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David Inserra

European threats against tech companies and the speech of its users continued to escalate last weekend (August 24) as French authorities arrested Pavel Durov, the CEO of the encrypted communications app Telegram.

This is reportedly due to Telegram’s lack of content moderation and failure or inability to meaningfully cooperate with law enforcement in combatting criminal activities, which French authorities allege as complicity in such criminality.

The French complaint centers on the fact that Telegram provides encrypted forms of communication, with its private or “secret” messages being the most robustly protected through end-to-end encryption. Such encryption keeps users, their data, and their communications safe from the prying eyes of both criminals and governments alike. Other parts of Telegram are more open to the public like traditional social media but are less aggressively moderated.

If the French government is arresting a technology company CEO for refusing to break its encryption or moderate content, then this is yet another threat to American speech and companies.

While Telegram is based in Dubai and Durov hails from Russia, the platform carries significant amounts of American speech that is now being threatened by the French government. Furthermore, this action is a clear threat to American technology companies—moderate speech and weaken your encryption or else.

But Telegram’s emphasis on mixing lightly moderated social media with the privacy of encryption is appealing to many users. This includes dissidents and activists looking to remain safe from government repression, security and privacy-focused consumers who simply do not want their communication and social media experience to be so public, and yes, some criminals or other bad actors.

Ever since encryption started to become widespread, governments have wanted the ability to crack it. Whether it be to root out dissidents, stop true criminals, or spy on other countries, governments view encryption as a roadblock. In the early 1990s, the US intelligence community developed and proposed the adoption of a special “clipper chip” that would create a “back door” or way to bypass mobile phones’ encryption.

While these first battles in the “Crypto wars” would end with victory for strong encryption, it didn’t take long for governments to return to their demands. In 2016, the FBI initially got a court to issue an order requiring Apple to develop new coding that would allow the FBI to bypass the encryption on one of the San Bernardino terrorists’ iPhones. Policymakers around the world have called for or enacted legal requirements on technology companies to provide law enforcement or the intelligence community access to encrypted communication. Even last year, the bipartisan EARN IT Act demanded that companies be able to access and scan encrypted messages or else lose legal liability protections.

The UK went further last year and passed the encryption-threatening Online Safety Bill. While the government promised that it would only invoke the bill when feasible technical solutions are available to balance privacy and government access, that decision is ultimately in the hands of the UK government.

The approach taken by the Online Safety Bill has been derided in the tech community as the “math harder” approach. In essence, strong encryption promises that it is not technically possible for anyone other than the sender and intended recipient to read a message or a piece of data. On the other hand, access to such information is exactly what governments want. And so, governments have consistently tried to claim that it is magically possible to both protect users’ privacy while also giving law enforcement access to users’ encrypted communications if the companies developing these products just try harder.

But despite the fanciful dreams of governments, every technology company knows that building a backdoor or other weakening of encryption comes at the expense of users’ privacy and online security.

And so, the French government, seemingly frustrated with the way that Telegram was being used by criminals and others they dislike, has taken the radical step of arresting its CEO. To be clear, some of the communications may be objectively terrible ranging from terrorism to child sexual abuse material (CSAM). And if Durov is actively supporting or engaging in such criminality, then he can and should be held responsible.

But just because some bad people use a tool for bad purposes does not mean we should destroy that tool for everyone else. The French charges do not appear to accuse Durov of actively supporting criminal behavior, but merely that he is complicit because bad actors are using his platform. We should know more in the coming days.

So let us be clear, the French arresting the Telegram CEO for merely creating a communication platform threatens Americans’ speech. If Americans are using Telegram but then the strength of Telegram’s security is weakened in response to what France is doing, then Americans are worse off. Their speech is less secure and chilled. While consumers can switch to other products, there is little stopping France from arresting or threatening the CEOs of Signal or even Meta’s WhatsApp and Messenger. Going back to the UK, what stops the current government from invoking the Online Safety Bill amid riots and unrest to clamp down on all encrypted tools that they believe are being used to “incite hatred” or spread misinformation?

European threats against tech companies and free expression can no longer be ignored. What happens in Europe is not staying in Europe. We see EU bureaucrats threatening Elon Musk for hosting a conversation with former US President Donald Trump; UK police threatening to try to extradite Americans for speech the current UK authorities find to be hateful; or many other in force or proposed speech laws or anti-encryption laws in Germany, Ireland, and around the world.

The US must not only defend American freedoms at home, but increasingly it is faced with how to respond to threats from even democratic allies. The irony is not lost on Pavel Durov, who left Russia in 2014 after Putin’s regime effectively forced him out of his previous social media company, VKontakte, because Durov wouldn’t de-platform dissident Alexei Navalny or give user information to Russian authorities.

It is difficult, though, for the US to call out such attacks on expression and privacy when our policymakers have long considered or advocated requiring backdoors and weakening encryption. Similarly, while the TikTok divest or ban law is (in)famous for what it does to TikTok, the law also more broadly gives power to the executive branch to initiate similar divest or ban proceedings against other foreign adversary-controlled applications deemed to be security threats.

Given that Telegram is headed by a Russian national and is viewed by many Western governments as too permissive of various types of bad or criminal actors, it is not hard to imagine a future US administration taking legal action against Telegram or other tech companies.

The US needs to be more committed to strong encryption and tech-powered expression if it wants to effectively argue against other nations harming American speech, security, and companies. It also strengthens the argument for more decentralized forms of social media and communication that are more resistant to government censorship because no one company or person has the power to squash expression or invade users’ privacy.

Will Duffield

On August 24, French police arrested Telegram founder Pavel Durov moments after his plane touched down at Le Bourget airport outside Paris. He remains detained on “an arrest warrant alleging his platform has been used for money laundering, drug trafficking and other offenses,” according to French television network TF1. Although Durov has not been officially charged, his unprecedented arrest threatens Telegram’s unique neutrality.

Telegram is an instant messaging platform particularly popular in post-Soviet states. It allows its 900 million users to communicate via one-to-one, optionally encrypted, chat, and in large public channels. Durov created Telegram in 2013 as his previous social media platform, a Russian Facebook analog called VKontakte, was being expropriated by Putin-friendly oligarchs. Then, recounting resistance to FSB demands for Euromaidan channel data, police intimidation, and a Douglas Adams-inspired “so long and thanks for all the fish” resignation from VK, he was celebrated in the West as a dissident.

A 2014 New York Times profile titled “Once Celebrated in Russia, the Programmer Pavel Durov Chooses Exile” quoted Durov saying, “me myself, I’m not a big fan of the idea of countries,” and characterized him as “Neo from the ‘Matrix’ movies … moving from country to country … One day he is in Paris, another in Singapore.”

Russia’s 2022 invasion of Ukraine and the attendant return of great power geopolitics has made stateless nomadship much more difficult. Everyone and everything—even social media platforms—have been expected to pick sides. Nevertheless, Telegram has remained uniquely neutral, and, until now, unmolested.

