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Travis Fisher

The Inflation Reduction Act (IRA) offers a master class in implementing expensive, counterproductive, and highly partisan energy policy. In previous posts, I discussed 1) how the electricity generation subsidies in the IRA could cost taxpayers $2.5 or $3 trillion and 2) why policymakers should remove those subsidies before expanding the high‐​voltage transmission system. As we count the reasons why repealing the energy subsidies in the IRA is a good idea, let’s also consider their interaction with the Environmental Protection Agency’s (EPA’s) proposed power plant rule.

It is technically true that, as Senator Joe Manchin has said, “[n]either the Bipartisan Infrastructure Law nor the IRA gave new authority to regulate power plant emission standards.” However, the IRA did provide the foundation upon which the EPA has built its power plant regulation by subsidizing the technologies that enable the new standards. Consequently, lawmakers who oppose the EPA’s overreach should consider repealing the energy subsidies in the IRA.

What is the EPA’s New Power Plant Rule?

Proposed in May of this year, the EPA’s new power plant rule looks a lot like the Clean Power Plan (CPP), which was struck down by the Supreme Court last year in the landmark case West Virginia v. EPA. Some have referred to the new rule as CPP 2.0, which is a much shorter name than the 39‐​word title the EPA gave it (“New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel‐​Fired Electric Generating Units: Emission Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel‐​Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule”).

Many analysts believe, as I do, that CPP 2.0 ultimately will be struck down or rescinded for at least three reasons: 1) it will cause electricity prices to skyrocket, 2) it will exacerbate a looming grid reliability crisis (according to grid operators), and 3) it is a regulatory overreach just like CPP 1.0. (For a more thorough examination of the flaws in the CPP 2.0 proposal, see this set of joint comments submitted in the EPA docket.)

Although a final rule has not yet been published, I have no faith that the EPA will heed any of the recommendations offered by commenters on the proposal. After all, the EPA was rebuked just last year by the Supreme Court, yet its next action under the same statute—section 111 of the Clean Air Act (CAA)—once again violates the Major Questions Doctrine, the same doctrine invoked to invalidate the EPA’s CPP 1.0.

In other words, if the EPA won’t listen to the Supreme Court, what are the odds it will listen to commenters?

How EPA Established the Proposed Standards in CPP 2.0

Close followers of the CAA are familiar with the alphabet soup involved in federal air regulations. For the uninitiated, the acronyms and initials may be daunting, but the fundamental concepts are easy to understand. The energy team at the law firm Van Ness Feldman aptly explained the process of regulating pollution under section 111 of the CAA as follows:

CAA section 111 directs EPA to establish standards for controlling air pollutants for categories of major stationary sources, which include electric generating units (EGUs). Section 111 outlines a two‐​step process for establishing a standard of performance for emissions from EGUs. Under the first step, EPA determines the “best system of emission reduction” (BSER) for the relevant pollutant that is “adequately demonstrated,” taking into consideration cost, any non‐​air quality health and environmental impacts, and energy requirements. EPA then sets a standard that quantifies the “degree of emission limitation achievable through the application” of the BSER. Sources subject to the standard of performance can use any system of reduction to meet the limit; they are not required to use the system EPA determined is the BSER.

In the case of CPP 2.0, the EPA selected two technologies as the BSER used to establish greenhouse gas (GHG) reductions in the electric power sector—carbon capture and sequestration/​storage (CCS) and low‐​GHG hydrogen. With CCS and low‐​GHG hydrogen as the BSER, power plants across the country will have to 1) apply one or both of those technologies or 2) meet the same level of emissions reductions enabled by these technologies in some other way, most likely by simply shutting down power plants.

The CPP 2.0 proposal would impact all power plants that use fossil fuels to generate electricity, chiefly the coal‐​fired and natural gas‐​fired plants that together provided about 60 percent of the energy on the power grid last year (20 percent from coal and 40 percent from natural gas).

Why the Definition of ‘Adequately Demonstrated’ Matters

The fact that the EPA must choose the BSER using technologies that are “adequately demonstrated” is important because it’s one of the main ways the EPA is held to some measure of realism in crafting its rules. To be clear, CCS and low‐​GHG hydrogen are nowhere near “adequately demonstrated” according to the plain meaning of those words. Neither technology is available presently on a commercial scale, and both suffer from severe limitations.

For example, CCS requires a vast network of new pipelines to transport carbon dioxide (CO2) from places where fossil fuels are combusted to places where CO2 can be injected and stored in suitable geologic formations. Given the forceful protests that nearly all linear infrastructure projects face, it is unclear whether that network can be built at all under current law, let alone on the EPA’s timeline. Energy realist Robert Bryce offered the following observation:

[T]he amount of gas involved is staggering. A bit of simple math shows that sequestering 600 million tons of CO2 per year (the number the EPA published in its May 11 press release) would require creating an industry capable of handling a mass of CO2 that’s equal to about 12 million barrels of oil per day. In other words, the EPA’s proposed CCS plan if enacted, would require creating the U.S. oil industry in reverse. (U.S. oil production is now about 12.5 million barrels per day.)

However, under precedent established by the Court of Appeals in the DC Circuit, the EPA can choose as the BSER the technologies it reasonably expects to become available in the relevant timeframe. An “adequately demonstrated” technology is, according to the DC Circuit in Essex Chemical Corp. v. Ruckelshaus (a case cited in the proposed rule at page 33272):

[O]ne which has been shown to be reasonably reliable, reasonably efficient, and which can reasonably be expected to serve the interests of pollution control without becoming exorbitantly costly in an economic or environmental way.

