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David J. Bier

This is the five-minute spoken summary of my written testimony before the House Homeland Security Committee’s December 10, 2024, hearing, titled “Given the Green Light: Open Border Policies and Threats to Law Enforcement.”

Chairman, ranking member, and distinguished members of the subcommittee, thank you for the opportunity to testify.

For nearly half a century, the Cato Institute has produced original research showing that in a free society, people—whatever their background, ancestry, or birthplace—are directed toward activities that benefit mankind.

As they have for centuries, America’s new immigrants are contributing to our success, working for us and with us to build a stronger, wealthier, and safer country.

But immigrants are people, and in any large group, some people will commit crimes. Is mass deportation the answer?

No, mass deportation would make Americans—including law enforcement—less safe.

In 2023, immigrants, legal and illegal, were half as likely to have committed crimes serious enough for them to be incarcerated in the US.

Data from Texas show that in 2022, the average illegal immigrant was 36 percent less likely to commit and be convicted of murder. Legal immigrants were even less likely.

Not surprisingly, crime rates and murder rates have been shown to fall in response to immigration.

In my written testimony, I show that homicides have fallen in 83 percent of the 72 cities receiving most of the new illegal immigrants from January 2021 to June 2024.

Cities with more new illegal immigrants were slightly more likely to see a decline in homicides.

Salt Lake City was the top city for immigration court filings as a percentage of its population, and its murders fell 53 percent—twice as fast as the national average.

Cato also reviewed every instance of a law enforcement officer being shot and killed in the line of duty in 2024, finding no illegal immigrant shooters.

We looked at every NYPD officer killed for the last decade—again, no illegal immigrant killers. In fact, immigrants were more likely to be killed serving as NYPD officers than they were to kill NYPD officers.

We shouldn’t be surprised by these findings. Immigrants are more likely to be engaged in activities not associated with crime, such as working, starting businesses, marrying, having kids, attending church, and avoiding drugs.

Mass deportation would remove a population less likely to commit serious crimes, which would increase the crime rate and victimization rate for Americans and US law enforcement.

But let’s just suppose I’m wrong, and immigrants are more likely to commit crimes.

Mass deportation would still harm public safety. Mass deportation means indiscriminate enforcement.

It means targeting both threats and peaceful people. It deprioritizes serious offenders.

We saw how that played out during four years of Trump, who removed the requirement to target criminals on his first week in office.

He doubled arrests of noncriminals—pizza delivery drivers, domestic violence victims, and spouses of US citizens.

He released these criminals, many with violent histories, while Immigration and Customs Enforcement released twice as many convicted criminals as Biden has.

Trump separated families and prosecuted parents, which US attorneys said allowed sex offenders to go free.

When you’re only interested in deporting as many people as possible, you’ll downplay public safety.

As a result, the number of criminals trying to enter illegally tripled to record highs under Trump.

The threat of mass deportation won’t deter criminals. But it would threaten immigrant victims and witnesses who work with law enforcement to stop and solve crimes.

Let me be clear: When noncitizens victimize people in the US, their welcome is over. Even one such instance is too many.

That’s why law enforcement should be laser-focused on those threats.

Don’t ignore illegal immigration. Fix it. But rather than mass deportation, what we need is legal immigration.

Create legal ways for peaceful people to apply, get vetted, and live here legally.

Then, cops can be cops and focus on threats to public safety. That’s something we can all agree on.

Thank you.

Erec Smith

Norbert Michel and Jerome Famularo

In the aftermath of the COVID-19 pandemic, the United States experienced a much higher rate of inflation than at any time during the prior few decades. Like the prices of many goods and services, the cost of housing rose rapidly, with the median home price increasing almost $100,000. (Figure 1.) Unsurprisingly, many potential homebuyers were—and still are—shocked and upset.

As they have in years past, many politicians have latched on to the anger surrounding the recent housing market turmoil. During the presidential debate, Vice President Kamala Harris said. “Here’s the thing: we know that we have a shortage of homes and housing. And the cost of housing is too expensive for far too many people.” Prior to the election, Donald Trump outlined his own solutions, and now federal officials want to implement a host of policies, ranging from subsidies to selling federal land.

