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Michael Chapman

In a recent speech, GOP presidential contender Vivek Ramaswamy outlined a multi‐​year plan to reduce the federal workforce by 75 percent, slash regulations, and “shut down redundant federal agencies,” if elected. While Ramaswamy’s goals may seem fantastic, scholars at the Cato Institute have presented detailed policies for reducing the size of the federal government and its workforce.

In 2022, for instance, economist Chris Edwards, the editor of Cato’s Down​siz​ing​Gov​ern​ment​.org, published a detailed plan of specific cuts to the federal budget. These spending reductions, phased in over 10 years, would “by 2032 total $2.3 trillion annually, including reduced interest costs,” he wrote.

Federal spending would fall from “23.8 percent of GDP in 2022 to 18.1 percent in 2032, which would balance the budget that year,” and “reduce dangerously high debt levels,” wrote Edwards. The cuts would also trim the federal workforce, which is estimated at 2.2 million civilian workers.

With health care, for instance, Edwards’ plan would produce annual savings of $808 billion (see Table 1). For Social Security, cuts would equal $380 billion a year. Total annual savings in those two categories would equal $1.18 trillion.

With discretionary federal programs there are many places to reduce spending (see Table 2). For instance, in the Agriculture Department, ending farm subsidies would total $33.5 billion a year in savings, and cutting food subsidies would equal $145.6 billion. Ending rural subsidies would save $5.8 billion a year. Total annual savings in 2032 for the department would equal $184 billion.

Some of the annual savings from phased‐​in cuts in several other departments include,

Department of Commerce $5.1 billion
Department of Education $75.9 billion
Department of Energy $6.8 billion
Department of Homeland Security $30.1 billion
Department of Housing and Urban Development $67.3 billion
Department of Transportation $49.8 billion
Department of the Treasury $89.4 billion
Cut foreign aid by 50 percent $12.3 billion
Cut NASA budget by 50 percent $11.7 billion
End EPA state/​local grants $3.7 billion

In total, the discretionary spending cuts from Edwards’ plan would produce an annual savings of $610.9 billion. (“The plan assumes that one‐​tenth of the cuts would be phased in each year over the coming decade.”)

These reductions in federal spending would produce numerous benefits. They would boost economic growth (more money and opportunities in the private sector), trim the power of the administrative state (fewer federal workers), slash deficit spending, reduce inflation and the national debt, and enhance individual liberty. Federal downsizing would disperse power out of Washington and back to the people—individuals, private businesses, and communities.

It would also help to corral the federal government back inside its constitutional borders.

In a separate report on federal pay and benefits, Edwards documented that the 2.2 million federal civilian workers impose “a substantial burden on American taxpayers.” Their wages and benefits in 2019 cost taxpayers $291 billion.

The U.S. Bureau of Economic Analysis reported in 2022 that federal civilian workers enjoyed an average wage of $99,622. In the private sector that year the average annual salary was $74,666.

But that does not include total compensation, such as health insurance, paid vacation days, and a pension. In 2022, total federal compensation averaged $143,643, or 63 percent more than the private‐​sector average of $88,152, reported Down​siz​ing​Gov​ern​ment​.org.

On average, a federal civilian worker’s benefits package cost $44,021 (in 2021); in the private sector, the package cost $13,486.

Federal workers also get about “13 days of sick leave per year, 10 paid federal holidays, and 13 to 26 days of paid vacation, depending on years of service,” reported the Washington Post. They also “enjoy first priority and subsidies at a number of top‐​notch daycare facilities.”

On top of all this, federal workers rarely get fired. As Down​siz​ing​Gov​ern​ment​.org reported, “Just 0.5 percent of federal civilian workers a year get fired for any reason, including poor performance and misconduct. That rate is just one‐​sixth of the private‐​sector firing rate.”

In such a situation, footed by American taxpayers, there is no incentive to scale back or improve, no retrenching. There are no market forces at play, no competition, and virtually no layoffs. Yet this intractable behemoth administers $6,200,000,000,000 in revenue.

It is no mystery why the federal government is inefficient and intervening in nearly every aspect of people’s lives.

The federal government and its workforce must be radically downsized. There are ways to do that. But it takes political commitment. Talking about a 75 percent federal workforce reduction may seem unattainable, but talking about it is a start. Even a 7 percent reduction would be a giant step in the direction of freedom.

David J. Bier

For many years, I have advocated for the U.S. government to allow the private sponsorship of immigrants and refugees, freeing U.S. citizens to resettle vulnerable people. This vision finally became reality in 2022 when the Department of Homeland Security (DHS) announced it would allow Americans to sponsor Ukrainians fleeing Russia’s invasion. A version of this same policy was then expanded to Cubans, Haitians, Nicaraguans, and Venezuelans.

In a new paper Cato released today, I explain how these policies work and what challenges they face going forward. Here is the executive summary:

The U.S. government has recently launched multiple novel migration initiatives through which Americans may sponsor Ukrainians, Cubans, Haitians, Nicaraguans, and Venezuelans for a temporary U.S. residence known as parole. Parole allows the beneficiaries to travel to the United States legally and live there legally for at least two years. Sponsors must show financial assets and income sufficient to support the beneficiaries. The parole sponsorship processes have decreased migration from these five countries to the U.S.-Mexican border.