CCS fails the test outlined above because it has not been shown to be reliable, efficient, or cost‐​effective. Ditto for low‐​GHG hydrogen, which is not only exorbitantly costly but may not be viable without CCS. That’s because 95 percent of the hydrogen produced in the United States today comes from natural gas via steam methane reforming. CO2 is a byproduct of that process, so the vast majority of hydrogen produced would only be “low‐​GHG,” if the carbon dioxide byproduct is captured and stored.

Only 1 percent of domestic hydrogen is produced via electrolysis, which does not directly emit GHGs but could rely on electricity from GHG‐​emitting sources. (The remaining 4 percent of domestic hydrogen is produced by partial oxidation of natural gas via coal gasification.)

As of 2021, there were over 2,000 natural gas‐​fired power plants in the United States. So even if we assume every coal plant will simply close, reconfiguring all the natural gas plants in the U.S. is no small task. Those 2,000 natural gas‐​fired power plants provided about 40 percent of the electricity generated in 2022, making natural gas by far the largest energy source on the grid. Whether power plant operators choose CCS or low‐​GHG hydrogen to comply with the CPP 2.0, the effort would be something between Herculean and impossible. In no way are the BSER technologies “adequately demonstrated.”

The IRA Allows EPA to Disconnect its Rules from Reality

The energy subsidies in the IRA enable the EPA’s overreach because they allow the EPA to set unrealistic standards. In the CPP 2.0 proposal, EPA relied explicitly on the subsidies in the IRA to claim that the BSER technologies—CCS and low‐​GHG hydrogen—are “adequately demonstrated.”

If the technology were actually “adequately demonstrated,” why are the subsidies required in the first place? Presumably, technology that functions as intended and is economically efficient wouldn’t require subsidies to be “adequately demonstrated.” Specifically, the EPA said in the CPP 2.0 proposal:

The legislative history of the IRA makes clear that Congress was well aware that the EPA may promulgate rulemaking under CAA section 111 based on CCS and explicitly stated that the EPA should consider the tax credit to reduce the costs of CCUS (i.e., CCS).

To reiterate the reliance of widespread CCS adoption on IRA subsidies, EPA stated the following on page 33373 of CPP 2.0:

EPA is projecting approximately 12 GW of coal‐​fired generation will likely retrofit with CCS in order to meet the proposed January 1, 2030, compliance date for affected long‐​term coal‐​fired steam generating units. These and other CCS projects that are likely to be occurring in response to the IRA may take up a significant amount of the capacity to plan and build CCS between 2023 and 2030 [emphasis added].

The same analysis applies to low‐​GHG hydrogen. Contrary to the observed reality that low‐​GHG hydrogen only comprises 1 percent of domestic production, the EPA claims on page 33310 of CPP 2.0 that:

Given the incentives provided in both the IRA and [Infrastructure Investment and Jobs Act] for low‐​GHG hydrogen production and the current trajectory of hydrogen use in the power sector, by 2032, the start date for compliance with the proposed second phase of the standards for this rule, low‐​GHG hydrogen may be the most common source of hydrogen available for electricity production.

In essence, the EPA claimed low‐​GHG hydrogen would transform itself from 1 percent of the domestic hydrogen market to the majority of the market based on lavish subsidies. This is fanciful thinking applied to environmental regulation—the EPA can establish whatever standards it wants if the BSER technology is sufficiently subsidized.

This is a harmful precedent and does not accurately reflect reality. The standard in the CAA that the BSER be “adequately demonstrated” is instead becoming a standard that the BSER be “adequately subsidized.”

Conclusion

The energy subsidies in the IRA provide the foundation upon which the EPA built the CPP 2.0. The BSER established in the EPA’s new power plant regulation is only “adequately demonstrated” by the heavy subsidies in the IRA. Consequently, lawmakers who oppose the EPA’s overreach and want to see a reliable and cost‐​effective power grid in the United States should consider repealing the energy subsidies in the IRA.

Jeffrey A. Singer

When the California legislature passed a bipartisan bill one month ago that would decriminalize possessing and personally using certain plant‐​based psychedelic drugs, I welcomed the action as building momentum toward full legalization of a class of drugs with great potential to treat depression, post‐​traumatic stress disorder, addiction, and a host of other mental health disorders. Alas, over the weekend, California Governor Gavin Newsom vetoed the bill.

The legislation would have effectively allowed people to possess small amounts of psilocybin or psilocin (found in so‐​called “magic mushrooms”), DMT (found in ayahuasca), and mescaline (found in peyote and other cactus plants) but explicitly would not have legalized the sale of these products, or allowed psychotherapists or “facilitators” to administer them to people for psychedelic‐​assisted psychotherapy. The bill did not decriminalize possessing ibogaine (found in the iboga shrub) or synthetic psychedelics such as LSD or MDMA.

In vetoing the bill, Governor Newsom stated:

California should immediately begin work to set up regulated treatment guidelines—replete with dosing information, therapeutic guidelines, rules to prevent against exploitation during guided treatments, and medical clearance of no underlying psychoses. Unfortunately, this bill would decriminalize possession prior to these guidelines going into place, and I cannot sign it.

The governor’s veto message is simultaneously a non sequitur and a “catch‐​22.” First, the bill didn’t decriminalize psychedelic‐​assisted therapy, only personal possession. So, the governor’s concerns about “dosing information, therapeutic guidelines, and rules to prevent exploitation during treatments” do not logically connect to the language or intent of the law.

Second, there is no way clinicians can develop dosing information and therapeutic guidelines for psychedelic‐​assisted therapies when the drugs remain illegal and essentially off‐​limits to clinical research. Yet that’s how medical science works: clinical researchers perform trials using varying doses and treatment modalities, report their findings, and thus develop and refine dosage and therapeutic guidelines.