But is the United States really facing a housing crisis? Or a shortage of homes? And should Americans really expect recent federal policy proposals to make housing more affordable?

This Cato at Liberty post is the third in a series that examines these questions. (Previous posts are here and here.) While the series presents evidence that the United States is not facing a true housing crisis or shortage, nothing in the series suggests that local officials should refrain from relaxing zoning restrictions and other regulations. 

Elected officials should reduce rules and regulations to make it easier and less costly for people to live. Additionally, federal officials should end the many demand-side policies that place upward pressure on prices across the nation.

Just as important, nothing in the series ignores that many Americans have taken an economic beating these past few years—real wages have fallen, and prices have not reverted to pre-COVID levels. It is no surprise that so many people have been calling for increased government intervention.

As previously, though, if federal officials answer those calls, it will likely increase Americans’ economic burden. Evidence shows that over the long term, people have overcome the many federal roadblocks that increase the nominal cost of housing, but affordability would be much improved in the absence of those policies.

Fortunately, federal officials have an excellent opportunity to make it easier for Americans to afford housing because the lessons learned from the post-COVID-19 inflationary episode are directly applicable to the housing market. In both cases, federal policies that distort both demand and supply result in harmful outcomes. The housing market is just a microcosm of what can go wrong—and how difficult it can be to fix—when the federal government interferes with markets.

This post focuses on affordability and whether consumer preferences might have been driving prices higher over the past few decades. While the previous post considered several important adjustments to nominal (and real) home prices, several other changes in consumer preferences and quality suggest that people have been choosing to pay for more with respect to housing.

For instance, in the 1980s, most newly constructed homes had three bedrooms. Now, most have at least four bedrooms, even though household sizes have been decreasing. (Figure 2.) Similarly, in the 1980s, many homes were still built without air conditioning or garages, but those numbers have trended downward. Now, almost all new homes are built with both air conditioning and a garage (Figure 3). These kinds of changes suggest that consumer preferences—and thus, demand—drive prices in the housing market. 

Renters Also Paying for More Housing

Interestingly, some policymakers concede that changing consumer preferences might explain Americans’ increased expenditures on housing but still claim that housing has become unaffordable. The 2024 Economic Report of the President, for instance, acknowledges that “increased spending on housing could be a rational consumption choice.” It then argues, without much evidence, that this higher spending is not by choice.

To support its claim, the president’s report uses a US Department of Housing and Urban Development benchmark (developed in 1969 and last updated in 1980), which defines a family as “rent burdened” if it spends more than 30 percent of its income on housing (rent/​mortgage, utilities, and other housing needs). Using this metric, the report shows that the “share of households burdened by housing expenses has risen steadily over the last 60 years” and that “nearly 45 percent of renters are rent-burdened.” The report also shows that, since 1960, the percentage of renter households spending more than 40 percent and 50 percent of their income on rent, respectively, has steadily risen.

These shares did rise, but they merely confirm that people have been spending more on housing. So, despite acknowledging consumer preference changes (such as choosing to spend a greater portion of their income on larger homes or those with more amenities) could have been driving the trend, the president’s report does nothing to account for those changes.

The report also fails to account for whether renters are now able to spend more of their budgets on housing for other economic reasons, such as higher real earnings or lower cost of non-housing items.

In fact, the president’s report contains evidence—though it ignores it—that households have not been losing the ability to spend more during the past few decades. Specifically, the report presents a graph (figure 4–3 in the report) of the minimum monthly hours of work needed to pay for the median monthly rent. The graph shows that the hours needed essentially remained the same in 2002 and 2012 (for the median wage earner, the minimum wage earner, and someone at the federal poverty level, respectively).

The hours needed only increased in 2022, after the COVID-19 pandemic—a problem that occurred for nearly all goods and services. For the median worker, the number of hours increased to “more than 70 hours in 2022,” up from 55 in 2002.

Figure 4 confirms this finding. It shows that work hours needed to afford rent were very stable from 2007 to 2019. Additionally, both rent and food as a percentage of income varied little until the pandemic. (Figure 5.) That is, the recent spike is anomalous—it has certainly been harmful for many people, but it was not indicative of a long-term trend. To the extent that nominal incomes continue to rise, the real effects from this spike will continue to dissipate.