This policy has transformed migration to the United States. By July 2023, parole had already redirected about 316,000 people away from long, perilous treks through Mexico and into a legal framework to fly directly from their home countries or third countries to the United States. The parole sponsorship processes have accomplished these early positive results mainly because they have relatively open eligibility criteria and because the government initially expedited their adjudications.

Unfortunately, some features of the processes have stymied the initial progress, and a backlog of about 1.7 million applicants has developed. The government also failed to cover the costs of parole processing because it exempted sponsors and parole applicants from fees usually charged to other travelers, leading to delays in adjudication. Even if resources were sufficient, the government has capped approvals for Cuba, Haiti, Nicaragua, and Venezuela at just 30,000 per month, making extremely long waits inevitable. Removing the cap and charging a fee would permit expansion to other countries where a legal avenue is sorely needed.

You can read the whole paper here.

Alex Nowrasteh

Yesterday, I testified at the “Terrorist Entry Through the Southwest Border” hearing before the House Subcommittee on Immigration Integrity, Security, and Enforcement. You can watch the entire hearing here, my spoken testimony here, and highlights here. My written testimony is here. This was an excellent opportunity to highlight my research on foreign‐​born terrorism in the United States.

Inspired by John Mueller’s pathbreaking work to quantitatively estimate the risk posed by terrorism, I adapted his methods to estimate the threat posed by foreign‐​born and native‐​born terrorists in response to the policy issues in the 2016 election and during much of the Trump administration. I updated the terrorism and immigration risk analysis last month, but this is just a tiny sample of my work on this topic.

I testified that zero Americans have been injured or killed in terrorist attacks by illegal immigrants or asylum seekers who entered through the southwest border. Indeed, there have been zero terrorist attacks on U.S. soil by illegal immigrants or asylum seekers who crossed that border.

However, nine foreign‐​born terrorists have entered the United States illegally since 1975. Three convicted illegal immigrant terrorists crossed the U.S.-Mexico border. They are Dritan Duka, Eljvir Duka, and Shain Duka, and they entered illegally in 1984 when they were aged 5, 3, and 1, respectively. They were arrested in 2007 while plotting to attack Fort Dix. Of the other illegal immigrant terrorists, five illegally crossed the U.S.-Canada border, and one was a stowaway on a ship.

Over the 1975–2022 period, the chance of being murdered in an attack by a foreign‐​born terrorist was about 1 in 4.3 million per year. That is no comfort to the actual victims of foreign‐​born terrorism, nor should it ever be construed as comfort. The rarity of foreign‐​born terrorism does not diminish the death or injury of the victims and the suffering it causes their families. But the rarity of such attacks means that pain, injury, and death are mercifully uncommon. The U.S. government has an obligation to intercept foreign‐​born terrorists and to prevent their entry into the United States.

The rarity of terrorism and the death and destruction it causes should guide public policy. The quantity of taxpayer resources and the types of restrictions on individual liberty that have been enacted to counter the threat of foreign‐​born terrorism is grossly disproportionate to the risk, like it is for all counterterrorism spending.

At a minimum, the government has an obligation to use taxpayer resources wisely so that expenditures pass a cost‐​benefit test. That bare minimum has not been met in counterterrorism or in many other areas.

Below is my opening statement to the subcommittee.

Chairman McClintock, Ranking Member Jayapal, and distinguished members of the subcommittee, thank you for the opportunity to testify. Over many decades, the Cato Institute has produced original research on immigration and sober evaluations of the realistic threat of foreign‐​born terrorism.

Terrorism is a serious topic, so serious that we should focus laser‐​like on data and facts. We cannot let ourselves be distracted by fiction or speculation. This focus on data and facts requires looking at the past, which is the source of all data about terrorism. The title of this hearing is “Terrorist Entry Through the Southwest Border.” When I first heard that was the title, my reaction was, “What terrorist entry through the southwest border?”

Zero people have been murdered in attacks committed by terrorists who entered as illegal immigrants. Zero people have been injured in attacks committed by terrorists who entered illegally. Zero attacks have been carried out by immigrants who entered illegally.

Nine terrorists have entered the United States illegally. Five of them illegally crossed the U.S.-Canada border, one was a stowaway on a ship, and three of them, Dritan Duka, Eljvir Duka, and Shain Duka, entered illegally through the U.S.-Mexico border in 1984. At the time of entry, Dritan Duka was five years old, Eljvir Duka was three years old, and Shain Duka was one year old. In 2007, they were convicted as part of the Fort Dix plot, which was broken up by law enforcement during the planning stage.

Zero asylum seekers who became terrorists entered through the U.S.-Mexico border. Thirteen terrorists have entered as asylum seekers, and they are responsible for nine murders and about 669 injuries in attacks on U.S. soil, but none of them crossed the southwest border.

There have been zero terrorist attacks by illegal border crossers who were flagged by the Terrorism Screening Database (also called the watchlist). Federal prosecutors have not filed charges related to a terrorist plot on U.S. soil against anyone who entered between a port of entry and who was flagged by the watchlist.