Since 2022, social media, and to an extent the entire internet, has been steadily separating into Russian and Western spheres. Both shifting user attitudes and state sanctions have played a role. The EU sanctioned the owners of VKontakte, prohibiting payments to the platform. At the same time, Russia banned Meta for “extremist activities” after Facebook and Instagram relaxed their hate speech rules to allow Ukrainian invective against Russian invaders. While WhatsApp has remained popular in both Russia and the West, its maximum group size, 1,024, is far smaller than Telegram’s 200,000 user limit, making Telegram the preferred platform for public conversation. Although there are a few prominent Russian state accounts on Twitter, and some Russians still lob insults at American volunteers on Instagram, division is the rule. Telegram is the exception.

Everyone on both sides of the war uses Telegram. They were already using it when Russia’s full invasion began and quickly pressed their favorite social media app into wartime service. Heads of state, government agencies, military units, and civilians all began to coordinate, troll, boast, and propagandize on Telegram. Ukraine’s security services set up chatbots to allow the reporting of Russian troop movements. Overnight, Telegram became simultaneously a digital Switzerland and a battlefield.

The unique circumstances of its birth had, until August 24, allowed the platform to remain awkwardly neutral throughout the two-and-a-half-year conflict. Although Russia tried to ban the platform in 2018, it didn’t stick, and by 2022 the Russian state itself had become too reliant on the platform—both for external and internal communication—to abandon it.

It didn’t have the same sort of moderation controversies as Meta when used by combatants because it did less to restrict violent speech to begin with and didn’t offer concessions to one side over the other. Indeed, Durov merely tried to assure Ukrainians that their data would be secure against wartime hacking. This isn’t to say Telegram isn’t unmoderated. But its combination of channel-based communication and largely reactive moderation—relying on user reports—creates a more laissez-faire moderation paradigm than more centralized, web-first platforms. 

Because Durov had already left Russia and taken Telegram with him, it didn’t fall under the sanctions that affected the Russian-based internet and European services operating in Russia. Indeed, last year, I contrasted perceptions of the platform’s independence with perceptions of TikTok, writing “TikTok isn’t a small founder-run operation like Telegram, which while born in Russia, escaped its orbit and is now registered in the Cayman Islands and headquartered in Dubai.” However, Durov’s refusal to limit Russian use of Telegram and the platform’s commitment to light-touch moderation as other social media platforms have grown more restrictive, has gradually soured attitudes towards Telegram among many Western elites.

In the Second World War, Swiss neutrality was often disdained by the Allies, especially later in the war. Nevertheless, a neutral Switzerland had undeniable value, not only to journalists and spymasters but to many downed airmen as well. Likewise, even if a neutral Telegram offers Russia access on equal terms, it allows for the observation of Russian chatter and activity, the identification of captured soldiers, and the simple maintenance of pacific and familial ties between friends and family separated by the conflict. It is also the only place where ordinary Russians can get an uncensored view of their country’s awful military misadventure. These are all goods worth safeguarding. 

Telegram’s neutrality might have become an annoyance, but this shift alone doesn’t explain Durov’s perplexing arrest. Telegram has long been more pugnacious in its relations with courts and regulators than most publicly traded platforms, but it is far from unique in offering encrypted messaging. In fact, end-to-end encrypted chat makes up a much smaller portion of its use than competing services. While Telegram’s “secret chats” are end-to-end encrypted, its massive public channels are not. If Telegram’s encryption is at issue, WhatsApp owner Mark Zuckerbeg and Signal founder Moxie Marlinspike and many other tech luminaries should avoid France.

More generally, it is hard to see how France has jurisdiction over Telegram. Telegram isn’t a French company. France might have personal jurisdiction over Durov as a French citizen, but operating a social media platform offering encryption isn’t a criminal act in France. To the extent that Durov’s arrest is related to Telegram’s platform policies rather than Durov’s private activity, France has just taken a hostage. France shouldn’t follow in the footsteps of Turkey and India.

Absent official clarity, speculation and likely misinformation abound. Some have claimed, without evidence, that Durov’s arrest is the roundabout work of the American State Department. Durov’s arrest is much more likely to have been prompted by French anxieties about Russian disinformation campaigns targeting Francophone Africa, where eight countries have experienced coups in the past four years. many of which brought them closer to Russia. Durov’s refusal to suppress such campaigns may have been the trigger for his arrest. It is also worth noting that while Telegram isn’t uniquely encrypted, it is simply the communications platform of choice—for everyone—in the parts of the world from which organized crime comes to Western Europe. 

On August 26, Jean-Michel Bernigaud, Secretary General of Ofmin, a French child protection agency, muddied as much as he clarified in a Linkedin post saying, “At the heart of this issue is the lack of moderation and cooperation of the platform (which has nearly 1 billion users), particularly in the fight against pedophilia.” He, confusingly, attached a link to a documentary about pedophiles’ use of Instagram. French President Emmanuel Macron tweeted that he had “seen false information regarding France following the arrest of Pavel Durov,” and proclaimed France’s commitment to “freedom of expression,” “the spirit of entrepreneurship,” and “the rule of law,” but offered no greater clarity as to why his country had arrested Durov. 

France owes Durov, Telegram users, and the internet as a whole, a rapid explanation. Its actions are already damaging its reputation as both a friend of liberty and a safe place to do business. More importantly, Durov’s opaque arrest threatens Telegram’s unique neutrality and potentially the safety of its users on both sides of the conflict. The appearance of capture can be just as damning as the real thing. If France is truly an ally committed to a free internet, it should free Pavel Durov.

Adam N. Michel

Vice President Kamala Harris’s campaign recently confirmed that she supports all the nearly $5 trillion in tax increases included in President Biden’s 2025 budget proposal. Among the long list of tax hikes is a novel proposal to tax the unrealized gains of wealthy Americans. As many commentators have noted, such a tax would be economically destructive, but the fervor over this one bad idea has distracted from other more wide-reaching and even more economically damaging proposals.

For example, Harris’s 28 percent federal corporate tax rate and 44.6 percent top capital gains and dividend tax rate would give the United States the highest total tax rate on corporate income in the developed world when combined with state taxes. As I recently explained, workers ultimately bear most of the cost of the corporate income tax through lower wages and fewer job opportunities. Because the corporate income tax is one of the most economically destructive ways to raise revenue, the total economic cost of Harris’ proposed tax hike will likely be multiple times larger than the tax revenue it raises.

The Harris plan would also increase top federal income tax rates so that combined state, local, and federal tax rates would be on the wrong side of the Laffer curve in 36 states and Washington, DC—the point at which higher tax rates create so much economic distortion that they no longer bring in additional tax revenue. 

The cumulative economic losses from Harris’s tax hikes will be death from a thousand cuts. Each proposal may seem targeted at just a few Americans, a particular industry, or only profitable companies. However, taken together, Harris proposes the largest tax increase in more than 40 years, raising tax rates to some of the highest in the world and resulting in lower wages for American workers and slower economic growth.