The president’s report also ignores that the share of workers in poverty and the share of workers earning at or below the minimum wage were both smaller in 2022 versus 2012. According to the BLS, the 2012 share in poverty was 15.9 percent, but it declined to 12.6 percent in 2022, while the share of Americans making at or below the minimum wage declined from 1.1 percent (3.55 million workers out of 314,725,000 Americans) in 2012 to 0.3 percent (1.023 million workers out of 333,568,000 Americans) in 2022.

Various other metrics also contradict the idea that households have steadily become more economically burdened because of housing costs during the past few decades. For example, the square footage that the average householder can afford has increased slightly, with little variation, from 1975 to 2024. (Figure 6.) (The metric displayed in Figure 6 is merely an alternative way to view the data presented in the second post of this series.)

Comparing Costs

Separately, outside of housing costs, most consumer goods and services have become more affordable over time, suggesting that Americans can afford to spend more on housing than they did in the 1960s and 1970s.

The second largest expenditure for most Americans (after housing but before necessities such as food) is vehicle costs, and those have declined. For example, in 1992, a Toyota Camry cost 55 percent of median household income. But by 2023, a Camry cost just 34 percent of the median household income. And, as with other vehicles, the 2023 Camry is much different than it was a few decades ago—it is more powerful (203 vs. 130 HP in 1992 model) and more efficient (it averages 32 MPG vs. 21 MPG), and it has more standard convenience and safety features.

These findings are consistent with the work that our Cato colleagues have done at Human Progress. They show, for example, that “basic food items in America have become almost eight times cheaper relative to unskilled labor over the last 100 years.” Together, this kind of evidence supports the idea that consumer preferences do explain at least some of Americans’ increased expenditures on housing.

Separately, it is possible to compare the portion of annual median household income needed to buy the average-priced home to the portion of income needed to pay 12 years of average rent. Figure 7 plots both of these series. Although both series spiked during the COVID-19 pandemic, the rent series was otherwise stable for the full period, and the only other spike in the home purchase data was prior to the 2008 crisis. (Based on the standard deviation, a common measure of variation, the increases in 2021, 2022, and 2023 were anomalous.)

To date, this series has presented a great deal of data that goes well beyond just the nominal cost of housing. That’s partly because it is so difficult to tell when something has become “less affordable” over time. But after analyzing the affordability question from many angles, the United States is not suffering from a long-term housing crisis.

Though the recent spike in prices has surely harmed many Americans, that spike does not justify a massive federal effort to “fix” the housing market. Indeed, long-term housing affordability would be much improved in the absence of the many federal policies that distort the market.

Nonetheless, the housing shortage story remains part of the conventional wisdom. The next post in this series will examine the data behind that supposed shortage.

Marc Joffe

The new Department of Government Efficiency (DOGE) is a promising adjunct to the second Trump administration that proposes to identify and root out billions or even trillions of dollars of federal waste, fraud, and abuse. To properly manage the problem of government inefficiency, it is best to measure it with big data on federal spending. But as those of us who have been studying wasteful federal programs know, getting the necessary data has become more and more difficult.

The primary tool available to outside analysts is the Freedom of Information Act (FOIA), a 1966 law that allows members of the public to obtain government documents. Sadly, the heydays of executive branch compliance with FOIA are long behind us. Today, departments and agencies rarely respond to complex requests within the twenty working days specified by the law and often have to be taken to court to disclose anything at all. FOIA includes a variety of exceptions that bureaucrats interpret liberally, claiming the right to heavily redact documents or withhold them.

While FOIA abuses related to federal mismanagement of the COVID-19 pandemic are now well known, there are many low-profile cases of unjustified secrecy. For example, any government that receives more than $750,000 of federal funds in a given year must provide the federal government with audited financial statements. In 2016, the Obama administration made all of these audits publicly available, but Native American tribes were exempted. As a result, outside researchers cannot assess wasteful spending directed to tribal governments.

Medicaid and Medicare are two very large programs that generate reams of data unavailable to the public. The Center for Health and Human Services has granular data detailing medical visits by public healthcare program beneficiaries, including amounts paid. These data can be linked to patient health outcomes (on an anonymized basis to avoid disclosing personal medical information), enabling researchers to assess the cost-effectiveness of various treatments and medical providers. However, this information is not accessible by FOIA and is instead made available only to a handful of academic researchers and corporate users who pay hefty subscription fees for the data.

