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Alan Reynolds

The Federal Reserve chairman and Federal Open Market Committee (FOMC) always imagine that they can prevent recession by anticipating trouble in time to stop it. If that were true, soft landings would be the norm rather than a freak rarity.

At his July 31 press conference, Fed Chair Jerome Powell remarked, “We know that reducing policy restraint … too late or too little could unduly weaken economic activity and employment.… If the labor market were to weaken unexpectedly, we are prepared to respond. Policy is well positioned to deal with the risks and uncertainties that we face.” 

Prepared and well positioned? That would be a unique surprise. The Fed has an almost perfect record of raising the federal funds rate on bank reserves only after inflation surges are well underway. And it has an even better record of cutting interest rates only after recessions are likewise underway, always too late and usually too much.

Was the Fed prepared and well positioned to deal with unexpectedly high inflation from the second quarter of 2021 to the second quarter of 2022? From October 2008 to May 2022 the federal funds averaged 0.5 percent and was almost always near zero (rising above 2 percent only from October 2018 to September 2019). The Fed did not respond at all as the year-to-year personal consumption expenditures (PCE) inflation rate rose to 4.1 percent in the second quarter of 2021, 4.7 percent in the third, and 5.9 percent in the fourth. By the second quarter of 2022, inflation reached 6.8 percent. Yet the fed funds rate in 2022 was only 1.2 percent in June 2022, 1.7 percent in July, and 2.3 percent in August.

Conversely, when it comes to “reducing policy restraint” to prevent recessions, consider what happened in 2008. By June 2008, the economy had been in recession for six months, but no Fed governor or regional bank president expected even a future recession in their June dot-plot “projections” for 2008–2010. Even when the oil shock recession was aggravated by financial crisis in the next two months, the FOMC remained unprepared to act.

This is what happened in 2008 and how the Fed reacted, as documented by the New York Times:

August 5: “The F.O.M.C. holds interest rates steady. It frets that inflationary pressures are building. Three of the regional reserve banks want to raise interest rates.”
September 7: “The Federal Housing Finance Agency places Fannie Mae and Freddie Mac in government conservatorship.
September 15: Lehman Brothers files for Chapter 11 bankruptcy protection; Bank of America buys Merrill Lynch.”
Sept. 16: “The F.O.M.C. continues to hold steady on rates. Most Fed officials say they still believe the economy is growing, still predict it will grow in the final months of 2008 and grow more quickly in 2009. And they still fret that inflation is rising.”

Previously, at a Federal Reserve policy meeting on November 20, 2007, a month before the Great Recession began, the FOMC introduced a new quarterly Summary of Economic Projections (SEP). These highly publicized quarterly projections, from Federal Reserve governors and reserve bank presidents, became famous as a scatter diagram called the “dot-plot.”  Barely seven months after the November 2007 launch, however, this new FOMC central planning ritual failed spectacularly.

The SEP dot-plot projections from June 12, 2008, are shown in Table 1. By that time, the economy had already been in recession for half a year. Yet nobody at the FOMC in mid-2008 imagined recession was a serious threat. Indeed, “some participants pointed to the apparent resilience of the US economy … and suggested that the adverse effects of financial activity outside of the housing sectors could prove more modest than expected.”

SEP tables reveal participants’ projections of the percentage change in real GDP and PCE inflation between the fourth quarters of each year. They also post the unemployment rate expected in the last quarter.

The top panel in Table 1 instead highlighted the “central tendency” of these estimates in June 2008. Instead of using a median as an average (which became common later), this “trimmed mean” eliminated the highest and lowest three. To emphasize that not one of the projections was remotely close to being right, I prefer to focus on the bottom panel—which shows the entire range of estimates for all 12 participants.

Meeting in the middle of 2008, with half the year behind them, not one of the June 2008 FOMC projections imagined the 18-month recession that started that January would happen at any time in 2008, 2009, or 2010. Projections of real gross domestic product (GDP) growth by year-end ranged from 0.9 percent to 1.8 percent. Yet actual real GDP growth in 2008 was sharply negative—down 2.5 percent by the fourth quarter. For 2009, the Fed’s June 2008 projections expected real growth of 1.9 to 3.0 percent. But economic growth in 2009 was roughly zero, 0.1 percent.

The June 2008 FOMC SEP projected PCE inflation of 3.4 to 4.6 percent between the fourth quarters of 2007 and 2008. But actual inflation was only 1.2 percent in 2008 and 2009.

The unemployment rate in the June 2008 dot-plot was projected to be 5.5 to 5.8 percent in the fourth quarter of 2008, and 5.2 to 6.1 percent in the fourth quarter of 2009. But the unemployment rate reached 6.9 percent by the last quarter of 2008 and 9.9 percent by late 2009. Unemployment remained above 9 percent until the end of 2011 and did not return to pre-recession levels until 2014.

Table 1: FOMC summary of economic projections, June 2008

The Fed has only once managed to keep the federal funds rate above 5 percent for a long time without recession, from November 1994 to November 1998 (even as PCE inflation fell from 2.1 percent in 1994 to 0.8 percent in 1998). Before that, the longest such “higher-for-longer period” experiment with such a high central bank interest rate lasted only 14 months—when the New York Fed kept the discount rate at 5–6 percent from August 1928 to October 1929. That ended with the Great Depression.

The FOMC’s third major experiment with a higher-for-longer strategy lasted from June 2006 to September 2007, when the federal funds rate was kept above 5 percent for over a year. That ended with the Great Recession.

The latest higher-for-longer Fed marathon, which began August 2023, is now almost a year old and still being tested.

The 2008 Fed projections were dangerously slow to react to the unfolding recession, remaining strangely more concerned about an assumed inflationary impact of a global oil price spike. They forgot that oil price spikes are reliable omen of recession (and of Fed mistakes). High oil prices and a high fed funds rate preceded every postwar US recession since 1957 except one (1960). Oil prices and the fed funds rate spiked before the recessions of 1957, 1970, 1974, 1980, 2001, and 2008.

Figure 1: Weekly oil prices and the federal funds rate 2007–2014

As Figure 1 shows, shortly after the June 2008 FOMC meeting, on the week ending July 4, the spot price of West Texas Intermediate (WTI) crude oil peaked at $142.52 a barrel, and the fed funds rate was 2.2 percent. Oil then fell to $97.19 by the week ending September 19, and the Fed cut the funds rate below 1.3 percent.

By Christmas 2008, WTI crude reached a weekly low of $32.98, and the Fed fund rate had been slashed to essentially zero (0.14 percent) where it remained until May 2022, aside from October 2018 to September 2019.

The hubris of central banking relies on what F. A. Hayek called “the pretense of knowledge.” Like the quaint central planners of socialist fantasies, the pretense is that a dozen experts can somehow steer the entire US economy with a tiny rudder—the overnight “policy rate” paid to banks for holding reserves at Fed district banks. Even if that worked as planned, it requires forecasts because using past data to set future policy is doomed by the long and uncertain lags between Fed actions and business and household reactions.

Just as the FOMC was astonishingly slow to react to the inflation surge in 2021and early 2022, they were equally blindsided in 2008 by another oil price shock recession—despite the Fed having repeatedly made the identical blunder in other recessions of keeping interest rates high because oil prices were high.

Keeping Fed policy unchanged until the Fed’s committee could agree about obvious risks of inflation or recession caused costly procrastination errors in 2008 and again in 2021–2022.

Top Fed officials today apparently remain as confident as they were in mid-2008 that they will get it right this time—by reacting to “the data” in plenty of time to avoid a recession. But economic data looks backwards, not forward. Because monetary policy works with a long lag, Fed policy must be based on forecasts. Unfortunately, FOMC forecasts have a dismal record.

Andrew Gillen

Note, this post updates last month’s post. The biggest changes from last month include:

the 8th Circuit Court of Appeals halting the Saving on a Valuable Education (SAVE) plan;
added insights from Jason Delisle’s recent analysis of the legislative history regarding the SAVE plan; and
the Biden administration making Higher Education Act (HEA) plan preparations.