Almost all individuals listed on the watchlist are not terrorists. Data released to the Washington Examiner showed that 25 of the 27 watchlist hits encountered by Border Patrol in the first six months of 2022 were citizens of Colombia. If they were even members of Foreign Terrorist Organizations (FTO), they were likely members or former members of FARC, FARC offshoots, or other insurgents in Colombia.

There has never been a terrorist attack committed on U.S. soil by these Colombian FTOs, there is no publicly available evidence that they have ever intended to target the U.S. homeland, and no foreign‐​born person from Colombia has ever committed, planned, attempted, or been convicted of attempting to commit terrorism on U.S. soil.

Special interest aliens (SIA) are a supposed terrorism concern along the U.S.-Mexico border. DHS has a fancy definition of SIA, but the reality is that the SIA designation is a label for “illegal immigrants from a country that could have terrorists” and nothing more. SIA is not a meaningful metric to understand the threat of terrorism along the border or anywhere else.

Although terrorists who crossed the U.S.-Mexico border have never murdered or injured anyone in a terrorist attack on U.S. soil, there is a chance that a foreign‐​born terrorist could cross the U.S.-Mexico border and commit an attack in the future. The way to reduce that threat is to vastly expand legal immigration to diminish the number of illegal immigrants down to very low levels.

Such a liberalization and deregulation of immigration would allow Border Patrol to focus its efforts more fully on deterring security threats instead of trying to centrally plan international labor markets.

Thank you.

Gabriella Beaumont-Smith

On August 31, New Zealand introduced legislation for a digital services tax (DST). Also last month, Canada issued new draft legislation on its proposed DST.

Countries levy DSTs differently (see Table 1), but generally they are a tax on gross revenues based on user location. As such, DSTs can be considered extraterritorial taxes, meaning that governments tax and collect revenue beyond their territories. The scope of DSTs is also very broad, covering online sales, digital advertising, data usage, streaming and downloads, and more.

The renewed momentum on DSTs is tied to ongoing negotiations at the Organisation for Economic Co‐​operation and Development (OECD) on the Base Erosion and Profit Shifting (BEPS) project. Pillar One of the BEPS project tries to address growing concerns over unilateral DSTs, like Canada and New Zealand’s proposals. However, Pillar One will maintain taxation based on customer location, rather than business activities.

This prong is presenting problems for numerous American businesses (e.g. YouTube) that are unsubtly targeted by DSTs and will be disproportionately impacted by Pillar One. For example, France implemented a 3% DST on revenue from sales of user data, digital advertisements, and online platforms run by companies with more than €750 million in global revenues; and Nigeria’s DST targets non‐​resident businesses with revenue over N25 million from sales of digital content, user data, etc.

As negotiations continue at the OECD, countries with adopted or proposed DSTs agreed to hold off applying the taxes until 2025. Canada is the only country to refuse the “freeze” on unilateral DSTs. What’s even more problematic is that Canada’s proposal contains a retroactivity provision. The 3% tax applies starting January 1, 2024 and is retroactive to January 1, 2022.

Further, the Canadian DST could violate the United States‐​Mexico‐​Canada Agreement (USMCA). In fact, in February 2022, the United States Trade Representative (USTR) stated that if Canada adopts its DST proposal, “USTR would examine all options, including under our trade agreements,” implying it could use enforcement mechanisms outlined in the USMCA.

The uncertainty surrounding the OECD negotiations is made worse by the options the USTR might employ to counter Canada. For example, in 2019 and again in 2021, the Trump administration initiated investigations under Section 301 of the Trade Act of 1974 after a handful of countries implemented DSTs. The Trump administration used Section 301 to ”determine whether an act, policy, or practice of a foreign country is… unreasonable or discriminatory” and burdens or restricts U.S. commerce.

The USTR found that these DSTs were discriminatory against U.S. companies and threatened retaliatory tariffs. If the Biden administration utilized this law and equally threatened retaliatory tariffs, U.S. businesses and consumers would pay for Canada’s misdirected tax policy.

While the OECD seems to have lost its way on promoting global free market economic development, the World Trade Organization (WTO) has spearheaded efforts to reduce taxes on digital products.

Since 1998, members have voted every two years to maintain the moratorium on customs duties on electronic transmissions. These transmissions are commonly understood to include things like digital music, video games, movies, software, text messages, emails, etc. These duties are different from DSTs and more akin to a tariff as they apply to electronic transmissions imports whereas DSTs are technically domestic taxes that could apply to domestic and foreign businesses. DSTs are also a tax on business revenues, while a tariff is usually applied as a fixed fee or ad‐​valorem (a percentage based on the value of the good) to the price of the product.

Unfortunately, the increasing importance of digitalization and, thus, increased opportunity for raising tax revenue, is having repercussions for the moratorium—some members have expressed reservations about foregone revenues and may not vote to extend the moratorium next year. Given the problems at the OECD, it would be prudent for WTO members to make the moratorium permanent.

Politicians capitalizing on digitalization to raise tax revenue is problematic. Customs duties are the same as tariffs and if the moratorium is not extended, consumers will likely bear the brunt of the costs. DST costs will similarly be passed on.

Since DSTs are applied to revenues (not profits), a firm could be required to pay taxes in a jurisdiction it doesn’t actually earn income in. As a result, consumers will likely pay the price or see reduced variety in the market. For example, in the case of the French DST, a study from Deloitte estimated that over half of the tax would be paid by French consumers directly, and 40% by local French businesses that use the taxed digital platforms. For Canada, the Montreal Economic Institute estimates that the tax will cost Canadian consumers between $1.1 billion and $3.3 billion per year.

