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Mustafa Akyol

A new review of my recent book, The Islamic Moses, was published today in Religion & Liberty Online, a publication of the Acton Institute: “Recovering Islam and Judaism’s Shared Golden Age.” The writer, Farah Pandit, is a young Pakistani journalist who is currently a PhD student at Boston University. He rightly notes that my book highlights the much-forgotten “Judeo-Islamic tradition.” And he also captures why this theological and historical tradition is politically important today: 

The scale of Akyol’s challenge is immense, as he confronts not just contemporary prejudices but also deeply entrenched political and cultural narratives that frame Jewish-Muslim conflict as historically inevitable. Modern discourse, shaped by some Islamists, mainstream Western media, and Middle Eastern propaganda, presents their enmity as rooted in irreconcilable theological differences and ancient tribal hatreds. Contrary to this, Akyol reveals a sophisticated tradition of cooperation that fundamentally shaped both faiths’ development.

You can read the whole review here at Religion & Liberty Online.

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Romina Boccia

Below are abbreviated remarks I delivered before the US House Committee on the Budget on December 11, 2024. You can find my full testimony here and watch the hearing here (my remarks are at 20:15 ‑25:55).

Chairman Arrington, Ranking Member Boyle, and distinguished members of the Committee,

Thank you for the opportunity to testify today.

My name is Romina Boccia and I am the Director of Budget and Entitlement Policy at the Cato Institute, a nonpartisan public policy research organization in Washington, DC.

The fiscal health of the United States is at a critical juncture. Rising debt and persistent deficits threaten to undermine our economic prosperity, national security, and the opportunities enjoyed by working Americans and their families.

Without significant reform, we risk a severe fiscal crisis that could diminish America’s economic leadership and undermine our national security.

There is still hope. History and international experiences demonstrate that with the right institutional reforms, even the most challenging fiscal situations can be overcome.

The US debt at 100 percent of GDP with annual deficits above 6 percent of GDP is primarily driven by irresponsible emergency spending, unsustainable entitlement spending—including ever-increasing benefit levels for Social Security and Medicare beneficiaries that outpace inflation—and the rising cost of interest on the debt.

As the debt grows, interest rates are getting pushed up. Interest payments now exceed what the government spends on defense. This will constrain the government’s ability to respond to the next major emergency or economic crisis.

To address the spending-driven debt crisis, institutional reforms like a balanced budget amendment (BBA) could serve as a critical commitment device to guide fiscal policy. A well-designed BBA would require Congress to balance revenues and expenditures over the business cycle, allowing for flexibility during recessions or emergencies but ensuring long-term fiscal stability.

International experience shows that fiscal rules can succeed when they are sufficiently firm, necessarily flexible, and broadly supported.

Switzerland’s constitutional debt brake, adopted in 2003, balances its budget based on economic conditions. Any deviations from spending caps are recorded in a compensation account, which mandates future corrections. The debt brake has proven highly effective, reducing public debt relative to GDP and fostering long-term fiscal stability while maintaining flexibility for emergencies like economic crises, and also paying down those emergency expenditures after the crisis concludes.

Germany’s constitutional debt brake introduced in 2009 limits structural deficits. The framework allows for temporary suspension during crises, provided a repayment plan is established. Oversight by the independent Stability Council ensures accountability. This rule has stabilized Germany’s debt trajectory, even as it accommodated emergency spending during the COVID-19 pandemic, reinforcing trust in fiscal discipline.

In the 1990s, Sweden implemented a fiscal framework with three key pillars: a surplus target over the business cycle, multi-year spending caps, and a debt anchor or debt stabilization target. These rules are monitored by an independent Fiscal Policy Council. Sweden’s structural reforms, such as tying pension benefits to life expectancy and converting a portion of their social security to defined contribution plans, have complemented its fiscal rules, preserving its welfare state without bankrupting the nation.

A BBA alone cannot resolve the nation’s fiscal challenges. It must be accompanied by credible reforms to entitlement programs and structural spending constraints.

Congress could also adopt a BRAC-like fiscal commission to propose reforms and overcome political gridlock—one modeled after the successful Base Realignment and Closure commission.

Such a commission would provide independent recommendations in response to clear and narrow congressional guidelines such as stabilizing the debt below the size of the US economy or achieving primary balance by a certain year. Recommendations could be self-executing, subject to congressional disapproval with expedited consideration, facilitating the adoption of necessary but politically sensitive changes.

The risks of continued inaction are profound. Credit rating agencies have already warned of the dangers of political dysfunction and fiscal irresponsibility. Fitch and Standard & Poor’s downgraded the US debt, while Moody’s altered the US outlook to negative. Subsequent potential downgrades loom, given the US trajectory.

Worse, due to the unique nature of the US dollar as the world’s preeminent reserve currency, bondholders may not send early warning signals. In other words, we may be missing the canary in the coal mine.

The US dollar’s status has created complacency among policymakers. Investor behavior, influenced by herd mentality and the winner-take-all nature of the global bond market, may trigger a self-reinforcing debt doom loop of bond sales and rising interest rates without advance warning. Historically, as Reinhart and Rogoff note in This Time Is Different, debt crises most often arise not from gradual decline but from a sudden collapse in investor confidence.

We shouldn’t find out where the fiscal cliff is by going off it.