Mass student loan forgiveness is terrible policy (see “The Problems with Student Loan Forgiveness” for a comprehensive list of reasons), but that hasn’t stopped the Biden administration from trying to forge ahead. While the Supreme Court overturned the Biden administration’s student loan forgiveness plan, every few weeks the Biden administration announces another batch of loans that have been forgiven. In fact, the administration recently celebrated that since taking office, it has succeeded in forgiving $ $169 billion of student loans for 4.76 million borrowers by transferring the financial burden from the students that took out the loans to taxpayers who did not. And they aren’t going to stop—the administration’s spokeswoman declared that “President Biden has vowed to use every tool available to cancel student debt for as many borrowers as possible, as quickly as possible.” And President Biden himself stated, “I will never stop working to cancel student debt—no matter how many times Republican elected officials try to stop us.”

But if student loan forgiveness lost in the Supreme Court, how are so many student loans still being forgiven? The answer is that there isn’t a student loan forgiveness plan, there are many plans, some of which are already up and running. Previous laws had already left a plethora of methods to forgive student loans, and many of those laws may give the secretary of education the ability to expand those programs. The administration is also claiming existing law gives it the authority to create new ways to forgive student loans. So the student loans the Biden administration already has or wants to forgive are a combination of existing programs, existing programs the Biden administration has expanded, and new programs the administration is seeking to implement.

Here’s a rundown of the administration’s student loan forgiveness plans and actions, which I’ll update monthly.

Higher Education Relief Opportunities for Students (HEROES) Act (new plan—overturned in court)

This was the big plan that got a lot of attention in 2022 and 2023. The plan was to forgive $10,000 for borrowers making less than $125,000 and $20,000 for borrowers who received a Pell grant, at a total cost of $469 billion to $519 billion. The alleged authority for the plan was the 2003 HEROES Act. While designed to alleviate loan-related hardships for soldiers and reservists serving in Iraq and Afghanistan, the law also covered national emergencies, and the Biden administration argued the COVID-19 emergency gave it the authority to forgive virtually everyone’s loans. Most observers were skeptical of this supposed authority, but it was not clear who had standing to sue (standing is the requirement that those filing the suit have a concrete injury from the policy). The companies that service student loans would be the most obvious injured party, but there was a perception that the Biden administration would punish any servicer that challenged the policy in court, a perception that now appears accurate.

Fortunately, the Supreme Court ruled that Missouri had standing to sue (due to a quasi-public student loan servicer that would lose revenue under the plan) and that the plan violated the major questions doctrine (which holds that there needs to be clear congressional authorization for programs of substantial economic or political significance), preventing the policy from being implemented.

Higher Education Act (new plan—forthcoming)

Immediately after losing on HEROES, the Biden administration announced a new effort that would use authority under the HEA. The administration announced new plans, which would:

waive unpaid interest;
forgive debt for those who have repaid for 20 years (25 years if there is debt for graduate school);
forgive debt for those who attended a low-financial value program (e.g., programs or colleges that fail the Cohort Default Rate or Gainful Employment); and
forgive debt for those undergoing financial hardship.

There are a several problems with this plan, which the Penn Wharton Budget Model estimates will cost $84 billion. The public comment window on the proposed regulations recently concluded, and the administration is now considering those comments and will issue final regulations, with a goal to start forgiving debt this fall. Once finalized, this plan will likely be overturned by the courts for two main reasons. First, it is likely to run afoul of the major questions doctrine, just as the HEROES plan did. Second, the Supreme Court recently overturned Chevron deference, which held that courts should defer to executive agencies when a statute was ambiguous. With major questions and no Chevron deference, it is very hard to imagine the courts allowing the administration to stretch vague clauses in old laws into vast new powers authorizing billions of dollars in forgiveness.

However, much of this forgiveness is easy to implement, so a key question is whether a court injunction will come fast enough to prevent the administration from forgiving billions of debt before the courts can determine whether the regulations are legal. The Biden administration is already preparing to move quickly to present the plan as a fait accompli the moment the final plan is released by immediately forgiving billions in loans, so state attorney generals need to be ready to file lawsuits the moment the final regulations are published.

SAVE (new plan—paused by the courts)

Before diving into this one, it is important to understand the concept of income-driven repayment (IDR). Under traditional (mortgage) style loan repayment, the amount and length of repayment are fixed (e.g., $200 a month for 10 years). For the past few decades, the federal government has been introducing IDR plans, in which the amount repaid each month varies based on the borrower’s current income, and the length of repayment varies based on how fast they repay their loan. The key features of an IDR plan are:

the share of income owed each month (e.g., 20 percent);
the income exemption that is protected from any repayment obligation (e.g., the poverty line); and
the cap on length of repayment (e.g., 25 years).

IDR is a great idea, providing borrowers with better consumption smoothing across their lifetime and flexible repayment that helps avoid defaults due to short-term liquidity constraints.

But we’ve also botched the implementation. To begin with, a cap on the length of repayment is completely inappropriate. IDR ensures that payments are always affordable, and borrowers who make so little they do not repay will receive de facto forgiveness even without the cap, so there is no justification for a cap on the length of repayment.

The other problem with how we’ve implemented IDR is political—the plans are tailor-made to allow politicians to give constituents big benefits today while sticking future taxpayers with the bill. It is therefore no surprise that these plans have gotten more generous over time. The first IDR plan, introduced in 1994, had an income exemption equal to the poverty line, a share of income owed of 20 percent, and a cap on length of 25 years. Very few borrowers would receive forgiveness under these terms, and of those who did, they really wouldn’t have been able to repay regardless of whether they received forgiveness or not. The Obama administration introduced plans with an income exemption of 150 percent of the poverty line, a share of income owed of 10 percent, and a cap on length of payment of 20 years.

The Biden administration’s SAVE plan took an existing plan (the Revised Pay as You Earn, or REPAYE, plan) and made it much more generous. It changes the share of income owed from 10 percent to 5 percent, increases the income exemption from 150 percent of the poverty line to 225 percent, and caps the length of repayment at as little as 10 years for some borrowers. By cranking every possible lever to the most generous settings in history, this plan would impose massive costs on taxpayers, estimated at $475 billion for just the next 10 years.

The legal questions facing this plan are the reverse of the HEROES plan. For the HEROES plan, the main obstacle was standing; once that hurdle was cleared, it was fairly obvious that the plan was well beyond what Congress had authorized. But for the SAVE lawsuits, this is reversed. Standing is easily established (for Missouri at least), but the plan does have a much stronger argument of being within the parameters of the law. Mark Kantrowitz thinks SAVE will be upheld, while Michael Brickman did yeoman’s work digging up details on page 18,909 of the 1993 congressional record that may lead to SAVE being scrapped. Jason Delisle also recently released a fascinating report on the legal foundation so SAVE. He argues that “the Biden administration has claimed legal authority far outside what Congress intended when it enacted the law.” In particular, he argues that:

“Lawmakers assumed that the IDR plan the secretary would create would entail minimal or no budget costs” whereas SAVE may cost up to half a trillion dollars over 10 years.
“Lawmakers assumed that the secretary would set loan forgiveness at 20 or 25 years, but not earlier as SAVE does. Moreover, loan forgiveness was clearly an afterthought in the original debates” whereas it is the central feature of SAVE.
“Lawmakers believed that appropriate monthly payments in an IDR plan should be much higher than those in the SAVE plan.”

The Supreme Court’s overturning of Chevron deference is also likely to affect these cases in a major way. Now that courts are no longer required to defer to executive agencies when statutory language is ambiguous, it will be much harder to convince courts that the president spending close to half a trillion dollars over the next 10 years on this plan is consistent with congressional intent.

Parts of the SAVE plan have already been implemented, and full implementation was scheduled for July 2024. The plan has already forgiven “$5.5 billion for 414,000 borrowers.” However, there are two lawsuits that seek to overturn the plan, one by Kansas and 10 other states (though a court ruled that only 3 of the states had standing to sue), and another by Missouri and 6 other states. An injunction from the 8th Circuit Court of Appeals (in the Missouri case) has paused implementation of the entire SAVE plan pending resolution of the case.

In sum, the chances of SAVE surviving the court challenges have declined dramatically over the past year. When it was first introduced, many analysts thought it had the best chance of being upheld in court, but the recent injunction, the overturned Chevron deference, and the work by Brickman and Delisle on congressional intent leave SAVE much more vulnerable legally than most thought would be the case a year ago.

