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Alex Nowrasteh

Donald Trump is likely to be elected president again in the 2024 election. His chances have risen precipitously over the last year for several reasons that economist and columnist Tyler Cowen outlines here. Cowen’s points are solid as a matter of purely positive analysis and he’s correct or at least partly correct about all of them, but crime and disorder should be included.

You can group Cowen’s reasons and my additions into four broad buckets. To be clear, these are merely theories that attempt to explain why Trump is favored to win, not my positions on the issues or whether the perceptions are justified.

One, the economic situation isn’t so rosy. Unemployment is low, but inflation, an elevated price level, high housing prices, and increased uncertainty are all destructive. Two, the Democrats overreached on some social issues involving race and transgenderism and they are (mostly rightly) blamed for many of the post-COVID-19 problems with schools. Three, the Democrats are bland and feeble, and the Republicans are much less so. Say what you will about Trump or J.D. Vance, they are far more entertaining and dynamic than President Joe Biden or Vice President Kamala Harris and personality matters more now that so much power is concentrated in the presidency.

Fourth, there is a real and perceived increase in chaos and disorder. The best examples of this are immigration and crime. The point of chaos and disorder is important and under-emphasized everywhere except by me (here, here, here, here, here, here, and here) and Republicans who combine the two most chaotic issues into one. As a result, the GOP convention speeches last night had the theme of Make America Safe Again.

A video played during the convention claimed, “The Biden [illegal immigrant] surge has also led to a surge in violent crimes committed by illegal migrants.” Senator Tom Cotton (AR) said that Biden “welcomed a third world invasion” and that “I asked them why they came. None said persecution and most said for a job.” The supposed violent intent of the illegal immigrants is implied by the word “invasion,” but a moment’s reflection is enough to realize that invading armies are not looking for jobs when they intrude.

Senator Ted Cruz (TX) talked about murders committed by illegal immigrants in recent years and said, “These aren’t just stories or statistics, they’re our daughters, our sisters, our friends. The families don’t care about the empty numbers. They care about the empty chairs at the dinner table, about the voices they’ll never hear again, about the laughter lost, and about the dreams that will never be fulfilled.” Michael Morin, whose sister was murdered by an illegal immigrant, spoke about the criminal who killed his sister in moving and personal terms.

The speakers’ stories of individual immigrants who have committed awful crimes were front and center. The victims deserve justice, and their loved ones and friends deserve our sympathy. However, it is a leap to go from highlighting the need to punish individual murderers to supporting punishing everybody who shares the same immigration status, as if they are all murderers—a form of collective guilt at odds with our civilizational values.

Individuals are responsible for their actions, not for the actions of others who look like them, sound like them, or share other opinions or immutable characteristics in common. This is also true for murder or attempted murder, regardless of the identity of the criminal. For instance, an illegal immigrant who alone commits murder is solely responsible for his crime. Other immigrants on the same visa, from the same country, or who are also illegal immigrants are not responsible.

However, there is another angle that should concern policymakers. If a certain group of people is more crime-prone than another, then the government should allocate additional law enforcement resources to reduce their crime. One of the government’s jobs is to protect life, liberty, and private property, and the government has scarce taxpayer resources that can be used for many different purposes. It should allocate those resources to efficiently minimize the amount and cost of crime.

The implication from the speakers at the Republican convention is that illegal immigrants are especially dangerous and crime-prone, intensive immigration enforcement would reduce crime, and mass deportations would reduce the crime rate. Those policies may prevent some individual crimes, but they will not reduce the overall crime rate and make America safer. A goal of Making America Safe Again requires prosecuting criminals who hurt people and not enforcing immigration laws in an indirect attempt to reduce overall crime rates.

The best data on illegal immigration and crime come from Texas, which is the only state that records criminal convictions and arrests by immigration status. Texas is also an ideal state to study immigrant criminality because it borders Mexico, has the second-largest illegal immigrant population of any state, is governed by Republicans, does not have sanctuary jurisdictions, has a reputation for strictly enforcing its criminal laws, and most border encounters of illegal crossers since 2020 occurred there. Homicide is the most serious crime and the homicide data are the most thoroughly recorded, so the following focus will be on homicide and comes from my recent policy analysis.