Policymakers can chart a new course by adopting a debt brake or balanced budget amendment and pursuing entitlement reforms, possibly by empowering a BRAC-like fiscal commission. International models show the way, but decisive action is needed now to safeguard the United States of America.

Thank you, and I look forward to your questions.

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Protectionist Sightseeing in New York Harbor

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Colin Grabow

My family spent Thanksgiving in New York City, where we did many of the usual tourist things such as a picture with Wall Street’s Charging Bull sculpture, ice skating in Central Park, and a (mercifully short) visit to Times Square. The first item on our sightseeing agenda, however, was the Statue of Liberty. Looking at the ferry that would transport us, I was struck by an underappreciated paradox. Visitors to the world’s most famous monument to liberty are transported by vessels rooted in coercion.

Despite the US’s free market reputation, the country is home to some of the world’s most restrictive maritime cabotage laws, including the Jones Act and (most relevant for ferries) the Passenger Vessel Services Act. Among their requirements is that vessels transporting goods or people within the United States — including the transfer of visitors to Liberty Island — be constructed in US shipyards. 

In the land of the free, foreign-built ferries (and other vessels) are strictly off-limits.

After boarding our ferry, I quickly located its certificate of inspection. It showed that the vessel, the Statue of Liberty V, was quickly approaching its 48th birthday having been delivered on January 1, 1977.

The ferry’s advanced age wasn’t much of a surprise. Thanks to the high cost of new construction in US shipyards — which almost entirely subsist on sales to the protected domestic market — vessels ranging from tugboats to containerships to fishing vessels tend to be significantly older than those used in other countries.

Indeed, only minutes after our departure I spotted another aging vessel, the tugboat Lucy Reinauer. Built in 1973 (compared to an average build year of 2001 for foreign seagoing tugs), the tugboat was paired with the barge RTC 60 to form an articulated tug barge (ATB). Developed as a response to the high cost of building and crewing vessels within the protected US market, ATBs are relatively little used outside the United States. That countries without restrictions on where vessels can be purchased — i.e. the rest of the world — largely avoid ATBs suggests their employment is less than optimal.

Theoretically, prohibiting foreign-built vessels assures the United States of a robust shipbuilding sector. In reality, the restriction has produced a fleet that is significantly older than its international peers while failing to generate much in the way of new vessel construction. Last year, the US commercial shipbuilding industry accounted for 0.1 percent of global output, placing it roughly on par with Iran.

The shipyards that built the Statue of Liberty V and the Lucy Reinauer closed decades ago.

But back to the ferry. After a short time, we arrived at Liberty Island and climbed the 215 steps (useful for working off Thanksgiving gluttony) of the Statue of Liberty’s pedestal for some excellent views of New Jersey and Manhattan.

Later, we boarded another ferry on the wrong side of 40, the 1981-built Hornblower Freedom, for a quick stop at Ellis Island and then a return to Lower Manhattan. Along the way, I spotted the Staten Island Ferry, which appeared to be one of three Molinari class vessels delivered between 2003–2004. Purchased for $140 million, the Molinari class ferries drew attention in 2014 for their frequent mechanical problems.

More recently, three more similar-sized Staten Island ferries were purchased from a Florida shipyard for $314 million. Although it’s unclear what they would have cost if built abroad, the fact the shipyard that built the ferries has never constructed one for the competitive international market suggests an inflated price tag.

Arriving back at Battery Park, I couldn’t help thinking about the benefits that could be realized if Americans had access to vessels from world-class international shipyards. Imagine the cost savings. Imagine the efficiency gains from fleets of new, modern vessels zipping around New York Harbor and other US waters. Imagine if we had that kind of liberty.

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Friday Feature: Kipe Academy

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Colleen Hroncich

Tonya Kipe saw the flaws of the public school system both as a mom and a teacher. She loved her elementary teaching position at first but grew frustrated by how cookie-cutter and robotic it became. Hers was one of eight second-grade classrooms at her school, and they were all expected to be keeping the same pace despite having students at various levels. “We were a Title I school,” she recalls. “Half of the group was reading below grade level, but we were still pushing second-grade content.” Kids responded by crying, crawling on the floor, and generally acting out. Tonya says she felt guilty because she knew she wasn’t serving the children well and it seemed unethical to her. 

As her own children left elementary school and headed into middle and high school, she saw problems throughout the system. Her oldest son had a block schedule in high school, which meant classes met fewer days per week but for longer periods of time. In theory, this schedule gives teachers and students more time to dig in and explore the topics they’re covering. But that’s not what was happening. “The teacher would teach for 10 to 15 minutes and give them a worksheet. When they were done, they’d put it in a basket. Then they could watch Netflix, sleep, talk on the phone, and be with their friends,” she says. He watched complete multi-season shows during school because there was so much downtime.

Things were worse for her youngest son, who has an individualized education program (IEP), a document that provides guidance and explains accommodations for students with special needs. When he was in elementary school, Tonya was able to work with his teachers when any issues came up. But it wasn’t as smooth in middle school. By the time he was in eighth grade, she realized it wasn’t working and decided to homeschool him.

Tonya let him pick out what he wanted to learn, like welding and building. “He wasn’t stressed by the schedule. He wasn’t stressed by people telling him how he’s going to be a burger flipper, and he’s dumb and that he’s not doing what the rest of the group is doing,” she says, adding that she wishes she’d started homeschooling sooner. Her son was so much happier that his friends started asking him if he was taking drugs.