Transit Capital Investment Grants are a major category of inefficient federal spending. For example, the federal government spent $1.55 billion to partially fund the construction of an elevated train line in the Honolulu suburbs. It opened several years late and only carries about 3,000 passengers per day. These riders could just as easily reach their destinations via express bus. Active federal transit grant programs are subject to a monthly review by an independent Project Management Oversight Contractor (PMOC). 

However, the Federal Transit Administration (FTA) rarely publishes these PMOC reports. At the Cato Institute, we FOIAed these reports three months ago and are still waiting for them. If researchers could obtain and systematically analyze a corpus of PMOC report data, they may better understand the early warning signs that transit projects will run far above budget and behind schedule.

Executive branch officials have a not unreasonable explanation for the slowdown in FOIA compliance: understaffed FOIA departments deal with a deluge of often complex and sometimes poorly formed requests. But modern technology provides a couple of solutions to this problem.

First, agencies should be able to use artificial intelligence to supplement or even replace FOIA liaison staff. If AI has access to a department’s full corpus of potentially responsive documents and can interpret FOIA requests, it should be able to fulfill these requests with limited or no human intervention.

A second, much simpler technology solution obviates FOIA entirely. Departments, especially those that do not deal with large volumes of documents with national security implications or contain personally identifiable information (PII), should just automatically publish all the documents they produce or receive to the public cloud. There, non-government organizations can apply crawlers and large language models to make the document stash digestible to a wider audience. Even documents with PII can be published by default if there is satisfactory technology to redact them automatically.

Because DOGE’s success will rely on access to an enormous volume of federal information, the creation of this department presents an incredible opportunity to open up government processes to external oversight. To be fair, a heightened level of transparency will not only expose government waste but may also reveal government agencies that function relatively well. 

But let the chips fall where they may: DOGE should act as a battering ram against the walls of federal secrecy.

Michael F. Cannon

I submitted the following recommendations to the “Department of Government Efficiency,” a private-sector organization that will advise President-elect Donald Trump on how to reduce inefficiency in the federal government. The following recommendations would cut federal health spending 49 percent below baseline over the next 10 years and erase the primary federal deficit by 2027, even after increasing military pay $100 billion per year (to pre-fund veterans benefits). I further submitted recommendations relating to federal tax policy and regulatory policy. The three sets of recommendations operationalize the reforms I propose in my latest book, Recovery: A Guide to Reforming the U.S. Health Sector (Cato Institute, 2023). 

The long-term federal debt problem is a health care problem. The Congressional Budget Office projects that only two categories of federal outlays will grow faster than gross domestic product (GDP): health care subsidies and interest payments on the debt. The former is, therefore, the primary driver of the latter.

Wasteful government health spending is rampant because nobody spends other people’s money as carefully as they spend their own. The best available data suggest that one-third of Medicare spending is pure waste (i.e., that Congress could cut Medicare spending by one-third without affecting overall health). 

Medicare sets and pays excessive prices for medical care. Spending on patients age 65 and up is more out of line with international norms than spending on patients below age 65. Medicare also has a large negative impact on health care quality.

Obamacare promised to make health care “affordable.” In reality, taxpayers are subsidizing enrollees earning up to $600,000 per year. Biden economic adviser Michael Geruso admits that Obamacare rations care for the sick and that “currently healthy consumers cannot be adequately insured.”

Pay-as-you-go funding of veterans benefits allows Congress to kick those costs into the future, which enables policymakers to ignore the largest fiscal cost of putting US troops’ lives at risk. Pre-funding and privatizing veterans benefits would force policymakers to justify those costs at the moment they are putting US lives at risk.

The House Republican Study Committee proposes to cut federal health spending 26 percent below baseline over the next decade.

The following reforms would cut federal health spending 49 percent below baseline over the same period and erase the primary deficit by 2027, even after increasing military pay $100 billion per year (to pre-fund veterans benefits). These reforms would deal a 100 percent cut to high-cost, low-quality health care providers and to the fraudulent schemes of providers and state officials. They would make health care more universal and give states flexibility to meet the needs of patients who cannot afford the medical care they need.