Between 2013 and 2022 the homicide conviction rate in Texas was 2.2 per 100,000 illegal immigrants, 1.2 per 100,000 legal immigrants, and 3.0 per 100,000 native-born Americans (Figure 1). Illegal immigrants were 26.2 percent less likely than native-born Americans to be convicted of homicide. Legal immigrants were 61.4 percent less likely than native-born Americans to be convicted of homicide. Focusing on 2022, homicide conviction rates for illegal immigrants and legal immigrants were 35.6 percent and 62.3 percent, respectively, below those of native-born Americans.

The relative homicide conviction rates between native-born Americans, illegal immigrants, and legal immigrants in Texas are similar to the estimated ratios in the nationwide illegal immigrant incarceration rate, which are also closer to all criminal convictions by immigration status in Texas although you should be skeptical when interpreting the last number. Police clearance rates are not lower in states with many illegal immigrants, so it’s unlikely that many illegal immigrants are also not committing crimes and escaping prosecution. Furthermore, the crime rates do not make any individual murder less heinous. However, the crime rates are what matter when the goal is to Make America Safe Again.

It’s reasonable to infer that illegal immigrant criminality is similar nationwide to what it is in Texas, but we don’t know for sure. All states should copy Texas’ method of recording the immigration statuses of criminals arrested and convicted, as I recommended here.

A second policy response is to expand legal immigration to reduce border chaos and disorder by channeling would-be illegal immigrants into the legal immigration system. This would shrink the pool of illegal border crossers, meaning Border Patrol could focus on excluding the few criminals and security threats that attempt to cross illegally. The effect would be to better dissuade foreign-born criminals and others from coming to the United States because they’d have a higher chance of being apprehended if crossing illegally and, if they entered legally, making sure they go through criminal checks.

Because legal immigrants have the lowest criminal conviction rates of all three categories in Figure 1, this would mechanically reduce overall immigrant criminality. Of course, the top policy response is to deport noncitizens who commit violent and property offenses in all cases, as mostly happens currently.

Chaos and disorder are the ignored causes of Donald Trump’s popularity among American voters—and those voters have good reasons to be upset by them. Immigration and crime are the most obvious examples of chaos and disorder during President Biden’s administration. Republicans and others are linking immigration and crime in ways that don’t match the facts. Still, it is an effective political strategy that could lead to changes in public policy that emphasize enforcement of our immigration licensing regime in a misguided attempt to reduce real crime indirectly. That strategy will not work and relies on a theory of collective guilt at odds with Western values.

Justin Logan

In my 2023 paper, “Uncle Sucker,” I lamented the failure of US efforts to shift the burdens of defense back onto the shoulders of US allies and client states. During the Cold War, Congress required presidential administrations to produce a report on “Allied Contributions to the Common Defense.”

In that report, as former Pentagon official Richard Perle would later admit, US officials would portray allied defense efforts in the most favorable possible light to protect them from political pressure in the United States to lessen the American commitment to their defense. In Perle’s words, he was always “thinking of ways to put the best possible gloss on some pretty dismal figures … we look for statistics that make the allies look good.”

Although the report was ineffective at shifting defense burdens, it performed the service of making administration officials uncomfortable while they played Robert Shapiro to the allies’ OJ.

Utah Senator Mike Lee has introduced a couple of new bills that should interest readers. The “NATO Burden Sharing Report Act” expresses the sense of Congress that “the United States should not continue to shoulder a disproportionate share of the burden for European security.”

That bill reinstates an amped-up version of the Allied Contributions to the Common Defense report, stipulating that such a report should include figures on defense spending, defense spending as a percentage of GDP, contributions to Ukraine’s defense, a look at the countries’ defense-industrial bases, plus the size, structure, and independence of the countries’ militaries.

Lee also introduced a more general “Allied Burden Sharing Report Act” that includes countries outside Europe, examining many of the same issues. Rep. Warren Davidson, who spoke at Cato on NATO last week, has spearheaded a similar effort in the House, getting a provision for an Allied Burdensharing report into the House version of the 2025 NDAA.

With the United States $35 trillion in debt, the programs producing the debt seeming insulated from reforms, and current Congresses throwing another $1.5 trillion on the fire of debt each year, the time has come to twist allies’ arms on their own efforts. They will not like it, and the swampy “transatlantic community” will not like it. But American taxpayers and service members deserve a more serious look at the allies’ contributions to their own defense. It isn’t 1949 anymore.

