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Brent Skorup

The Supreme Court has been clear in the past that government officials cannot directly or indirectly coerce a private party to censor speech on the government’s behalf. However, in its Murthy v. Missouri decision today, the court made it harder for Americans to vindicate their free speech rights when censorship is secretive.

Several people, including former Harvard professor Martin Kulldorff, sued the White House, the FBI, and other agencies, alleging that government officials coerced YouTube, Twitter, and other tech companies to remove their online posts and commentary, including criticisms of the government’s COVID-19 policies. In light of government emails to social media companies and other evidence presented, a federal judge prevented those agencies and their employees from urging social media companies to censor. That preliminary injunction was narrowed but largely upheld by the Fifth Circuit Court of Appeals.

The government agencies appealed, and the Supreme Court today reversed those lower court decisions. The court held that Kulldorff and others had not presented enough evidence of censorship and therefore they lacked standing to sue. For now, government communications with social media companies can continue. It’s discouraging to see the court impose a high burden on people who want to prevent the government from using its power to indirectly chill the speech of private parties and government critics.

Jeffrey A. Singer

The US Public Health Service Commissioned Corps has come a long way since its inception in 1798 when Congress created the US Marine Hospital Service to care for sick and injured merchant seamen. This service evolved into a national marine hospital system staffed by a corps of physicians overseen by a Supervising Surgeon. In 1889, Congress formally named it the Commissioned Corps, a military branch administered by what eventually became renamed a Surgeon General.

Today, the Commission Corps is one of the eight uniformed services of the United States. It serves under the US Public Health Service, a US Department of Health and Human Services division. Its staff is sent to various federal agencies, including the Indian Health Service, the Food and Drug Administration, the Federal Bureau of Prisons, the Department of Homeland Security, and the State Department. Its mission is to “protect, promote, and advance the health and safety of our nation.”

In the 1980s, when Surgeon General C. Everett Koop embarked on an effort to make America a “smoke‐​free society by the year 2000,” it marked the beginning of an expanded role for the Surgeon General. Since Koop, Surgeons General have seen themselves as “the nation’s doctor.” They have influenced Congress to pass legislation on ever‐​expanding “health issues.” And because one can find a health angle for so many activities or substances that autonomous adults choose to engage in or consume, “public health policy” is bleeding into adults’ right to pursue happiness.

The latest example came yesterday when Surgeon General Vivek Murthy declared firearm violence a “public health crisis.” Murthy released an advisory stating, “Overall, deaths caused by guns rose to a three‐​decade high in 2021, driven by increases in homicides and suicides.” He called on Congress to enact new gun regulations. Of course, lockdowns and the associated emotional stress and anxiety that resulted from the public health establishment’s response to the COVID-19 pandemic made 2021 an atypical year.

But, surely, someone on Murthy’s staff must have updated him that there was a 7.7 percent decline in gun violence from 2022 to 2023, according to the Gun Violence Archive. This is the largest annual decline since the Archive’s inception in 2014. And according to a report from the Center for American Progress, “preliminary data suggest that gun violence broadly trended down in 2023 across the United States, representing a historic decrease.” Did Murthy jump the gun when he declared gun violence a public health crisis by not putting the 2021 gun violence data in proper context?

More importantly, criminal justice professionals best address homicides and other forms of gun violence, not doctors. Doctors and mental health professionals should work on suicide prevention, not gun laws.

Murthy’s claim that gun violence is a public health crisis comes just a week after he called on Congress to require social media platforms to display labels warning parents that engaging on these platforms may endanger adolescents’ mental health. Aside from the fact that the science is far from clear, as I have written here, a social media public health panic can push Congress to infringe on free speech rights. It may also encourage frivolous lawsuits that cause platforms to impose speech restrictions.

Policymakers should oppose public health and medical professionals’ efforts to expand the definition of health to encompass more human activities. If this pernicious trend continues, we risk evolving into a society governed by a partnership between unelected bureaucrats and a medical ruling class exerting social control.

Adam N. Michel and Josh Loucks

It has been nearly seven years since the Tax Cuts and Jobs Act (TCJA) was signed into law in December 2017. Most of the law expires at the end of 2025 when taxes will increase by more than $400 billion a year, hitting Americans at every income level.

As Congress debates the future of the tax code, it is also important to revisit key questions about the past. There remain many misperceptions about the 2017 reforms. Clarifying a few central questions will allow policymakers to pursue better policy for 2026 and beyond.