Extraterritorial taxation, including as currently being negotiated at the OECD, gives distant politicians the power to involve themselves in local affairs. While free trade proponents (like myself) wish for as borderless a world as possible, borders matter. After all, tariffs are taxes and as long as we live in a world with non‐​zero tariffs, it is important that tax competition can exist among countries through sovereignty over trade and tax policy.

The United States should question the direction the OECD has taken and USTR should continue to consider the implications of taxing digital products, whether through a customs duty or a DST, which only serves to empower politicians and impoverish people.

Colleen Hroncich

When education was disrupted during the pandemic, Dominique Burgess didn’t waste time. An educator with more than a decade of experience, she had started Burbrella Education pre‐​COVID‐​19 to support parents, teachers, and school leaders with coaching and support. In spring 2020, she started offering remote learning options to help families while schools were closed.

Dominique was very flexible and began adding options as parents and teachers expressed interest. She now operates Burbrella Learning Academy, which includes an online microschool, an in‐​person microschool in North Carolina, and tutoring.

In the beginning, she says most of the families who signed up with Burbrella were already homeschooling their kids and were looking for academic support and a consistent schedule. Then there were parents who were frustrated by the poor communications from their local school and wanted something more concrete. As schools started to return in person, some parents who weren’t ready for that turned to Burbrella. But at the same time, other parents were asking for in‐​person options. “So we coordinated some homeschool co‐​ops in specific states where we had interest from parents,” she explains.

As the homeschool co‐​ops spread, more families were asking for in‐​person options in their locations. Dominique says, “I did a good amount of research on microschools for about a year. After looking at the parameters around how a microschool can operate in North Carolina, I decided to start the first one here because (1) this is currently home for me, and (2) I spent a lot of time during Covid analyzing the different educational institutions and dynamics of education here in North Carolina.”

She chose Alamance County for her first in‐​person location to help parents see that there are other educational options out there and because she didn’t find many alternatives in the area. “The first question that we get is ‘what’s a microschool,’” says Dominique. That gives her the opportunity to explain what a microschool is and how they are revitalizing education while providing families with choice.

The Burbrella microschool in NC, which opened this year, is K‑5 and meets Monday through Friday. Parents can choose a hybrid option as well, where they do three days in person and two at home in the online school. There’s also a homeschool drop‐​in option for homeschoolers on Tuesdays and Thursdays. The after‐​school program is open to district, charter, and private school students.

Plans are in the works to open an in‐​person microschool in Indiana next year. The online microschool is preK‐​12, which is Dominique’s goal for her in‐​person locations as well.

The Burbrella online microschool offers live classes Monday through Friday. Students get all of the core content area subjects—math, reading, history, and STEAM [science, technology, engineering, art, and math]. Dominique says teachers must understand that Burbrella is play‑, projects‑, and nature‐​based. “Our classes are structured just a little bit different than the traditional online classes, and we hire teachers that are aligned with our philosophy and our mission,” she says.

According to Dominique, Burbrella operates kind of like a network school district. “We say, ‘Here are the parameters around curriculum. Every class that will be taught in the online school needs to cover these four subjects—because we’re in a large number of states and want to make sure that the homeschooling expectation for every state is covered.”

It’s clear that Dominique’s flexible approach is appealing for many parents. She has 168 students from 18 states in the online microschool.

Dominique’s advice for parents is “know what’s available to you in your community, in your county. If it’s not there, push for it, ask for it.” And, like other education entrepreneurs I’ve talked to, her advice for prospective school founders is “take the leap.”

She notes that many teachers are afraid to leave the traditional setting because they don’t know where they’ll get things like insurance and retirement plans. “It will find you,” she says. “I tell teachers all the time the same 401K that I had and insurance premiums that I had, I still have. And that’s because people in this community found me. I was able to bring plans over for a much cheaper rate. So, take the leap. Do it. All the things will fall into place for you.”

Daniel Griswold

The Census Bureau reported this week that real median household income in the United States fell in 2022 for the third year in a row. We can debate the underlying causes of the setback, but the report shouldn’t obscure the long‐​term gains made by American workers and families during recent decades of expanding globalization.

One data point—highlighted by AEI scholar (emeritus) Mark Perry in a chart posted on X—exposes the myth that decades of growing trade have somehow “hollowed out” the American middle class. Going back to 1967, Perry shows that the share of American households with earnings between $35,000 and $100,000 (in constant 2022 dollars) has indeed shrunk, but so too has the share of households with earnings below $35,000. Meanwhile, the share of households earning more than $100,000 has nearly tripled.

I document the same phenomenon in a new essay, “The Misplaced Nostalgia for a Less Globalized Past: The ‘Great Again’ Economy Wasn’t so Great.” The essay is part of an ambitious new Cato Institute project called “Defending Globalization.”

Looking at the same Census series from 1970 to 2021, you can see in the nearby chart that the number of both poor and middle‐​class households has been shrinking as a share of total households, while those with incomes above $100,000 in constant dollars have been rising. The American middle class in the era of globalization has been moving up, not hollowing out!