Despite decades of clinical research providing evidence of psychedelics’ therapeutic potential, the Drug Enforcement Administration decided that psychedelics have “no currently accepted medical use.” It classified them as Schedule 1 drugs, another example of “cops practicing medicine.”

By placing psychedelics on Schedule 1, the DEA erected many regulatory obstacles for researchers wishing to conduct clinical trials that could yield information regarding the efficacy, dosage, and therapeutic guidelines of plant‐​based or synthetic psychedelics. Additionally, plant‐​based psychedelics, as well as synthetics such as LSD or MDMA, are off‐​patent. While pharmaceutical companies can still patent the processes by which they extract or synthesize psychedelics, they have little incentive to seek DEA approval for clinical psychedelic research.

One example of a DEA and Food and Drug Administration‐​approved clinical trial is the phase 2 trial of psilocin (the active component of psilocybin found in certain mushrooms) reported in the August 31, 2023 issue of the Journal of the American Medical Association. Researchers published the results of a multi‐​center, six‐​week randomized, controlled placebo‐​based trial with 104 adults who met diagnostic criteria for major depressive disorder (MDD). Participants were given either 25 mg of pharmaceutical‐​grade psilocin or 100 mg of niacin (as a placebo) and psychological support. The researchers followed the participants for six weeks after one treatment session. The result:

Psilocybin treatment was associated with a clinically significant sustained reduction in depressive symptoms and functional disability, without serious adverse events. These findings add to increasing evidence that psilocybin—when administered with psychological support—may hold promise as a novel intervention for MDD.

This means psilocybin or psilocin combined with psychological support might eliminate the need for many patients to continually take antidepressants, many of which have side effects and require gradual tapering to avoid withdrawal symptoms. Findings like this might provide another explanation for why many pharmaceutical manufacturers lack the incentive to seek permission from federal law enforcement to conduct clinical research on psychedelics.

This is not the first time Governor Newsom struck a blow against harm reduction and drug policy reform. A year ago, he vetoed a bill that would have allowed certain state urban areas to establish overdose prevention center (OPC) pilot programs. Despite a wealth of evidence showing OPCs have reduced deaths and disease since the 1980s (New York City’s two city‐​sanctioned centers saved over 1000 lives in a little over a year), Newsom echoed drug‐​war zealots who criticize this proven harm reduction strategy by expressing in his veto message unfounded concerns that OPCs would encourage illegal drug use.

Meanwhile, Californians seeking psychedelic‐​assisted therapy will need to travel to Oregon or Colorado. Oregon recently announced the first functioning legal system under which patients may obtain psilocybin‐​assisted psychotherapy, the result of Measure 109 that Oregon voters passed in 2020. That same year, Oregon voters decriminalized personal possession of all federally‐​illegal drugs.

In November 2022, Colorado voters approved Proposition 122, authorizing the state to establish a regulatory system resembling Oregon’s by the end of 2024. It has the added feature of creating a “gray market” in psychedelic‐​assisted psychotherapy, in which people can give away or share psychedelics and offer “services” or “support” to people who personally possess and use psychedelics independent of the state regulatory scheme. Colorado’s law decriminalizes more than psilocybin or psilocin. It also decriminalizes ibogaine, DMT, and mescaline.

As clinicians and facilitators gain experience with psychedelic‐​assisted therapies in those states, the body of knowledge about dosing and therapeutic practice standards will grow organically despite a dearth of DEA or FDA‐​approved clinical trials.

Several cities in the United States have also decriminalized or reduced penalties for people who possess psychedelics for personal use. The city council of Santa Cruz, California, for instance, passed a resolution in 2020 instructing local law enforcement to assign the lowest priority to enforcing laws against the personal possession of plant‐​based psychedelics.

With a federal election just over a year away and Governor Newsom increasingly taking to the national stage, it is reasonable to suspect that political considerations played at least as much of a role as his stated concerns about dosages and clinical practice standards in his decision to veto the bill.

In seeking to exercise their fundamental right to self‐​medicate, voters in Oregon and Colorado went around their governors and legislators by approving ballot initiatives. On the other hand, Californians relied on their representatives and their governor in Sacramento. Perhaps people in California and elsewhere will draw a lesson from this.

David Boaz

Authoritarian—and not just authoritarian—governments typically see national history as an important way to shore up support for the regime. China is probably the most prominent example of that right now, as Xi Jinping and the Chinese Communist Party reinforce their efforts to teach every Chinese citizen the glories of the party’s history and to conceal the truth about such crimes as the land‐​reform campaigns of the early fifties, the Cultural Revolution, the Great Leap Forward, and the Tiananmen Square massacre. But a new book reveals the efforts of unofficial historians to make sure the truth is not lost.

The book by Ian Johnson is Sparks: China’s Underground Historians and Their Battle for the Future. Ian Buruma has a long and informative review in the New Yorker:

Johnson’s underground historians are mostly concerned with unearthing and keeping alive forbidden memories of the past. Official Party history, imposed on China’s population, is also a matter of official forgetting. Many people born in China after 1989 have never heard of the Tiananmen massacre. Many of the young people who lived through the Cultural Revolution, in the nineteen‐​sixties and early seventies, would have had limited knowledge of the Great Leap Forward, in the late fifties and early sixties, when Mao’s crackpot schemes for industrial and agricultural transformation caused tens of millions of deaths from starvation. And many of those who starved may not have been fully aware of the land‐​reform campaigns of the early fifties, when vast numbers of people were murdered as class enemies, because they owned some land (as Mao’s father did, but that is a fact Party ideologues prefer to keep quiet).

The book’s title comes from a secretly mimeographed magazine, Spark, that began in 1960. It lasted only two issues, “and some of the contributors were executed as ‘counter‐​revolutionaries’ after spending years in prison under horrifying conditions.” But it inspired “the writers, the scholars, the poets, and the filmmakers who found the courage to challenge Communist Party propaganda.”