Tonya realized she wanted to create a place where she could be just as happy teaching and the kids could be happy learning. “If they need extra time for something or they need to accelerate, I want to be able to give them that. And then I want to teach them what they want to learn,” she says. “So we started Kipe Academy. We started off with one student, then it grew to three, and it just kept growing.” (Kipe Academy is in Polk City, Florida.) 

Like many founders, Tonya had a hard time finding a building, so she initially offered after-school tutoring at a park or the library. She began holding science-themed weekend workshops that were open to any student regardless of school. As Florida’s school choice programs began providing flexibility for personalized learning, she started getting more home-education students.

She expanded her search and finally found a location that worked to launch her full-time program in August. “We try to do academics Monday through Thursday that are based on the unit theme. Then Friday is the social piece of it or the more relaxed piece, where we’re doing like the fictional text instead of non-fiction. And we’re doing the directed drawing and the one-and-done art, not a project that takes the whole week,” she explains. “We have kids who come Monday through Friday, and we have some kids who come for just fun Friday.”

Tonya acknowledges that she, like many parents in her community, used to see options like homeschooling as taking away from the public system. But her perspective changed when the system wasn’t working for her son. “Why should we keep doing something if it doesn’t work? Just because that’s the way it’s always been done? And so that’s when my mindset was changed,” she says. “I’m not saying public school is bad or that public school should be abolished. But if it’s not working for you, pick something different. Especially since you have options.”

Now Tonya is working to help other parents understand and navigate Florida’s diverse educational landscape. “In October, I teamed up with some other local microschool leaders, and we hosted the first Homeschool Choice Expo. We invited the state scholarship program to come, so they were there. We got to network with other microschool leaders and just to try to bring awareness to the community about all of the different options that homeschooling allows,” she says.

Founding Kipe Academy has been enormously beneficial for Tonya as well as her students. “When I go home, I’m not tired because when my kids are doing recess, I can actually sit and do a little admin work. Or if I want to get up and play with the kids, I can play with the kids. We can go to the bathroom when we want to go to the bathroom. Even though I’m working all day and then I tutor after school and then I have meetings in the evenings, I am still less tired and more energized than when I was working in public school,” Tonya says. “I’m not stressed. And because I’m not stressed, I don’t have to force that stress on the kids. And it just makes it a whole different vibe or environment.”

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Jack Solowey

This blog is part of a series on technology innovation and free expression.

On December 5, President-Elect Trump announced that entrepreneur, venture capitalist, and ALL-IN Podcast co-host (i.e., “bestie”) David Sacks will be the “White House A.I. & Crypto Czar.”

An underappreciated feature of this czardom is that AI and crypto will be part of the same portfolio. While there are straightforward reasons the technologies might be joined—they’re both “emerging” and command a great deal of VC (venture capital) and media attention, for example—the pairing carries deeper significance.

Specifically, the properties of AI and crypto (in different ways) counsel in favor of an American tech policy that prioritizes decentralization of capabilities and governance. The Trump administration and the 119th Congress should embrace decentralized tech’s potential to advance American competitiveness.

In 2018, Peter Thiel—an early intellectual partner of Sacks—famously observed that “Crypto’s decentralizing. AI is centralizing,” or in other words, “crypto is libertarian and AI is communist.” This important conception of the technologies’ tendencies, though, should not be confused with a normative statement about the policy responses they demand. To the contrary, Thiel went on to say that, “if you look at the Chinese Communist Party, it loves AI and hates crypto,” and also, “there probably are ways that AI could be libertarian,” but those are harder to realize.

The US should lean into crypto’s decentralizing tendencies and encourage AI’s most libertarian path. Decentralization—i.e., the devolution of control—is the most compatible with American values. It is the principle behind the Constitution’s separation of powers and federalism. And it suits America as a self-governing republic, as opposed to an infantilized populace requiring bureaucratic permission at every turn.

In the financial context, decentralization captures the idea that managerial and intermediary risks can be mitigated by technology that operates autonomously, is not subject to a single entity’s discretionary control, and allows individuals to self-custody their own assets. These features make crypto an alternative to an intermediated financial system plagued by politically motivated debanking.

Protecting this future begins with ending the Biden administration’s de facto ban on crypto. It continues with ensuring that regulators do not maintain discretionary veto authority over new financial tools and do provide practical legal pathways for crypto projects to stay onshore.

In the AI context, decentralization means avoiding the technology’s capture by a narrow cartel enforced by an ideologically captured bureaucracy. It also emphasizes AI’s potential as a tool for Americans’ self-reliance, diffusing expertise out of centrally gatekept institutions.

Encouraging this future begins with keeping open-source AI an American strong suit. It means avoiding a 50-state legal patchwork that suffocates AI with unmanageable compliance burdens. Further, it means ensuring a liability regime that follows the practical wisdom of common law principles, so developers are not on the hook for unforeseeable risks and consumers can permissionlessly use quality AI experts.

