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Jennifer J. Schulp

American financial privacy has been in steady decline for more than 50 years. Regulatory frameworks, such as the Bank Secrecy Act and the Securities and Exchange Commission’s Consolidated Audit Trail, establish government surveillance of Americans’ financial transactions. As financial services have become increasingly digitized—and as the thresholds for required reporting to the government have remained locked in time—the amount of financial records to which the government enjoys easy access has grown exponentially. And proposals for a central bank digital currency, which involve the government becoming more intimately involved in Americans’ use of money, have the potential to further erode the ability to transact without government surveillance.

There has been a flurry of recent congressional activity around financial privacy, including efforts to reform the Bank Secrecy Act, eliminate the collection of investors’ personal information in the Consolidated Audit Trail, and prohibit central bank digital currencies. Policymakers in both parties should focus on these important issues. Easy government access to financial data poses risks to everyone—not just those with something to hide.

Questions of financial privacy shouldn’t be shunted to the side.

Does financial convenience have to come at the cost of financial privacy? Does the Constitution provide the protections needed to limit government access to financial information? Can decentralization provide privacy-protecting solutions?

Join us on September 12 to consider these questions and more when Cato’s Center for Monetary and Financial Alternatives hosts Financial Privacy under Fire: Protecting and Restoring Americans’ Rights. This conference will feature a fireside chat with House Financial Services Committee Chairman Patrick McHenry. It will also bring together experts and policymakers to discuss important questions about the state of financial privacy in the United States.

Our program includes:

9:30 — 9:35 AM: Opening Remarks by Norbert Michel, Vice President and Director, Cato’s Center for Monetary and Financial Alternatives

9:35 — 10:45 AM: Panel Discussion on Financial Privacy and the Constitution

Morgan Cloud, Emory University School of Law
Stephen Henderson, University of Oklahoma College of Law
Rob Johnson, Institute for Justice
Jumana Musa, National Association of Criminal Defense Lawyers
Brent Skorup, Legal Fellow, Cato’s Robert A. Levy Center for Constitutional Studies (moderator)

11:00 AM — 12:15 PM: Panel Discussion on Evaluating Central Bank Digital Currencies

Robert Bench, Radius
William Luther, Florida Atlantic University
Natalie Smolenski, Bitcoin Policy Institute
Jay Stanley, American Civil Liberties Union
Victoria Guida, Politico (moderator)

12:45 — 1:55 PM: Panel Discussion on Bank Secrecy Act Reform

Katherine Kirkpatrick Bos, StarkWare
Gregory Lisa, Hogan Lovells
Norbert Michel, Vice President and Director, Cato’s Center for Monetary and Financial Alternatives
Lanier Saperstein, Dorsey & Whitney LLP
Claire Williams, American Banker (moderator)

2:00 — 2:30 PM: Fireside chat with Representative Patrick McHenry, Chairman of the House Financial Services Committee, moderated by Jennifer Schulp, Director of Financial Regulation Studies, Cato’s Center for Monetary and Financial Alternatives

2:45 — 3:55 PM: Panel Discussion on Decentralization and Financial Privacy

Paul Brigner, Coinbase Institute
Ahmed Ghappour, Espresso Systems
Ian Miers, University of Maryland
Miller Whitehouse-Levine, DeFi Education Fund
Nikhilesh De, CoinDesk (moderator)

Register here to attend in person or online to join this important conversation.

Chris Edwards

Robert F. Kennedy Jr. writes in the Wall Street Journal that “Trump Can Make America Healthy Again.” I agree with Kennedy that some national health trends are disturbing. The share of US adults who are obese has risen from 15 percent in the late 1970s to 42 percent today.

Kennedy proposes some health system changes that I am not qualified to assess. But I approve of his proposals for food stamps and farm subsidies quoted here.

Stop allowing beneficiaries of the Supplemental Nutrition Assistance Program to use their food stamps to buy soda or processed foods. Nine percent of all SNAP funding goes to sweetened drinks, according to 2011 data. It’s nonsensical for U.S. taxpayers to spend tens of billions of dollars subsidizing junk that harms the health of low-income Americans.

SNAP will cost taxpayers $105 billion this year, with almost 25 percent of the dollars going toward junk food, including soda, candy, potato chips, cookies, and ice cream. Those subsidies are absurd given the explosion in obesity and the government’s large budget deficits.

Low-income individuals have higher obesity rates than other Americans, and SNAP recipients have higher obesity rates than low-income individuals not on the program. The “N” in SNAP is a government falsehood.