In fact, when we account for changing household sizes as well as more accurate measures of price inflation, median household income in the United States has increased by 50 percent since 1967. Meanwhile, real average hourly earnings have risen by 74 percent in the past 50 years. The time that Americans must work to acquire basic household goods such as food, clothing, and appliances has fallen steadily as technology and trade have combined to make goods more affordable.

The essay goes on to show that Americans are not only earning more on the job but are safer from workplace injury and death. Women workers have benefited in our more globalized era from rising levels of education and more opportunities in the workplace. The rising level of prosperity has benefited minorities as well with falling levels of poverty; inequality as measured by the Gini co‐​efficient has actually decreased slightly in recent decades.

All this has occurred over decades of rising levels of foreign trade and investment as a share of U.S. gross domestic product. Despite the recent turbulence, Americans today are better off than they were 50 years ago, not despite globalization, but in significant measure because of it.

You can check out all the essays as they roll out as well as Scott Lincicome’s introductory talk at the “Defending Globalization” website.

Scott Lincicome

Thirty‐​four years ago tomorrow, Boris Yeltsin — then a newly elected member of the Supreme Soviet of the Soviet Union — visited NASA’s Johnson Space Center in Houston, Texas, where he toured the U.S. government facility and the various technologies therein. But it’s a brief, impromptu visit to a nearby grocery store that may very well have changed world history.

Yeltsin, who’d two years later become the first freely elected leader of Russia, roamed the aisles of the relatively small Randall’s market that day and was astonished at the variety and affordability of the products on display. According to various reports, this visit — not the one to NASA — catalyzed Yeltsin’s exit from the Communist Party and his abandonment of the Soviet economic model. His 2007 New York Times obituary tells the tale:

During a visit to the United States in 1989 he became more convinced than ever that Russia had been ruinously damaged by its centralized, state‐​run economic system, where people stood in long lines to buy the most basic needs of life and more often than not found the shelves bare. He was overwhelmed by what he saw at a Houston supermarket, by the kaleidoscopic variety of meats and vegetables available to ordinary Americans.

Leon Aron, quoting a Yeltsin associate, wrote in his biography, “Yeltsin, A Revolutionary Life”…: “For a long time, on the plane to Miami, he sat motionless, his head in his hands. ‘What have they done to our poor people?’ he said after a long silence.” He added, “On his return to Moscow, Yeltsin would confess the pain he had felt after the Houston excursion: the ‘pain for all of us, for our country so rich, so talented and so exhausted by incessant experiments.’ ”

He wrote that Mr. Yeltsin added, “I think we have committed a crime against our people by making their standard of living so incomparably lower than that of the Americans.” An aide, Lev Sukhanov was reported to have said that it was at that moment that “the last vestige of Bolshevism collapsed” inside his boss.

My Cato colleague Sophia Bagley and I recall this wonderful story in a forthcoming essay for Cato’s new Defending Globalization project, explaining how the United States’ grocery abundance — owed in large part to globalization — fueled Yeltsin’s freezer‐​side conversion and has increased further since that time. Between 1975 and 2022, for example, the number of products in an average U.S. supermarket has increased by more than three‐​fold, from 8,948 products to a whopping 31,530. Not all of that increase is due to globalization, of course, but much of it is. As shown below, for example, imports of essentially every type of food have increased substantially in the decades following Yeltsin’s tour of Randall’s:

Some of these gains reflect Americans’ increasing appetites for “ethnic foods” and the related explosion of such items in American grocery stores. As I note in my first essay for the project (on the current state of globalization), these cuisines are today “so commonplace that American grocers are struggling to fit them all in the ‘ethnic food’ aisle, where buyers and sellers prefer them,” while “H Mart, a Korean American supermarket chain, has become one of the fastest‐​growing retailers by specializing in foods from around the world.”

But there’s probably no bigger symbol of U.S. grocery globalization than in the produce section. Supermarkets in 1980, for example, carried an average of 100 different produce items, and the number approached approached 250 by 1993. But, even then, certain fruits and vegetables were limited to North American growing seasons, and few here had even heard of products like rambutans, lychee, or jackfruit.

A casual stroll through the same aisles today, by contrast, reveals an incredible variety, driven in large part by global trade and Americans’ globalized taste buds. According to the FDA, in fact, 55 percent of fresh fruits and 32 percent of fresh vegetables are today sourced from abroad. As Bagley and I explain in our essay, much of the expansion in international trade in food is owed to trade agreements completed in the 1990s.

In the United States, the 1994 North American Free Trade Agreement improved Americans’ access to warm‐​weather produce grown in Mexico and certain other foods in which Canada specialized (and not just maple syrup). Globally, the 1995 World Trade Organization agreements, especially the Agreement on Agriculture, dramatically reduced global food and related trade barriers. Since then, agricultural trade has more than doubled in volume and calories. (For more on why we have these and other trade agreements, check out Simon Lester’s new Defending Globalization essay.)

Globalization has even improved our domestic food supply. For example, more than 40 percent of the steel used for canning goods is sourced globally, meaning that many canned foods, although grown domestically, would be more expensive if U.S. producers lacked access to imported materials. American farmers, meanwhile, often rely on imported fertilizer, or use export revenues to fund expansions or crop experimentation. Total U.S. food and agriculture exports hit $196 billion in 2022, almost half of which ($88 billion) went to Asia.