Student Loan Payment Pause (existing and extended plan—now expired)

When COVID-19 hit in March 2020, student loan payments were paused. The pause was supposed to last two months but ended up lasting three and a half years after Trump extended it once and Biden extended it six times. A pause would not normally result in massive student loan forgiveness as it would delay, but not waive, repayment. There would still be a cost to taxpayers (driven by the government’s cost of borrowing), but it wouldn’t be huge. But recall that IDR plans (unnecessarily) cap the length of repayment, and the pause counted toward that cap. In other words, for any student that does not fully repay before they hit the length of repayment cap, payments weren’t paused; they were waived. We won’t know for many years how many students had their payments forgiven rather than postponed, but the current estimates range from $210 billion to $240 billion.

New research from Sylvain Catherine, Mark Pérez Clanton, and Constantine Yannelis finds that the substantial inflation and counting the pause toward the cap on repayment reduced the present value of future student repayments by around 25 percent.

There is virtually no chance for this burden on the taxpayer to be reversed. The only good news is that the payment pause ended, with most borrowers restarting payments in October 2023.

Public Service Loan Forgiveness (existing and extended plan—still active)

The Public Service Loan Forgiveness (PSLF) program was established during the George W. Bush administration and allowed for public and nonprofit workers to receive forgiveness after 10 years of repayment when they used an IDR plan. While I object to PSLF in principle (as a distorting and nontransparent subsidy for the government and nonprofit sectors) and due to the windfalls these borrowers receive (an average of over $70,000 per beneficiary), since PSLF legally exists, it should operate as seamlessly as possible. The Biden administration granted many waivers and other changes to increase the number of borrowers who could benefit under PSLF. For example, the administration introduced a waiver that allowed for payments made under non-IDR plans to count toward the payment limit (previously, only payments made while enrolled in an IDR plan counted). Some of these changes were good in the sense that they more faithfully implemented the law, but the administration crossed some lines too. In particular, it started counting some types of deferment as payments (borrowers can get deferment when they cannot afford to make payments, which generally allows the borrower to temporarily postpone payments though interest continues to accrue). The whole point of deferment is to temporarily avoid making payments, so for the Biden administration to give borrowers credit for making payments when they were in deferment is logically, morally, and potentially legally wrong (Cato was part of a lawsuit seeking to end this abuse, but the case was thrown out when a court ruled the policy didn’t directly affect Cato enough to satisfy standing requirements). The administration also waived income requirements, making more people eligible for the program. 

The Biden administration has forgiven $69.2 billion for 946,000 borrowers under these programs, which works out to around $73,000 per borrower. By comparison, a formerly homeless student who receives the maximum Pell grant for four years would get less than $30,000 in Pell grants. Some of this would have been forgiven even if the administration hadn’t made any changes to the program, but not all of it. In the future, these burdens on the taxpayer can be reduced by rolling back some of the administrative changes, but eliminating the program entirely would require legislation.

Borrower Defense to Repayment (existing and extended plan—still active, though recent changes are paused during a court case)

When a college engages in fraud or severely misleads students, borrowers can have their debt forgiven under Borrower Defense to Repayment. This is reasonable, as victims of fraud should have some recourse. It is also extremely rare, since a college would not just need to dupe a student but would also need to fool a state, an accreditor, and the US Department of Education, as all three are required to sign off on the legitimacy of a college before its students can take out student loans. As the House Committee on Education and the Workforce noted, “for the first 20 years of the rule, there were 59 claims.”

However, the federal government can claw back debt forgiven from the responsible college. This makes borrower defense to repayment an incredibly powerful tool for progressives in their war on for-profit colleges. If a for-profit college can be declared to have substantially misled students, they can be ruined financially by the clawbacks. Indeed, new regulations from the Biden administration would make it much easier to conclude a college engaged in misconduct. As the White House gloated, “Less than $600 million in debt relief had been approved through borrower defense, closed school discharges, and related court settlements from all prior administrations combined, compared to the $22.5 billion approved under the Biden-Harris Administration alone.” Some of this was done outside the law. For example, $5.8 billion of debt for Corinthian Colleges students was forgiven even if students didn’t submit a borrower defense claim. The administration has promised to forgo clawbacks on much of it (likely in part to avoid giving affected colleges standing to oppose the changes in court).

The good news is that any further forgiveness under the new regulation is on hold due to an injunction from the 5th Circuit Court of Appeals (this injunction applies to the closed school discharge plan as well).

Closed School Discharge (existing and extended plan—still active, though recent changes are paused during a court case)

Borrowers whose school closes while they are still enrolled or shortly after they have withdrawn can have their student loans forgiven. The Biden administration imposed new regulations that loosened the requirements and has used this as an excuse to forgive other loans as well. For example, Biden forgave $1.5 billion in debt for students from ITT Technical Institute, even if they didn’t qualify for a discharge. Further forgiveness under the new regulations has been paused by the 5th Circuit Court of Appeals until courts determine whether the new regulations are legal. However, the administration can still forgive loans under the previous iteration of these regulations.

Total and Permanent Disability Discharge (existing and extended plan—active)

Borrowers who are unable to work due to a permanent disability can have their loans forgiven. Historically this was very rare. And to protect against fraud, the income of borrowers who had their debt forgiven was monitored to ensure that they really couldn’t work. The Biden administration both expanded eligibility and dropped fraud-detection efforts. In particular, in 2021, regulations were introduced that “provided automatic forgiveness for borrowers who were identified as eligible for a total and permanent disability discharge through a data match with the Social Security Administration. The Department had been using such a match for years to identify eligible borrowers but required them to opt in to receive relief.” Switching to the opt-out model dramatically increased the number of borrowers receiving forgiveness. As a result of these changes, forgiveness under total and permanent disability discharge to spike from negligible amounts to $14.1 billion for 548,000 borrowers.

Waiving Interest

Another method the Biden administration is using to forgive loans is to waive interest. This plan is somewhat unique in that it is usually a component of another forgiveness plan, but the goal and methods are unique enough to warrant its own category.

Waiving interest has been implemented primarily through three mechanisms. The first was the student loan payment pause, which as previously noted waived interest for three and a half years. The second were regulations that took effect in July 2023 that “ceased capitalizing interest in all situations where it is not required by statute (87 FR 65904). This includes when a borrower enters repayment, exits a forbearance, leaves any IDR plan besides Income-Based Repayment (IBR), and enters default.” And the third is the SAVE repayment plan, which waives any unpaid interest.

Conclusion

In sum, Biden’s has been the most aggressive presidential administration in history regarding student loan forgiveness. Despite many setbacks, the administration has canceled a massive amount of debt ($169 billion and counting), with most of the burden on taxpayers still to come from future repayments that will no longer be made. And while many of its attempts to forgive student loans have been stymied, there are still many active plans in play, with more on the horizon.

Walter Olson

Here’s another roundup of short-form items on election law and policy:

For all the occasional creakiness of our decentralized way of holding elections under the Constitution, the reports from Venezuela make me again glad that we never developed a centralized, result-announcing national electoral commission.
Past studies have been inconclusive on whether ranked-choice voting (RCV) in itself raises turnout. A new study says it does: “We find significant and substantially higher probabilities of turnout in places that use RCV,” possibly because it incentivizes campaigns to reach out to a wider range of voters. Note also that the combination of RCV with a single universal qualifying primary open to all voters and candidates—the “Final Four” or “Final Five” model—was associated with robust turnout when Alaska adopted it, according to work by the Bipartisan Policy Center and the Sightline Institute.
Speaking of turnout, there is more evidence for a trend I’ve touched on before: while high turnout has historically tended to benefit Democrats, that correlation has faded and may even have reversed as poorer, less-educated, and low-civic-attachment voters increasingly favor Republicans. That has major implications for the politics of election reform: Expect partisans to begin moderating or even swapping sides on various process questions that are seen as encouraging or discouraging high turnout (Thomas Edsall, Nicholas Stephanopoulos, Nate Cohn, Ilya Somin; straws in the wind on enthusiasm for nonpartisan voter registration drives).
“We are at the beginning of a global movement. We are going to outlaw political lying,” said a politician in Wales, where the Labour Party–led regional government is preparing a bill “for the disqualification of members and candidates found guilty of deliberate deception through an independent judicial process.” Let me predict here and now that such a law either will be ineffective at turning politicians honest or will become a subject of selective if not malicious enforcement, or both. (Read more on the policing of electoral lies in my blog post “General Bans on Election Untruths Would Violate the First Amendment.”)
In California’s Central Valley, a no-contest plea by a Lodi city councilman charged with election felonies sounds a very real alarm about the problems with ballot harvesting. Note, however, one dimension absent: per the San Joaquin County registrar, “California’s voting system didn’t immediately flag the ballots tied to Khan because the people being registered were real citizens with legitimate information.”