Johnson describes efforts over many decades and also ongoing work today. Of course, “None of this work can be released in China.… But Johnson’s underground historians are mostly concerned with unearthing and keeping alive forbidden memories of the past. Official Party history, imposed on China’s population, is also a matter of official forgetting.”

It’s an inspiring story. And of course China is not the only country trying to craft an official history that may veer far from the truth. The Soviet Union pioneered official history and official forgetting before Mao came to power and before George Orwell wrote Nineteen Eighty‐​Four. After the fall of the USSR the dissident and human rights activist Vladimir Bukovsky, who late in life was a Cato senior fellow, devoted much of his efforts, along with organizations as Memorial, to exposing the crimes of the Communist Party.

Of course, history is a concern of liberal and democratic countries as well. Shakespeare wrote plays that promoted the claims and the achievement of the Tudor dynasty, which was most pleasing to Queen Elizabeth I. The American Founders believed that the study of history is our best guide to the present and the future. The authors of the Federalist Papers wrote of history as “the oracle of truth” and “the least fallible guide of human opinions.” From their study of history they learned of the ancient rights of Englishmen, the importance of individual virtue in preserving freedom, and the dangers of power and thus the necessity of constraining and dividing it.

History helps us to understand the development of our civilization, including the ideas that shape it. Often the ideas that we now regard as universal principles arose in response to particular circumstances. Magna Carta and similar medieval charters reflect the struggle to constrain the power of kings. From such guarantees of specific liberties, eventually liberty developed. The rights guaranteed in the Bill of Rights reflected particular historical experiences: with religious wars, censorship, confiscation of property, the Star Chamber, and the constant tendency of government to seek more power.

People get much of their understanding of government and policy from history. The way we view the Constitution, slavery, Jim Crow, the industrial revolution, the robber barons, the New Deal, and other historical events shapes our view of the present. And in a liberal society we’re not always going to agree on the lessons or even the facts of history.

Scholars such as Frances Fitzgerald have written about past battles over how to tell the American story. And of course we’re having heated disputes today over how to understand and teach American history.

But for now I want to focus on the courageous efforts of Chinese citizens who have given so much to keep the truth alive. And I’ll also note that we at the Cato Institute have done our very little bit to introduce dissident ideas into China.

During the post‐​Mao opening Cato held conferences on liberty, limited government, and free markets in China in 1988,1997, 2000, and 2001. The 1998 conference, featuring Milton Friedman, numerous Chinese scholars, and a Friedman meeting with Premier Zhao Ziyang, was surely the first conference on market liberalism in Chinese history. Papers from the conference were published in both English and Chinese (English title Economic Reform in China), as were papers from the 1997 conference (China in the New Millennium). Several Cato books have been published in China: my Libertarianism: A Primer (later updated as The Libertarian Mind) in 2012, Johan Norberg’s books In Defense of Global Capitalism and Progress, Randal O’Toole’s Gridlock and The Best‐​Laid Plans, and just last month the Cato Handbook for Policymakers.

Ian Johnson is telling an important story of heroic Chinese people who for more than 60 years have been making sure historical truth is not lost in a great country.

Colleen Hroncich

Matt Barnard was a long‐​time public school math teacher. As he saw things he didn’t agree with happening at his school, he and his wife, Amy, decided to begin homeschooling their son. They partnered with friends from church, Amanda and Ryan Zaring, who had also decided to begin homeschooling. Amanda covered English and history during the day while Matt covered Math in the evenings.

They realized other Christian families needed affordable educational options beyond the public school. They felt called by God to start a new Christian school. At the same time, a local church was looking for ways to use their building to help advance their mission. It was a perfect match. Refine KC opened in Kansas City on August 29, 2022, with 15 students ranging from grades 1–11. This year, the school has more than doubled, with 40 students from pre‑K through 12th grade.

The small size allows each student to have a personalized experience. “Refine KC has given students a school community where they feel like they belong,” says Matt. “Students are placed in coursework not based on a grade level or age, but based on their current abilities. This allows students who struggle academically to go back and truly master learning objectives, especially in reading and math. It also gives students the opportunity to move forward in more challenging coursework if they are ready. Students are really taking ownership of their learning and becoming better advocates for themselves.”

This approach is attracting students that don’t necessarily fit the mold of other schools. Some of the them are very advanced for their age and others are struggling. It was hard for their parents to find a school that would meet their needs—until they found Refine KC. “Our families feel like they truly have a partnership with us as we all work together to equip these children both academically and spiritually,” Matt explains.

Refine KC meets Monday‐​Thursday for regular academics, such as English, math, science, history, Bible, physical education, and music. Most of the students are full‐​time, but there are a couple of homeschooled students who only come for certain classes. Every other Friday, the school operates in the morning for enrichment activities, extra academic support, and community service projects.

A typical school day at Refine KC starts with a group lesson followed by small group time for more individualized support. Students must show mastery of a topic before moving on. This approach is meant to help students become advocates in their own learning and develop strong critical thinking skills.

Matt notes that they often get referrals from other schools because Refine KC is so unique with its size and personalized approach. He says they want to keep the school small because that’s part of its character. But if interest continues to grow, he’d be happy to see other Refine KC schools open. Along those lines, they’re very intentional in creating school policies so they can use their experiences to help other school founders down the road.

For anyone who is considering starting a new school, Matt has encouraging words. “Every school startup has its own story, its own mission, and its own niche. If starting a school has been put on your heart, seek wisdom from others who may have already been in the same position. Share your heart with others and form a small team of people who are committed to the mission in your area. It will take many long nights and in‐​depth conversations to make the vision a reality. What you envision for your startup might not be exactly what you dreamed; therefore, the ability to be flexible as founders and as a staff is essential.