Jeffrey A. Singer

Millennium Health, a drug testing company that monitors drug use for pain management and drug addiction treatment centers, publishes “Signals Reports” on emerging drug use trends based on urine drug test samples across the country. In September 2023, the Millenium Signals Report revealed their labs detected the veterinary tranquilizer xylazine, which drug trafficking organizations mix with fentanyl to enhance its potency (users call it “tranq”), in all regions of the country but most heavily concentrated in the eastern US.

The report found that people who tested positive for fentanyl plus xylazine were more likely to use multiple other substances as well, including cocaine, methamphetamine, heroin, and diverted prescription pain pills.

On July 16, Millenium Health published a “Signals Alert” warning that the xylazine scourge has picked up steam in western states. The report states that since the White House Office of National Drug Control Policy (ONDCP) declared xylazine an emerging threat in April 2023, “the greatest gains in xylazine use were largely in the western half of the US; the Pacific, Mountain, and West North Central Census Divisions all increased significantly; New England also increased significantly.”

However, xylazine-positive urine tests remain highest in the East, with positive test rates there nearly twice the national average, at 15.6 percent. Rates were highest in Pennsylvania, New York, and Ohio.

Congress has not yet required the Drug Enforcement Administration to add xylazine to its schedule of controlled substances. However, soon after the ONDCP declared xylazine a threat in 2023, multiple states responded to the spread of xylazine by designating the tranquilizer a Schedule III controlled substance. Schedule III drugs are medically used drugs with a “moderate to low potential for physical and psychological dependence.”

Examples of Schedule III drugs include ketamine, codeine, and anabolic steroids. But this will do nothing to stop drug trafficking organizations from adding xylazine to fentanyl and other opioids they smuggle. Heroin, MDMA (“ecstasy” or “molly”), “magic mushrooms,” and cannabis have been Schedule I (“no currently accepted medical use and high potential for abuse”) for decades; methamphetamine and cocaine have been Schedule II (medically useful but “with a high potential for abuse”). That hasn’t stopped drug traffickers from providing any of those drugs to people seeking to buy them.

As I explained in the past, the “iron law of prohibition”—the harder the enforcement, the harder the drugs—drives xylazine’s emergence. Intensified law enforcement incentivizes drug trafficking organizations to develop more potent drugs that are easier to smuggle in smaller sizes and that they can subdivide into more units to sell. Because of the iron law, policymakers should beware: if they erect too many obstacles to xylazine smuggling, they will motivate drug trafficking organizations to substitute xylazine with something more potent and, therefore, easier to smuggle in smaller packages.

Another more powerful tranquilizer, medetomidine, used in both veterinary and human medicine, is already appearing on the black market. Drug toxicology labs in Maryland discovered medetomidine and its isomer dexmedetomidine (brand names Domitor and Precedex, respectively) in drug test samples in 2022. They have since been detected in Florida, Ohio, Pennsylvania, and Canada toxicology studies. These drugs are similar to xylazine but much more potent.

Like a broken record, policymakers continue the futile war on drugs, which brings newer and more potent drugs into the black market. Then, they double down on the drug war, further fueling the cycle. This pattern repeats endlessly. Until policymakers lift the metaphorical phonograph needle from the stuck groove by ending the drug war, they will keep playing this sad tune over and over.

Jeffrey Miron

Maybe not.

Commentary on the left and right tends to paint a gloomy picture about whether currently young generations will be economically better off than previous ones.

Yet such pessimism has existed for centuries, even while improved outcomes have mainly been the norm. FDR’s “forgotten man” and the “Make America Great Again” slogan — as used by Trump, Clinton, and Reagan — both prey on inaccurate nostalgia.

It appears this pattern — pessimism that is inconsistent with the facts — continues. Kevin Corinth and Jeff Larrimore, of AEI and the Federal Reserve, explain in their paper and Cato Research Brief no. 391 that

each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963–2022 based on the Current Population Survey Annual Social and Economic Supplement. At age 36–40, Millennials had a real median household income that was 18 percent higher than that of the previous generation at the same age. This rate of intergenerational progress was slower than that experienced by the Silent Generation (34 percent) and Baby Boomers (27 percent), but similar to that experienced by Generation X (16 percent).