Adam N. Michel

The 2017 Tax Cuts and Jobs Act (TCJA) was projected to lower revenue by $1.5 trillion over ten years by the Joint Committee on Taxation at the time of passage. However, because the law boosted investment, wages, and economic growth, revenues outperformed the static projections that didn’t account for the economy’s dynamic response to tax cuts.

The Tax Foundation’s dynamic projections from 2017 imply the tax cuts will have paid for themselves in 2028. Actual tax collections and current Congressional Budget Office (CBO) projections—which have been significantly affected by interceding legislation and unforeseen economic events—show that revenues have almost fully recovered from the 2017 cuts. However, making the TCJA permanent in 2025 without additional reforms would likely permanently lower revenue below the 2017 baseline.

The TCJA Could Have Paid for Itself, Eventually

A tax cut that boosts the economy and thus increases revenue growth above static government estimates will have three phases. Initially, revenues fall below the pre-tax cut baseline. If post-tax cut revenue grows faster than the pre-reform baseline, it will hit a break-even point. The tax cut will have paid for itself when the cumulative revenue losses from before the break-even point equal the higher revenues from after the break-even point.

If we accept the premise that some tax cuts result in a permanently larger economy, there is some subset of reforms that will result in a revenue break-even point. And if such a break-even point exists, the question is not if the tax cut pays for itself but when it pays for itself.

Figure 1 uses data from the Tax Foundation’s 2017 projections of federal revenue following the TCJA, adjusted for unanticipated inflation and projected past 2024 with a simple linear model.[1] The figure shows that compared to the CBO’s adjusted pre-tax cut baseline, revenues are close to breaking even in 2023 and surpass the 2017 baseline in 2024.

These extrapolated estimates imply the accumulated deficits from 2018–2023 ($1.4 trillion) will be fully offset by annual surpluses in 2028. This is due to the combined effect of economic growth and many temporary provisions that expire between 2022 and 2026. Assuming the law is made permanent, the break-even point is pushed back to roughly 2027, and the law pays for itself by 2033. Beyond 2033, the TCJA could be deficit-reducing.

These estimates likely understate the actual economic effects of the tax cuts and, thus, additional revenue due to the larger economy. Using actual firm responses to the tax cuts, Gabriel Chodorow-Reich and coauthors have estimated the TCJA will result in a long-run increase to the capital stock of 7.2 percent, roughly 50 percent larger than the Tax Foundation’s underlying estimates, which drive GDP growth.

The Actual Story is More Complicated

A recent Tax Foundation analysis of how federal tax revenue evolved since 2017 explains that revenue forecasting is a limited tool, made quickly obsolete by intervening events. In addition to unanticipated high inflation, “a growing trade war, a pandemic, a war in Europe, and a new conflict in the Middle East have each impacted tax revenues.” Congress implemented numerous tax changes in response to the pandemic, natural disasters, the CHIPS Act, and the Inflation Reduction Act, each of which lowered revenue collections. Higher-than-expected immigration has also boosted revenues more than government scorekeepers projected.

Figure 2 builds on the Tax Foundation’s methodology to show the inflation-adjusted CBO 2017 revenue forecast (adjusted for the unanticipated pandemic-era inflation), actual federal revenue through 2023, and CBO forecasted current-law revenue through 2033.

The data show that in 2021 and 2022, actual revenue surpassed the pre-TCJA CBO forecast due, in part, to the pandemic and changes to corporate taxes. However, revenue declined below the pre-TCJA forecast in the following year. Accepting all intervening economic and legislative changes that lowered revenues, actual revenues are projected to break even again in 2026 and then remain close to the pre-TCJA trend. The accumulated deficit (the gap between the 2017 baseline and actual revenue) between 2018 and 2025 is about $680 billion. By 2033, the total net deficit will fall to $220 billion, but the cumulative deficit is not currently projected to fall to zero.

The law’s many temporary provisions complicate assessing the long-run revenue effects of the TCJA. Making the tax cuts permanent in 2026 without additional reforms would permanently lower actual revenues below the 2017 CBO baseline.

Tax Cuts, Deficits, and Economic Growth

As the TCJA demonstrated, if the tax cuts are sufficiently pro-growth, positive revenues in later years can outweigh the initial deficit effects. However, if a tax cut is not sufficiently pro-growth, it will permanently reduce revenues. Ultimately, the goal of a tax cut should be to reduce revenue. If the resulting economic and behavioral effects of a tax cut are so large that it results in a fully offsetting increase in revenue, it means the tax rate is likely still too high and should be lowered further.

The most pro-growth tax cuts tend to be permanent changes that increase the after-tax return to investment, such as business expensing, lowering business taxes, and cutting capital gains taxes. These types of changes can be at least partly deficit-financed without worsening the long-run fiscal outlook (and could improve it).

Tax cuts for workers and consumers also have positive economic effects—such as encouraging additional work and entrepreneurship—but most are not sufficiently pro-growth to expect a larger economy to make up most of the lower revenue. Individual tax cuts are still worthwhile, but they should be paired with spending cuts to ensure the reduced revenue is sustainable.

As Congress prepares for the expiration of the TCJA, deficits and debt will dominate the discussion. Congress currently spends $2 trillion more than it raises in revenue, and no pro-growth tax cut can fix a $2 trillion (and growing) budget imbalance. To keep taxes low for the long run, Congress must decisively cut spending and prioritize the most pro-growth tax reforms.

[1] Tax Foundation’s adjusted 2017 projections from here. The adjusted CBO 2017 baseline uses the June 2017 baseline and March 2017 long-term budget outlook, adjusted using the accompanying economic assumptions. Original revenue projections are adjusted by an annual adjustment factor, which is the 2017 CPIU projection divided by the 2017 CPIU index projection inflated by the difference between projected and actual inflation rates or 2024 updated projections.

Michael Chapman

Nobel laureate Milton Friedman, a libertarian and one of the most influential economists of the twentieth century, was born on July 31, 1912, and died on November 16, 2006, at the age of 94. This blog is posted in remembrance of his birthday and in honor of his legacy, particularly his many contributions to individual freedom.

Over his distinguished career, Friedman’s work influenced such areas as US monetary policy, macroeconomics, taxation, deregulation, privatization, and school choice. He was also one of the most articulate and persuasive advocates for the legalization of drugs, arguing that the war on drugs had failed just like Prohibition had failed.

The situation today with violent narco-cartels, police and government corruption, global drug markets, fentanyl overdoses, ever-stronger synthetic drugs, and thousands of bystander victims only strengthens his argument. One of the best interviews of Friedman where he addressed the pros and cons of drug legalization occurred in 1991 on “America’s Drug Forum,” a program hosted by Emmy Award-winning reporter Randy Paige and broadcast on public television.

During the lengthy interview, Friedman explains, for instance, how the war on drugs is like alcohol prohibition in the 1920s-30s, complete with gang violence, corruption, and innocent victims. “Alcohol was readily available” during Prohibition, says Friedman. “Bootlegging was common. Any idea that alcohol prohibition was keeping people from drinking was absurd. There were speakeasies all over the place. But more than that, we had this spectacle of Al Capone, of the hijackings, of the gang wars. … Anybody with two eyes to see could see that this was a bad deal, that you were doing more harm than good.”

“The same thing happened under prohibition of alcohol as is happening now,” says Friedman. “Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the illegal bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up.” This is certainly the case with fentanyl when laced with other drugs.

Part 1: Milton Friedman on Legalizing Drugs (Source: YouTube)

Friedman also notes that drugs such as alcohol and tobacco (nicotine), which are legal, are among the top substances abused by Americans and cause far more deaths than those claimed by illegal drugs. According to the CDC, in 2020–2021 there were 178,307 deaths caused by excessive alcohol use in the United States; the American Lung Association reports that smoking kills more than 480,000 per year in the US and second-hand smoke causes 41,000 deaths each year. In 2022, according to the CDC, there were 107,941 drug overdose deaths. Those deaths involved drugs such as fentanyl, heroin, cocaine and methamphetamine.