Some of the other more than 90 proposals include a higher stock buyback tax, new global minimum taxes, higher taxes on carried interest, new limits on the deductibility of wages for highly paid employees, elimination of some like-kind exchanges, permanent loss limitations for pass-through businesses, higher taxes on oil, gas, and coal production, limits on retirement contributions and accelerated minimum distributions for some high‐​income individuals, a new 30 percent excise tax on digital mining electricity costs, and a higher death tax.

One of the more narrowly tailored new taxes that deserves some additional analysis is a novel proposal to tax unrealized capital gains.

Taxing Unrealized Gains

The Harris plan includes a new minimum tax of 25 percent on traditional income and unrealized capital gains for taxpayers with more than $100 million in total wealth. While ostensibly limited by a high net-worth threshold, such a tax would be economically destructive and administratively unworkable—not to mention unconstitutional.

What’s wrong with taxing unrealized gains? The core problem with taxing unrealized gains is that there is not actually anything to tax until the asset is sold for a profit. For example, if I purchase a house for $400,000 and it appreciates by $50,000 the following year—an unrealized gains tax at 25 percent would mean I owe the government $12,500, regardless of whether I sell the house or have the cash on hand to pay the bill.

If you don’t have the cash, such a system would force you to sell your home or take out a loan to pay the government. Levying a tax on someone’s projected future income before they have full claim to it themselves also raises deeper questions about individual property rights, financial privacy, and due process.

The pursuit of taxes on unrealized gains turns on a core disagreement about what constitutes “income.” Cato’s Chris Edwards recently noted, “Unrealized capital gains are not a component of any of 11 different measures of income currently used by various federal agencies, and unrealized gains have been excluded from income since the first modern income tax law of 1913.” However, some liberal tax scholars have long sought to define income as an individual’s annual change in net worth—a measure that includes wages plus any increase or decrease in the value of assets. Thus, an unrealized capital gains tax, often also called a mark-to-market tax, uses a better approximation of these liberal economist’s preferred tax base, which is biased against saving and investment.

Taxing unrealized gains raises effective tax rates on US savers by making them pre-pay their taxes on gains not yet realized. An unrealized gains tax paid annually out of cash on hand increases taxes paid by more than 12 percent.[1] Such a tax increase on investment returns would disincentivize entrepreneurship, new business start-ups, angel investing, and overall investment in leading-edge industries. The new tax would also disadvantage domestic investors relative to similarly situated foreign investors not subject to the tax.

Few other countries tax unrealized market gains in the way Harris proposes because it is administratively unworkable. One of the practical challenges is appropriately accounting for losses when the value of an asset declines. If paper gains are taxed, paper losses require a rebate for pre-paid taxes. In 2022, when Elon Musk’s net worth declined by a record-breaking $182 billion, the government would have owed him a $45 billion check—in effect, paying him back some of the taxes he paid in previous years on gains that were only fleeting. Writing the wealthiest Americans large checks when the economy falters would create significant budgetary issues, not to mention difficult political perceptions.

Acknowledging some of these administrative difficulties, the brief description of the Harris proposal includes rules that formulaically value non-tradeable assets, a separate system of rules for illiquid taxpayers, and refund rules for some overpayments. Even with simplified rules, taxes based on asset values are all but impossible to administer and would place extraordinary new burdens on an already poorly performing IRS. It took 12 years for the IRS and the estate of Michael Jackson to reach a court-mediated agreement on the value of the estate’s assets. Going through such a process every year for all taxpayers with assets near the tax threshold is administratively impracticable.

Some commenters have brushed off concerns about the tax because it would not apply to most people (by one estimate, there are about 10,660 centi-millionaires in the US). Unfortunately, exempting most people from a burdensome tax does not make it any better policy. And arbitrary thresholds should not provide much comfort to the majority of Americans who would still be exempt from the income tax had the 1916 exemption threshold continued to protect 99 percent of Americans from the tax. Senate Finance Chairman Ron Wyden has a similarly flawed unrealized gains tax proposal with a threshold ten times lower than Harris’s ($10 million in assets or $1 million in income).

Conclusion

Harris’s proposal to tax unrealized gains may appear to target only the wealthiest Americans, but it sets a dangerous precedent that would pave the way for even more aggressive and economically damaging tax increases. This tax is not just an attack on the wealthy; it’s an assault on investment, innovation, and economic growth, risking widespread economic damage that will be felt across the entire economy. And it is just the tip of the iceberg—it’s one of more than 90 proposed tax increases and other changes that target the engine of American prosperity.

[1] Assumes a 7% annual return for 10 years. Expressed in present value assuming 3 percent inflation.

Jeffrey A. Singer

A paper published in the journal Harm Reduction in June by Arielle Selya, PhD argues against the “gateway” hypothesis that nicotine-vaping prohibitionists like to employ. Electronic nicotine delivery systems (ENDS) opponents point to studies that suggest teens who use e‑cigarettes may be more likely to use illicit drugs and tobacco. (To be logically consistent, they would also have to claim that tobacco is a gateway to using illicit drugs.) However, as is the case with similar, long-ago debunked arguments against cannabis use as a gateway to harder drugs, the hypothesis is based on observational studies that show correlation, not causation.

Congress commissioned the Institute of Medicine of the National Academy of Sciences to investigate whether cannabis is a gateway drug to other, more harmful illicit substances, and in 1999 it concluded:

Patterns in progression of drug use from adolescence to adulthood are strikingly regular. Because it is the most widely used illicit drug, marijuana is predictably the first illicit drug most people encounter. Not surprisingly, most users of other illicit drugs have used marijuana first. In fact, most drug users begin with alcohol and nicotine before marijuana — usually before they are of legal age.

In the sense that marijuana use typically precedes rather than follows initiation of other illicit drug use, it is indeed a “gateway” drug. But because underage smoking and alcohol use typically precede marijuana use, marijuana is not the most common, and is rarely the first, “gateway” to illicit drug use. There is no conclusive evidence that the drug effects of marijuana are causally linked to the subsequent abuse of other illicit drugs.

An alternative explanation for these correlations is what researchers call “common liability.” The common liability hypothesis claims that users of various substances share a common attraction to a component or effect of those substances. In the case of vaping and tobacco smoking, the component is nicotine.

Dr. Selya writes:

[E]arly conceptualizations of the gateway concept—marijuana use leading to subsequent use of “harder” substances—is no longer accepted as a plausible hypothesis. It has since been dismissed for the same reasons: that the association between marijuana use and other substance use reflects common risk factors rather than a causal relationship…

… rather than ENDS use directly causing some youth to also smoke cigarettes (as in the gateway explanation), youths’ pre-existing tendency to use products containing nicotine explains why youth who use ENDS also smoke cigarettes. This is referred to as the common liability explanation because the same list of individual characteristics mentioned above are common to both ENDS use and cigarette smoking, and having these characteristics is a liability (i.e., they are risk factors) for using any product that contains nicotine.

In an interview with Filter Magazine, Dr. Selya states, “The real question is: What would these youths have done in a hypothetical world without e‑cigarettes? We call this the ‘counterfactual.’”