Thus at least by this measure, intergenerational progress has been continuing, albeit at a slower rate. Even on this point, the authors show that

[s]lower progress for Generation X and Millennials is due to their stalled growth in work hours—holding work hours constant, they experienced a greater intergenerational increase in real market income than Baby Boomers. Intergenerational progress for Millennials under age 30 has remained robust as well, although their income growth largely results from higher reliance on their parents. We also find that the higher educational costs incurred by younger generations is far outweighed by their lifetime income gains.

Working fewer hours—even if that means less income—is an understandable choice when income is well above the level needed to survive.

Nothing can guarantee that intergenerational progress will continue. But it is important to avoid misstated pessimism about the past since that is often used to justify misguided policies. For example, the idealization of America in the 1950s regularly inspires unfruitful industrial policy.

Lemoni Matsumoto, an undergraduate at the University of Chicago, contributed to this article.

Marc Joffe

Like many other fiscal conservatives, I often criticize the large and growing government subsidies to transit. The very active transit advocacy community on X often responds: “How about government subsidies to driving?” Although the initial reaction might be “What subsidies?” the issue is worth investigating because road financing in the US is complex. And if the cost of road infrastructure is not, in fact, fully covered by the various taxes and fees drivers pay, it is worth questioning the resulting subsidy to drivers.

Subsidizing any form of transportation raises both normative and efficiency issues. Compelling taxpayers to finance mobility is unfair to those who prefer to stay close to home and increases such negative externalities as pollution and congestion. With the advent of the internet and smartphones, many tasks that used to require travel (including getting to work) can often be performed from home.

Further, individuals can choose to live in walkable or bikeable communities, avoiding the need to use motorized transportation to reach shopping, dining, educational, and recreational destinations (although paved, non-tolled sidewalks and bike lanes are also subsidized).

Having established that subsidies for driving are undesirable, we’re left with the question of whether such subsidies exist. In this post, I will specifically look at driving-related government revenues and expenditures in California.

Historical View

A look back into history shows that California did subsidize driving at the beginning of the automobile era, but the current situation is murkier.

In the decades after California became a state in 1850, dozens of companies were incorporated to build and maintain toll roads. But late in the nineteenth century the counties, and then the state, took over the private toll roads and made them free at the point of use.

California’s first state-maintained road was a portion of what is now US 50 in the Sierras. The “Lake Tahoe Wagon Road” had been privately operated and maintained until 1886 when El Dorado County purchased it and eliminated tolls. Then the State of California acquired the road in 1896.

In 1910, California voters approved (by a relatively narrow 54 percent-46 percent margin) the first State Highway Bond Act, which authorized the state to borrow $18 million to construct 3,052 miles of state highway. Voters authorized another $15 million of highway bonds in 1916. At first, the state borrowed to build its highway system using general revenues to repay principal and levies to pay interest. It was not until 1923 that California enacted a gasoline tax of two cents per gallon.

But gas taxes were not enough to cover the costs of building and maintaining roads around the state. For example, in fiscal year 1949 the California Division of Highways collected $939 million in gas taxes but its expenditures totaled $1,258 million. Most of the difference was offset by federal aid, funded by the federal gas tax; but, to balance its budget, the Division also received state general funds and proceeds from issuing bonds.

In recent decades, California has sharply increased its gasoline tax, from six cents per gallon in 1963 to sixty cents per gallon today, with some of the proceeds redirected to transit. At the same time, the cost of building and maintaining roads has increased sharply.

Looking at Today’s Data

To determine whether the government is still subsidizing California drivers today, Krit Chanwong and I reviewed a variety of local, state, and federal disclosures for the 2022–2023 fiscal year. We used actual figures when available but were sometimes obliged to use budgeted amounts due to lack of sufficiently detailed actuals.