Commenting further, Friedman says, “Look, the case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it’s in principle okay for the government to say you must not consume drugs because they’ll do you harm, why isn’t it all right to say you must not eat too much because it will do harm? Why isn’t it all right to say you must not try to go in for skydiving because you’re likely to die? Why isn’t it all right to say, ‘Oh, skiing, that’s no good, that’s a very dangerous sport, you’ll hurt yourself?’ Where do you draw the line?”

Friedman, who was awarded the Presidential Medal of Freedom in 1988 by President Ronald Reagan, also explains how criminalizing drugs drives “people from mild drugs to strong drugs” and adds that crack cocaine “would never have existed, in my opinion, if you had not had drug prohibition.” Why was crack cocaine created? he asks. “Because cocaine was so expensive.” And it was expensive because of drug prohibition.

Part 2 : Milton Friedman on Legalizing Drugs (Source: YouTube)

Further, “if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel,” says Friedman. “That’s literally true. … What do I mean by that? In an ordinary free market business—let’s take potatoes, beef, anything you want—there are thousands of importers and exporters. Anybody can go into the business. But it’s very hard for a small person to go into the drug-importing business because our interdiction efforts essentially make it enormously costly. So, the only people who can survive in that business are these large, Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on.”

“[B]y keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high,” explains Friedman. “What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.”

If drugs were legalized in the United States, says Friedman, “the one adverse effect that legalization might have is that there very likely would be more people taking drugs. That’s not by any means clear. But if you legalize it, you destroy the black market, the price of drugs will go down drastically.”

He qualifies this point by saying, “The child who’s shot in a slum in a pass-by shooting, in a random shooting, is an innocent victim in every respect of the term. The person who decides to take drugs for himself is not an innocent victim. He has chosen himself to be a victim. And I must say I have very much less sympathy for him. I do not think it is moral to impose such heavy costs on other people to protect people from their own choices.”

Drug use is a “moral problem,” says Friedman. “It’s a problem of the harm which government is doing. Look, I have estimated statistically that the prohibition of drugs produces on the average 10,000 additional homicides a year. It’s a moral problem that the government is going around killing 10,000 people. It’s a moral problem that the government is making into criminals people who may be doing something you and I don’t approve of but who are doing something that hurts nobody else.”

Part 3: Milton Friedman on Legalizing Drugs (Source: YouTube)

“I would legalize drugs by subjecting them to exactly the same rules that alcohol and cigarettes are subjected to now,” says Friedman. “Alcohol and cigarettes cause more deaths than drugs do, by far, from use, but many fewer innocent victims.”

When asked if anything frightens him about legalizing drugs, Friedman replies, “Nothing scares me about the notion of drugs being legal. … What scares me is the notion of continuing on the path we’re on now, which will destroy our free society, making it an uncivilized place.”

In addition to winning the 1976 Nobel Prize for Economics, Friedman served as a professor at the University of Chicago (1946–77) and was a Hoover Institution Fellow at Stanford University (1977–2006). He was awarded the National Medal of Science (1988) and he wrote several influential books, including Capitalism and Freedom, A Monetary History of the United States 1867–1960, and, wife his wife Rose Friedman, Free to Choose: A Personal Statement. The latter was adapted into a ten-part TV series and broadcast on PBS.

You can watch the entire interview with Milton Friedman in the three videos embedded in this blog. A condensed transcript is provided below. For more on the failed war on drugs, visit the Cato Institute website.

Partial transcript, “America’s Drug Forum,” 1991:

Randy Paige: Let us deal first with the issue of legalization of drugs. How do you see America changing for the better under that system?

Milton Friedman: I see America with half the number of prisons; half the number of prisoners; 10,000 fewer homicides a year; inner cities in which there’s a chance for these poor people to live without being afraid for their lives; citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug; being able to get drugs for which they’re sure of the quality. You know, the same thing happened under prohibition of alcohol as is happening now.

Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the illegal bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up.

Paige: How would legalization adversely affect America, in your view?

Friedman: The one adverse effect that legalization might have is that there very likely would be more people taking drugs. That’s not by any means clear. But if you legalize it, you destroy the black market, the price of drugs will go down drastically. And, as an economist, lower prices tend to generate more demand. However, there are some very strong qualifications to be made for that. The effect of criminalization, of making drugs criminal, is to drive people from mild drugs to strong drugs.

Paige: In what way?

Friedman: Well, you may, take marijuana. Marijuana is a very heavy, bulky substance, and therefore it’s relatively easy to interdict. The warriors on drugs have been more successful interdicting marijuana than, let’s say, cocaine. So marijuana prices have gone up, they become harder to get. There’s been an incentive to grow more potent marijuana and people have been driven from marijuana to heroin, or cocaine, or crack or one of the other drugs.

Paige: Let us consider another drug then, and that is the drug crack, crack cocaine.

Friedman: Crack would never have existed, in my opinion, if you had not had drug prohibition. It was drug prohibition. Why was crack created? Because cocaine was so expensive. … I’m not talking from personal experience. I’ve never touched any of this stuff. I’m speaking from what I’ve read in the literature. But the preferred method of taking cocaine, from what I understand, was by sniffing it, snorting it, became very expensive, and they were desperate to find a way of packaging cocaine.

… [Crack] is addictive, but I understand from all the medical evidence that it’s no more addictive than other drugs. In fact, the most addictive drug everybody acknowledges is tobacco.

Friedman: … Prohibition was repealed in 1933 when I was 21 years old—so I was a teenager during most of Prohibition. Alcohol was readily available. Bootlegging was common. Any idea that alcohol prohibition was keeping people from drinking was absurd. There were speakeasies all over the place. But more than that, we had this spectacle of Al Capone, of the hijackings, of the gang wars. … Anybody with two eyes to see could see that this was a bad deal, that you were doing more harm than good.

Now, in addition, I became an economist, and as an economist I came to recognize the importance of markets and free choice and of consumer sovereignty and came to discover the harm that was done when you interfered with them. The laws against drugs were passed in 1914, but there was no very great enforcement of it. …

… But I have to admit that the one negative feature of legalizing drugs is that there might be some additional drug habits. However, I want to qualify that in still another way.

The child who’s shot in a slum in a pass-by shooting, in a random shooting, is an innocent victim in every respect of the term. The person who decides to take drugs for himself is not an innocent victim. He has chosen himself to be a victim. And I must say I have very much less sympathy for him. I do not think it is moral to impose such heavy costs on other people to protect people from their own choices.

Paige: For us to understand the real root of those beliefs, how about if we just talk for a minute about free market economic perspective, that perspective, and how you see the proper role of government in its dealings with the individual.

Friedman: The proper role of government is exactly what John Stuart Mill said in the middle of the nineteenth century in “On Liberty.” The proper role of government is to prevent other people from harming an individual. Government, he said, never has any right to interfere with an individual for that individual’s own good.

Look, the case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it’s in principle okay for the government to say you must not consume drugs because they’ll do you harm, why isn’t it all right to say you must not eat too much because it will do harm? Why isn’t it all right to say you must not try to go in for skydiving because you’re likely to die? Why isn’t it all right to say, “Oh, skiing, that’s no good, that’s a very dangerous sport, you’ll hurt yourself”?

Where do you draw the line?

… It [drugs] does harm a great many other people, but primarily because it’s prohibited. There are an enormous number of innocent victims now. You’ve got the people whose purses are stolen, who are bashed over the head by people trying to get enough money for their next fix. You’ve got the people killed in the random drug wars. You’ve got the corruption of the legal establishment. You’ve got the innocent victims who are taxpayers who have to pay for more and more prisons, and more and more prisoners, and more and more police. You’ve got the rest of us who don’t get decent law enforcement because all the law enforcement officials are busy trying to do the impossible. And last, but not least, you’ve got the people of Colombia and Peru and so on. What business do we have destroying and leading to the killing of thousands of people in Colombia because we cannot enforce our own laws? If we could enforce our laws against drugs, there would be no market for these drugs. You wouldn’t have Colombia in the state it’s in.

Paige: Is it not true that the entire discussion here, the entire drug problem is an economic problem till now?