The best reform would be to repeal SNAP and allow the states to pursue their own low-income food policies. But regarding Kennedy’s proposal, I’d suggest simply giving the states waivers allowing them to cut out any foods they want from their SNAP programs. The federal government has denied such waivers in the past.

Reform crop subsidies. They make corn, soybeans and wheat artificially cheap, so those crops end up in many processed forms. Soybean oil in the 1990s became a major source of American calories, and high-fructose corn syrup is everywhere. Our subsidy program is so backward that less than 2% of farm subsidies go to fruits and vegetables.

Crop subsidies should be repealed because they burden taxpayers and distort agriculture. Kennedy is right that fruits and vegetables receive few subsidies, and neither does ranching. But the lesson is not that subsidies for crops should be reallocated to other products, but that most American farming prospers without subsidies. There is no reason to coddle corn, wheat, and soybean farmers when other farmers stand proudly on their own two feet.

More on SNAP here.

More on farm subsidies here.

Colleen Hroncich

In early 2018, I received an email from our local Christian academy with “Exciting Opportunity” in the subject line. “We are excited to introduce you to a refreshing new development in classical Christian education: the Classic Learning Test (CLT),” the email began. At the time, according to the email, the test was accepted by nearly 90 colleges and universities.

That fall, my daughter took the Classic Learning Test as she was applying to colleges. Little did we know how the CLT would take off in the coming years. It is now accepted by more than 250 colleges and universities for admissions and scholarships.

The Classic Learning Test features readings from classic literature and historical texts that have shaped Western culture. The test was created in 2015 by a teacher, Jeremy Tate, who had learned to appreciate classical education despite not growing up with it. “I first discovered classical literature when I was living in a tent in Alaska in 2001. I had no other form of entertainment and spent countless hours reading the works of Russian author Fyodor Dostoevsky,” he recalls. “After graduating from LSU I went to Reformed Theological Seminary (RTS) where I was more fully immersed in the classical tradition. The formation I received at RTS shaped my vision for education and profoundly inspired the launching of the Classic Learning Test.”

In 2013, while teaching evening classes to eleventh-grade students who had failed English, Jeremy looked through the materials and realized why the students were bored and disconnected. He completely re-vamped the class, getting rid of the textbooks and buying the students copies of Flannery O’Connor’s short stories. Each evening, they formed a circle, read out loud, and paused when anyone wanted to discuss the reading. It completely changed the dynamics of the class—students who previously were completely uninterested in the material became enthusiastic when they were given readings that delved into topics like religion, philosophy, ethics, or the nature of good and evil.

Jeremy realized he was on to something. He recognized that the SAT and ACT had become the drivers for most high school curricula, so he decided to create an alternative test that would help revitalize education. The CEO of the College Board, which produces the SAT, has acknowledged that “teachers will teach towards the test. There is no force on this earth strong enough to prevent that.” Given that, the CLT website notes, “Shouldn’t those tests engage students with the thinkers and writings that have most meaningfully shaped our culture for the past two millennia?”

CLT exams emphasize critical thinking and problem-solving to help parents and teachers evaluate their students. The tests include Verbal Reasoning (textual comprehension and analysis), Grammar/​Writing (textual editing and improvement), and Quantitative Reasoning (logic and mathematics). Exam results include an analytics report that explains the student’s outcome and performance.

The main CLT is for high school juniors and seniors and serves as an alternative to the SAT and ACT for admission to hundreds of colleges. The CLT10 is aimed at ninth- and tenth-grade students, similar to the PSAT. For younger kids, the CLT3‑8 exams assess language arts and mathematics to track student growth and abilities. Students can take the tests at schools or by being remotely proctored at home. There are test dates offered throughout the year, and students can test multiple times to try to improve their score.

Recent years have seen a resurgence in classical learning. The Friday Feature has profiled many classical educational entities, including public and private schools, full- and part-time programs, homeschool co-ops, and organizations that help support classical education. The CLT has played a big role in that revival by giving schools and families a more fitting way to evaluate and track the results of their efforts.

Jeremy has said that one of the goals of CLT is to help revitalize American education. To further that goal, his staff works to get the CLT accepted by states that have testing requirements for homeschoolers or students who participate in school choice programs, such as education savings accounts. The CLT website includes a map that shows which states have homeschool testing requirements and which of those accept CLT for that requirement. There’s also a page that lists which state school choice programs partner with CLT.