There are five main sources of driving-related revenue:

State-level taxes: California levies a sales tax and an excise tax on both gasoline and diesel. For gasoline, the state sales tax is 2.25 percent, and the state excise tax is $0.596 per gallon. In FY2022-2023, these state-level taxes brought in approximately $8.7 billion.
State-level fees: California charges multiple fees to consumers. These include the motor vehicle registration fees and the transportation improvement fee (a $25-$175 fee when registering a vehicle). In FY2022-2023, these fees accounted for approximately $3.2 billion in revenue.
Local Government Revenues: These are additional local fuel sales taxes, and local fees (such as those charged for parking). In FY2022-2023, local sources brought in $1 billion.
Toll Revenues: California has multiple agencies that collect tolls for bridges and express lanes. These entities collected approximately $1.2 billion net of operating expenses in FY2022-2023.
Federal Gas Tax: On top of California’s gas taxes, the federal government also levies an excise tax of $0.184 per gallon for gasoline and $0.244 per gallon for diesel. We estimated that this brought in $3.2 billion.

California state government driving-related spending can be divided into four major categories:

State Highway Operations: This category accounts for around $6 billion in spending. This money is spent on new capital project design and maintaining state highways.
Local Assistance: California spends approximately $3.2 billion to help maintain, build, and plan roads in California’s many cities and counties. We excluded the average annual budget authority for the Active Transportation Program (of around $100 million in both federal and state funds annually) from these calculations because that program focuses on bike and pedestrian infrastructure.
Capital Outlay: This category accounts for around $5 billion in spending. This is used to acquire land and for building and widening roads.
Electric Vehicle Rebates. Federal and state incentives for drivers to buy EVs totaled almost $500 million.

Apart from the above spending categories, cities and counties also spend around $9.2 billion on streets and highways. To avoid double counting, we subtracted $3.2 billion of state aid from this total, yielding a figure of $6.0 billion for local spending.

Our final accounting can be found in Table 1 below.

Our finding is that driving-related expenditures exceed revenues by over $3 billion (A more detailed breakdown of revenues and expenditures can be found here and here). So, in California, assertions by transit advocates that driving is subsidized appear to be empirically supported. Comparable analyses in other states may yield different conclusions. 

Although subsidies for driving are smaller than those for transit, they nonetheless merit criticism from those of us who believe in small government and fiscal responsibility.

David Inserra

Scientists are now using AI to help humans understand what dogs are trying to communicate with their barks. When I wrote my new Policy Brief, “Artificial Intelligence Regulation Threatens Free Expression,” this wasn’t exactly the type of expression I had in mind but it nonetheless proves my point.

The fast-moving AI space is drawing so much attention and money because of its ability to radically change how we access information and communicate, apparently even with man’s best four-legged friends. Generative AI’s ability to create text, imagery, and audio in ways that mimic human intelligence and to do so quickly and at relatively low cost, is going to change the way we interact with each other and with the information in our world.

Given this massive expressive potential, we should be concerned about efforts to restrict the speech that AI can produce. Of course, there are some objectively dangerous types of speech that we may want to prevent AI from producing, like developing malware or instructions for making chemical weapons. But limiting AI speech because it isn’t diverse enough or some groups would find it offensive is not healthy for a culture of free expression.

Thankfully, the market is likely to respond to the demand for all sorts of speech and viewpoints by providing a host of personalized AI tools…unless the government gets in the way first. My new paper describes two ways that government regulation will harm free expression.

First, by generally making it harder for new companies to enter the market, suffocating regulations will cement the dominance of current big tech companies over AI. Consumers won’t get expanded choice and innovation that meets their needs and viewpoints.

Second, government regulation could explicitly target certain types of products or speech as “harmful.” When talking about potential AI harms, policymakers might be concerned about the impact of AI on jobs or the dystopian future of killer AIs like in Terminator or The Matrix. But another common harm that many elites and governments fear is the ability of AI to spread certain perspectives that are considered misinformation or hate speech. And so governments may also try to stifle the expressive potential of AI by restricting speech that they don’t like.

Instead of restrictions, regulations, and censorship, my paper proposes a light-touch approach to AI regulation. Existing rules and authorities are already being applied by government agencies and courts so this isn’t the Wild West. In some cases, like the EU, existing laws are so burdensome that they are already crippling innovation, indicating the need for fewer rules rather than more. Together with other forms of soft law, such as the development of social norms and best practices and improved AI literacy, policymakers can incentivize greater AI innovation and thus greater expression.

Whether you are using AI to better understand your dog or better communicate with your fellow Americans, the expressive possibilities are immense as long as we pursue an innovation-first approach to AI.