The federal government should do the following:

Cut Medicare spending by one-third; give Medicare’s remaining budget directly to enrollees as cash; give poorer and sicker enrollees larger “Medicare checks” than healthier and wealthier enrollees; and allow overall Medicare spending to grow no faster than GDP.
Adopt the Republican Study Committee proposal for Medicaid and Children’s Health Insurance Program spending in 2025 and give those funds to states as unrestricted, zero-growth block grants.
Repeal what’s left of the Patient Protection and Affordable Care Act of 2010 (i.e., Obamacare), including its grants to states and subsidies to private insurance companies.
Turn the Veterans Health Administration and its assets into a private, shareholder-owned corporation; give the $36 billion or so in shares away to current veterans; use the Department of Veterans Affairs existing budget to give current veterans annual, risk-adjusted subsidies sufficient to purchase private life, disability, and health insurance at actuarially fair premiums; increase military pay to enable active-duty military personnel to purchase such insurance that pays benefits once they leave active duty; allow that additional military pay to rise and fall automatically with those actuarially fair “veterans benefits” premiums.

Alex Nowrasteh and Ryan Bourne

Shortly after winning the 2024 election, President-elect Donald Trump announced the creation of a parastatal Department of Government Efficiency (DOGE) headed by Elon Musk and Vivek Ramaswamy. The goal of DOGE is to “pave the way … to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.” Those goals don’t just require tinkering around the edges or rooting out waste but shrinking the size and scope of the federal government.

Today, we released the “Cato Institute Report to the Department of Government Efficiency (DOGE): How to Downsize and Reform the Federal Government” to provide specific policy reform ideas to DOGE and, ultimately, Congress and the incoming administration.

The report covers 23 policy issue areas organized into three chapters focusing on bureaucracy and the administrative state, regulation, spending cuts, and tax reforms. Each chapter contains reform ideas with links to Cato’s longstanding research, incorporating recommendations for executive orders, regulatory changes, and spending cuts. Where possible, the chapters highlight budgetary savings from any spending cuts identified. We estimate that our initial annual proposed spending cuts are worth approximately $2 trillion.

Chapter 1 describes cuts and reforms to the Bureaucracy and the Administrative State, such as eliminating DEI programs, affirmative action, and collection of race data; ending government interference with online speech; privatizing or transferring to the states federally owned businesses and assets; and enacting wage, benefit, and headcount reductions for federal employees.

Chapter 2 details cuts to Regulation that would reduce costly overreach and boost economic performance. Those supply-side reforms should focus on energy production, environmental rules, the financial sector, health care, childcare, and the Jones Act and similar laws.

Chapter 3 proposes numerous Spending Cuts and Tax Reforms, such as ending aid to states and subsidies for politically favored sectors of the economy, sharply reducing federal involvement in education, streamlining national security spending, reining in emergency spending, and reforming entitlements.

The DOGE has an important and difficult mission, regardless of its eventual legal form. While some meaningful change can be achieved via executive actions and rulemaking powers, many other worthwhile reforms require Congress to change legislation.

DOGE should nevertheless encourage that action and recognize that eradicating waste, fraud, and regulatory duplication is not enough: A truly efficient government requires paring back the size and scope of the federal government. Cato’s report offers the most comprehensive guide to start that downsizing today.

Romina Boccia

This morning, December 11, I’ll testify before the House Committee on the Budget at a hearing on “Sounding the Alarm: Pathways and Possible Solutions to the US Fiscal Crisis.” The Honorable David Walker (former Comptroller General of the United States), Kurt Couchman (Americans for Prosperity), and Dr. Douglas Elmendorf (Harvard Kennedy School of Government) will also testify as witnesses. You can watch the hearing live on C‑SPAN, YouTube, or the Committee’s website.

The United States is speeding toward a fiscal reckoning, and policymakers seem content to look the other way. How long can a government keep recklessly borrowing without facing the consequences? Not forever—and the bill is coming due. In my upcoming testimony, I’ll address the perilous trajectory of federal debt, which threatens to erode the foundations of economic prosperity, deepen inequality, and undermine national security.