Sadly, the hope and optimism of Yeltsin’s Russia are today a distant memory. But his amazement that day in Houston — and the blessings of American grocery abundance — are still worth celebrating. They may have even changed the world.

Jeffrey A. Singer

On September 12, a Food and Drug Administration advisory panel reported that oral phenylephrine hydrochloride, an ingredient in many popular over‐​the‐​counter decongestants people purchase to treat common cold symptoms, does not reduce nasal congestion.

Phenylephrine, a drug that causes small blood vessels to constrict, is an ingredient in numerous cold remedies, including Nyquil Sinex Nighttime Relief and Sudafed PE. The FDA and drug makers believed that constricting blood vessels that supply mucus glands in the nasal passages and sinuses would cause a drop in mucus production. However, new research shows that oral phenylephrine is no more effective than a placebo.

Because FDA drug approval means that the agency determines a drug is both safe and effective, the agency might next order all of these popular brands pulled off the shelves.

The FDA first approved phenylephrine as a safe and effective over‐​the‐​counter decongestant in the 1970s. In 2007, an advisory panel told the FDA that evidence oral phenylephrine worked was “murky” and “not definitive” and recommended further study.

It is reasonable to ask why it has taken the FDA—an agency that controls what drugs doctors can recommend to their patients and what medications people may take to self-medicate—roughly 50 years to figure out that a drug it declared effective is not.

As Michael Cannon and I wrote in “Drug Reformation”:

Government‐​imposed prescription requirements violate the rights of individuals to access the medicines they want. Vesting this power in government has left Americans with less access to medicines overall—even relative to consumers in other nations where governments also impose prescription requirements. It imposes unnecessary costs that rise during public health crises such as the COVID-19 pandemic. Evidence also suggests that government‐​imposed prescription requirements make patients less safe, not more.

The answer might have something to do with the fact that Congress passed the Combat Methamphetamine Epidemic Act in 2005, which went into effect in March 2006. Designed to prevent the diversion of an effective decongestant, pseudoephedrine, into the black market where meth lab “cooks” converted it into methamphetamine, the Drug Enforcement Administration ordered all oral pseudoephedrine medications to be “behind the counter.”

Pharmacists must record the personal identification of patients wishing to purchase it. The DEA places strict limits on the dose and number of pseudoephedrine‐​containing products patients may obtain within a 30‐​day time frame. Oregon and Mississippi lawmakers went even further. Those states required patients to get a doctor’s prescription to purchase oral pseudoephedrine. Both states repealed those prescription requirements in 2022.

Sudafed, a popular and effective brand of pseudoephedrine decongestant, was moved “behind the counter” under the new law. People can purchase Sudafed PE over the counter without restrictions. Sudafed PE substitutes phenylephrine for pseudoephedrine (thus the “PE”).

Of course, the restrictions and inconveniences the DEA imposed on patients did nothing to combat the “methamphetamine epidemic.” It didn’t take long for the drug cartels to figure out other ingredients that could be used to make methamphetamine more efficiently (anybody who has watched the award‐​winning television series “Breaking Bad” knows this).

One such ingredient is phenyl‐​2‐​propanone, also called phenylacetone or P2P. As a result, meth‐​related drug deaths per 100,000 increased nationally by 1,500 percent between 2006 and 2021. The iron law of prohibition — “the harder the law enforcement, the harder the drug” — struck again.

Two agencies, the FDA and the DEA, combined to make millions of people with colds, allergies, and other causes of severe congestion waste their money on placebos and go without relief for decades while driving the drug cartels to discover more effective ways to make more potent forms of meth, which helped to cause meth‐​related deaths to skyrocket. 

Sometimes, irony can be tragic.

Chris Edwards and Krit Chanwong

Congress is scheduled to reauthorize farm programs this fall, which provides an opportunity to cut spending and reduce budget deficits. This Cato study discusses reasons to cut cash payments to crop farmers, but there are other dubious farm programs in addition to the direct handouts.

The U.S. Department of Agriculture (USDA) spends more than $2 billion a year on three programs that provide food aid to poor countries, which aim to alleviate hunger and support development. The programs have noble goals, but they suffer from serious practical flaws.

Food Aid Programs

The table summarizes three foreign food aid programs. The programs provide emergency aid in crisis situations and nonemergency aid aimed at long‐​term development. They rely on nongovernment and international organizations for implementation.

Most of the aid involves shipping U.S. food abroad and distributing it to recipients. But some of the aid involves buying food abroad near the area where it will be delivered. And some of the aid involves shipping U.S. food abroad and reselling it in foreign markets to raise cash for programs, which is called monetization.

Here are some program details:

Food for Peace. Enacted in 1954, this program was aimed at feeding poor nations while disposing of excess U.S. crop production stimulated by federal support programs. Food for Peace (also called P.L. 480) is administered by the U.S. Agency for International Development (USAID) but is funded in USDA’s budget and relies on the USDA to purchase the food. About four‐​fifths of the aid is for emergencies and one‐​fifth for non‐​emergency programs.
Food for Progress. Enacted in 1985, this program funds development activities, including helping countries improve their infrastructure and agriculture. The program uses monetization—shipping U.S. food abroad and selling it in foreign markets to raise money. It is run by the USDA.
McGovern‐​Dole. Enacted in 2002, this program donates food for school‐​age children and other groups in poor countries, while also helping countries expand their government food programs. Up to 10 percent of funding can be spent on purchasing food in foreign markets, which is called “local and regional procurement.” The program is run by the USDA.