Youth tobacco smoking has been declining since 2004. “Common liability” may explain why the rate of decline in youth tobacco smoking accelerated after e‑cigarettes appeared on the scene. It may also explain a UK survey released this month showing nearly 3 million people have used nicotine e‑cigarettes to quit smoking since 2019, and a record 5.3 million people currently vape in the UK (11 percent of the population).

Of course, policymakers should not interfere with adults’ right to vape because of concerns that minors might do so. Besides, as is the case with alcohol, it is already illegal for retailers to sell e‑cigarettes to anyone under age 21. However, in their zeal to restrict access to alternative nicotine delivery systems, policymakers should remember to consider the counterfactual.

Chris Edwards

State legislative sessions have wrapped up for the year, and taxpayers have once again gained ground. Budget surpluses are prompting many states to cut taxes. Unfortunately, the quality of tax cuts has varied — from broad pro-growth rate cuts in some states to narrow special interest breaks in others.

Republican-led states have focused on cutting individual- and corporate-income tax rates, which is the best way to spur investment and job creation. Between 2021 and 2024, 14 states cut their corporate tax rates and 21 states cut their top individual income tax rates.

Unfortunately, rate cuts are not the only tax change sweeping the country. State tax systems are increasingly infested with narrow breaks, or subsidies, as politicians intervene to aid trendy industries, such as green energy, semiconductors, film production, and data centers.

New York has a tax credit for digital-gaming businesses, Virginia has a tax credit for vineyards, California has a tax credit for cannabis businesses, and Georgia hands out $1 billion a year in tax credits for the film industry. These breaks — often called “incentives” — complicate tax codes, distort the economy, and are unfair to businesses that pay the full tax load.

In legislatures, there is always a battle between the general interest and special interests. In state tax policy, we’ve been getting a lot of both in recent years.

Read more in my new op-ed at National Review.

And look for a full analysis in my upcoming Fiscal Report Card on the Governors.

Jeffrey Miron

Policies that subsidize or mandate family leave aim to reduce the gender pay gap, shrink the “child penalty,” and otherwise promote success for women in the labor market.

A recent study, however, finds

no evidence that [California’s 2004 Paid Family Leave Act (CPFL)] … increased employment, boosted earnings, or encouraged childbearing, suggesting that CPFL had little effect on the gender pay gap or child penalty. For first-time mothers, … CPFL reduced employment and earnings roughly a decade after they gave birth.

The study authors conclude,

Given the growing research on the health and well-being benefits of paid family leave policies, US policymakers favoring these benefits may want to consider alternative implementation strategies to mitigate the potentially adverse effects on women’s employment and careers.

One alternative is to leave decisions about career and child-rearing to women and their families, with no government thumb on the scale!

This article appeared on Substack on August 23, 2024.

Alex Nowrasteh

The Mississippi Office of the State Auditor released a report that purports to show that illegal immigrants impose a cost of over $100 million on state taxpayers and that “actual spending could be higher.” Unfortunately, the report is not a high-quality estimate and is practically worthless because it doesn’t even attempt to include the tax revenue collected from illegal immigrants in the state. The report poorly estimates outlays for illegal immigrants and entirely ignores tax revenue, so a negative answer is the only methodologically possible answer.

The report, which is six pages long, isn’t even useful when it comes to estimating the costs by themselves. It uses back-of-the-envelope estimates for the number of students who are illegal immigrants and emergency room visits by illegal immigrants. Oddly, the auditor didn’t use state administrative data to more accurately identify illegal immigrants who consume taxpayer-funded health care and other services. Instead, the auditor looked at macro data and merely made assumptions—for instance, that half of illegal immigrants go to the emergency room once a year. The Medicaid Budget and Expenditure System FY 2023 report shows that emergency services for illegal immigrants amounted to a total of $0 in Mississippi. The state auditor should have started there, at least.

Upon opening the report, there were two initial signs that the state auditor’s report was not a careful study. The first was its heavy reliance on a state-level fiscal cost estimate by the Federation for American Immigration Reform (FAIR) that overcounted costs and underestimated tax revenue to such an extent that it’s hopelessly flawed, detailed above.

The second sign is that the opening paragraph unintentionally argues that the illegal immigrant share of the population halved from 2016 to 2022—which did not happen. They wrote:

Illegal Immigration [sic] is a challenge all 50 states face. According to experts from Yale and MIT, 22.1 million illegal immigrants lived in the United States in 2016. Experts acknowledge the number of illegal immigrants in the United States is expected to grow when 2023 and 2024 data becomes available. As of 2022, researchers estimate that illegal immigrants make up 3.3% of the nation’s population.

An illegal immigrant population of 22.1 million in 2016 would have been equal to just over 6.8 percent of the US population at that time. But the auditor then wrote that the population of illegal immigrants was just 3.3 percent of the US population in 2022. What happened? The auditor took two illegal immigrant population estimates from two different sources, one of them a numerical estimate and the other a share of the population, and used them interchangeably. The numerical estimate that comprises 3.3 percent of the population is 11 million. That’s a sloppy mistake.

What about the estimated population of 22.1 million illegal immigrants in 2016? This substantially overstates the illegal immigrant population in that year. Don’t believe me? Perhaps you should read the piece “New Estimate of 22 Million Illegal Immigrants Is Not Plausible” by Steven A. Camarota from the immigration-restrictionist Center for Immigration Studies.

Most troubling, the Mississippi Office of the State Auditor produced a much better state-level illegal immigrant fiscal cost estimate in 2006. There are a few oddities in that report, such as counting the lost tax revenue from remittances as a cost, but it tries to include the tax revenue paid by illegal immigrants, whereas the most recent auditor’s report doesn’t. The state auditor could have dusted off their old paper, updated the data, and published a much more defensible estimate. Instead, they published a report that is even less defensible than the report produced by FAIR. Despite all its flaws, at least FAIR tried to estimate tax revenue paid by illegal immigrants. The Mississippi Auditor didn’t even try. Shockingly, the FAIR report above is more methodologically sound than the Mississippi auditor’s attempt in 2024 to estimate the fiscal costs of illegal immigration in Mississippi.

State auditors should attempt to produce better fiscal cost estimates of illegal immigration if they’re going to go down this path. Mississippi state auditors have tried it before, and they can do it again. Failing to publish fiscal cost estimates is better than publishing unserious reports like Mississippi’s most recent effort. Who audits the auditors? Quis custodiet ipsos custodes?

Ryan Bourne

Note: This is an excerpt from my book The War on Prices, made all the more relevant by Kamala Harris’s promise to introduce a federal anti-price-gouging law on groceries should she win the election.

Hurricane Harvey hit the Texas coast near Port Aransas on August 25, 2017. It was the second-costliest hurricane on record, resulting in over 100 deaths and $125 billion worth of damage to hundreds of thousands of buildings and cars.

Days later, Texas Attorney General Ken Paxton told CNBC that his office had received 500 complaints about “price gouging”—instances of sellers charging prices for goods and services at levels so high they are deemed neither reasonable nor fair. Some businesses charged $99 for a case of water; hotels had tripled or quadrupled their rates; and gas prices had soared from $4 to $10 a gallon. “These are things you can’t do in Texas,” Paxton said, reminding viewers of the state’s emergency law against what many deemed “greedy profiteering.”