The TCJA cut individual and corporate tax rates, shifted more than 29 million Americans to the simpler standard deduction, consolidated family tax benefits, and overhauled the international tax system, among many other reforms. However, the law was not perfect. For example, the vast majority of the individual tax changes and crucial incentives for investment are temporary, blunting the economic effects and hiding the law’s true fiscal cost.

The following piece answers some of the most commonly asked questions about the TCJA. They include:

Who received a tax cut?
Who received the biggest tax cut?
Did the SALT limit raise taxes on the middle class?
What’s the difference between tax reform and tax cuts?
Did the tax cut affect the economy?
Did workers see wage increases?
How much did the tax cut add to the deficit?

You can download a consolidated one‐​page version of these FAQs and a summary of all the major tax changes here. For a compendium of future tax reform options for Congress to build on the success of the TCJA in 2025, see the recent Cato Policy Analysis, “Slashing Tax Rates and Cutting Loopholes.”

1. Who received a tax cut?

The tax code has seven income tax brackets, which tax Americans at progressively higher rates as they earn more income. The TCJA cut the top rate from 39.6 percent to 37 percent, intermediate rates were also cut, and bracket thresholds—the points at which income is taxed at higher rates—were expanded so that more income is taxed at lower rates.

Combined with all the other changes in the law, the Tax Policy Center estimated that the tax cuts would result in 80 percent of taxpayers receiving a tax cut and 15 percent seeing no change in taxes paid. Five percent of taxpayers were estimated to pay more in 2018 than they did in 2017.

2. Who received the biggest tax cuts?

Estimates from the Tax Policy Center and the Heritage Foundation indicate the average taxpayer received a tax cut of roughly $1,500 and double that for a family of four in 2018.

The top 10 percent of taxpayers pay about 76 percent of the income tax. The lowest‐​income half of taxpayers pay 2.3 percent of income tax collections. Because of this imbalance in who pays the majority of the tax burden, the highest‐​income Americans benefited from the largest tax cuts in dollar terms. It is hard to cut taxes for people who already aren’t paying any income tax.

A more informative way to look at the distribution of tax cuts is as a portion of what people were already paying. Figure 1 uses IRS data from before and after the TJCA to show that the largest tax cuts went to Americans in the bottom 75 percent of income earners. The lowest‐​income 50 percent of individuals saw a 9.3 percent reduction in their tax bill, compared to a 0.04 percent tax cut for the highest‐​income 1 percent.

3. Did the SALT cap raise taxes on the middle class?

In 2017, taxpayers who chose to itemize and were not subject to the alternative minimum tax (AMT) could deduct their full state and local tax (SALT) payments from their federal income. The TCJA limited the SALT deduction to $10,000. So even if only 5 percent of all taxpayers paid higher taxes, there could be significant variation across the country, with higher income and higher tax areas being hit harder.

A Heritage Foundation analysis looked at the tax cuts by congressional district and found no district had more than 12 percent of taxpayers with a tax increase. Those who did see tax increases tend to be high‐​income earners.

For most taxpayers, the SALT cap was more than offset by a larger (almost doubled) standard deduction and lower tax rates. Due to the tax code’s complexity, many higher‐​income Americans may also not have realized that changes to the AMT also offset the SALT cap. (The AMT is a parallel minimum tax system with slightly lower rates and fewer deductions, including full denial of the SALT deduction.) Raising the AMT exemption limit reduced the number of AMT taxpayers from 5.3 percent to less than half a percent. For these taxpayers, the SALT deduction increased from $0 to $10,000.

4. What’s the difference between tax reform and tax cuts?

A tax cut lowers tax rates, increases deductions, or expands tax credits to lower tax revenue. Tax reform can also cut taxes but, more importantly, includes significant measures that improve the tax base and simplify complex provisions.

On net, the TCJA lowered revenue by about $1.5 trillion over ten years. However, the Joint Committee on Taxation estimated more than 60 different changes to the tax code that increased revenue by approximately $4 trillion. The higher revenue from base broadening and other one‐​time changes allowed the TCJA to cut taxes by $5.5 trillion on a gross basis. Figure 2 summarizes categories of provisions with the largest changes in revenue in the 2017 law.