The U.S. foods purchased for these programs include wheat, sorghum, pulses, rice, corn, soybeans, and vegetable oil. Africa is the largest recipient region.

The Congressional Research Service (CRS) says, “U.S. reliance on in‐​kind [food] aid is controversial due to its potential to disrupt international and local markets and because it typically costs more than market‐​based assistance.” Also, the USDA’s foreign aid activities overlap those of the main federal aid agency, USAID.

Undercutting Local Farmers

When the United States gives free grains and other foods to poor countries, it risks undercutting local farmers abroad, and thus undermining the ability of poor countries to feed themselves. Foreign aid experts have warned about this problem, and of the general inefficiency of food aid, for decades, but U.S. agricultural and shipping interests favor donating U.S. food. The CRS notes that other donor countries have mainly dropped in‐​kind food aid: “Many other major donors—such as Canada, the United Kingdom, and the European Union—have converted primarily to cash‐​based assistance.”

In recent years, McGovern‐​Dole has given thousands of metric tons of rice to Laos. But Laos is a substantial producer of rice—indeed a net exporter—and the U.S. donation was small compared to the total Laos production. Using U.S. taxpayer funds to ship rice across the ocean to potentially displace some of Laos’ production does not make economic sense.

A 2017 study examined 118 countries over 45 years that received U.S. food aid to see if the aid affected local food production. It found that “doubling U.S. food aid reduces cereal‐​grain production by 1.5%” in recipient countries, and that the “disincentive effect of food aid on production is particularly significant for sub‐​Saharan African countries, low‐​income countries, and regular recipients of U.S. food aid.”

The USDA and USAID are supposed to analyze whether their food aid projects will distort local economies, but the GAO found that the agencies “did not consistently document that U.S. commodities would not negatively affect recipient countries’ production or markets.”

It is counterproductive to provide foreign aid in ways that interfere with poor countries’ efforts to achieve market‐​based growth. Thus, providing free commodities that may undermine farmers in recipient countries is not a good aid strategy.

Slow and Expensive Delivery

Even in cases where U.S. food aid may be helpful, such as some crises, the long time needed for shipping reduces the usefulness. U.S. food aid shipments typically take four to six months to reach their destinations abroad. USAID pre‐​positions some food abroad for emergencies, but that approach is expensive and subject to problems such as theft, infestation, and spoilage.

A better approach is usually local and regional procurement (LRP) in markets near to where food is needed. But only a small share of U.S. food aid uses this approach, apparently because of the influence of U.S. farm and shipping lobbies.

LRP is less expensive than shipping U.S. food, and it can reach destinations months earlier. One study found that compared to shipping U.S. food, “Procuring food locally or distributing cash or vouchers results in a time savings of nearly 14 weeks, a 62 percent gain.” The study found that procuring grains and pulses locally was far less expensive than shipping from the United States.

The GAO found that U.S.-sourced food aid typically costs 25 percent more than LRP. And the auditors have noted, “Buying food close to where hungry people live has advantages over buying food in the United States and shipping it overseas: It can be much more cost effective and allow for more timely assistance .… This practice can also have the added benefit of supporting the local or regional agricultural sector, rather than undercutting it with imported food.”

The George W. Bush and Barack Obama administrations favored expanding the LRP approach instead of shipping U.S. food. The Donald Trump administration proposed repealing the Food for Peace program noting, “Procuring food near crises can save up to two months or more on delivery time and can significantly reduce the costs of food aid.”

Foreign aid experts generally argue for flexibility in aid responses and against tying aid to U.S. food production, which is a relic of farm support programs from decades past. Repealing the USDA’s foreign aid activities and allowing USAID to use more efficient aid approaches—such as LRP—would be a step forward.

Cargo Preference

The Cargo Preference Act requires that half the tonnage of government‐​financed cargo must ship on U.S.-flagged vessels. Food for Peace, Food for Progress, and McGovern‐​Dole must abide by these rules. U.S.-flagged vessels have substantially higher costs than vessels flagged abroad, so the rules raise the costs of U.S. food aid programs.

A GAO study found that cargo preference rules increase shipping costs of food aid by an average 31 percent. A 2021 study by the American Enterprise Institute found that “cargo preference requirements increase real ocean transportation costs per metric ton by 68 percent for packaged goods shipments and 101 percent for bulk goods shipments.”

Interestingly, about half of the U.S.-flagged ships available for food aid programs are owned by foreign parent companies. Colin Grabow discusses other flaws in the cargo preference rules here. The bottom line is that even in situations when donating U.S. food to poor countries makes sense, the government is doing it in an inefficient manner.

Monetization

Under the Food for Progress program, the “USDA donates U.S. agricultural commodities to international organizations, NGOs, foreign governments, or private entities, which can then distribute the commodities to beneficiaries or monetize the commodities by selling them locally to raise funds for development projects.”