Placing AI and crypto together is far-sighted, as the technologies stand to be complementary. AI represents digital abundance (generating vast amounts of content) and crypto represents digital validation (verifying the provenance of content and value transfers). The latter likely will be key to living with the former. For one futuristic example, where AI agents serve as users’ remote workers, equipping those agents with crypto wallets can make them useful and keep them honest. Money damages have incentivized pro-social behavior from humans for centuries; AI agent-specific cryptocurrencies (and special purpose arbitral fora) can help do the same for bots.

Uniting AI and crypto in the same portfolio is an opportunity for crypto’s decentralizing tendencies to rub off on AI, and for tech policy to go full steam ahead on decentralization. America’s future and freedom depend on seizing that opportunity.

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Eric Gomez

The US arms sale backlog to Taiwan was reduced by $436 million in November 2024 as the first tranche of 11 High Mobility Artillery Rocket Systems (HIMARS) arrived. With this delivery, the arms sale backlog is now valued at $21.95 billion. See Figures 1 and 2 for a breakdown of the backlog by weapon category and a side-by-side comparison with October 2024, respectively.

Donald Trump’s victory in the US presidential election will also have important consequences for US arms sales to Taiwan.

The first Trump administration is responsible for the bulk of the Taiwan arms backlog by dollar value. Of the $21.95 billion in undelivered weapons, the Trump administration sold $15.70 billion, roughly 72 percent. This will change over the first two years of the second Trump administration as several large sales are scheduled to be fully delivered by the end of 2026. But it is worth comparing the Trump and Biden administrations’ records on arms sales to Taiwan in detail.

HIMARS Delivery and New Maintenance Sales

In early November, Taiwan’s Ministry of National Defense confirmed the delivery of a batch of HIMARS launchers and Army Tactical Missile Systems. The HIMARS is a mobile, precise rocket artillery system that has seen heavy use in Ukraine. In our dataset, it is coded as an asymmetric capability due to its relatively low unit cost and high mobility, which makes it harder to find and destroy.

The November delivery fulfills a $436 million foreign military sales (FMS) case that was notified to Congress in October 2020, an almost four-year gap between notification and final delivery. Earlier press reporting suggested delivery of this sale would be completed sometime in 2025, so this first batch of HIMARS may have arrived a little ahead of schedule.

Taiwan is still waiting on delivery of a second batch of 18 HIMARS launchers and munitions valued at $520 million, which were notified to Congress in December 2022. This second batch is scheduled to arrive in 2026. Taiwan ordered the additional HIMARS after canceling a $750 million FMS case for Paladin self-propelled howitzers.

The United States also announced two new FMS cases to maintain equipment already in Taiwan, $65 million to support a field communication system, and $320 million for F‑16 aircraft and radar spare parts. As discussed in previous updates, our dataset does not count maintenance FMS cases as part of the arms backlog because they support equipment that Taiwan could use to defend itself, unlike backlogged arms sales that Taiwan has not received yet.

For an itemized list of arms sales in the backlog, see Table 1.

Comparing Trump and Biden

The pending return of Trump to the White House has prompted much speculation over where the US–Taiwan relationship will go next. Including backlogged cases, delivered cases, and maintenance cases, the first Trump administration issued 22 Taiwan FMS notifications valued at $18.65 billion. The same figures for the Biden administration as of November 2024 are 27 notifications valued at $8.71 billion.

However, comparing only the topline figure for arms sales to Taiwan ignores important details.

Figure 3 compares the Trump and Biden administrations by category of weapons system. The two administrations sold roughly the same dollar amount of asymmetric capabilities, but the Trump administration sold Taiwan $10.4 billion in traditional weapons compared to the Biden administration’s $500 million.

Traditional weapons are more flexible but they tend to have much higher unit and lifetime costs and take longer to build than asymmetric capabilities. As of November 2024, only one of the four traditional FMS cases that the Trump administration notified to Congress had been delivered to Taiwan. Initial deliveries of Abrams tanks and F‑16s—both announced in 2019—should begin in the next few months and end sometime in 2026.

The Biden administration, by comparison, has placed greater emphasis on asymmetric capabilities (9 cases, $4.36 billion) and maintenance (14 cases, $2.81 billion). Given Taiwan’s relatively low level of defense spending, acquiring more asymmetric capabilities to fend off a Chinese invasion while maintaining existing traditional capabilities to respond to lower-intensity conflict and aggression is a sensible strategy. In other words, while the first Trump administration sold Taiwan more weapons, the Biden administration sold Taiwan a better mix of weapons for Taiwan’s self-defense needs.

Some recent news reports suggested that Taiwan might put forward a large arms sale wish list early in the second Trump administration to demonstrate its seriousness about self-defense and create political goodwill. The Financial Times gives a figure of $15 billion for surface warships, F‑35 fighter aircraft, E‑2D early warning aircraft, and Patriot interceptors.

This would be a terrible choice for Taiwan.

Except for Patriot interceptors, all the capabilities mentioned in the Financial Times are traditional systems that will eat up a large share of Taiwan’s limited defense budget, be relatively easy for China to counter, and take a long time to be built and delivered. While it has not been perfect, in the past few years Taiwan has increased its focus on acquiring new asymmetric capabilities that it urgently needs. The allure of the large arms sale is understandable. However, it makes much more sense for Taiwan and American interests for Taipei to continue buying cheaper but more militarily effective asymmetric capabilities.