Disasters completely disrupt the supply-and-demand patterns for goods and services. Hundreds of southeast Texas communities had no safe drinking water, which sent the demand for bottled water soaring. Damaged homes led to a surge in hotel bookings and the need for more tools and building materials. Impassable roads and bridges hampered the delivery of groceries and other retail products, while the total shutdown of oil refineries directly limited fuel production.

Prices thus become highly volatile after natural disasters. Consumers, however, resent paying more for essential goods, particularly when they have been triggered by soaring demand (as with bottled water), as opposed to businesses’ costs rising because of the disaster. As a result, 37 states and Washington, DC, have anti-price-gouging laws (APGLs) that use government power to prevent or limit large price increases during emergencies.

Texas’s APGL kicks in when a disaster is declared by the governor or the country’s president. Under the law, merchants are not allowed to sell or lease fuel, food, medicine, lodging, building materials, construction tools, or other necessities at “exorbitant” or “excessive” prices, with those caught facing civil penalties of up to $10,000 per violation, rising to $250,000 if elderly consumers are affected.

APGLs like this are often extremely popular. After Hurricane Harvey, 67 percent of polled Americans thought there should be a federal APGL, with just 3 percent saying no such laws should exist at any government level.

Concerns about price gouging during the COVID-19 pandemic and the recent inflation crisis encouraged federal legislative proposals in Congress. Sen. Elizabeth Warren’s Price Gouging Prevention Act of 2022 would, for example, have made it unlawful “to sell or offer for sale a good or service at an unconscionably excessive price” during “exceptional market shocks” like natural disasters, power outages, strikes, civil disorder, war, or public health emergencies. The proposed fines were huge, at 5 percent of parent company revenue for very large and important companies. Firms would only be able to avoid them if they could demonstrate price increases were a direct result of rising costs outside their control.

The Basic Economics of APGLs

In a free-market economy, prices serve as a vital mechanism to balance supply and demand, with price movements signaling changes in underlying market conditions. Consider a hurricane that significantly increases the demand for bottled water, due to disruptions to public water supplies and electricity outages. This shock creates a relative scarcity of water at the old price, leading to a situation where the quantity demanded exceeds the quantity supplied.

In response to this unmet demand of more dollars chasing dwindling stocks, the price of bottled water begins to rise. This rising price sends a loud message of a relative scarcity in the market—of supply not satisfying now-higher demand—at the old price. Yet that price increase brings useful incentives for suppliers and consumers to adjust their behavior to avoid these shortages.

First, the higher price acts as a financial rationing device. Consumers, facing an increased cost of purchasing, reassess their needs, prioritizing buying only what is necessary, rather than what is nice to have. This behavior helps ensure that those who value water the most at that time—and are willing to pay higher prices—can still obtain it.

Second, the rising price compensates suppliers and merchants for bringing more bottled water to market. The higher price justifies the costs and risks associated with opening stores in damaged areas, transporting bottled water from surrounding states, paying overtime to workers and truckers, or ramping up production or transportation through acquiring new inputs and storage space.

The higher price thus increases the quantity supplied to meet the higher demand, which means that more water is sold, albeit at higher prices, than before the hurricane. In fact, the potential for prices to rise in areas where hurricanes could hit grants retailers the incentive to invest in option-ready supply or contingency arrangements for that eventuality in the future.

Yes, we’d obviously see some charity and relief efforts to ship in water from other states when disaster strikes, even if prices were capped. As Nobel Prize-winning economist Richard Thaler and others have observed, big drugstore chains and big-box retailers face large reputational risks from being seen to raise prices significantly in emergencies. To protect perceptions about their brand, and so longer-term profits, they often decide not to hike prices significantly anyway, accepting some shortages or non–price rationing in their stores, or else bear the cost of developing systems to transport supply from nonaffected areas.

Yet with price increases, other small sellers, independent stores, and newer individual suppliers, without major brands to worry about, face stronger incentives to open stores, and release stocks of bottled water, transport it from elsewhere, or reorient their production facilities to increase the supply. Their efforts help mitigate the immediate shortage.

A binding anti-price-gouging law alters this dynamic. True, these APGLs vary significantly across states, typically applying to cleanup products, medical supplies, home heating oil, housing, transportation, storage, and motor fuels once emergencies are triggered. Some laws are prescriptive, with California’s limiting price increases to less than 10 percent above their pre-crisis level, unless the business can validate that it now faces higher costs. Other laws are more opaque: Virginia bans “unconscionable prices” for covered goods, loosely defined as a price “grossly” exceeding that charged for the same or similar goods in the 10 days before the emergency.

All these laws, however, can act like price ceilings when they bind—and distort prices in a way that sends out the wrong signals about the relative scarcity of products. In California’s case, that price control is explicit when demand really surges, so the law holds prices below market rates. For most other states, the laws create uncertainty. Vague definitions like “unconscionable” or “excessive” create an unwillingness to raise prices because of the lack of clarity about the legality of any such action or requirements to prove that cost increases—which are often broader than specific product costs, such as for labor and transportation—are driving those pricing decisions.

In short, we’d expect APGLs to worsen shortages by disincentivizing the closure of the gap between the quantity demanded and the quantity supplied. With prices capped below market rates, consumers wouldn’t feel the same urgency to conserve bottled water and would overbuy to be on the safe side, quickly depleting stocks. From a seller’s perspective, fewer merchants would find it profitable to bring goods to market, including from out of state, while those holding stocks in cupboards or warehouses would be more likely to hoard supply in the hope of selling in the higher-priced black market. This situation would leave some customers unable to find water at any price.

Such a law might discourage businesses from making necessary contingency investments, increasing market susceptibility to future demand shocks too. High-profile advocates, such as the economist Isabella Weber, implicitly admit this, arguing that APGLs must be supplemented by “buffer stock systems” and “monitoring capacity” to be effective. This acknowledges that APGLs cause shortages. Such planning schemes essentially attempt to mimic market outcomes for these goods through corrective government action.

APGLs during COVID-19

After COVID-19 struck, the national state of emergency saw many state APGLs triggered, covering personal protective equipment, hand sanitizer, and various drugs and medicines. These laws proved more damaging during a pandemic. Unlike natural disasters that affect specific regions for a short time, COVID-19 was a long-lasting crisis across the entire country. There was no “outside” area from which major stores could bring in extra supplies, and the elevated demand for, say, hand sanitizer and facemasks endured much longer given the protracted nature of the pandemic.

So APGLs prolonged shortages. Hand sanitizer shelves at major chains such as CVS were barren right through May 2020. CEOs helping access facemasks from abroad said business worry about accusations of price gouging prevented their importation. Economists Rik Chakraborti and Gavin Roberts found that states imposing APGLs saw “significant increases in online searches for hand sanitizer,” implying people were having to search more aggressively to find it.