Unchecked borrowing by the federal government doesn’t just live in the abstract world of fiscal spreadsheets and Congressional Budget Office projections. It crowds out private investment, hobbling entrepreneurs and businesses that drive innovation and job creation. It raises the specter of runaway inflation and leads the Federal Reserve down a dangerous path of debt monetization. And when a fiscal crisis hits, it’s not Washington politicians who will pay the highest price—it’s American families.

The writing is on the wall: this path is unsustainable. The warning signs are flashing red. Credit rating agencies have sounded the alarm—Fitch and S&P have downgraded US sovereign debt, and Moody’s has shifted its outlook to negative, citing political dysfunction and fiscal irresponsibility. These are not distant, academic concerns. They reflect a real and growing fear that elected officials are incapable—or unwilling—to chart a sustainable fiscal course.

And yet, Congress remains indecisive. The United States has become a textbook example of how democracies without strong fiscal rules succumb to persistent deficits. But it doesn’t have to be this way. Countries like Germany, Switzerland, and Sweden have shown that effective reforms are possible. With debt brakes and deficit limits, they’ve reined in unfunded spending and stabilized their budgets.

The way forward is clear. Congress should adopt a fiscal stabilization plan with enforceable goals, like achieving primary balance or stabilizing the debt-to-GDP ratio. Entitlement programs, primarily Medicare and Social Security, which account for the entirety of America’s long-term unfunded obligations, must be reformed. Political gridlock is no excuse—establishing a fiscal commission modeled on the successful Base Realignment and Closure (BRAC) process can help Congress adopt necessary changes.

Long-term solutions require structural change. That means institutionalizing fiscal discipline through mechanisms like a debt brake or a balanced budget amendment. And these tools must be flexible enough to account for emergencies or economic downturns. Fiscal rules work best when they have broad-based support, clear targets, and built-in mechanisms to accommodate crisis deficits while aiming for long-term balance.

The stakes couldn’t be higher. Failing to act will leave working Americans footing the bill for today’s excesses, with fewer opportunities and greater economic uncertainty. By committing to reform, Congress can safeguard prosperity and ensure America’s fiscal health as a robust base for economic growth. But time is running out. Will lawmakers rise to the challenge—or will they let the debt crisis define our nation’s legacy?

Watch the Full Testimony Live

Ian Vásquez

Today, December 10, marks the one-year anniversary of Javier Milei in office. The Argentine president was elected promising a paradigm shift that would return his country to the classical liberalism that made it one of the richest countries in the world a century ago.

With that ambitious goal in mind, Milei has achieved much more than most people thought possible in such a short period of time. Such is the case that The Economist approvingly declared, “Milei’s first year holds lessons for the rest of the world.”

It’s worth remembering that when Milei assumed the presidency, Argentina was in the midst of a deepening crisis. This crisis was the result of 20 years of mostly Peronist rule and 80 years of a corporatist economic and political system that strengthened as time went by. Milei inherited a country suffering from more than 200% inflation in 2023, 40% poverty, a fiscal and quasi-fiscal deficit of 15% of GDP, a huge and growing public debt, a bankrupt central bank, and a shrinking economy.

So Milei’s message of freedom and the need for reform is understandable. But he is often misrepresented or misperceived. In fact, as The Economist observes,

“The left detests him and the Trumpian right embraces him, but he truly belongs to neither group. He has shown that the continual expansion of the state is not inevitable. And he is a principled rebuke to opportunistic populism, of the sort practised by Donald Trump. Mr Milei believes in free trade and free markets, not protectionism; fiscal discipline, not reckless borrowing; and, instead of spinning popular fantasies, brutal public truth-telling.”

To address the crisis, Milei has prioritized economic stability, telling Argentines that they will feel more pain before things get better but that there is no better path than thorough reform. The government immediately stopped spending more than it had, and the central bank subsequently stopped printing money. Milei cut spending by 30% and produced a fiscal surplus after his first month in office. Monthly inflation fell from 25% in December last year to 2.7% in October. Central bank debt was transferred to the Treasury, where it is being managed more transparently and on better terms.