Patrick G. Eddington

Thomas Matthew Crooks’ failed attempt on former President Trump’s life on July 13 has resulted in the opening of multiple investigations into the incident. What follows is a brief summary of what we know at the moment about each of these investigative tracks.

Criminal investigation: The Federal Bureau of Investigation (FBI) has the lead, with the case falling under its Classification 89 investigative category. In a press release issued late on July 14, FBI officials said that information developed to date indicates that the shooter acted alone but that no motive had yet been established. Bureau officials also said Crooks was “not known to the FBI” prior to the shooting, and no information has surfaced yet indicating that Crooks had a prior criminal record or run-ins with law enforcement in his hometown of Bethel Park, Pennsylvania.

In addition to the firearm used in the attack on Trump, the Bureau found at least a few improvised explosive devices (IEDs) in Crooks’ possession that were subsequently neutralized by Bureau explosive ordnance experts. Given that we’re less than 72 hours into the criminal portion of the investigation, it will be at least several more days before we learn whether there were any indicators of Crooks’ intentions that were missed or successfully concealed prior to his assassination attempt on Trump.

Independent investigation of the security failure at the Trump rally: Beyond President Biden’s announcement of an “independent” investigation of the security breach at Trump’s event, we don’t actually know who is conducting the review, the scope of its mandate, or other key details. Earlier today, ABC News reported that Department of Homeland Security Secretary Alejandro Mayorkas had this to say:

Mayorkas said it is important to have an “independent body” outside the Department of Homeland Security for “the integrity of the investigative process and the conclusions reached and the recommendations made have the full confidence of the government and the American public. And we intend to be transparent with respect to the findings and recommendations of the independent review.”

This means that DHS’s Inspector General will apparently not be involved in this particular investigation, which raises questions about whether the independent body Biden has charged to quickly investigate the security lapses will have the requisite investigative and forensic expertise to conduct a proper inquiry.

The congressional angle: One week from today, the House Oversight Committee will, in theory, be holding a hearing into the Secret Service’s handling of the security arrangements for Trump’s Butler, Pennsylvania campaign event. Today, the House Homeland Security Committee will be briefed by Secret Service Director Kimberly Cheatle on the incident, and next week FBI Director Chris Wray will appear before the House Judiciary Committee for a previously scheduled hearing that will now no doubt focus heavily on the Trump assassination attempt and the status of the FBI’s investigation into it.

I’ll have more to say on each of these investigative tracks as information becomes available.

Jai Kedia

The latest Consumer Price Index (CPI) report showed prices falling 0.1 percent in June, offering hope that the fight against inflation may be nearing an end. When inflation first spiked post-COVID-19, the discretionary Fed labeled it “transitory” and was sluggish in its response to rising prices. Once inflation became entrenched, the Fed was forced to execute its fastest series of rate hikes in decades.

The Fed should learn from its prior errors and return to rules-based guidance, which is currently indicating a significant policy rate reduction. Otherwise, it risks keeping monetary policy overly tight and contracting the economy.

Most experts expect the Fed to keep rates unchanged in July and issue a rate cut in September. But macroeconomic data indicate that there is no reason for the Fed to wait. While the Fed is obsessed with its communication and forward guidance, these measures have had numerous negative consequences and have failed to inform the public of the Fed’s next moves. The best way for the Fed to improve its communication is to adopt a policy rule and be required to explain any deviations from that rule. (This was proposed by the 2015 FORM Act.) This would make monetary policy more objective and prevent the private sector from having to parse every word from Fed officials for guidance.

Many widely used monetary policy rules advocate for an immediate rate cut. For example, the Taylor rule, an approximate relation between the Fed’s policy rate target and its dual mandate macro indicators (inflation and unemployment), shows the Fed’s target range is already off by 75 basis points. The following equation is a simplified Taylor rule, one that the Fed would use to calculate its target federal funds rate (FFRt):

FFRt = 0.8 x FFRt‑1 + ( 1 — 0.8 ) x [ 1.5 x Inflationt — 0.5 x ( Unemployment Ratet — NAIRUt ) ]

In June, the realized federal funds rate (FFR) was 5.33%, and the latest quarter-to-quarter CPI inflation was 0.26%–annualized to 1.05%. Using June’s unemployment rate of 4.1% and a 4.41% natural rate (NAIRU), the implied current FFR should be:

FFRJuly 2023 = 0.8 x (5.33%) + 0.2 x [ 1.5 x (1.05%) — 0.5 x (4.1% — 4.41%) ] = 4.61%

So, the Taylor rule indicates the Fed’s target range of 5.25 to 5.50% is too high. It should adjust the target range quite significantly by lowering it to 4.50 to 4.75%.