“Founding and running a school becomes your life. In the end though, it’s worth it as you seek to change the lives of the children and families that will come together. We have also seen God move at Refine KC as He has provided so much. Through our journey, it has been so important to have people pray for the mission as this has truly been a leap of faith for all of us.”

Refine KC is a unique school and wouldn’t be the right fit for everyone. But the year‐​to‐​year growth indicates many families are drawn to this model. Plus, I was able to tour the school recently and meet with the teachers. They indicated how much they enjoyed teaching in such a personalized, faith‐​filled, and family‐​friendly school. That’s the beauty of having more options in education—it allows families and teachers to find the environment that works best for them.

Neal McCluskey and Mustafa Akyol

We are in the midst of Banned Books Week. A creation of many groups, including publishers, librarians, and booksellers, the week is intended to shine a spotlight on challenges to books, especially in public schools and libraries. If such challenges are not what immediately come to mind when you think of “book banning” – if, rather, the term conjures images of police rounding up books from homes and hiding places – that’s because such challenges are not what true bans are.

Opposition to books in public institutions stems from serious curbs on liberty, but as one of us knows firsthand, it is not equivalent to actual book bans.

When government truly bans a book, it makes possessing, publishing, or selling that book illegal. You can also go to jail as its author.

This is what happened with Mustafa Akyol’s book Islam Without Extremes: A Muslim Case for Liberty in Malaysia. Originally released in English in 2011, the book was published in Bahasa Malay in 2017, and Mustafa, as an invitee of the publisher, travelled to Kuala Lumpur to speak about it to public audiences. But soon he was arrested by the “religion police” for basically arguing that, well, there should be no religion police.

Meanwhile, the book itself was banned in an official decision announced by Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi, with bookstores prohibited from selling any copies. To break the censorship, Cato and Mustafa offered the book’s digital copy freely on the Cato Institute website, leading to thousands of downloads.

That situation was worse than what is happening in American public schools and libraries, where banning is rife if you ask groups associated with Banned Books Week. Arguably the highest profile of those groups is free‐​speech watchdog PEN America, which has reported that in the 2022–23 school year 3,362 books in public schools met their definition of banned: “either completely removed from availability to students, or where access to a book is restricted or diminished.”

Note that there is no legal penalty for publishing a book, or a child or adult owning it, or reading it, in PEN’s definition. No one is being punished for selling it. The “banning” is removal from a public institution, or restricting minors’ access in that institution. It is not the infringement on freedom that true banning is.

It does, though, see the same entity curbing liberty as in Malaysia and elsewhere: government. But government’s role is different.

In true banning, governments deem books unacceptable for private selling, disseminating, or possession, directly infringing on the right to speak and read. This is despotism.

The governmental curb on liberty in American “banning” is not prohibiting reading or possession of specific books, but government forcing all taxpayers to pay for books it chooses, including taxpayers who find the books immoral. Compounding the infringement, public schools – government schools – often give children lists of books from which they must choose, and assign specific books to read.

When a public school or library selects a book for shelves, reading lists, or assignments, government is elevating that speech. Conversely, what it does not select, it suppresses relative to readings it deems worthy. This is not as egregious as prohibiting writing or possessing books, but government favoring and disfavoring speech is nonetheless a serious infringement on liberty and equality.

In the United States, the attack on liberty is not removal efforts, as it is when government says one cannot sell or possess a book. It is government forcing taxpayers to purchase and promulgate books of its choosing.

Marc Joffe

Two recent developments reinforce the case against new, large government‐​run rail projects. These initiatives are usually a bad deal for taxpayers given their high and unpredictable costs, long construction cycles, and disappointing ridership.

First, Prime Minister Rishi Sunak radically downsized Britain’s ambitious HS2 high‐​speed rail project intended to connect Central London with Manchester in the north of England. Estimated costs had ballooned to £106 billion (or $129 billion at the recent exchange rate).

HS2’s northern terminus will now be at Birmingham, limiting the project which was originally expected to include 335 miles of track, to just 140 miles. And the first six miles between London Euston and Old Oak Common in the London suburbs will only be built if private funding can be found.

Sunak announced his decision at the Conservative Party conference on October 4, telling attendees:

HS2 is the ultimate example of the old consensus. The result is a project whose costs have more than doubled, which has been repeatedly delayed and it is not scheduled to reach here in Manchester for almost two decades… and for which the economic case has massively weakened with the changes to business travel post‐​Covid. I say, to those who backed the project in the first place, the facts have changed. And the right thing to do when the facts change, is to have the courage to change direction. So I am ending this long‐​running saga. I am cancelling the rest of the HS2 project.

Much the same can be said of California’s high‐​speed rail project. As I discussed here previously, estimated project costs have roughly tripled since it was originally sold to voters in 2008 and the completion date will be at least a decade later than the original expectation of 2020. And, with California population not growing in accordance with projections, the high‐​speed rail authority has reduced its ridership forecasts.

Perhaps California Governor Gavin Newsom can take a page from Prime Minister Sunak by truncating his own high‐​speed rail project. Newsom indicated such an intention in his 2019 State of the State speech, but rapidly backtracked after facing criticism from project advocates.

Meanwhile, in Northern California residents have been absorbing the latest bad news about one of its own rail‐​based white elephants. The six‐​mile extension of the Bay Area Rapid Transit (BART) system through downtown San Jose received a new price tag and delivery date.

The construction cost estimate was raised from $9.3 billion to $12.2 billion (or roughly $2 billion per mile), and revenue service is now not expected until 2036.

The new completion date is one year after Californians will be prohibited from buying cars with internal combustion engines. As I wrote previously, the extension will replace very few car trips and a large proportion of those theoretically would have been in electric vehicles. As a result, the BART project is an extremely inefficient way of battling climate change.