Thus, Argentina has not only avoided default but has also generated growing confidence in its economy. Its country risk declined from over 2,100 points in January to around 735 points now. The confidence is also due to hundreds of deregulations that began with a mega-decree last December and the creation of the Ministry of Deregulation in July, which announces deregulations almost daily. We calculated that in his first year in office, Milei has issued some 672 regulatory reforms. That’s 1.84 reforms per day.

The economy has begun to recover, especially in certain sectors such as agriculture and energy. Real wages are improving. Poverty rose, as expected, to 55% in the first quarter. But it has started to fall and has reached 49%, according to a Di Tella University study.

Milei remains a popular president. After falling a bit, his popularity has increased in recent months and is at 52.3%, according to the Tendencias consulting firm.

Much more still needs to be done. After all, Milei started with a highly repressed economy. Argentina’s place in the Fraser Institute’s index of economic freedom was 159 out of 165 countries for 2022. Argentina still has a closed economy with barriers to trade and tight capital and exchange controls. Milei wants to open the economy once it stabilizes further and only then dollarize it and abolish the central bank.

Such measures would be welcomed sooner rather than later and would increase confidence in the economy. No doubt the economy is already in good enough shape to eliminate capital controls and start dollarization without creating too much turbulence in the short term.

The change that Milei has initiated has not only been economic and structural. It has also been cultural. Milei has promoted a shift in mentality away from the socialist and statist ideals that created the Argentine crisis and toward one that is supportive of civil society and the principles on which it relies, including tolerance, equality before the law, freedom, and individual responsibility. A new Reason documentary does a fine job highlighting the battle of ideas that Milei is waging and what’s at stake:

At a time when so many countries are moving in an illiberal direction, Milei has so far provided a salutary example of a better way forward.

Tad DeHaven

Department of Government Efficiency (DOGE) chiefs Elon Musk and Vivek Ramaswamy journeyed to Capitol Hill last week to meet with legislators. Republicans in the House and Senate have been organizing to focus on DOGE, and some Democrats have expressed interest in participating. 

The head of the new Senate DOGE Caucus, Iowa Republican Joni Ernst, sent Musk and Ramaswamy a letter with “a trillion dollars’ worth of ideas for trimming the fat and reducing red ink.” While the ideas listed aren’t specific enough to validate her figure, they contain some good suggestions. 

One idea, however, points to problems with focusing on examples of wasteful spending. A section titled “Stop Giving Away the Farm” bemoans the US Department of Agriculture (USDA) “subsidizing cricket farms or teaching pigs to play video games, that do nothing to support agriculture.” To the average person, that certainly sounds wasteful. Perhaps it is—waste sometimes is a subjective term. 

Last year, the USDA awarded Mighty Cricket, a Missouri company that makes protein powder from crickets, a $131,500 grant. Crickets are inherently nutritious and thus serve as a potentially markable alternative for consumers who eschew animal-based proteins. 

My issue is that food markets free of government interference should satisfy the wants and needs of consumers without taxpayers being compelled to provide financial assistance. Otherwise, it’s fair to say farming crickets for food is an agricultural activity. 

It’s also hard to see how spending $131,500 on cricket farming subsidies is “giving away the farm,” given the roughly $40 billion in total farm subsidies the USDA will provide this year at taxpayer expense. Chris Edwards explains that the USDA administers more than 150 programs that subsidize and support farm businesses, with most handouts going to corn, soybeans, and a handful of other crops. (Iowa is the largest producer of corn and ranks second for soybeans.) The average and median income for farm households is well above that for all US households, and the largest and wealthiest recipients of farm subsidies are the primary beneficiaries. 

Again, taxpayers shouldn’t finance cricket farmers. But it is disingenuous to suggest that a tiny —albeit inappropriate—grant to Mighty Cricket is the main problem with USDA spending while billions flow annually to politically favored commodities. DOGE should use its platform to make this point.

If Musk and Ramaswamy are willing and able to share the gospel of Downsizing Government with Congress, that would be great. At the very least, it’s good we’re finally discussing federal bloat after years of unrestrained spending being treated like a free lunch (it wasn’t). It’s also not sustainable. 

But getting Capitol Hill to agree to substantive cuts will be difficult. 