Taiwan Arms Backlog Dataset, November 2024

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Eliminate Government Holidays

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Jeffrey Miron

The United States currently recognizes eleven federal holidays: Independence Day (1870), Washington’s Birthday (aka Presidents’ Day) (1879), Christmas (1885), New Year’s (1885), Labor Day (1894), Veterans Day (1926), Columbus Day (1937), Thanksgiving (1941), Memorial Day (1967), MLK Jr Day (1983), and Juneteenth (2021).

In so doing, the government implicitly endorses some ideas over others, so national holidays are a form of thought control. Christmas endorses Christianity; Presidents’ Day elevates a particular president; Labor Day honors the work of labor movements; Columbus Day celebrates his contribution to US history. These holidays raise many questions: Why Martin Luther King but not other influential Civil Rights leaders? Why George Washington but not Ronald Reagan? Why two days for those who served in the armed forces but none that recognize other public servants? Should Columbus Day instead be Indigenous’ Peoples’ Day? If the government recognizes no holidays, it avoids these issues altogether.

Some of these endorsements do not seem controversial at first glance, but the potential for controversy is still there. Thanksgiving seems like an irreproachable day of family, food, and gratitude, yet it arguably celebrates a false narrative about the interactions between early settlers and Native Americans.

A different argument for government holidays is that they help coordinate the consumption of leisure time. But this is unconvincing; most jobs allow choice of vacation days, so individuals can coordinate with others on their own. Further, mandated coordination generates large congestion costs.

The right number of federal holidays is zero.

This article appeared on Substack on December 13, 2024. Amelia Heller, a student at Harvard College, co-wrote this post.

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Jeffrey A. Singer

A December 12 report in the UK Independent implies Elon Musk thinks most homeless people are “violent drug zombies with dead eyes, and needles and human feces on the street.” That’s an oversimplification, to say the least.

The report claims President-elect Donald Trump wants the government to force homeless people into drug treatment and mental institutions or face arrest. It cites the Trump/​Vance Agenda 47 website:

[W]orking with states, we will BAN urban camping wherever possible.

Violators of these bans will be arrested, but they will be given the option to accept treatment and services if they are willing to be rehabilitated. Many of them don’t want that, but we will give them the option.

We will then open up large parcels of inexpensive land, bring in doctors, psychiatrists, social workers, and drug rehab specialists, and create tent cities where the homeless can be relocated and their problems identified…

…And for those who are severely mentally ill and deeply disturbed, we will bring them back to mental institutions, where they belong, with the goal of reintegrating them back into society once they are well enough to manage.

Both Musk and Trump appear to give short shrift to a major cause of homelessness: a growing shortage of affordable housing. As Vanessa Calder Brown wrote in a Cato briefing paper, “Reforms that eliminate zoning, improve permitting speed, legalize greater housing density, and remove barriers to housing innovations—including co-living units, tiny homes, and manufactured homes—are all part of a successful strategy to reduce homelessness.” Building codes and land use and zoning laws are largely state-level issues.

Another key contributor to homelessness is mental illness. Two-thirds of homeless people have a mental illness, and up to 20 percent of the homeless may have schizophrenia. In many cases, mental illness is the force driving alcohol and illicit drug use. The Substance Abuse and Mental Health Services Administration points out that, in many cases, people with mental health problems “misuse these substances as a form of self-medication.”

Contra President-elect Trump’s proposal, the government coercing people, directly or indirectly, to undergo mental health or drug addiction treatment flagrantly assaults their autonomy. As psychiatrist and civil libertarian Thomas Szasz wrote in his classic work The Myth of Mental Illness: Foundations of a Theory of Personal Conduct, “Involuntary psychiatric interventions violate the fundamental moral and political principles of free societies and turn psychiatric authority into a species of despotism.”

Numerous studies have also failed to find evidence that involuntary mental health treatment is effective. There is some evidence it may increase suicidal tendencies.

Studies on the efficacy of mandatory drug rehab have also had negative results. Compulsory drug rehab has high relapse rates. There is also evidence that it increases the risk of subsequent overdose deaths among people released from rehab.

Enforcing public nuisance laws or penalizing actions like blocking streets, creating public health hazards, or disturbing the peace is not inappropriate or unjust. Incarcerating peaceful people who choose to live unhoused is. And coercing people with substance abuse and mental health problems to undergo treatment assaults their autonomy.

President-elect Trump’s pick for Secretary of Health and Human Services, Robert F. Kennedy, Jr, is seriously interested in reforming the public health agencies. Trump’s pick for the Food and Drug Administration, Dr. Marty Makary, has a history of challenging conventional narratives and welcoming outside-the-box ideas. One reform that both should consider, which can help mitigate the homelessness crisis, is ending the FDA’s Risk Mitigation and Evaluation Strategy (REMS) program it imposes on the drug clozapine—the only drug that the FDA has approved for treatment-resistant schizophrenia.

As Josh Bloom, PhD of the American Council on Science and Health, and I wrote in The Hill last month, “the REMS program has unintentionally created barriers that disproportionately affect individuals with severe mental illnesses like schizophrenia, further compounding the significant challenges they already face, including unemployment, substance abuse, heightened suicide risk and homelessness.”

An estimated 30 percent of schizophrenic patients do not respond to first-line antipsychotic drugs. Yet, clozapine is prescribed to only 4 percent of these patients in the United States—a situation that underscores a significant gap in treatment.