Local leaders have generally supported the BART extension despite its poor cost/​benefit profile, but perhaps now someone in power will call for a reappraisal. As with high‐​speed rail, the project has strong support from advocates and special interests. It remains to be seen whether any California official will stand up to the train lobby and take the side of the state’s beleaguered taxpayers.

Michael Chapman

During the 2020 presidential race, Joe Biden pledged to play tough with Saudi Arabia and hold it accountable for its human rights abuses – in one case, especially: the regime’s murder of journalist Jamal Khashoggi. However, as a recent Cato policy analysis by Jon Hoffmann, Pariah or Partner? details, Biden did not keep his promise after the election and is now seeking to build warmer US‐​Saudi relations.

A cushier relationship between the countries is not wise policy, according to the Cato report, which states that “Saudi Arabia actively undermines both U.S. interests and values.” One of those interests is human rights. Saudi Arabia’s human rights record should make it a pariah among nations. Let’s look at just a few of the facts about the Saudi regime.

The US State Department’s 2022 Country Reports on Human Rights: Saudi Arabia reports,

“Capital punishment may be imposed for a range of nonviolent offenses, including apostasy, sorcery, and adultery, although in practice death sentences for apostasy, sorcery, and adultery were rare and usually reduced on appeal.”
“… members of the Shia minority and members of the al‐​Huwaitat tribe were disproportionately sentenced to death.”
“Amnesty International reported that Saudi Arabia executed 148 persons in the first 11 months of 2022 and that in March, the authorities executed 81 individuals in a day—the largest mass execution in years—including 41 individuals who were from the Saudi Shi’a minority.”
“On April 11, the Sanad and THE WINA human rights organizations reported that Abdullah bin Abdulrahman al‐​Kamli, age 29, died in prison with marks indicating that he died under torture.”
“…[O]n November 10, the government resumed executions for drug‐​related crimes when it executed two Pakistani nationals for smuggling heroin, according to Amnesty International. By year’s end, a total of 20 drug‐​related executions had been carried out despite the announced moratorium [against capital punishment for drug crimes].”
“…[T]he European Saudi Organization for Human Rights (ESOHR) said it had documented 21 killings by government officials or others in prisons during the period from December 2010 to October 2021.”
“There were numerous credible reports of disappearances carried out by or on behalf of government authorities. … [A]uthorities arrested and forcibly disappeared rapper and songwriter Omar Shiboba in mid‐​March for unknown reasons without a charge. As of year’s end, his whereabouts were unknown.”
“[T]here were numerous credible reports … of torture and other cruel, inhuman, or degrading treatment or punishment by government officials and law enforcement officers, and of defendants’ confessions being obtained through torture or other mistreatment.”
“[L]awyer and activist Mut‘ib bin Zafir al‐​Amri … had been subjected to severe physical and psychological torture since 2018 by government officials in Dahban Prison, including beatings and electric shocks.”
“… [W]riter, translator, and computer programmer Osama Khaled, detained since 2020, was sentenced to a prison term of 32 years …following ‘allegations relating to the right of free speech.’”
“… U.S.-Saudi citizen Saad Almadi, age 72, was sentenced to 16 years in prison, plus a 16‐​year and 3‑month long travel ban, for tweets he primarily posted while abroad, some of which were critical of the government.”
“There were reports that authorities attempted to intimidate critics living abroad, pressured their relatives in country, and in certain instances abducted or pressured dissidents and repatriated them to the country.”
“[F]ormer interior ministry official Salem al‐​Muzaini, who is the son‐​in‐​law of exiled former senior security official Saad al‐​Jabri, was abducted from a third country in 2017, forcibly returned to Saudi Arabia, tortured, and detained.”
“T]he government uses the Kollona Amn (We Are All Security) app, which allows citizens to report others alleged to be critical online of the government, and to target female critics of the government.”
“Government authorities regularly surveilled websites, blogs, chat rooms, social media sites, emails, and text messages.”

Those are just some of the human rights abuses in Saudi Arabia reported by the US State Department for one year (2022).

On a related note, Amnesty International reported that Saudi Arabia passed a new Personal Status Law in March 2022, which “enables discrimination against women, including through male guardianship. Only men can be legal guardians under this law, and women must have a male guardian’s permission to marry and are then obliged to obey their husband.”

Twenty‐​one years ago, Cato Senior Fellow Doug Bandow wrote a policy analysis about America’s dubious alliance with Saudi Arabia, describing the nation as “a corrupt totalitarian regime.” He concluded, “Although America should not retreat from the world, it should stop supporting illegitimate and unpopular regimes where its vital interests are not involved, as in Saudi Arabia.”

That policy change is long overdue.

Adam N. Michel

Interest rates on 10‐​year Treasury bonds recently surpassed 4.7 percent after not exceeding 3.1 percent in the decade before 2022. Rising bond yields make borrowing more expensive for the federal government and increases the likelihood of a fiscal crisis.

In July, the Congressional Budget Office (CBO) assumed 10‐​year bond yields would be 3.8 percent right now, rising to 4 percent in 2024. We breached the 4 percent threshold in August.

In addition to increasing the cost of new borrowing, higher interest rates mean the US government’s $25 trillion of outstanding debt held by the public will grow more quickly as it is refinanced at higher rates. About half of the debt will need to be refinanced over the next three years.

As a rule of thumb, Brian Riedl estimates that “each additional [interest rate] percentage point would cost Washington $2.8 trillion over the decade, and $30 trillion over three decades.”

Where interest rates will eventually settle is unclear. But two things are clear. First, investors are currently demanding a higher return to lend to the federal government. Second, the federal government intends to continue borrowing—with annual deficits already projected to rise past $2 trillion within the decade.