There are many successes that Jeremy could point to when he evaluates how far CLT has come, but he’s quick to say what tops the list. “The most rewarding aspect of the CLT journey has been meeting the young people who are receiving this kind of education,” he explains. “Truly, the best argument for classical education is found in the character of the young people who are receiving this kind of education. They are truly amazing and CLT is blessed to employ many of them.”

Jeffrey A. Singer

In a blog post earlier this year, I lamented the decision by Oregon lawmakers to roll back Measure 110, a ballot proposition that Oregon voters passed in November 2020 decriminalizing drug use and possession while expanding access to harm reduction and addiction treatment services.

Measure 110 went into effect in February 2021, when COVID-19 pandemic policies and bureaucratic delays blocked harm reduction and treatment services. Complicating matters further, fentanyl, which had been making its way in an east-to-west wave across the country, arrived in the Pacific Northwest around 2019–2020, causing a spike in opioid-related overdoses similar to the spikes seen in every other region when fentanyl entered the drug supply. ( By 2018, almost 90 percent of overdose deaths involving fentanyl and its analogs occurred in 28 states east of the Mississippi River.) These factors combined to create a “perfect storm,” leading Oregon policymakers to believe Measure 110 was responsible for the increase in overdose deaths.

With the law in effect only two years, and with the expansion of harm reduction and treatment services begun only eight months earlier, Oregon lawmakers re-criminalized drug possession. Pundits supporting drug prohibition were quick to point to Oregon as an argument against decriminalization.

Today, researchers from Brown University and RTI International published new research in the Journal of the American Medical Association (JAMA) that analyzed the association between fatal overdose and the enactment of Measure 110. The researchers conducted a cohort study using a “matrix completion synthetic control method.” The 48 states and the District of Columbia that had not decriminalized drugs served as the control. The researchers assessed the prevalence of fentanyl in unregulated drug markets by analyzing the percentage of state-level drug samples reported to the National Forensic Laboratory Information System and identified as fentanyl or its analog. They obtained mortality data from January 1, 2008, to December 31, 2022, from the Centers for Disease Control and Prevention. The primary outcome they assessed was fatal overdose rates per half-year. They used a changepoint analysis—a statistical technique that detects points in a data series where the properties or underlying patterns change—to determine when the fentanyl wave hit each state. Their findings:

After adjusting for the spread of fentanyl as a confounder, the effect size changed signs (estimate [SE], −0.51 [0.61]; P = .41) and there was no longer an association between decriminalization and overdose mortality in Oregon.

The researchers’ conclusion:

In this cohort study of fatal drug overdose and the spread of fentanyl through Oregon’s unregulated drug market, no association between M110 and fatal overdose rates was observed. Future evaluations of the health effects of drug policies should account for changes in the composition of unregulated drug markets.

There is now empirical evidence showing decriminalization critics and Oregon lawmakers too quickly abandoned Oregon’s “experiment” with decriminalization combined with increased access to harm reduction and treatment. Will the critics examine this new evidence?

Alas, it may be too late. All the bad publicity hoisted unjustly on Oregon’s short-lived attempt at drug policy reform has set back similar reforms in other parts of the country.

Adam N. Michel and Josh Loucks

Vice President Kamala Harris recently announced a new proposal to expand the tax deduction for start-up costs for small businesses from $5,000 to $50,000. Without the immediate deduction, the deduction of start-up costs must be spread out over 15 years. The Harris proposal allows us to dig deeper into the various business expenses that can’t be fully deducted and to demonstrate how delayed deductions hurt business growth.

A deduction delayed is a deduction partially denied because time and inflation erode the value of the write-off years later. Under the normal tax system, a $100 investment deduction that must be incrementally used over 15 years is only worth about $74 to the business in present value (assuming 2 percent inflation). Fifteen years of waiting erodes a quarter of the deduction’s value to the business, which increases the after-tax cost of investing. When costs rise, investment falls.

This problem is even worse for investments in residential buildings and other structures. These longer-lived investments must be depreciated or deducted over 27.5 years and 39 years, respectively. At 2 percent inflation, the present value of the deduction for an investment in a structure is cut in half.

Fixing this problem of waiting to recoup the cost of new investments, particularly for structures, could be the most important change to the tax code to boost investment and economic growth.

For a timely example of one way to even out the tax treatment of some business investments, consider legislation recently reintroduced by Sen. Mike Braun (R‑IN) and Rep. Kevin Hern (R‑OK) (S. 4924 and H.R. 9069). The proposed modification would shorten the depreciation schedules for structures to 20 years and allow the remaining deductions to be indexed for inflation and the time value of money. This system is often called neutral cost recovery.