Friedman: No, it’s not an economic problem at all. It’s a moral problem. I’m an economist. But the economics problem is strictly tertiary. It’s a moral problem. It’s a problem of the harm which government is doing. Look, I have estimated statistically that the prohibition of drugs produces on the average 10,000 additional homicides a year. It’s a moral problem that the government is going around killing 10,000 people. It’s a moral problem that the government is making into criminals people who may be doing something you and I don’t approve of but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users. Now, here’s somebody who wants to smoke a cigarette, a marijuana joint. If he’s caught, he goes to jail. Now, is that moral? Is that proper? I think it’s absolutely disgraceful that our government’s—supposed to be our government—should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. I don’t— that’s the issue to me. …

… See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.

Paige: Is it doing a good job of it?

Friedman: Excellent. What do I mean by that? In an ordinary free market business—let’s take potatoes, beef, anything you want—there are thousands of importers and exporters. Anybody can go into the business. But it’s very hard for a small person to go into the drug-importing business because our interdiction efforts essentially make it enormously costly. So, the only people who can survive in that business are these large, Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on.

In addition to which, by keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high. What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.

… [Drug] legalization is a way to stop—in our forum as citizens—a government from using our power to engage in the immoral behavior of killing people, taking lives away from people in the US, in Colombia, and elsewhere, which we have no business doing.

Paige: So, you see the role of government right now as being just as deadly as if Uncle Sam were to take a gun to somebody’s head.

Friedman: That’s what he’s doing, of course. Right now Uncle Sam is not only taking a gun to somebody’s head, he’s taking his property without due process of law. The drug enforcers are expropriating property, in many cases of innocent people on whom they don’t have a real warrant. That’s a terrible way to run what’s supposed to be a free country.

Paige: … How would you legalize drugs? How would you go about doing that?

Friedman: I would legalize drugs by subjecting them to exactly the same rules that alcohol and cigarettes are subjected to now. Alcohol and cigarettes cause more deaths than drugs do, by far, from use, but many fewer innocent victims. And the major innocent victims, in that case, are the people who are killed by drunk drivers. And we ought to enforce the law against drunk driving, just as we ought to enforce the law against driving under the influence of marijuana or cocaine, or anything else.

But I would, as a first step at least, treat the drugs exactly the same way we now treat alcohol and tobacco, no different.

….

Paige: What scares you the most about the notion of drugs being legal?

Friedman: Nothing scares me about the notion of drugs being legal.

Paige: Nothing?

Friedman: What scares me is the notion of continuing on the path we’re on now, which will destroy our free society, making it an uncivilized place. There’s only one way you can really enforce the drug laws currently. The only way to do that is to adopt the policies of Saudi Arabia, Singapore, which some other countries adopt, in which a drug addict is subject to capital punishment or, at the very least, having his hand chopped off. If we were willing to have penalties like that—but would that be a society you’d want to live in?

Paige: Last question. You have grandchildren?

Friedman: Absolutely. I have a two-year-old granddaughter named Becca.

Paige: When you look at Becca, what do you see for her and for her future?

Friedman: That depends entirely upon what you and your fellow citizens do to our country. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition, but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago [before the collapse of the USSR in 1991].

Chris Edwards

Which states are Americans moving to and which are they leaving?

The Internal Revenue Service (IRS) has released interstate migration data for 2022. The data include the domestic movements of households into and out of each state broken down by income level and age group.

The table shows the net migration for each state and the ratios of in-migration to out-migration for all households, households headed by an individual age 65 and older, and households earning more than $200,000 a year.

Looking at all households, for example, 1.46 households moved to Florida for each one that left, and 0.71 households moved to Illinois for each one that left.

People move because of jobs, living costs, weather, and family. Taxes are also an important driver of migration, particularly for higher-income households. States with lower taxes tend to have higher ratios of in-migration to out-migration.

The figure ranks migration ratios for households earning more than $200,000. Of the 9 states that do not have individual income taxes, 7 of them are in the top 15 states for in-migration (Florida, Tennessee, South Dakota, Nevada, New Hampshire, Wyoming, and Texas). Only 3 states in the top 15 have above-average tax burdens (Delaware, Maine, and Vermont).

At the other end, high-tax Illinois is losing more than two high-earning households for every one that it gains. States such as Illinois, California, Minnesota, New Jersey, and New York have been losing high earners for years, which is undermining their economies. Yet, as explored in Cato’s new Fiscal Report Card to be released in October, governors in these states seem oblivious to the talent drain their high-tax policies are causing.

The next figure ranks migration ratios for households age 65 and over. States view these households as desirable in-migrants, and many have cut taxes on retirement income to attract them. Seniors may be particularly responsive to taxes because they can decide where to move when their careers end.

I examine interstate migration further here, here, here, here, and here. Krit Chanwong contributed to this blog post.

David Inserra

Social media users took to X to alert supporters of former President Donald Trump that Google appeared to be suppressing or altering various search results to favor his new opponent, Vice President Kamala Harris.

In one set of tweets and news stories, journalists discovered that Google’s autocomplete feature would not autocomplete statements related to the attempted assassination of Trump. In a statement, Google said that no “manual action taken on these predictions,” and that its systems include “protections” against autocomplete predictions “associated with political violence. We’re working on improvements to ensure our systems are more up to date.”

This suggests that Google has some sort of policy that suppresses recent instances of political violence in its autocomplete. Older examples of political violence were autocompleted, including other presidential assassination attempts, the shootings of Rep. Gabby Giffords and Steve Scalise, and the attempted assassination of Slovakian Prime Minister Robert Fico in May 2024.

So, while there is a potentially neutral explanation for the suppression in Trump’s case, the news spun up journalists and activists to search for more examples of potential bias in Google search.

And they found more. Posting on X, various users found multiple apparent cases of Google suppressing Trump. When searching for “President Donald Trump” autocomplete would not complete this search but would instead autocomplete President Donald Duck or Donald Regan, an apparent reference to former Treasury Secretary Donald Regan. All other presidents autocomplete normally. Strangely enough, searching for just “Donald Trump” would autocomplete in my searches.

When users would actually search for Donald Trump, Google would not provide normal news about Trump. Instead, Google appeared to alter the search so it was searching for and showing news about Kamala Harris and Trump. Searching for Kamala Harris, however, would turn up normal search results only focused on news about Harris.

While it is possible that Google has a policy against autocompleting very recent cases of political violence, it is harder to explain why President Donald Trump did not autocomplete the way it did for every other president. Similarly, there does not appear to be as clear a reason for adding Kamala Harris to searches focused only on Donald Trump.

It is possible that this is some glitch or oversight—after all, tech platforms are massively complicated combinations of automated systems and policies. The sheer number of mistakes or glitches, however, starts to strain credulity.

But mistakes do happen, as seen by another recent case of apparent bias in which Meta began to label and demote the famous picture of Donald Trump pumping his fist after the assassination attempt as misinformation. This was a mistake as Meta’s fact-checking program had identified an altered version of the photo in which the Secret Service agents were photoshopped to look as though they were smiling. The fact check should have only applied to that photoshopped photo but the automated enforcement systems accidentally enforced on the original, real photo too. But the timing could not be worse as users were already looking for instances of tech bias.

Now, if Google’s search misfires were not mere mistakes, it is possible that some rogue engineers are altering search functionality without the approval of Google HQ. It is also possible that Google has implemented policies that directly or indirectly suppress various searches related to Donald Trump.

No one other than Google knows exactly what is going on, and it is not a good look. Even as I write this blog, some of these examples appear to be fixed or changed. In the aftermath of Google Gemini’s high-profile failure, in which the new AI refused to create many images of Caucasians, the appearance of bias has led to continued political accusations against Google.

Former President Trump accused Meta and Google of censoring him, saying “GO AFTER META AND GOOGLE.” Elon Musk posted several times on X to call attention to these search results, and to accuse Google of a “massive amount of hidden censorship.” Rep. Chip Roy (R‑TX) wrote on X that he had verified the “censoring” of the Trump assassination. Donald Trump Jr. took to X to accuse Google of election interference to help Kamala Harris. Senator Roger Marshall (R‑KS) said he would be launching an “official inquiry” into Google’s “suppressing” of searches into Trump.

While at least some of the apparent bias may be due to neutral policies against recommending searches about recent political violence or mistakes made by automated technologies, it is possible that bias is at work in other instances. But it is important to realize that tech companies, like TV stations, journalists, bookstores, and other businesses have the right to be biased. They can use their products to advance speech they agree with and suppress speech they disagree with.