High and rising interest rates increase the prospect of a European‐​style fiscal crisis. Sooner or later, rising interest rates will create a doom loop of more borrowing just to service interest payments on existing debt. When such an episode occurs, governments are typically forced into undertaking rapid deficit reduction efforts. They can cut spending, increase taxes, or both.

Politicians often turn to tax increases first, but tax‐​heavy fiscal adjustments often fail to address the underlying drivers of deficits and cause more economic damage, prolonging recessions. Learning from previous successful deficit reductions, Congress should focus on flattening the long‐​term path of spending.

Tax Increases or Spending Cuts?

In their 2019 book Austerity: When It Works and When It Doesn’t, Alberto Alesina, Carlo Favero, and Francesco Giavazzi summarize more than a decade of research on how countries have reduced budget deficits across 184 distinct austerity plans. The authors conclude: “Tax‐​based plans lead to deep and prolonged recessions, lasting several years. Expenditure‐​based plans on average exhaust their very mild recessionary effect within two years after a plan is introduced.” Because expenditure‐​based plans also usually include some tax increases, it’s worth noting that spending‐​cut‐​only plans may not be recessionary at all.

Major entitlement programs—Medicare and Social Security—are responsible for almost all the projected non‐​interest spending growth over the next three decades. Rapid health and retirement spending growth is neither caused by a lack of revenue nor fixable with tax increases. As I estimated earlier this year, “if Treasury collected as much revenue as it did in 2000 when it had a record 2.3 percent budget surplus, the U.S. would still have a 2022 budget deficit of about 5.1 percent of GDP (compared to the actual 5.5 percent deficit).” The deficit would continue to grow toward 10 percent of GDP over the next 30 years.

Even if Congress wanted to import a European‐​style tax system—raising taxes by thousands of dollars on Americans at every income level—it would still need to rein in spending growth, which is not projected to level off in any current projection. 

In addition to being unable to fix the underlying growth rate of spending, tax increases come with economic costs that often worsen fiscal crises. In a 10‐​year review of new empirical research following the financial crisis, Valerie Ramey showed that in a majority of estimates, tax increases reduce GDP by two or three times the amount of revenue they raise.

In a 2020 report, I explained:

“Because tax increases have steep economic costs, they are less effective at reducing deficits. Alesina and his co‐​authors conclude that tax‐​based fiscal adjustments are “self‐​defeating: they slow down the economy and do not reduce the debt ratio.” Relying on taxes to close the fiscal gap can create a cycle of tax increases that slow down growth, which adds pressure to expenditure growth by increasing the use of countercyclical anti‐​poverty programs, which then requires still higher taxes to avoid a debt crisis. Additional evidence outside fiscal crises also shows that new taxes are followed by increases in spending, making deficits larger, not smaller.”

If large tax increases are self‐​defeating, it leaves spending cuts as the most effective way for Congress to address the budget crisis. Spending cuts are less likely to prolong recessions and can address the root cause of long‐​term deficits, uncontrolled spending growth.

In a review of fiscal adjustments, Andrew Biggs, Kevin Hassett, and Matthew Jensen conclude, “lasting reductions in debt stem from expenditure cuts, and less so from revenue increases…our results indicate that social transfer reductions should comprise the largest share of the consolidation; there is a stark difference between the very large transfer shares in successful consolidations and very small transfer shares in unsuccessful consolidations.”

Conclusion

If Congress is serious about fixing the long‐​term debt challenge, it must address the programs no one wants to talk about. My Cato Institute colleague Romina Boccia recently put it this way: “With Medicare and Social Security responsible for 95 percent of long‐​term unfunded obligations, according to the Treasury Financial Report, there’s simply no way any serious fiscal reform effort can leave these programs untouched.”

Alesina’s research has one more hopeful conclusion for politicians facing these tough choices. In a review of electoral outcomes following large fiscal adjustments, Alesina and co‐​authors find “no evidence that governments which reduce budget deficits even decisively are systematically voted out of office.” There really is no excuse for continuing to kick the fiscal crisis can further down the road.

Today’s rising interest rates are a warning to Congress: get your fiscal house in order to avoid a crisis. Past fiscal adjustments provide another warning: relying on tax increases to fix budget problems is a recipe to make things worse, not better.

Norbert Michel

The United Auto Workers announced it’s expanding the strike against General Motors and Ford today, just three days after Politico’s story about what many see as a major shift in the Republican Party toward supporting organized labor. But while the politics might be shifting, the economics haven’t changed.

With the GOP long on the opposite side of unions, several key Republicans now seem ready to embrace the cause. Senator J.D. Vance (R‑OH), for example, says that striking workers “deserve to get their end of the shake.” The strike also coincides with a new poll conducted by American Compass, the “conservative” think tank that’s been pushing a populist agenda.

According to Oren Cass, American Compass’s executive director, the shift has already occurred.

Cass recently told Politico there is “no going back to a pre‐​Trump, 1980s‐​style conservatism,” adding “It just does not have anything useful to say about the actual issues of the 2020s.” Perhaps Cass is correct about the political environment. He did, after all, work on Mitt Romney’s two failed presidential campaigns in 2008 and 2012.

Cass is dead wrong, though, on the details of the actual policy. He insists that this newly oriented conservativism is a reaction to “this weird sort of hyper libertarian economics, pro‐​capital, no matter what kind of force for, globalization and open borders and nation building and all of this stuff.” That’s a lot of stuff, but the idea that U.S. economic policy even got to the edge of becoming libertarian, much less hyper libertarian, is completely detached from reality.

Cass is quite good, though, at remaining detached from reality.