So rather than, say, paying directly for an education program in a poor country, monetization involves shipping U.S. food abroad and selling it to raise cash for the program. The main U.S. farm products shipped in the program are soybeans, wheat, and rice.

The monetization process loses money for taxpayers and can undermine foreign farmers. A GAO study on food aid monetization was titled, “Funding Development Projects through the Purchase, Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause Adverse Market Impacts.” The GAO found that monetization is “inefficient and can actually hurt the domestic agricultural markets in developing countries that are already challenged in meeting the food needs of their people.”

Monetization is a wasteful and roundabout method of funding aid programs, and it should be repealed.

Overlap with USAID

In 2023, the federal government will spend more than $17 billion on USAID, the Millennium Challenge Corporation, multilateral aid institutions, and other non‐​security international aid agencies. Funding other foreign aid on top of that through domestic agencies, such as the USDA, creates wasteful duplication with the international‐​focused agencies.

The GAO has examined the bureaucratic overlap between the USDA and USAID. The auditors found, for example, “Both USAID and USDA were implementing nonemergency food aid programs in Guatemala and Uganda in fiscal year 2011, and we found that these programs shared common geographic focus areas, activities, and implementing partners.”

There are so many agencies now involved in foreign food aid and hunger issues that the government created a superstructure to coordinate the sprawl called the Government Global Food Security Strategy (GFSS). The GAO reported last year that the USAID “leads the global coordination of efforts conducted by itself and 11 other U.S. agencies—collectively known as the GFSS Interagency—to implement the strategy. According to the GFSS, increased interagency engagement is intended to build effective coordination.”

But we suspect that coordination would be better and taxpayer costs lower if aid was consolidated in the USAID and not spread across 11 other agencies.

Conclusions

Congress should end the USDA’s involvement in foreign aid. The Trump administration pointed to the flaws in these activities in proposing to repeal Food for Peace, Food for Progress, and McGovern‐​Dole. That would save taxpayer money, reduce duplication, and eliminate the harmful side effects that food aid projects can create.

More broadly, some analysts question the efficacy of government foreign aid in general. Ian Vasquez argues that providing foreign aid to countries with poor policy environments does not boost development. He points to the strong relationship between economic freedom and growth. In 2019, the average per capita income of the least free quintile of countries in the world was $5,911, which compared to $50,619 for the most free quintile.

Rather than relying on foreign aid, countries struggling with hunger and low incomes should pursue institutional reforms such as strengthening private property, opening markets, adopting stable money, and removing barriers to entrepreneurship including farming. The good news is that as more countries have adopted market institutions in recent decades, global incomes have risen and hunger has plunged.

More on farm subsidies here. More on global hunger issues at Human Progress here.

Scott Lincicome

Today we’re launching a new multi‐​year, multimedia Cato project — Defending Globalization. The last few years have witnessed renewed criticism from the left and the right — in the United States and abroad — on the relatively free movement of things, people, capital, and ideas across national borders, a.k.a., “globalization.”

Unfortunately, the most common anti‐​globalization narratives are not just inaccurate; they ignore the fundamental humanity of globalization and that, for all its foibles and missteps, global capitalism’s long‐​term direction is undeniably positive.

Frustrated by the ossifying conventional wisdom that, actually, globalization has been mostly Bad, we set out to launch this Cato project, which will both correct the record and offer a strong, proactive case for more global integration in the years ahead.

To make our case, Defending Globalization will roll out over the next year or so a trove of new content, including,

An online library of relatively short, accessible essays on all aspects of globalization (economics, foreign affairs, law/​politics, society/​culture, history, etc.), written by Cato scholars and prominent outside experts;
An interactive quiz on the myths and realities of globalization;
New polling on Americans’ view of globalization;
A day‐​long conference in January and other events in DC or elsewhere;
A searchable “Academic Library” containing all Cato “Research Briefs” summarizing scholarly research on trade, immigration, and related issues;
Videos and other media on both the facts and faces of globalization — real people who benefit greatly from our globalized world.

All this content (and more) will be available at this dedicated Cato website. Today, we’re leading off with my essay introducing the Defending Globalization project and seven others on a wide range of topics:

Comparative Advantage, by Don Boudreaux.
Globalization Creates a Global Neighborhood, Benefiting All, by Deirdre Nansen McCloskey.
The Dangers of Misunderstanding Economic Interdependence, by Dan Drezner.
The Misplaced Nostalgia for a Less Globalized Past, by Daniel Griswold.
U.S. Immigration Policy Lags Behind a Globalizing World, by David Bier.
Why Do We Need Trade Agreements At All? by Simon Lester.
Globalization Isn’t Going Anywhere, also by me.

Two weeks from now, and then every two weeks thereafter through the fall, we’ll roll out another three essays and additional multimedia content. (The aforementioned quiz, for example, will go live on September 26, along with essays on the World Trade Organization, digital trade, and the “American System.”) The Academic Library is also now live, as are essay pages listing both what we’ve already published and what we’ll publish in the weeks ahead.

Additional work will come online in 2024 as it’s ready. As you’ll soon see, we have a lot of new, different, and fun content in the works — content we believe will fill a big hole in the current debate on globalization and the future of global trade and immigration policy. We hope you enjoy it.