This problem was worse in states that had APGLs before the COVID-19 pandemic, implying that people’s experience with APGLs led to expectations of shortages, which in turn led to more hoarding and panic buying early on. Interestingly, APGLs might have even worsened the virus’s spread in March and April 2020. Those economists’ later research found that states with APGLs saw more people visiting stores (perhaps having to search more extensively for out-of-stock items), alongside higher COVID-19 case rates and deaths.

Of course, not all sellers would have raised prices aggressively, even absent these laws. Economists Luis Cabral and Lei Xu found that facemask prices on Amazon Marketplace rose 270 percent in March 2020 compared with 2019. But those who had sold them pre-pandemic only charged 63 percent of new sellers’ prices—indicating that it’s harder to hike prices as an established firm. Amazon itself was critical of price gouging, and stores such as CVS and Walmart appeared to react as they would with localized disasters through fear of the public reaction.

What APGLs did, however, was create new legal uncertainties for smaller convenience stores and online merchants willing to sell at higher market prices. That diminished the incentives for the economy to produce more of these goods that were in sustained high demand. It also deterred firms from making investments to build up capacity that could help during future pandemics.

The Economic Arguments for APGLs

Proponents of APGLs claim that large price increases during emergencies merely reflect companies’ exploitation of customers—a greed for profiteering from disasters. “People are outraged at ‘vultures’ who prey on the desperation of others and want them punished—not rewarded with windfall profits,” says philosopher Michael Sandel.

The laws of economics, however, don’t stop functioning just because a hurricane hits. Companies are disciplined when setting prices by customers’ willingness to pay and competitors’ ability to undercut them. The question is whether quasi–price controls lead to worse or better outcomes for allocating goods and ensuring people’s needs are met when disasters strike.

Two seductive economic objections are held up for APGLs. First, if prices rise too much, Pulitzer Prize-winning journalist Michael Hiltzik has written, then the poor suffer disproportionately. It is understandable, he says, that the public consider a first-come, first-served approach more reflective of need, in such situations, than a “most-money-best-served advantage.”

Why assume, though, that lines, rationing, or black markets help the poor? When shortages arise (as with COVID-19 tests in the spring of 2020), lots of nonprice forms of allocation occur instead that have extremely regressive effects. Merchants can sell to those who are well connected, at higher black-market prices, or give preference to their own family and friends. Richer people, who are less likely to have suffered catastrophic damage to vehicles or homes after hurricanes, given their greater resources, are better placed to pay people to go stand in line and buy up goods when available. The poor, whose lives may be less resilient to damage—meaning the lack of availability of goods to repair their home or to get their vehicle working has far graver consequences—may be willing to pay more to ensure quick access to goods for which APGLs create shortages.

A second, more sophisticated critique comes from economists Jeff Ely and Sandeep Baliga. They argue that after natural disasters, supply often cannot respond effectively and quickly to meet spikes in demand, so price increases are inevitable. In these extreme circumstances, when we are deciding how to allocate a fixed quantity of goods, policymakers should try to maximize “consumer surplus” and ignore “producer surplus.” The benefits to consumers from keeping prices low will exceed the efficiency gains of allocating goods to those who most value them.

But their assumption determines their conclusion. A high price really does affect marginal decisions to supply goods. The South Carolina attorney general’s office found that after Hurricanes Gustav and Ike, some “station owners reported that to avoid bad publicity they simply shut their doors instead of purchasing gasoline at elevated prices.” Small independent stores, when deciding whether to risk opening or transporting product in from out of state, are influenced by prices. In fact, free-market pricing affects supplier expectations about acting on an elevated willingness to pay when crises hit, encouraging them to store more product and mitigating shortages even before natural disasters strike.

The Morality of APGLs

Economists therefore generally object to APGLs. Asked whether they backed Senator Warren’s APGL proposal, just 3 percent of 40 top economists in the Initiative on Global Market’s survey agreed, whereas 84 percent disagreed. A 2012 poll over a proposed anti-price-gouging law in Connecticut saw the same result. That’s because economists see prices as reflective of supply and demand, rather than business whims. Firms are constrained in what they can charge by customers’ willingness to pay and by competition from other businesses at all times. Price movements provide crucial incentives to act on market realities.

The public clearly disagrees with economists, reacting with moral revulsion to large price hikes during emergencies, even when informed that experts believe APGLs deliver shortages and store closures. Philosopher Michael Sandel speaks for many in saying that “a society in which people exploit their neighbors for financial advantage in times of crisis is not a good society.” As economist Dwight R. Lee concludes, it’s as if we collectively demand a “magnanimous morality” of business during crises—an active sacrifice for the greater good, just as we hope someone jumps into a frozen lake to save a drowning child.

This sort of small group moral instinct is not invoked consistently, of course. During the spring of 2020, few accused traveling nurses earning $10,000 per week in New York, with free accommodation, car rentals, and covered travel, of “wage gouging.” Companies are treated differently.

More importantly, this instinct fails a consequentialist morality test. The disaster, and its effects on demand and supply, cannot be wished away. The question is how best to deal with it. Yes, donations of money, goods, or services, such as help providing water and tools, are welcome. But if such relief efforts were sufficient to overcome the destruction, firms wouldn’t even be able to raise prices significantly and we’d see no shortages, black markets, or rationing with APGLs.

That we do shows charity is insufficient. What’s more, only a freely operating price system, not relief agencies or charities, can coordinate action across large populations and sectors, including resolving tradeoffs over how much victims value the supply of, say, bottled water compared with plywood or medicines.

Some have argued that economists’ opposition to APGLs is overblown. Given the limited scope and duration of these laws, the often extensive carveouts if firms can prove that price increases are caused by cost increases, and the fact that major firms often avoid raising prices anyway, due to the reputational effects, some economists, such as Josh Hendrickson of the University of Mississippi, have argued that APGLs “aren’t so bad.”

But as the COVID-19 pandemic showed, they can still undermine our resilience and recovery from major shocks. And the sort of misguided economic thinking that gives rise to their adoption is even more troublesome.

Recent debates suggest much of the public considers it illegitimate for firms to raise prices significantly if they are being driven by demand increases, for example. Companies were blamed for high inflation, despite the role of excessive stimulus driving demand. There has even been some pushback against dynamic pricing as it has been rolled out beyond ridesharing companies to bowling alleys and other entertainment centers (see Chapter 24). If such impulses, which underpin APGLs too, become law in “normal times,” these sorts of price regulations could do much more damage.

Romina Boccia

It’s tempting to believe that Social Security is an “earned benefit”—after all, that’s a prevalent idea we’ve been sold for decades, and it feels good to think of it as “our money.” But the reality is more complex. It’s important to look under the hood of the Social Security system to see what’s really going on.

I was in Columbus, Ohio last week, playing the role of party pooper at Social Security’s 89th birthday bash, hosted by the AARP. Our backdrop was a big bold sign with the message: “Social Security. It’s your money. You’ve earned it.” Per show of hand, more than 9 out of 10 attendees were receiving Social Security. You can imagine the disapproving looks in the room when I explained how Social Security actually works. Here are five reasons why Social Security is an income transfer program, and not an “earned benefit.”