Bloom and I argue that REMS programs mandated by the government are redundant. Once the FDA approves a drug for marketing, manufacturers will monitor it for long-term risks to protect their reputation and avoid liability. Additionally, physicians prescribing high-risk medications routinely monitor their patients, as failing to do so constitutes malpractice.

There are about 653,000 homeless people in the US today. That population could be potentially reduced by 60,000–120,000 with easier access to a long-used, effective drug for schizophrenia. If the incoming Trump administration is serious about reducing homelessness, eliminating the FDA’s REMS program is a good place to start.

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Mike Fox

Carrying large amounts of cash is not a crime in the United States. But tell that to Stephen Lara, a Marine Corps combat veteran who was stopped by the Nevada Highway Patrol for allegedly following a truck too closely. A trooper interrogated Lara, who acknowledged having $87,000 in cash in the trunk of his car. Lara was never arrested or charged with a crime. But that did not stop the Nevada Highway Patrol from seizing his life savings and handing it over to the US Drug Enforcement Administration (DEA).

Civil forfeiture is the practice by which the government seizes people’s money or property supported only by probable cause, a bare-bones suspicion of wrongdoing—without securing a criminal conviction or even filing charges. Upon seizing property, the government initiates a civil suit—not against the owner but against the property itself—and owners must navigate a costly and convoluted process to get their property back.

Equitable sharing is a program administered by the Department of Justice under which state and local law enforcement agencies can share their forfeiture proceeds with federal agencies who then pursue forfeiture under federal law. It is common for state and local law enforcement agencies to use the equitable sharing program to sidestep state laws that seek to limit civil forfeiture. By handing Lara’s money over to the DEA, the Nevada Highway Patrol would see 80 percent returned to them. In exchange for “sharing” the remaining 20 percent with the DEA, the Nevada Highway Patrol can circumvent the state’s comparatively more robust legal protections regarding civil forfeiture, including Nevada’s requirement that the government meet a higher standard of proof. Nevada law requires prosecutors to provide clear and convincing evidence connecting seized property to a forfeitable crime, meaning it must be highly likely that seized property is connected to a crime. On the contrary, the federal standard is a mere preponderance of the evidence, a more deferential evidentiary standard, meaning it is more likely than not that seized property is connected to a crime.

Represented by the Institute for Justice, Lara challenged the forfeiture and immediately got his money back after the case garnered significant media attention. Unfortunately, most victims of civil forfeiture are not able to retain effective counsel and find the process so cumbersome that they end up hoisting the white flag in defeat.

Civil forfeiture traces its roots back to 16th-century England and beyond, where its antecedent was used to seize ships and uncustomed goods from foreign smugglers. Congress likewise initially authorized civil forfeiture to go after pirates and smugglers. But it was not until the war on drugs that civil forfeiture became widely used by law enforcement. While proponents claim civil forfeiture is an effective tool for going after drug kingpins, the data tell a different story. The Institute for Justice found that in Philadelphia between 2012 and 2018, the median cash forfeiture was a paltry $178 and that civil forfeiture was disproportionately used against poor people of color with little recourse to fight back.

The Fifth Amendment Integrity Restoration (FAIR) Act sponsored by Sen. Rand Paul (R‑KY) and Sen. Cory Booker (D‑NJ) is an effort to reign in these abuses. The FAIR Act would

eliminate the equitable sharing program to guarantee that state efforts to protect the rights of their citizens are not defeated by federal overreach;
remove financial motivations for seizures by redirecting all forfeiture proceeds from the Justice Department’s Assets Forfeiture Fund to the Treasury’s General Fund;
raise the evidentiary standard from a preponderance of the evidence (more likely than not) to the less deferential clear and convincing (highly probable) evidentiary standard; and
make it easier to challenge forfeitures by ensuring access to counsel for indigent property owners and requiring judicial oversight.

Civil forfeiture is both easy to initiate and difficult to challenge. The ability of the government to strip a person of their property by simply alleging it may have been connected with a crime in some way eviscerates property rights and runs afoul of the fundamental concept of due process as enumerated in both the Fifth and Fourteenth Amendments. Americans should be able to rest assured knowing that their government will not be able to steal their life savings on a whim. 

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George Selgin

Having questioned, in a previous post, some proclaimed benefits of a Strategic Bitcoin Reserve, and specifically the claim that building such a reserve would strengthen the US dollar, I now wish to say something about what the proposed Bitcoin reserve will cost. In particular, I wish to discuss the cost of the BITCOIN Act’s plan to have the US government buy up to a million Bitcoins over the course of the next five years.

Too Good to Be True

“Cost?” you may be thinking; “What cost?” After all, as a recent report on the plan points out, it and some other proposals plans for establishing a Strategic Bitcoin Reserve neither require any increase in taxes nor add to the national debt. “Instead,” the report explains, “the government could leverage its existing resources, particularly gold certificates held at the Federal Reserve’s 12 banks.”

No new taxes? No more government borrowing? Glory and hallelujah! The authors of the BITCOIN Act have discovered a way to treat the taxpaying US public to a one-million Bitcoin (or, at today’s Bitcoin price, approximately $100 billion) free lunch! It seems too good to be true!