To be clear, our recommendations to the Fed have remained consistent and do not merely surface when advocating for rate cuts. Last year we used the same rule to commend the Fed’s decisions to maintain rates. Since that time, it seemed the Fed had returned (at least briefly) to rules-based policymaking, but its current stance again seems at odds with a policy rule.

The Fed should continue to follow a policy rule and drop rates in July—not wait until September. And it shouldn’t stop there. It should explicitly affirm its commitment to rules-based policymaking going forward. If not, Congress must ensure consistent monetary policy by forcing the Fed to follow a rule and publicly justify any deviations from it.

Michael Chapman

If elected to a second term as president, Donald Trump says he will impose a 60 percent tariff on all goods from China and a 10 percent tariff on all goods from other countries. He calls it a “ring around the country.” He should call it a ring around consumers because the tariffs will raise prices, limit choices, harm productivity, and act as a tax on importing businesses too.

These protectionist effects are undeniable, according to many experts, and their destructiveness is nothing new. More than 170 years ago, for instance, the free trade economist and French National Assembly member Frederic Bastiat (1801–1850) explained the folly of tariffs. He noted especially that “the restraint of trade” limits supply, making certain products scarce, which “raises prices.”

“Prices rise when and because things are scarce,” said Bastiat. In recent times, think of the baby formula scarcity and its higher price. Or recall that President Trump’s tariff on imported washing machines raised prices on washers foreign and domestic. Why on the latter? Because the tariff reduces competition on domestic producers.

That economic axiom was true in the 19th century and it is true today.

Trump’s tariff plan is “economically ignorant, geopolitically dangerous, and politically misguided,” says Scott Lincicome, head of Cato’s Herbert A. Stiefel Center for Trade Policy Studies. He adds that Paul Winfree, Trump’s Domestic Policy Council deputy in 2017, has denounced the tariff proposal, saying it “would impose a massive tax on the folks who it intends to help.”

According to the Peterson Institute for International Economics, the Trump tariffs “would reduce after-tax incomes by about 3.5 percent for those in the bottom half of the income distribution,” and “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.”

The Center for American Progress reports that Trump’s tariffs “would amount to a roughly $1,500 annual tax increase for the typical household, including a $90 tax increase on food, a $90 tax increase on prescription drugs, and a $120 tax increase on oil and petroleum products.” .

Erica York, senior economist at the Tax Foundation, says Trump’s 10 percent tariff ring “would amount to a $300 billion annual tax hike, reducing the size of the US economy by 0.7 percent and eliminating 505,000 jobs.” That’s before we even consider foreign retaliation.

“We know from decades of experience and evidence that tariffs reduce employment, productivity, and output,” says York. “The past five years have demonstrated that reality all too well. During his term, Trump imposed nearly $80 billion of tariffs on steel, aluminum, solar panels, washing machines, and thousands of products from China. President Biden has largely maintained them. The result? They have destroyed US manufacturing jobs, harmed US farmers, raised prices for US consumers, and alienated our allies ….”

So, while both Trump and Biden claim to be protecting America from “unfair” foreign trade, they are effectively hurting US consumers and workers. This is what protectionism always does, as Bastiat explained so well.

For instance, in one of his most famous essays, “The Candlemakers’ Petition,” Bastiat reveals the absurdity of trying to protect domestic manufacturers from low-priced foreign competition.

The satirical petition of 1845 is addressed to the “Honorable Members of the Chamber of Deputies” from the “Manufacturers of Candles, Tapers, Lanterns, Candlesticks, Street Lamps, Snuffers, and Extinguishers, and from the Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.”

The petition explains, “We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him …. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion ….

“We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull’s-eyes, deadlights, and blinds — in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.”

Blocking the sunlight, the petitioners claim, will boost production of candles and all the industries related to candlemaking and increase employment in those industries. “[W]hat industry in France will not ultimately be encouraged?” write the petitioners.