According to a Tax Foundation analysis of a similar proposal from 2022, the changes would reduce revenue by $187 billion on a static basis over 10 years. However, the reform is projected to boost long-run gross domestic product by 1.2 percent, increase capital stock by 2.3 percent, and expand employment by 230,000 jobs. When scored dynamically to account for the larger economy, the bill is projected to increase federal revenue by roughly $127 billion over 10 years. Neutral cost recovery is a tax cut that more than pays for itself.

This neutral cost recovery proposal is one of three critical pieces to fix the tax code’s broken treatment of business investments. Congress should allow full immediate deductions (called full expensing) for all short-lived assets (20 years or less). This policy was temporarily included in the Tax Cuts and Jobs Act of 2017, but it began to phase out in 2023 and will return to the normal depreciation system after 2027. All other costs, including research spending and all start-up costs (not just $50,000), should also be eligible for immediate deduction.

Although full expensing is also the proper treatment for investments in structures, it comes at a high cost of about $413 billion over the budget window (conventionally scored). Neutral cost recovery delivers a similar economic benefit as full expensing with a smaller reduction in revenue, albeit without some of the simplification benefits that come with full expensing. Either way, both treatments help reduce the after-tax cost of investing in structures compared with the current system.

Shifting away from the current depreciation rules toward full investment deductions is a more economically neutral treatment for business investment and, thus, creates a powerful incentive for new capital spending and domestic construction. Higher investment and productivity growth also lead to wage gains and new employment opportunities.

Many of the issues that Harris is campaigning on—such as housing affordability, manufacturing, transportation infrastructure, and domestic semiconductor production—would benefit from full immediate deductions for expenses, whether they be start-up costs, research spending, or new building construction. Full expensing removes current disincentives to expand existing businesses or build new ones.

Washington often relies on regulations, subsidies, and trade barriers to “help” American businesses compete. These market-distorting interventions do more harm than good. The Harris proposal to expand immediate business write-offs is a small example of a way to reduce existing tax disincentives to doing business in America. Extending similar treatment to all investments and keeping business tax rates low—something Harris is not proposing—would level the playing field between types of investments, expand investment opportunities, and drive widely shared employment growth and wage gains.

Romina Boccia and Ivane Nachkebia

How does Social Security compare to other countries’ retirement programs? It’s an interesting question that prompted me to organize a symposium with international experts at the Cato Institute earlier this year. In a recent Washington Post article, Julie Zauzmer Weil asks a similar question but misses the mark on several fronts.

Weil provides a compelling analysis of Social Security, emphasizing the program’s below-average replacement rate compared to other Organisation for Economic Co-operation and Development (OECD) countries. While the article raises valid concerns, it overlooks several points that paint a more nuanced picture of the US retirement system—most importantly, how much less dependent Americans are on government for their retirement income.

The article fails to acknowledge the total replacement rate of the US retirement system, which includes both Social Security and voluntary pensions. When considering this broader perspective, the US approach replaces more than 73 percent of pre-retirement earnings for average workers, significantly higher than the OECD average of 55.3 percent. This places the United States ahead of many countries, including some with more robust government-run systems.

For example, the article shows that French public pensions replace 57.6 percent of pre-retirement earnings of an average worker, compared to Social Security’s 39.1 percent replacement rate. (As mentioned, when voluntary pensions are included, the total replacement rate for the US retirement system exceeds 73 percent.) On the other hand, the French system remains at 57.6 percent due to the limited coverage of voluntary pensions, so low that the OECD does not factor them into total replacement rate calculations. OECD data also highlight that American seniors are far less dependent on government for their retirement income compared to their French counterparts. Public benefits make up 39.3 percent of American seniors’ total income, while in France, they account for 78.1 percent.

The higher income replacement rate in the United States is largely due to the strength of voluntary pension plans like 401(k)s and IRAs, which play a key role in supplementing Social Security benefits. The program was never intended to be most workers’ sole source of income in retirement but rather a backstop to keeping seniors out of poverty.

Importantly, income from private savings and investments is income that Americans fully own, whereas beneficiaries have no property rights to their Social Security benefits. Congress can change benefit policies at any time. (See my recent piece “Five Reasons Why Social Security Is an Income Transfer Program, Not an ‘Earned Benefit.’”)

Weil acknowledges that Americans rely more heavily on private pensions and savings, and she argues that not all workers have access to these savings, making across-the-board benefit cuts undesirable. However, this argument misses a critical point. Proponents of Social Security reform, including myself, do not advocate for across-the-board cuts. Instead, we support a more nuanced approach: focusing government benefits on low earners who are less likely to have significant private savings and reducing benefits for high earners who typically have substantial 401(k) assets and other retirement savings. This targeted approach would better align Social Security with its original goal of providing a safety net for those most in need.

