narrative that fuels the trust fund myth has persisted since Social Security’s inception. In the 1930s, the idea of government assistance was unpopular, and policymakers needed a way to sell Social Security to a skeptical public. Positioning it as an “earned” benefit convinced Americans that they had a personal stake in the program. But in truth, it was always a government transfer program. The notion that people are simply getting back what they paid in makes it politically difficult to reduce benefits. Even slowing the growth of benefits is considered taboo, despite the program providing higher benefits in absolute terms (after factoring in inflation) to successive cohorts of beneficiaries, because initial benefits are boosted by economy-wide wage gains.

This misunderstanding is dangerous. Social Security is unsustainable as designed, and it faces severe financial challenges. The growing number of retirees, combined with lower fertility rates, means there are fewer workers to support those retirees. In fact, the government is expected to borrow $4.1 trillion by 2033 just to keep up with benefit payments. Waiting until the so-called trust fund runs out in nine years will only lead to more drastic adjustments, threatening the financial security of both retirees and workers.

What’s needed is a shift in the social contract—a fairer system that avoids excessively taxing younger, often poorer workers to fund extended retirements for older generations, who on average are much wealthier. Reforming Social Security to focus benefits on keeping seniors out of poverty, reducing benefits for higher earners, and slowing the growth in future benefits is crucial. This approach would relieve younger workers from higher taxes and allow them to save more for their retirements through personal accounts that they own and control.

Social Security’s Ponzi-like structure—where current contributions fund current benefits—has always been its flaw. And unlike Ponzi’s scheme, which was illegal, Social Security’s issues are legal and transparent, rooted in flawed program design and changing demographics. Addressing this sooner rather than later is the only way to avoid severe consequences for future generations that are confronted with the triple threats of an unfunded Social Security system and the specter of higher taxes and inflation.

Brandan P. Buck

A perennial yet fanciful idea, the notion of sending US Special Forces into Mexico, has once again entered American political discourse. This latest flowering of foolishness emanated from President-elect Donald Trump’s future “Border Czar” Tom Homan, who, in a recent appearance on Fox News, declared that the incoming president “will use [the] full might of the United States Special Operations” to eliminate Mexico’s drug cartels. 

While this idea is not new in Republican circles, it has become hazardous now given the Mexican drug cartels’ increased military capacity and tactical competence. Directing American Special Operations Forces against the cartels would put them up against a sizable near-peer competitor in asymmetric warfare, thus putting the US government into a position of little escalatory advantage. Such a move would not just force the American military into another quagmire; it would drop them into a morass up to their metaphorical waist. 

These recent calls for the use of Special Operations Forces against the Mexican drug cartels ignore that the latter has developed capabilities perilously close to the former. Video evidence and Mexican officials have long revealed that the various cartels, particularly Los Zetas, the Sinaloa Cartel, and Jalisco Cartel New Generation (CJNG), possess the force-multiplying equipment of a formidable asymmetric military force. Examples include the possession of armored vehicles, the use of armed Unmanned Aerial Vehicles (UAV) and Improvised Explosive Devices (IEDs), man-portable heavy weapons systems, as well as the possession of surface-to-air missiles and numerous crew-served weapons. 

Beyond equipment, the cartels, chiefly CJNG, have benefited from extensive tactical training, knowledge passed to them from Mexican military defectors, ironically enough, who were trained by US Special Operations forces.

Putting legalities and congressional consideration aside for a moment, sending US Special Operations into a direct confrontation with the Mexican cartels would pit them against a near-peer competitor, who, like the Taliban, would likely enjoy the direct or tacit support of the local populace and the luxury of hiding in punishing terrain. 

Furthermore, as seen in more significant conflicts, such as Russia’s invasion of Ukraine and the Middle East, man-portable weapons systems and armed UAVs favor those who hold territory, thereby leveling the scales between otherwise mismatched military forces. Given these constraints, in such a scenario American special operators would find themselves involved in an asymmetric war where combat parity would be all but guaranteed, thereby tempting the US government to escalate further.

In recent months, supporters of this idea have cited the US government’s near destruction of ISIS as proof of concept; however, making a model of the campaign against ISIS is a mistake. The issue at hand is not the combat prowess of the American military; it is the realities of government power and who wields the monopoly of coercion. In Syria and Iraq, the Assad regime, the Iraqi government, and their Iranian militia allies, all of whom share an opposition to ISIS, continue to wage their own campaigns against the group. These conditions do not apply to the situation in Mexico as the cartels are parastate actors that operate within the pockets of Mexico which lay beyond the authority of the central government.

If the US government uses its military power against cartel leadership, what guarantee will there be that their networks won’t regenerate as fast as they can be degraded? Furthermore, if even targeted strikes succeed over the long haul, who fills the power vacuums left in their wake? If the central Mexican state cannot do so, then the US will find itself in a situation different from the campaign against ISIS but more akin to Afghanistan, where they played whack-a-mole against the organization’s leadership and were unable to rectify the governing vacuum that sustained the group overall. 

The further militarization of the drug war may score some political points, but it will not address the underlying causes of Mexico’s governance problem or stem the flow of drugs across the US southern border. 

There is no doubt that the Mexican drug cartels are dangerous and depraved organizations whose command of the drug trade and other illicit activities has caused immeasurable suffering to the people of Mexico that is spilling over the border and into the United States. However, the solution to such issues cannot bear the risk of creating new sets of problems that would threaten further intervention.