To this very day, he continues to premise his policy prescriptions on the idea that American capitalism has failed. One of his most‐​repeated lines is “A market economy that once produced widespread, broadly shared prosperity has devolved into one where wages rose only 1% in the past 50 years.” In his book, The Once and Future Worker, Cass laments that “while gross domestic product (GDP) tripled from 1975 to 2015, the median worker’s wages have barely budged.”

But the only way to legitimize these statistics is to cherry‐​pick and ignore the other 99 out of 100 ways to estimate Americans’ income growth over the past 50 years. That would be bad enough, but it’s unfathomable that Cass doesn’t know what he’s doing because so many people have explained the true income trends. (There’s a very long list.)

Or maybe that’s too harsh. Perhaps it really is just a coincidence that Cass picked a starting point of 1975, the year that produces the lowest possible (positive) growth rate going back to 1964. Or that ignoring female workers in the data dramatically worsens the picture. Even if these are just coincidences, the American Compass agenda has bigger problems.

First, it’s not at all clear that their income stagnation resonated with Trump voters, the supposed impetus for this new “conservatism.” For instance, when the authors of The Great Revolt surveyed rust belt Trump voters, they found that “a full 84 percent were actually optimistic about their own future career path or financial situation, regardless of how they felt about their community’s prospects as a whole.” (see page 20.) Even now, after the pandemic, polling by Gallup shows that “Between 81% and 90% of U.S. adults are either ‘very’ or ‘somewhat’ satisfied with their family life, current housing, education, job, community and personal health.”

Another major problem for American Compass is that their decaying Rust Belt and Appalachian town narrative is historically inaccurate. It’s not new, and there was no shortage of government intervention during the last 50 years.

In Big White Ghetto, author Kevin Williamson describes the story of Garbutt, New York, a town built on the gypsum industry (see page 18). A local historian wrote of Garbutt:

As the years passed away, a change came over the spirit of their dream. Their church was demolished and its timber put to an ignoble use; their schools were reduced to one, and that a primary; their hotels were converted into dwelling houses; their workshops, one by one, slowly and silently sank from sight until there was but little left to the burg except its name.

This passage wasn’t written in 1988. It was written in 1908.

Appalachia’s decay also started long before the 1970s, and government intervention hasn’t helped. In 1964, LIFE magazine published “The Valley of Poverty,” a special report on President Lyndon Johnson’s nascent War on Poverty. It described Appalachia, an area stretching from “Alabama to southern Pennsylvania,” as “a vast junkyard” due to the “same disaster that struck eastern Kentucky.”

The disaster? That would be the collapse of the coal industry 20 years earlier. Cass can’t blame China or Reagan for that one.

In 1965 the federal government made the region a key focus of its War on Poverty. While people can argue over whether those government programs made things worse, there’s no argument over whether those programs existed. Telling people that some kind of “market fundamentalism” caused all the problems in that region is pure propaganda.

Whatever their motivation, what Cass and his allies are selling is dangerous. They want government officials – presumably themselves – to have more control over how people produce and purchase the goods and services that meet their needs. That sort of system only works well for the politicians in charge. Until, of course, some other group of politicians is in charge.

Alan Reynolds

“Soaring Bond Yields Threaten Fed Goal of a Soft Landing” is the headline of a front‐​page Wall Street Journal story by Nick Timiraos, who writes that, “If the recent climb in borrowing costs—along with the accompanying slump in the stock market and [a 5%] stronger dollar—continues, that could meaningfully slow U.S. and global economies over the next year. The swiftness of the recent rise also increases the risk of financial market breakdowns.”

The author proposes a list of hypothetical explanations. But all of them are entirely domestic, as if each country’s financial markets were isolated and disconnected from the internet or telephones. The list of explanations or solutions also leaves the Fed powerless to do anything more than stand still.

As Figure 1 indicates (using OECD data), the market for government bonds is global. Changes in the yields of bonds of major countries are generally synchronized as investor arbitrage seeks the best returns, adjusted for exchange rate risk.

Figure 1:

The black line shows the rise in the UK bond yield from 3.7% in April to about 4.6% in September was just as large as the rise in US yield from 3.5% to 4.4%. That seems inconsistent with the Journal’s purely domestic “likeliest causes” of rising yields being due to “expectations about better U.S. growth and concerns [about] huge federal deficits.”

Yet synchronized global movements in yields are also inconsistent with an alternative theory that US yields rose because of “reduced demand for Treasuries from foreigners.”

The article quotes an economist saying, “It’s perplexing. No fundamental explanation is convincing.” But that is simply because all visible efforts at explanation assumed (1) the US is a closed financial system, and (2) the Federal Reserve had nothing to do with the rise of yield on US and competing foreign bonds.

If limited to those dubious assumptions, then the Fed must now be helpless to alleviate this unexplainable exogenous shock to domestic bond yields.

But the US has had a lot of experience with inverted yield curves — times when the Fed pushed the federal funds rate above the bond yield. The most stubborn postwar experiment with that “higher for longer” strategy was in 2006–2007, just before the Great Recession. Two earlier experiments (using the discount rate rather than fed funds) were in 1920–21 and 1928–29.

Inverted yield curves can easily be fixed in a week or two. Just keep the federal funds rate lower than the 10‐​year bond yield and have the FOMC offer sensible “forward guidance” that this policy will continue for the foreseeable future. The Fed probably did flatten the yield curve quickly enough by cutting the funds rate in 2019, but the pandemic lockdowns of March 2020 made that impossible to prove.

Keeping the fed funds rate lower than the US bond yield might not lower worldwide bond yields appreciably (since that also depends on foreign economic conditions and policies). But it would surely ensure a softer landing than we saw in 1970, 1974, 1980, 1981–82, 1991, 2001, or 2007–2009.