1. It’s pay-as-you-go. Social Security is a so-called pay-as-you-go system. This means it is a tax-and-transfer system in which taxes collected from today’s workers fund benefits for today’s beneficiaries. Beneficiaries include eligible workers who are 62 and older, spouses, and their surviving children. There’s no saving or investing that takes place. Payroll taxes collected today are spent immediately.

2. Repaying the “trust fund” adds to the debt. The so-called “trust fund” is an accounting ledger that doesn’t hold real assets. It records IOUs issued by the Treasury Department for Social Security. When the government collected more in payroll taxes than was needed to fund benefits, Congress spent those payroll tax surpluses as soon as the Treasury had collected them. Instead of making it possible to fund benefits when payroll taxes fall short in any given year, these IOUs allow Social Security to call on the Treasury to provide it with additional money, which the Treasury usually does by selling additional public debt. Social Security is in effect borrowing the money it needs to cover the cost of benefits in excess of available payroll tax revenues.

The good news is that Social Security is limited in its borrowing authority to the amount of payroll taxes previously collected plus interest. This means there is some accountability there and a legal mechanism to force corrective action when the so-called ‘trust fund’ becomes depleted. The bad news is that Congress can change the law at any time and decide to let Social Security keep borrowing money, even after its ‘trust fund’ ledger goes negative. In essence, one way that Congress can avoid automatic benefit cuts in 2033, when all past payroll tax surpluses plus their interest will have been repaid by the Treasury in the form of new public debt, is to just keep piling on more debt. That would be a fiscally reckless policy choice we should avoid.

3. Beneficiaries have no property rights to their benefits. Most people know by now that there’s no personal retirement account held by Social Security with their name on it. What many people don’t know is that even the Supreme Court has ruled that individuals do not have a property right to their Social Security contributions. Congress may change how the program works, including who receives how much in benefits, at any time. This undermines the idea that Social Security benefits are something individuals earn or own.

4. Benefits are based on policies made by Congress, not contributions. There is no direct, proportional relationship between what a worker contributes in payroll taxes and what that worker will receive in benefits. Social Security benefits are calculated using a progressive formula—lower-income workers receive higher benefits compared to their pre-retirement wages than do higher-income earners. Additionally, other factors, such as changes in life expectancy, and spousal and survivor benefits, further decouple contributions from benefits. Congress can decide how much to pay out in benefits and to whom, regardless of any contributions made.

The marketing that Social Security was an “earned benefit” was crucial for its political success, especially during expansions like the one in 1950, when Congress expanded eligibility criteria and added several new groups to Social Security’s rolls who wouldn’t qualify based on their own earnings records. This framing helped to distinguish Social Security from other welfare programs, thereby reducing opposition and increasing public support for benefit expansions that were not directly related to a worker’s earnings history. The earned benefit narrative was politically expedient because it resonated with the values of self-reliance and fairness that were central to the American political culture of the time.

5. It works like a Ponzi scheme. The notion of Social Security as an earned benefit obscures the significant intergenerational transfer inherent in the system. The first few generations of retirees received far more in benefits than they contributed, funded by the taxes of a larger, younger workforce. Like a Ponzi scheme, Social Security relies on revenues from new workers to pay for promises made to previous generations. Unlike Ponzi’s scheme, which collapsed when people learned of its true nature, Social Security can use the force of the government to continue this scheme by taxing younger workers more.

Toward a More Rational Conversation

The financing, progressive benefit formula, intergenerational transfers, Supreme Court decisions, and history of political framing all challenge the idea that Social Security is something you’ve truly “earned.” It’s important to look beyond the comforting rhetoric and understand the real dynamics at play.

With younger workers increasingly on the hook for rising benefit costs, effective policy reforms must build on the understanding that Social Security is an income transfer program, not an “earned benefit.” Once we come to grips with that reality, we can have a more rational conversation about who should receive how much in benefits, considering their circumstances, without losing sight of how much is fair to ask younger workers to pay to fund those benefits.

Deirdre N. McCloskey

On July 25, more than four years after the emergence of COVID-19 and the authoritarian reaction to it by the state, the once-annual debate between the interns of the Cato Institute and those of the Heritage Foundation resumed. Two interns from each side, coached by two or three others of their number, took the floor to defend their cases, the libertarian-liberalism of Cato and the conservative-Trumpism of Heritage.

It was a splendid occasion, marked by courtesy on both sides, though spiced with some indignant eloquence and even occasional snark. If these young people are typical of the two movements, both will prosper. Perhaps a conclusion will emerge, which was the old program, blown to pieces by Trumpism, of a partial alliance between liberalism and conservatism. (It will be no surprise which conclusion a senior fellow at Cato would prefer. But let us be minimally fair.)

The Cato champions started with principles, which can be formulated as the Golden Rule of Rabbi Jesus of Nazareth supplemented by the version of Rabbi Hillel of Babylon—“Do not do unto others what you would not want done to yourself.” The two together are a loving liberalism of equality of permission.

Since colonial times, though, Americans have practiced a matched pair of angry anti-liberal replies. One of them, which the Heritage interns repeatedly charged libertarian-liberals of espousing, has been, “Don’t tread on me, because I can do anything I damned well please.” Bring my AK-47 to church, say. As the Good Book says, “Do unto others before they do it unto you.” The other pair of angry American replies to an amiable equality of permission—favored by the conservative debaters—has been since the Puritans, “But don’t do that”—where the “that” ranges from recreational drugs to second-trimester abortions.

True liberalism, though—as in the blessed Adam Smith, Mary Wollstonecraft, and Henry David Thoreau—is that equality of permission. It’s what my grandmother, born in the 1890s, used to say: “Do what you want, but don’t scare the horses.” It’s a true liberal bumper sticker.

As one of the Cato interns noted, the very debate was liberal—the back and forth of liberty of speech. Such debate does not fit very well with conservatism, in which faith is the alpha and the omega. Conservatives, therefore, have a hard time debating on points of fact or logic, though their two champions at the Heritage building were eloquent and quick. A true liberal notes that they turn too quickly to their faithful feelings: Don’t do that.

Part of the problem with a conservative versus liberal debate is that conventional politics has long depended on positing a left-right spectrum, from the seating arrangement of the French National Assembly in the early 19th century. It is supposed to characterize all political opinions. Admittedly, nowadays, the conventional spectrum is getting out of focus all over the place, in Britain and France and the United States, in favor of cultural warfare unpredictable from the old left-right ideologies. Yet most people still think that this spectrum is all you need to know about politics and keep forcing everyone to declare their place on it. For example, journalists of a certain age simply cannot think of Cato-style liberalism as anything but conservative. The conservative debaters know well that such a thought is false.

Every position along the conventional spectrum supposes that it is a fine idea to have a large and coercive state, larger and larger, more and more coercive. See any book by Daron Acemoglu. The only dispute is what or whom the state should coerce. In the old left-right disputes, the right wanted liberty for the boardroom yet wanted state coercion for the bedroom; the left the other way around. The middle wandered in between.