Yet doing so can also be dangerous for their business. If an organization built on connecting people with other people and information is seen as suppressing certain types of political content, then users will find alternatives. Indeed, there are many alternative search engines that are available that will appeal to different user interests, including promises of enhanced privacy or anonymity, supporting the environment, or focusing on music and imagery. 

If Google is biased here, then it is worth noting that users have another tech platform, X, to thank for creating a space where users, journalists, billionaires, and politicians alike could connect and share this information.

So, before we rush to demand the government regulate or punish tech companies for their potentially biased choices, remember that the robust market of technology services is already working to deliver users more choices and better products.

Daniel Raisbeck

On July 26, I noted that the crucial question about Venezuela’s upcoming election was not whether Maduro would lose in a landslide, as he did according to serious exit polls and the National Electoral Council’s initial figures prior to an alleged blackout. Rather, the question was whether Maduro would accept the result. He did not.

At the time of writing, the regime, which controls the electoral council, has not produced evidence to back its claims that Maduro beat opposition candidate Edmundo González by a margin of 51 to 44 percent. Protests are erupting in Venezuela and several Latin American countries, including Chile, which is led by a left-wing president, refusing to recognize the election’s validity. It is now clear that Maduro’s plan is not to flee or negotiate, but rather to hold on to power by any means necessary.

Why are those means necessarily fraudulent, potentially also violent?

The following graphs will help explain why, according to fair calculations, around 65 percent of Venezuelan voters rejected Maduro’s government yesterday at the polls. 

Inflation

Source: International Monetary Fund

Chávez took control of Venezuela’s central bank in 2007. When he died in 2013, Maduro inherited 40 percent annual inflation levels after a hefty rise in the previous decade. By 2017, the Chavista regime’s monetary mismanagement had left inflation at 438 percent per annum.

Source: International Monetary Fund

Mere triple-digit annual inflation levels—such as those that Venezuela is experiencing now— would seem low in comparison to the hyperinflationary period of 2018 and 2019, when the Chavista regime oversaw 65,000 percent and 19,000 percent inflation respectively.

Devaluation

Source: Federal Reserve of St. Louis

Chávez constantly devalued Venezuela’s currency, as did Maduro when he took over. By 2017, the bolivar had lost 92 percent of its value against the dollar since 2000. As hyperinflation raged, Maduro further devalued by 95 percent and removed eleven zeroes from the currency in two years.

By 2018–2019, Chávez and Maduro had made Venezuela’s currency worthless; street vendors at one point sold goods woven from bolivar banknotes. Maduro was forced to remove currency exchange controls. By 2021, large parts of the Venezuelan economy were de facto dollarized.

Source: Federal Reserve of St. Louis

Debt to GDP

Source: International Monetary Fund

When Chávez won his first election in 1998, Venezuela had a relatively healthy debt-to-GDP ratio of 30.7 percent. By the time of Chávez’s death in 2013, the debt had risen to the equivalent of 85.4 percent of GDP. Since 2015, Venezuela’s debt-to-GDP ratio has remained well above 100 percent, having reached a record level of 327.7 percent in 2020.

Per Capita GDP

Source: International Monetary Fund

High oil prices and Chávez’s deficit spending boosted Venezuela’s per capita GDP nearly fourfold from 2003 until 2012. A full bust would follow the boom. The Chavista model’s collapse and the oil bear market of the mid-2010’s pushed the country’s per capita GDP in 2018 to roughly the same level as 1984—this despite a population exodus. The same remains true today despite the sharp rebound in oil prices since the lows of 2020. Chavismo thus set Venezuela back four decades in terms of economic growth.

Poverty & Extreme Poverty

Source: United Nations Office for the Coordination of Humanitarian Affairs

Through his extreme fiscal profligacy, fueled by debt and petrodollar income at the height of the 2000’s oil boom, Chávez created the mirage of a nation that was defeating poverty. By the early 2010’s, the poverty rate had dropped below 30 percent of the population and extreme poverty below 10 percent. Then came fiscal, monetary, and economic collapse. By 2019, 96 percent of Venezuelans lived in poverty and 79 percent in extreme poverty. In 2021, the Financial Times reported, “for the first time, the average Venezuelan is poorer than the average Haitian.” The formerly rich Venezuela had become Latin America’s poorest country.

Oil Production

Source: U.S. Energy Information Administration

Venezuela sits atop the world’s largest oil reserves and, in the early 2000’s, was producing north of 3 million barrels of crude per day. Even after the oil-sector strike of 2002–2003, an attempt to prevent Chávez from seizing control of the state-owned oil company (PDVSA), and Chávez’s subsequent firing of 20,000 PDVSA employees (out of a total of 35,000), Venezuela produced over 2.5 million barrels per day. But decline set in as Chávez seized PDVSA, filled its ranks with his supporters, and used its resources for his “revolutionary” aims, for instance building social housing.

The poorly led company was unable to weather the oil bear market which began in 2014. Trump-era sanctions halted all oil exports to the United States, but Venezuela’s exports to the rest of the world also dropped precipitously, as did internal oil consumption. By 2019, Venezuela was producing well below one million barrels of crude per day, a figure that dropped to under 500,000 barrels per day during the COVID-19 crisis.

Chavista propaganda blames the collapse of Venezuela’s oil industry solely on US sanctions, but history has provided a curious point of comparison. Despite facing severe sanctions on its own oil exports since early 2022, Russia “has defied predictions of severe declines in its oil supply,” as Reuters reported at the end of 2023 (with Russian supply expected to remain steady in 2024). In Venezuela’s case, Bolivarian socialism, not sanctions, is the main culprit of PDVSA’s downfall.

Emigration

Source: Plataforma de Coordinación Interagencial para Refugiados y Migrantes de Venezuela (R4V)

Venezuelans began to leave their country en masse in 2014. By 2022, 6.8 million Venezuelans were residing abroad, many of them as refugees. According to R4V, a platform of the United Nations High Commissioner for Refugees and the International Organization for Migration, there were 7.77 million Venezuelan refugees and migrants in the world in early 2024, with 6.59 million living in Latin America and the Caribbean.

Neighboring Colombia is the country that has received the most Venezuelans in the last ten years, at an astounding 2.8 million; Colombia’s total population in 2013 stood just above 46 million, according to the World Bank. Peru (1.54 million), Brazil (568,000), Chile (532,000), and Ecuador (444,000) follow. Outside Latin America, the United States and Spain have received the largest numbers of Venezuelan migrants. In 2019, a UN report estimated that Venezuela had already lost 10 percent of its population due to the exodus.

Political Prisoners

Source: Foro Penal

As in Cuba, whose regime Chávez admired and emulated, political repression has been a hallmark of the Chavista era, with a sharp rise in political prisoners during Maduro’s time in power. High-profile opponents of Chavismo who have been incarcerated include Leopoldo López, a party leader and local mayor in Caracas, and former Caracas mayor Antonio Ledezma, both of whom managed to flee Venezuela.

The number of political prisoners increased drastically in 2017 when the regime violently put down massive protests that arose after Maduro’s “dissolution” of the opposition-led National Assembly and the arbitrary arrest of opposition leaders. Although the regime has used the release of certain political prisoners as a bargaining tool in its frequent negotiations with the opposition, it targeted opposition leader María Corina Machado’s staff members for arbitrary detention during the recent election campaign.

Homicide Rate

Source: World Bank (based on official figures)

Chávez had little intention of upholding Venezuelans’ liberty and property. Nor did he safeguard their right to life. Venezuela’s homicide rate rose sharply under his rule and that of Maduro, reaching a high of 63 murders per 100,000 inhabitants in 2014, according to official figures, whose accuracy has been questioned. The Venezuelan Observatory of Violence, an independent research institute, has constantly published figures that exceed those of the regime. The institute calculated the 2013 murder rate, for instance, at 79 per 100,000 inhabitants versus the regime’s 39 per 100,000.

As journalist Jeremy McDermott wrote in 2014, “Unfortunately the government claims that homicides actually dropped 30 percent in 2013 are so unbelievable that they must be discounted.” At 79 homicides per 100,000 people, he added, Venezuela “is still far away the most dangerous nation in South America, and trails only Honduras (with a rate of 86) as the most dangerous nation on earth.”

But the homicide rate has dropped considerably since the mid-2010’s, as the observatory’s own figures attest. In 2023, the institute reported 27 homicides per 100,000 inhabitants, the lowest rate since 2001. According to one theory, mass emigration has lowered the murder rate because entire criminal groups have also left Venezuela.