A good example of a more targeted system that the United States should consider emulating is New Zealand’s Superannuation (NZS) program. New Zealand’s government-provided retirement benefits focus on eliminating poverty among the elderly, ensuring that all eligible retirees have a basic level of income security. To complement the government benefit, New Zealand offers the KiwiSaver program, which provides some incentives and makes it easy for people to save for their retirement in accounts they own and control. This targeted approach could serve as a model for the United States as we consider reforms to our Social Security system.

Additionally, while Weil acknowledges that poorer workers often lack access to 401(k)s and IRAs, this overstates the problem. It also fails to explore potential solutions. First, lacking access to 401(k)s or IRAs does not mean that Americans aren’t saving for retirement. According to the Federal Reserve, 88 percent of Americans who are 60 and older have retirement savings, when you include a broader set of income sources such as business and rental income and savings in other accounts. Second, one promising idea is the establishment of universal savings accounts (USAs). Unlike current retirement savings vehicles, USAs would be accessible to all workers and would lack the complex rules that often deter low-income workers from participating in 401(k)s and IRAs. Being able to access account funds without paying a hefty tax penalty is particularly important to younger and lower wage workers who may need to tap into their savings earlier, whether to cover an emergency or invest in their future through education or by building a business. By creating a more inclusive and flexible savings system, policymakers can help bridge the gap for those who are currently underserved by both Social Security and private employer–provided pensions.

In summary, while the Washington Post article sheds light on key aspects of the US retirement system, it overlooks the strengths of our voluntary retirement savings system, fails to acknowledge how targeted reforms could better protect vulnerable seniors, and misses an opportunity to explore innovative solutions like USAs, which would address the specific needs of low-income workers.

A more targeted approach to Social Security reform, one that focuses government benefits on those who need them most and scales back benefits for those with higher earnings—who have the ability to save for more of their retirement needs in ways they own and control—would better serve the diverse needs of American retirees while protecting younger workers from higher taxes and all Social Security beneficiaries from automatic benefit cuts.

We can learn a lot from how other countries manage their retirement programs, including how policymakers have addressed similar demographic and economic changes that the United States faces. As Jason Fichtner, one of the experts at our Cato Social Security Symposium, stated, “We need to think about this holistically as a retirement ecosystem and where income is coming from.” He’s right. We should avoid missing the retirement income forest by focusing primarily on the government benefit trees.

Following the May 2024 Cato Institute Social Security Symposium: A Global Perspective, we’re now working on a book that will compare the five featured countries (the United States, Canada, Germany, New Zealand, and Sweden) across several dimensions and will share insights and perspectives from the symposium in a forthcoming volume to be published next year. In the meantime, you can watch video from the symposium.

Peter Van Doren

An important insight offered by libertarians is that attempts to suppress market forces through policy often result in illegal underground markets accompanied by corruption. The libertarian policy insight is to legalize the suppressed trade.

The New York Times recently described evidence in support of this claim: corruption in Los Angeles. The FBI and the United States Attorney’s Office have investigated “a wide-ranging “pay-to-play” scheme in which developers bribed Los Angeles city officials to secure official acts to benefit their real estate projects.” 

A previous blog post as well as an article in Regulation have described proposals to allow developers to pay localities to alter their zoning constraints. Such proposals recognize that zoning rules have become de facto property rights. Currently, the negotiations between developers and politicians about zoning change are behind the scenes. The payments go to facilitators and politicians rather than neighboring property owners who suffer welfare losses from development.

Allowing local governments to convert the current in-kind, opaque, underground market for zoning change into an explicit legal exchange of cash for density would facilitate development and eliminate corruption.

David Inserra

On August 31, Brazil’s judiciary blocked X from being available in the country due to X’s refusal to secretly censor important political content. This includes content from accounts outside Brazil and even sitting legislators. More radically, the rogue justice Alexandre Moraes ordered app stores to block various virtual private networks (VPNs) and created a brand new penalty for Brazilians who managed to access X through a VPN.

While the original order to block VPNs was rescinded, a panel of the Brazilian Supreme Court upheld the banning of X and the new fine. At around $9,000, the fine is approximately equal to the income of the average Brazilian. The Brazilian court obviously holds X responsible for its failure to obey their censorial orders. But levying such a punishing fine on Brazilians for merely speaking their mind online shows how far authoritarians must go to effectively ban a speech platform.