Alas and alack, and as usual, it is. Despite not calling for any new taxes or for any addition to the national debt, the BITCOIN Act is no free lunch. Instead, the proposed Bitcoin purchase will actually end up costing the government more than if the Treasury raised the necessary funds by selling securities. 

To understand why, we must delve into the details of the BITCOIN Act’s “Bitcoin purchase plan.” That plan, which would have the government acquire up to 200,000 Bitcoin every year for five years, actually consists of three components. First, for five years, it would tap into the Federal Reserve System’s Treasury remittances—the interest the Fed earns on its security holdings minus Fed banks’ interest and operating expenses—devoting up to $6 billion of those remittances per year to Bitcoin purchases. Second, it would transfer $4,425 billion from the Federal Reserve System’s capital surplus account to the Treasury’s general fund, also to be spent on Bitcoin, reducing the Fed’s surplus to less than $2.4 billion. Finally, by changing gold’s official price from its present level of just over $42.22 per fine troy ounce to something like gold’s present market price of almost $2,700 per ounce, and having the Fed monetize the resulting circa $700 billion gain in the official value of the Treasury’s gold stock, it would supply the Treasury with ample funds with which to purchase up to 200,000 Bitcoins per year for five years. Were the Treasury able to buy all those Bitcoins at an average price of $100,000, those purchases would cost $100 billion, or about one-seventh of the Treasury’s golden gain. Put another way, were it to end up having to pay an average price of $700,000 per Bitcoin, the government could still afford to buy a million coins without having to draw on existing tax revenues, raise taxes, or float more debt.

Run Dry

Because the BITCOIN Act mainly relies on the third gold-revaluation method for financing a one-billion coin Strategic Bitcoin Reserve, I want to devote most of this post to assessing that part of the act’s Bitcoin purchase plan. But let’s first consider the plan’s other components.

The first of those other components—the plan to devote some of the Fed’s Treasury remittances to Bitcoin purchases—can be dealt with quickly because it’s unlikely to be taken advantage of. That’s so because, instead of earning a profit as it almost always used to, thanks to having to pay higher rates on bank reserves than it earns on the long-term securities it gobbled up during past crises, the Fed has lately been losing money hand over fist. As a result, it hasn’t sent the Treasury any money since September 2023, and it won’t do so again until it has first paid down over $200 billion in accumulated paper losses. Since the Congressional Budget Office was already predicting in June that doing so would take until 2030, the BITCOIN Act’s Fed remittance component isn’t likely to fund any substantial Bitcoin purchases.

Budgetary Slight-of-Hand

That the Fed has been running in the red doesn’t altogether prevent the Treasury from taking advantage of it to fund a Strategic Bitcoin Reserve. In fact, all three components of the BITCOIN Act’s Bitcoin purchase plan have the Fed helping out in some fashion, if only unwillingly, while the remittance-diversion plan alone depends on its turning a profit.

Instead of relying on those profits, the Bitcoin purchase plan’s second component has the Treasury grabbing most of the Fed’s capital surplus. Even now, at $6.8 billion, that surplus is paper thin compared to its $29.3 billion level when the FAST (Fixing America’s Surface Transportation) Act was passed in December 2015. Having failed to agree to legislation that might have allowed the FAST Act’s $305 billion price tag to be fully paid by traditional means, Congress chose instead to limit the Fed’s surplus capital to $10 billion. Doing so forced the Fed to immediately fork $19.3 billion over to the Treasury, which added it to the Highway Trust Fund. Two 2018 appropriation bills transferred another $3.2 billion of the Fed’s surplus capital, capping it at its remaining, lowered level of just $6.8 billion.

Although the FAST Act wasn’t the first time Congress treated the Fed’s surplus as a source of off-budget funding—in 1933, it drew on it to provide the FDIC’s working capital—the 2015 measure marked the first use of the Fed’s capital to fund activities having nothing to do with monetary or bank regulatory policy. So it’s pretty obvious that the BITCOIN Act’s plan to once again raid the Fed’s capital was inspired by the FAST Act precedent.

What’s wrong with that? The same thing that was wrong with the FAST Act’s own Fed raid, namely, that even if it did the Fed no harm, it amounted to what former Fed Chair Ben Bernanke called “a form of budgetary sleight-of-hand that would count funds that are already designated for the Treasury as ‘new’ revenue.” As Bernanke explained when the FAST Act was in the works, to actually come up with the $19.3 billion it owed the Treasury, the Fed had to sell securities, thereby reducing its future earnings and future Treasury remittances. “The net effect,” Bernanke says, “is precisely the same as that resulting from the issuance of fresh government debt.” Cato’s Center for Monetary and Financial Alternatives adjunct scholar Jeff Hummel reached the same conclusion while supplying further details. So did a 2002 GAO study of the general fiscal consequences of reducing the Fed’s surplus capital. “Amounts transferred to the Treasury from reducing the [Fed’s] capital surplus account,” the study says, “would be treated as a receipt under federal budget accounting but do not produce new resources for the federal government as a whole.” 

Nor is it certain that reducing the Fed’s surplus capital to avoid raising taxes or increasing the national debt does no harm. Although it’s true that fiat-money issuing central banks can operate without capital, as a 2017 GAO investigation reports, academics and Fed officials worry that the practice “might lead the public and financial markets to question if the Federal Reserve was independent from the executive and legislative branches.” The GAO also concluded that such questioning becomes more likely when recurring transfers threaten to eventually reduce the Fed’s capital to zero.