Human Freedom

Source: Human Freedom Index

The Human Freedom Index measures countries’ economic liberty together with the degree of civil and personal freedom that they allow their citizens. The index, which measures human freedom in 165 countries since the year 2000, has tracked Venezuela’s descent into authoritarianism since the early stages of Chávez’s rule. From its initial human freedom ranking below the middle of the pack in 2000, Venezuela steadily deteriorated. In 2019, it fell to second-to-last place. Venezuela currently ranks last in terms of economic freedom.

David Inserra

In the wake of the Supreme Court’s decision in Murthy v. Missouri, the Department of Justice’s (DOJ) Inspector General (IG) recently released its investigation into how the DOJ communicates with social media companies. The Murthy decision determined that to have legal standing to sue, potential victims of censorship need to prove that a specific government demand was backed by a clear coercive threat that led to the suppression of their speech.

As I wrote at the time, this means that some sort of transparency regime into government demands of social media companies is even more critical. The only way to discover clear evidence of censorship is for victims to be aware of government actions taken against their speech. Such knowledge is hard to come by, however, as most social media companies don’t tell users if the government is targeting their speech. And the government isn’t eager to let everyone know about its censorial actions.

Enter the new IG report. The IG found that in its efforts to counter foreign malign influence, “neither DOJ nor the FBI had a specific policy or guidance applicable to information sharing with social media companies until February 2024.” The lack of such guidance “created potential risks for the FBI and the Department arising from the fact that social media is often used as a forum for protected political speech in connection with U.S. elections.”

So the DOJ responded by developing a standard operation procedure for communicating with social media companies about such foreign threats. When asked by the IG to make this new procedure available to the public, the DOJ refused. The report states, “Additionally, in view of its sensitivity markings, the FBI informed the OIG that the SOP is not suitable for public release. Because DOJ’s credibility and reputation are potentially impaired when its activities are not well understood by the public, we recommend that the Department identify a way that it can inform the public about the procedures it has put into place to transmit foreign malign influence threat information to social media companies in a manner that is protective of First Amendment rights.”

Talk about an understatement. Neither the DOJ nor the FBI will tell Americans what its procedures are for protecting their First Amendment rights—yes, that might impair the DOJ’s credibility and reputation on this issue. In light of a significant Supreme Court case on this topic, government and experts getting truth vs. misinformation wrong, and falling and politicized trust in the FBI, government agencies like the DOJ have a lot of work to do to rebuild the public’s trust. But their response so far seems to be, “just trust us.”

If the DOJ won’t be transparent about its procedures, then, of course, it will resist even deeper transparency into the actual content of its communications. And this resistance is certainly present across the government.

That’s why Congress needs to step in and require government actors to report their requests and demands of social media companies. The Office of Management and Budget would collect these requests and then publish them for the public to see, subject to existing Freedom of Information Act restrictions for things like privacy and national security. Social media companies would also inform the people who are targeted by the government.

While true national security threats that the FBI wants to refer to social media companies will be kept secret, those targeted by the government should be allowed to challenge this in court. This prevents the government from abusing “security” as a way to keep its censorial demands secret.

The DOJ inspector general was right to point out that the lack of transparency and trust in how the government makes demands of social media companies is not healthy. Rather than trusting the government to abide by the First Amendment, policymakers should require transparency that brings censorship into the sunlight.

Jeffrey A. Singer

Over the years, several so-called midlevel human health care professions have emerged organically, responding to a growing demand for health care services for which, in many cases, providers with doctorate degrees are overqualified. Similar innovations may soon occur in veterinary health care delivery.

Research commissioned by MARS Veterinary Health, a global veterinary health company, in 2023 projects a significant increase in pet health care spending over the next decade. The researcher expects the increase, estimated to be three to four percent beyond inflation, to drive a surge in demand for veterinary services. He anticipates that this demand will require an additional 55,000 veterinarians by 2030, highlighting the need for proactive workforce planning in the veterinary health sector.

Even with the new veterinary graduates expected over the next 10 years, a shortage of up to 24,000 companion-animal veterinarians will likely still exist by 2030.
It would take more than 30 years of graduates to meet the 10-year industry need for credentialed veterinary technicians.

Over the decades, innovative and entrepreneurial health physicians and nurses have created new, midlevel clinical professions to meet the needs of a growing, aging, and diversifying US population. For example, in 1965, Eugene A. Stead, MD of the Duke University Medical Center, established the first program in the country to train physician assistants (PAs), beginning with four Navy hospital corpsmen that he selected for the program. PAs served as adjuncts, not competitors, with physicians.

By 1973, members of the growing profession created the American Academy of Physician Assistants with a mission to establish best practices standards and credentialing criteria. Since 1974, the National Board of Medical Examiners Commission on Certification of Physician Assistants has been the only organization that certifies PAs in the United States. The PA profession has matured into a crucial component of the health care workforce, providing many Americans access to care they might otherwise never obtain.

Advanced Practice Nurse Practitioners (APRNs) are another midlevel profession that emerged in the 1960s in response to growing health care demand. The first graduate-level nurse practitioner program was created at the University of Colorado in 1965. Today, NPs can get certified to practice in four specialties: Nurse Practitioner (NP), Certified Registered Nurse Anesthetist (CRNA), Certified Nurse-Midwife (CNM), and Clinical Nurse Specialist (CNS). NPs provide medical care to patients with or without physician supervision, depending on the state; CRNAs are responsible for administering anesthesia; CNMs specialize in women’s reproductive health and childbirth; CNSs may have a similar role to NPs but are typically involved in education, research, and consulting.

Recently, veterinary medical educators have proposed creating a veterinary medicine equivalent of the PA. Lincoln Memorial University College of Veterinary Medicine in Tennessee is now offering the first-in-the-country Master of Veterinary Clinical Care degree, designed to prepare licensed veterinary technicians who hold bachelor’s degrees as Veterinary Professional Associates (VPAs). According to the program brochure:

This MS program is the first in the United States designed specifically to help technicians build on the knowledge and skills learned in AVMA CVTEA-accredited programs, and graduates should expect to have master-level expertise in patient case management, clinical and professional skills, and evidenced-based medicine. The curriculum features courses that are co-instructed by DVMs and Veterinary Technician Specialists (VTS) to provide advanced critical thinking and clinical reasoning skills. Graduates will be prepared to work with diverse populations and provide exceptional veterinary care with sensitivity to the different cultural contexts and experiences of patient owners.

Colorado State University College of Veterinary Medicine and Biomedical Sciences, ranked seventh among the world’s top veterinary medical schools, recently announced plans to create an option for veterinary professionals similar to a PA. According to the CSU website, the Masters’s Degree in Veterinary Clinical Care would provide graduates with training to be competent to:

Diagnose animal medical concerns.
Perform routine surgeries.
Order and perform tests and procedures.

These skills would benefit animals and fill a demand for veterinary care that veterinarians or veterinary technicians are not able to meet alone.

A group of veterinarians, veterinary medical educators, veterinary technicians, APRNs, and animal shelter operators recently established The Coalition for the Veterinary Professional Associate (CVPA) to promote the emerging profession and develop best practices standards and certification criteria.

Not surprisingly, the American Veterinary Medical Association opposes efforts in states to allow animal owners to access services from trained and credentialed VPAs. The AVMA argues that such a midlevel position is unnecessary and that the way to increase access to veterinary care is to create more training programs for veterinarians and veterinary technicians—not to increase the number and options of veterinary professionals that consumers can choose from.

The Florida House of Representatives passed the Veterinary Workforce Innovation Act in December 2023. Unfortunately, the bill failed to pass in the Senate.

In Colorado, animal welfare groups, including the American Society for the Prevention of Cruelty to Animals (ASPCA) and animal shelter operators, are attempting to put a ballot initiative before voters this November that would require the State Board of Veterinary Medicine to establish credentialing criteria and create the category of Veterinary Professional Associate. Backers of the initiative hope that going directly to the voters will avoid the intense oppositional lobbying from the Veterinary Medical Association, which one would expect if it were taken up in the legislature.

Hopefully, Colorado voters will enable animal owners and welfare groups to overcome the veterinary profession’s attempts to use state power to restrict their choice of animal health providers.