We true liberals at Cato live in a treehouse well above the spectrum, sending amiable messages down to our friends on the spectrum, saying that they might want to consider whether the state is too big, too coercive, or too careless of liberty. Consider again the authoritarianism of Anthony Fauci, which most people fell for—even, to my shame, me.

What became clear during the debate is that even in its most sophisticated form, the conservatism of Heritage is based solely on moral sentiments—what Leon Kass championed and Martha Nussbaum challenges as a politics of disgust. An analysis of homosexuality or transgender or of heroin or the welfare queen comes down to emotivism, a loudly expressed “yuck.”

True, David Hume noted that ethical convictions come from just such moral sentiments. The alleged logic is a secondary justification and comes after the fact. Yes, all right. But without secondary justifications, it’s hard to see how policy debates can proceed. If Heritage supports industrial policy, as the Heritage interns said, then in the absence of analysis—such as that any material down to pencil graphite goes into the supply chain of Chinese weapons and therefore needs policy and protection—the case amounts to “The Chinese: Yuck.” Hayek once remarked that conservatives can’t interact in a liberal way with people they disagree with. It’s not really a matter of argument. It reduces to dueling “yucks.”

The left, right, and middle, too, are enthusiastically statists, I say, very willing to expand the reach and power and sheer size of the state to accomplish their purposes—of virtue on the right and of equality on the left. Statism on the right is evident in Heritage’s recent slouch into Trumpism. The Trumpian tropes poured from the Heritage interns, such as that illegal immigrants bring crime. But at least then we go on to a serious analysis of what exactly would be wrong with much larger immigration. (Answer, based on history and the liberal logic of equality of permission and cosmopolitan ethics: nothing.)

On the matter of immigration, by the way, no one raised the question of why the international movement of people is such a special evil. Why should we not raise an alarm about the domestic movement of, say, alleged criminals from California moving into Texas? (Uh-oh: Better not give the governor of Texas that idea.) Both the left and the right think it’s a fine idea to restrict housing for poor people, and thereby radically restrict their movement, making it illegal to build apartment buildings in toney suburbs, say, or restricting the heights of buildings in London or San Francisco, or making rooming houses illegal by claiming that they are occasions for the sin of prostitution.

Astonishingly, Heritage has become so Trumpian that it approves of protection against international trade. Trade with China, Heritage says, is the moral equivalent of war. But war is the wealth of the (mega and MAGA) state. And blockades depend for their efficacy on a false vision of the economy as a machine, in which throwing a spanner into any part stops it cold. And of course, such a war, like most, hurts the aggressor as much as the defender.

Some of the older readers will remember the anti-Japanese scare of the 1980s. To protect Detroit workers against Toyota, the Federal government instituted quotas, raising prices of all cars at the cost of hundreds of thousands of dollars imposed on the US consumers for each job saved in Detroit.

Now the cry is against Chinese stealing intellectual property (IP). IP enriches lawyers most gratifyingly. Yet the other way of describing IP is speech, which we liberals believe should be free. In economic terms, an invention or idea for improvement has zero social opportunity cost from its inception. Mickey Mouse should be open to the use of all. Absurdly long patents and copyrights are another evil fruit of nationalism, as similar, state-sponsored monopolies once were of monarchy.

The one conservative argument that got some traction, articulated especially by a young woman on the Heritage side, was that libertarians-liberals don’t care enough about the family. “The fabric of society” was a parallel (and conservative) trope much heard at the debate, in support of traditional families and to be subsidized by the state. J. D. Vance has fallen headlong into very hot water recently, making such a case for moving back to the 1950s of Leave it to Beaver and Father Knows Best. Observe, however, that a “fabric” implies a weaver, and we are back to a constructivist, social-engineering premise, the defining characteristic of politics along the spectrum.

Democracy gives everyone the dignity of a vote, which is essential for an equality of permission. But, as many have noted, democracy also slides toward interventions to achieve an anti-liberal, and always ineffectual, equality of outcome, not of permission. H. L. Mencken observed that “democracy is the theory that the common people know what they want, and deserve to get it, good and hard.” Beware the weaver of a social fabric, or you’ll get it good and hard.

The conservatives claim that they are taking the ethical high road. So do the progressives. All I can say is that we liberals really take it. All political theories, except true liberalism, treat citizens as children, which easily morphs into slavery. The right treats them as bad children who, for their own good, need to be policed, disdained, disciplined, and fooled. The left treats them as sad children who, for their own good, need to be policed, managed, subsidized, and fooled. The purpose of the state, according to conservatives, is to make people virtuous. The purpose, according to progressives, is to make them equal. True liberals reply that running the lives of adults is not the business of Congress or of the Harvard faculty. One of the Heritage debaters proposed “prudent protection” for strategic production against the Chinese. Does anyone here think that Congress is going to do anything “prudent”? True liberalism is a philosophy of realism that treats citizens as adults. It is the sole “adultism.”

The conservatives challenge true liberalism from “yuck” or “hurrah” about three items: (1) national security, hurrah; (2) drugs, yuck; (3) the 1950s family, hurrah. From these three comes their authoritarianism, their delight in pushing people around. I’ve never understood why people like to push other people around. I can’t understand how the state gets enough police and soldiers to do it. How, for example, does the policeman in Hong Kong go home at night to his apartment next door to the elderly couple whose grandson he has just beaten up? But my lack of understanding shows how naive I am. The state never had much trouble recruiting the Reserve Police Battalion 101 from Hamburg to hunt down and murder Jews during the Holocaust.

“Virtue” is the conservative claim. A Heritage lad said straight out that “the purpose of the government is to regulate morality.” Good goal; wretched means. I say that virtue grows best when people have an adult liberty of the will, theologically speaking, and equality of permission to exercise their will, economically and spiritually speaking, subject to the equal permission of their fellows.

The conservative debaters kept coming back to the metaphor of “guardrails.” It’s like the metaphor used by the progressives against the liberty of trade, that “unfettered trade” has numerous “imperfections.” Consult Joe Stiglitz’s latest book. Why guards and fetters are such grand ideas applied to adults is left unsaid. After all, Quis custodies Ipsos custodias? Who guards the guards? On both the left and the right, it is assumed that the state is a good, wise, effective custodia. In Copenhagen, maybe it is, roughly speaking. But in New Orleans and Chicago? Moscow and Riyadh?

The debate lightning round, skillfully MCed, asked first about the problem of homelessness. The obvious and liberal solution is to build more houses against the illiberal policies of NIMBY-ism advocated along the spectrum. Listen to the messages from the treehouse.

But notice: The rhetoric of “problems” is inherently statist and anti-liberal. It arose in the early 19th century, just as liberalism was getting underway in some countries. Yet the only solver of problems in sight is lo Stato. And any adult knows that not all problems have a solution, and many of the problems arise from the attempts by the state to “solve” too many of them.

I say: Do what you want, but don’t scare the horses.