Brazil’s judiciary didn’t stop there. Moraes also froze the bank accounts of Starlink, the company dedicated to providing internet via satellite. Since Elon Musk had closed X’s Brazilian office, Moraes felt it necessary to go after one of Musk’s other unrelated companies. It’s bad enough to see legal authorities plundering other companies to satisfy their grudge against Musk, but to make matters worse Starlink isn’t completely owned by Musk. He owns about half of Starlink, which means that Brazilian authorities are also going after the half of the company that belongs to other investors.

In response, Starlink initially refused to block X on its internet services, before eventually capitulating to Brazilian demands. Had Starlink refused, Brazil’s authorities could have banned Starlink and its service to over a quarter-million Brazilians. While Brazil’s authoritarians can’t quite get their hands on Starlinks’s satellites, they could have tried to seize the ground terminals in a move that would have significantly harmed internet availability in Brazil, especially among users in its vast rural areas.

Silencing political speech that is critical of the current government, threatening one’s citizens with massive fines for merely posting online, freezing the assets owned by international investors, being willing to cut off the internet to hundreds of thousands—these are not the actions of a liberal democracy but of tyrants. Even prominent supporters of the Brazilian judiciary’s censorial tactics believe these new actions have crossed the Rubicon.

Moraes and the courts more generally have seized new powers to act as the victim, prosecutor, judge, juror, and executioner. Their orders go against the clear letter of Brazilian law and constitutional protections for speech, and lack any real sense of due process, often being issued in secret and with little explanation for what law the targeted content or individuals violated.

Unfortunately, the response to such lawlessness from the US has been nonexistent. The Biden administration has not issued a statement on the attacks on American companies, investors, and principles in Brazil. The same is true in response to the assaults on US companies coming from the European Union and other nations. The absence of a formal response to such aggression is being felt by American companies and citizens as a growing number of nations take aim at free expression and the technology companies that enable it.

Even more disquieting is the support such censorship is receiving from some American elites. Democratic commentator Robert Reich, for instance, wrote an op-ed in The Guardian calling for international regulators to “threaten Musk with arrest if he doesn’t stop disseminating lies and hate on X” and for the US government to stop contracting with Space X and use the FTC to sue Musk because his speech rights aren’t in “the public interest.” Keith Ellison, the attorney general for Minnesota Gov. Walz, explicitly posted in support of the Brazilian censorship. Similarly, too many politicos have praised or collaborated with the EU’s regulatory morass to protect societies from hate speech and misinformation. 

The New York Times, in its otherwise worthwhile story on the situation, summarized this view of the conflict with the following choice. “Do too little and allow online chatter to undermine democracy; do too much and restrict citizens’ legitimate speech.” 

This idea that allowing free people to engage in “online chatter” undermines democracy is flat-out wrong. Free expression is what allows people to rule themselves by debating policies and who their leaders are. Yes, often that process is ugly and contains various falsehoods, half-truths, and offensive speech from all sides. But the government cannot be an arbiter of what is true and false or what is good or bad. That is left to the democratic process and free, liberal inquiry. To do otherwise is to somehow pretend that we can advance tolerance, freedom, and democracy by being intolerant, suppressing freedom, and cutting off democratic debate.

Brazil’s suppression of X, its citizens, and international investors ought to be met with a pro-expression response from the US. A formal diplomatic repudiation should be easy enough. And while there are plenty of programs that deserve to be cut from the US’s foreign aid budget, the current situation in Brazil calls for Congress to scrutinize and cut taxpayer dollars going to Brazil.

Failure to push back against a growing tide of censorship will only result in a future that is less free and prosperous. 

James Bacchus

One of the few issues our two major political parties appear to agree on is their mutual embrace of protectionism in international trade. They are both increasingly committed to raising barriers to trade while ignoring the global rules that make freer trade possible. Yet a recent national survey by the Cato Institute shows that, with some quibbles and qualifications, a solid majority of the American people favor more trade.

What explains the stark inconsistency between what the people say they want and what the Republicans and Democrats, and especially those who wear those party labels in elected and appointed office in Washington, seem determined to give them?

According to the national survey, 66 percent of Americans believe global trade is good for the American economy; 64 percent believe it has increased material abundance in their own lives by increasing the variety of the products they can buy; 58 percent say it has improved their standard of living; 63 percent want to increase trade with other nations; 57 percent say doing so is good for their communities; and 53 percent have a favorable view of free trade.