Striking Gold

So we come to the third and most important component of the BITCOIN Act’s Bitcoin purchase plan: the funding of Bitcoin purchases using the proceeds from gold revaluation and monetization. Although the Federal Reserve banks haven’t owned any gold since January 1934, their assets include Treasury gold certificates worth over $11 billion. Those certificates are backed by an equal sum of gold, according to its official price of just over $42.22 per troy ounce. The gold itself is owned by the Treasury and stored at Fort Knox and various other Treasury depositories. Were the BITCOIN Act to pass, gold’s official price would be raised to its market price. Assuming a market price of $2,700 per ounce, that would make the Treasury’s gold officially worth almost 64 times its present value. The Treasury would then swap new gold certificates reflecting gold’s higher official price for the ones now in Fed banks’ possession. Upon receiving the new certificates, the Fed banks would have 90 days in which to “remit the difference in cash value between the old and new gold certificates to the Secretary for deposit in the general fund,” thereby monetizing the Treasury’s accounting profit.

Still assuming gold to be worth $2,700 per ounce, these transactions would yield the Treasury a tidy sum just shy of $700 billion. Were the Treasury able to buy a billion Bitcoin at an average price of $100,000, or somewhat more than Bitcoin’s actual market price as I write this, the gold monetization scheme would give the Treasury seven times the sum needed for the purchase, without the government having to raise more tax revenue and without adding a nickel to the national debt!

Backdoor Borrowing

As I noted before, this sounds too good to be true. The catch is that, although it’s strictly true that the plan calls for no increases in taxes or the national debt, it’s no bargain; because despite not raising the national debt, it turns out to be equivalent to having the Treasury borrow $100 billion (or whatever its Bitcoin purchases end up costing) directly from the Fed (putting-up gold as collateral), and indirectly from the nations’ banks, at interest rates that are higher, and perhaps much higher, than it could get by selling securities.

To see why, let’s consider how the various operations just described affect both the Fed’s and the Treasury’s balance. Once again I’m assuming that revaluing the Treasury’s gold stock raises the value of its gold by $700 billion. To monetize that gain, the Treasury takes back the Fed’s existing gold certificates and gives the Fed new ones worth that much more. The Fed then credits the Treasury General Account (TGA) by the same amount. So we have, in billions:

Federal Reserve

Assets (Gold Certificates) + $700; Liabilities (TGA Balance) +$700

Treasury

Assets (TGA Balance) + $700; Liabilities (Gold Certificates) +$700

So far, so good. But the Treasury still has to buy a million Bitcoins. Let’s assume, as before, that doing so costs $100 billion. Let’s also assume, heroically, that the Treasury resists spending any more of its apparent $700 billion windfall. The new dollars spent on Bitcoin get deposited with US banks, increasing their reserves. The changes are:

Federal Reserve

Liabilities (TGA Balance) -$100; Liabilities (Bank Reserves) +$100 

Treasury

Assets (TGA Balance) -$100; Assets (Bitcoin) +$100

Once again, what the government has done is finance a $100 billion Bitcoin purchase with what amounts to a permanent $100 billion interest-free Federal Reserve loan, collateralized by that much of the Treasury’s increased nominal gold hoard. Although the Fed doesn’t directly charge the Treasury any interest on the $100 billion credited to the TGA, the Fed itself finances that credit by borrowing $100 billion more from the nations’ banks. And those banks do charge interest, as it were, at whatever rate the Fed pays on bank reserves. Since gold certificates earn no interest, the whole operation reduces the Fed’s profits and Treasury remittances by the full amount of those additional interest payments. The overall fiscal burden is therefore much as it might be were the Treasury to borrow $100 billion directly from the banks at the same rate the Fed pays them. But since the lending is financed by bank reserves instead of new Treasury securities.… Hey presto! It isn’t counted as part of the national debt.

Yet national debt it is, economically if not officially. And costly national debt at that. How so? At 4.65 percent, the current interest rate on bank reserves is higher than six-month and one-year Treasury bill rates of 4.26 percent and 4.27 percent, respectively. And it is much higher than the rate on three-year Treasury notes, which is now just 4.08 percent. Nor is the present situation unusual: The interest rate on reserves, being an overnight rate, is generally higher than rates on longer-term Treasury securities. Assuming that the Treasury holds all the Bitcoins it purchases for 20 years instead of selling any to pay off the national debt (the only options the BITCOIN Act allows), during that time banks will have earned, and the Fed will have lost, more than $150 billion as a result of the government’s Bitcoin investment. Were the Treasury instead to raise the money needed to buy a million Bitcoins by selling $100 billion worth of three-year Treasury notes, the interest cost would be about $125 million, or $25 billion less.

It’s $25 billion less, but more visible, for were the Treasury to finance its Bitcoin purchase by issuing more securities, the national debt would go up; and it is precisely in order to avoid having the debt go up, to skip past the ordinary appropriations process, and to otherwise pull the wool over Americans’ eyes, that the BITCOIN Act relies on so much gold-plated hocus pocus. What better way, after all, to gain the public’s support for a plan that may only serve to pump Bitcoin holders’ bags than by making it look like it won’t cost a thing?

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