Twenty years ago, I took a job with a senator after he told me he wanted to cut spending and thought I was the person to help him do it. My first (and last) shot was an amendment the senator offered to cut $11 billion in funding from a 1,000-page, $286 billion transportation bill. It was a relatively small sum, but it was enough for the office phones to ring off the hook with unhappy transportation interests back in the state. The amendment failed, receiving only sixteen votes in support. Walking out of the Senate chamber, the visibly irritated senator looked at me and muttered, “That’s the last g*ddam time I do that.”

Parochial interests blowing up your phones isn’t fun. But whether it’s road projects or farm subsidies, there must be a shared political sacrifice for DOGE to be successful. Hopefully, DOGE, with requisite strong backing from the White House, can convince members to make that sacrifice for the country’s betterment. 

Adam N. Michel

The Congressional Budget Office (CBO) released new estimates on December 4 that show the effects of extending Trump’s first-term tax cuts, which expire at the end of 2025. On the surface, the congressional scorekeeper showed that the “Trump tax cuts won’t help the economy grow,” as the New York Times unhelpfully summarized. That headline cherry-picks a partial result to conclude precisely the opposite of what the CBO estimates show. 

A better summary would read, “Extending Trump tax cuts will boost the economy, despite drag of massive government debt.” That debt drag presents another argument for cutting spending. Fiscal discipline through spending cuts could act like supply-side tax reform and turbocharge other pro-growth tax cuts and deregulation. 

In a recent blog post, CBO Director Phill Swagel summarized two slide decks with separate estimates of the economic effects of extending the Tax Cuts and Jobs Act (TCJA) for individuals and businesses. The New York Times headline fixates on the first set of estimates for extending just the individual tax cuts. 

The first set of slides shows that over time, the economic benefits of keeping individual taxes from increasing—primarily people working more than they would otherwise—are outweighed by the negative economic effect of more government debt. 

In other words, when federal debt held by the public is more than $28 trillion, approaching 100 percent of gross domestic product (GDP), the benefit of mildly pro-growth tax cuts for individuals is outweighed by the economic costs of more debt. 

The second set of CBO estimates turns that result on its head. The 2017 reforms paired tax cuts for individuals with tax cuts for businesses and investors. Some changes, such as the reduction in the corporate income tax rate, were permanent; others phase out or expire next year. According to the CBO, making the most pro-growth business tax cuts permanent—expensing for equipment and research—boosts potential GDP by about 0.4 percent in 2034 (about the size of the debt drag from the individual tax cuts).

Taken together, the CBO’s estimates for making both the individual and business tax cuts permanent imply extending the entire 2017 tax cuts would boost GDP by roughly 0.3 percent in 2034.

The CBO results also show that the business tax cuts are significantly more pro-growth than the individual tax cuts (scaling the economic boost by the size of the revenue reduction). This is consistent with other, more optimistic results from the Tax Foundation, which finds a permanent version of the TCJA grows GDP by 1.1 percent in the long run (with different assumptions about how debt impacts the economy).

The second missing piece of the story is that the economic risks of large government debts are not an immutable fact; the federal debt is a policy choice made by Congress. Making different choices, such as pairing tax cuts with spending cuts, would be massively pro-growth. The debt drag in the CBO model is the product of cutting taxes without offsetting spending cuts. 

When deficits are high, cutting spending is its own supply-side reform. Pairing deficit-reducing spending cuts with pro-growth tax cuts reinforces the GDP-boosting effects of both policies. This is one result found in economist Alberto Alesina’s research on fiscal adjustments; large gaps between revenues and spending can create economic uncertainty for forward-looking investors and consumers who understand that spending levels determine the long-run tax rate. In this circumstance, cutting spending signals commitment to keeping taxes low—as opposed to the current fiscal path with no spending cuts and thus necessary tax increases. In a 2020 working paper, John Cogan, Daniel Heil, and John Taylor show that holding down projected expenditure growth can boost short- and long-run private investment, personal consumption, and GDP growth.

The headline from the CBO’s estimates is that the economic effects of pairing the most pro-growth business tax cuts with individual tax cuts outweigh the very real drag of large and growing government debt. However, this leaves massive economic gains on the table. The more important message for Congress is that signaling fiscal discipline to markets is its own supply-side tax cut that would turbocharge other policies like full expensing, lower business tax rates, and deregulation.