Seventy-five percent of Americans worry that tariffs are raising consumer prices. Two-thirds of them, 66 percent, would oppose paying even $10 more for a pair of blue jeans due to tariffs—even if those tariffs are meant to help US blue jean manufacturing. In addition, three-fourths, 75 percent, worry that special interest groups are lobbying the government to impose tariffs or other restrictions on trade.

Virtually none of this is reflected in the current trade policies of our major political parties. Under the thrall of Donald Trump, Republicans have largely abandoned their longstanding historical support of free trade. Likewise, the decades-long struggle between free traders and protectionists for ascendancy in the Democratic Party has apparently ended in triumph for anti-trade protectionists. Although some Democrats are hoping Kamala Harris would step back as president from the most trade-restrictive and trade rule-scoffing of the policies of President Joe Biden—which are basically the same as those followed while in office by former President Trump—these wistful hopes seem mainly to be founded on wishful thinking.

Instead of pursuing the generally pro-trade sentiments of most of the American people, as demonstrated in the Cato survey, Republicans and Democrats alike are headed in the opposite direction. Trump is doubling and tripling down as “Tariff Man” with ever-evolving proposals for higher and higher tariffs on worldwide imports. The Democrats have had a hard time keeping up with his tariff-happy tweets, but they, too, are imposing and promising more regressive taxes on the American people in the form of tariffs.

Neither party seems to think trade is good for the American economy, neither appears to want to increase trade, and neither is trying to conclude or is committed to concluding more international trade agreements. Worst of all, Republicans and Democrats are united in ignoring international laws on trade and in impeding and undermining the World Trade Organization and its rule-based trade dispute settlement system.

Why this disjunction between the two parties and most of the people on trade? Put simply, both parties have been captured by minorities with minority views. Neither party is representing the broadest measure of their membership or the broadest extent of the American people. Both are responding mostly to their political “base,” which ignores a lot of other Americans—more moderate and centrist members of both parties and the independent voters who comprise a growing portion of the American electorate and are likely to be more favorable to more trade.

The Pew Research Center has found that only six percent of Americans and 12 percent of Democrats are of the “progressive left,” which is leading the charge against trade within the Democratic Party. The Republican Party has been captured by Trump and other anti-trade tribunes of economic nationalism, but there remain millions of traditional Republicans who, though exiled from Republican decision-making, nevertheless are still within the American electorate. Moreover, Gallup polling shows that a record 49 percent of Americans “see themselves as politically independent—the same as the two parties put together.” These many millions of Americans have been pushed aside in the policymaking of American politics.

In all their policymaking, both parties are now pulled by their “base” to the extremes. Republicans are pulled to their political right, where trade protectionism and other manifestations of the economic nationalism of Donald Trump prevail. Democrats are pulled to their political left, where progressivism is increasingly equated with protectionism and other forms of economic nationalism. The embrace by both parties of different versions of an interventionist and trade-discriminatory industrial policy by the federal government is one consequence of this pull to the extremes. With trade and numerous other issues, the center is not holding in American politics because, except in periodic general elections, it is not present and so is not heard in policymaking.

In the US House of Representatives and in many state legislatures, this hollowing out of the American political center is a result of gerrymandering in drawing the lines of congressional and legislative districts, which empowers the political extremes at the expense of the political middle in the electorate. This gerrymandering by both parties diminishes the political legitimacy of our democratic republic while advancing minority views that are translated into policy, including in international trade. Meanwhile, the vast center of the American electorate is increasingly left unrepresented. Where both parties once competed to be responsive to the political center in the country, now they often seem to ignore it, especially in their legislative and executive decision-making.

Instead, as the voters surveyed by Cato rightly fear, policymakers and decision-makers who should be pursuing the public interest increasingly hear and heed the voices and the views of self-seeking private interests. In trade, this includes those labor unions with workers in trade-challenged declining industries in politically pivotal states, and threatened businesses in those industries in those states that cannot—or will not—meet the challenge of global competition and thus seek to be sheltered from such competition behind protectionist trade barriers. Because these key states, such as Pennsylvania, Michigan, and Wisconsin, are crucial to the outcome of presidential elections and to control of Congress, popular calls for more openness to trade from other sectors in other states go unanswered.

Among the quibbles and qualifications to the overall desire of most Americans for more trade, as evidenced by the Cato survey, is the fact that most Americans want to make certain that trade policy benefits Americans. A majority of Americans, 56 percent, support putting tariffs on goods from foreign countries if those countries impose restrictions on goods from the United States.