Consumers who lose the free sunlight and pay more for candles, do not matter, explain the petitioners, because the lawmakers’ stated goal is “to encourage industry and to increase employment.” Block the sun and you’ll create jobs! But, of course, demand will go up for artificial light, and prices will rise, hurting both end customers and industry reliant on that input.

Bastiat’s argument is universally applicable. Tariffs on foreign goods—whether 10% or 100%— always hurt consumers, whether households or businesses. Even if you tax a foreign good that is so low priced—it’s free!—consumers will pay the cost. It’s a bad deal all around.

Bastiat ends the petition, “Make your choice, but be logical; for as long as you ban, as you do, foreign coal, iron, wheat, and textiles, in proportion as their price approaches zero, how inconsistent it would be to admit the light of the sun, whose price is zero all day long!”

Trump, Biden, and the entire Congress could learn from “The Candlemakers’ Petition.” The best trade policy is free trade.

Adam N. Michel

Representative Diana Harshbarger (R‑TN-01) recently introduced an updated and expanded bill to create universal savings accounts (USAs) with an annual contribution limit of $10,000. These new savings accounts would allow more Americans to build independent financial security through a flexible investment account without complicated rules for when or on what the funds can be spent.

The Universal Savings Account Act (HR 9010) adds a new tool for savers that, due to its simplicity, stands out from the existing list of overly complicated investment accounts, such as employer-administered 401(k) retirement accounts, Individual Retirement Accounts (IRAs), and 529 Plan education savings accounts. These qualified accounts remove taxes on capital gains, dividends, and interest, which function as a double tax on savers, discouraging investment (and encouraging current consumption).

A USA would function similarly to a Roth IRA—accepting after-tax contributions that can be withdrawn at any time tax-free—without the restrictions and penalties on using gains before retirement.

USAs encourage savings by cutting taxes; they also encourage savings by eliminating complexity. Existing special purposes savings accounts come with income and contribution limits, age restrictions, employer requirements, required minimum distributions, and restrictions on what and when the savings can be spent. These rules are enforced with steep tax penalties designed to increase the cost of accessing the savings for non-government-approved purposes.

Complexity and tax penalties discourage the use of existing savings accounts, especially among young and low-income savers for whom liquidity (easy access to funds) is most important. USAs fix these problems.

As I’ve written before, similar accounts in Canada, the United Kingdom, and South Africa are wildly popular, have increased personal savings, and are used by people at every income level.

In 2020, 40 percent of Canadian households contributed to a Canadian tax-free savings account (TFSA)—almost 60 percent own a TFSA—and 51 percent of TFSA account holders earned less than Canadian $50,000…. Willliam McBride concludes that “Canada’s tax-free savings accounts are a huge success,” and Garett Watson explains how the UK’s “individual savings accounts” should be a model for US policymakers “looking to encourage greater saving and financial security, particularly among low- and moderate-income households.”

A recent Tax Foundation report summarizing the benefits of USAs concludes that “over the long run, the most effective and sustainable way to improve financial security and upward mobility is through policies that lead to greater household saving and wealth accumulation at all levels of income.” A 2020 Joint Economic Committee analysis also found that USAs could support family formation, increase charitable giving, and deepen social ties. As has been demonstrated around the world, USA-type accounts improve financial security and economic mobility by allowing individuals to save for their own priorities, be it retirement, education, housing, entrepreneurship, child support, health, unemployment, or other emergencies.

In 2018, the House of Representatives approved a small USA (annual limit of $2,500) in the Family Savings Act that was part of a Republican effort to extend the temporary 2017 tax cuts. Rep. Harshbarger’s bill improves and expands on the previous USA proposals. One improvement follows a recommendation in my recent Senate Finance Committee testimony to expand the 2018 bill’s contribution limit to $10,000 to ensure the accounts can serve the majority of Americans’ saving needs—especially those who might save in fits and starts. The bill also includes an income limit that phases out access to the accounts for individuals with incomes over $200,000 (double that for married couples). Income limits create unnecessary complexity and unfairly deny the account’s benefits to higher-income Americans whose increased savings are just as beneficial for the economy and society.

As Congress prepares for the expiration of the Tax Cuts and Jobs Act at the end of 2025, it should look for ways to build on the 2017 tax cut’s successes. Rep. Harshbarger’s USA proposal should be key to any future pro-growth, pro-family tax reform.