This support plummets, however, if these retaliatory tariffs increase domestic prices, decrease innovation and US business growth, or decrease jobs in other American companies that rely on the imports affected by the tariffs (Figure 1). Overall, 61 percent of Americans believe US businesses must “learn how to become strong and compete globally without any government handouts or taxpayer subsidies” (Figure 2). Despite this, both parties are increasingly addicted to subsidies and other handouts, including protectionist tariffs.

Another qualification to the support of most Americans for more trade is the question of trade with China. Few Americans—only 15 percent—think that China has acted fairly in trade with the United States. Not surprisingly, both parties have “get tougher” policies on trade with China. However, 81 percent of Americans surveyed by Cato overestimated the share of imports the United States receives from China. (The correct answer is about 15 to 16 percent.) If the broad middle of the American electorate were better heard in American policymaking, a more temperate—and less bellicose—view might be evidenced in policymaking on China trade, perhaps leading to mutually beneficial solutions that have eluded the two trading partners thus far.

Like the overall support of most Americans for trade, these and other nuances in this majority support are blurred in the broad brush of pure protectionism that is manifested more and more in the trade policies of both parties. Hence the widening gap between what the American government, and the politicians who populate it, are saying and doing on trade and what most Americans seek in trade.

On trade policy, those who are leading us, and those who would lead us, are not giving voice to the views of the majority of the American people who generally support trade. Unless this changes, the result will be an American economy and an American future smaller than what they would be if the majority views were heard and reflected in US trade policy.

Eric Gomez and Benjamin Giltner

August 2024 was a very active month for arms sales with 22 new Foreign Military Sales (FMS) cases announced. However, the Taiwan arms sales backlog was unchanged from last month with no new sales announced or deliveries completed. Taiwan is waiting for $20.5 billion of US weapons. Although none of the new FMS cases directly affect the Taiwan arms backlog, it is worth taking a look at how these sales overlap with the sales that Taiwan is awaiting.

Figures 1 and 2 show how the backlog is divided between munitions, asymmetric capabilities, and traditional capabilities. Table 1 shows an itemized list of backlogged capabilities.

According to the Defense Security Cooperation Agency’s archive of major arms sales announcements, which goes back to April 2008, August 2024 was the busiest month for new FMS cases. Of the 22 sales announcements, 10 overlap with the Taiwan backlog. Table 2 shows all the August 2024 sales, with check marks indicating sales that overlap with capabilities that have been sold but not delivered to Taiwan. The dollar value of the 22 August FMS cases comes to $32.6 billion.

The United States has seen a significant increase in FMS cases since Russia invaded Ukraine in February 2022. According to the Department of Defense, “In fiscal year 2023, the US did more than $80 billion in business through the foreign military sales system. That is a record.” In fiscal year 2022 this figure was $51.9 billion. Conflicts in Europe and the Middle East and growing concerns about China’s military power are prompting this rapid increase in FMS. Foreign countries want to buy US weapons, and Washington is happy to oblige.

However, surging demand for US weapons may not be good news for Taiwan, at least not immediately. The US defense industrial base has started increasing its production capacity across many highly sought-after weapons. But it will be several years until these expansions are complete. Demand for US weapons currently outpaces supply, and this will remain the case until the late 2020s for several key capabilities.

Taiwan has already had to deal with the effects of this supply-and-demand mismatch. In 2022, Taipei cancelled a purchase of Paladin self-propelled howitzers due to production delays. Taiwan has also contended with delays for deliveries of TOW-2B anti-tank missiles and Stinger anti-aircraft missiles, both of which have been sent to Ukraine in large numbers.

The United States has used different legal mechanisms for providing weapons to Ukraine, and weapons sent to Ukraine do not necessarily or automatically lead to Taiwan arms delays. However, the defense industrial base must simultaneously replenish US stockpiles and fulfill new FMS cases while also supplying regular US military demand, and a growing number of new FMS cases are for weapons that haven’t been delivered to Taiwan yet. Taiwan should start receiving several large arms packages in the next one to two years. However, these timelines could slip given the competing demands on the US defense industrial base that are exacerbated by a record-high FMS caseload.

Ultimately, the pace of US weapons deliveries to Taiwan, especially before expanded industrial supply can catch up with increased demand, will be a useful tool to measure US foreign policy priorities. If moving Taiwan toward an asymmetric self-defense strategy is indeed a top US priority, then Taiwan should not see delays for high-demand capabilities, especially in FMS cases announced before the 2022 surge of new cases. Unfortunately, Taiwan’s recent experience suggests that it does not enjoy such pride of place.

Taiwan Arms Backlog Dataset, August 2024