5. Did the tax cut affect the economy?

Not all tax cuts are created equal. Some tax cuts—like individual and business tax credits—put money back in people’s pockets or pad industry profits but have only small effects on the long‐​run trajectory of the economy. Permanent tax cuts that improve incentives to work and investment tend to have the largest effects on long‐​run economic growth.

The most economically powerful changes in the TCJA were the reduction of the corporate tax rate from 35 percent to 21 percent and the allowance of full deductions for business investments (called full expensing). 

Estimates of the law’s economic effects from independent organizations found that TCJA would increase investment (growing the capital stock) and boost GDP by between 0.8 percent and 1.7 percent. Multiple years after the law took effect, empirical investigations of the actual economic outcomes have confirmed positive economic results.

Kyle Pomerleau and Donald Schneider find that in the years immediately after 2017, “real GDP, consumption, business investment, and payrolls grew more rapidly than expected” by pre‐​reform forecasts from the Congressional Budget Office (Figure 3). Gabriel Chodorow‐​Reich and coauthors use variation in how firms were impacted by the tax cuts to estimate the TCJA will result in a long‐​run increase to the capital stock of 7.2 percent, roughly 50 percent larger than some of the most optimistic projections. This result implies a positive overall economic impact larger than the consensus range.

6. Did workers see wage increases?

Wages rise when workers are more productive by using new tools and technologies. Tax cuts that are designed to increase investment are thus also designed to raise wages by making workers more productive. Much of this effect will be realized over many years and is likely still playing out today.

Estimates of the law’s effect on wages ranged from a roughly $550 to $2,000 increase in annual personal wages over time. Immediately following the tax cuts, there were clear indications that the labor market improved, including a significant increase in wage growth at the beginning of 2018. Compared to the pre‐​TCJA wage trend, the average production and nonsupervisory worker received about $1,400 more in above‐​trend annualized earnings as of April 2020 (before the pandemic disruptions).

7. How much did the tax cut add to the deficit?

The Joint Committee on Taxation estimated the TJCA would add $1.5 trillion to the deficit over ten years. The Tax Foundation found that accounting for the dynamic effects of economic growth, the ten‐​year deficit effect would be $448 billion, more than $1 trillion less than the official static estimate.

Because significant portions of the law are temporary, it is hard to assess its long‐​term budgetary impact. However, the dynamic revenue projections from 2017 indicate that federal revenues would break even in 2023—before most provisions began expiring. In this sense, the tax cuts were a one‐​time addition to the debt and not an ongoing contributor to the deficit. However, making the law permanent would lead to a multi‐​decade reduction in tax revenue and expansion of the deficit on an ongoing basis.

Congress should prioritize keeping taxes from rising, but any tax cuts must be paired with spending cuts or other reforms to ensure low taxes remain permanent. Since the 1980s, tax revenue has remained relatively stable as a percentage of GDP. Figure 4 shows that since 2000, Congress has allowed spending to grow faster than revenues and significantly faster than the economy. These trends are unsustainable, but raising revenue alone cannot fix out‐​of‐​control spending growth.

Alex Nowrasteh

Illegal immigrant criminality is a major contentious issue in the debate over immigration policy in the United States and is likely to feature prominently in Thursday’s presidential debate between President Joe Biden and former President Donald Trump. Cato has published much original research on illegal immigrant criminality over the years because of the importance of this issue. The arrest and indictment of Jose Antonio Ibarra for the murder of Laken Riley is a recent and brutal example of an alleged illegal immigrant killer. This case and those like it are truly awful, and Ibarra, if he murdered Riley, should be punished to the fullest extent of the law. These cases are tragic, but analyzing the broader facts of illegal immigrant criminality is crucial before changing public policy.

In a new Cato Institute policy analysis released today, I examine data from Texas on illegal immigrant homicide rates in that state for illegal immigrants, legal immigrants, and native‐​born Americans. Over the ten years from 2013 to 2022, the homicide conviction rate in Texas for illegal immigrants was 2.2 per 100,000, compared to 3.0 per 100,000 for native‐​born Americans and 1.2 per 100,000 legal immigrants.

Accordingly, illegal immigrants were 26 percent less likely than native‐​born Americans to be convicted of homicide, and legal immigrants were 61 percent less likely (Figure 1). This general trend also holds for 2022, where the illegal immigrant homicide conviction rate was 3.1 per 100,000, 1.8 per 100,000 for legal immigrants, and 4.9 per 100,000 for native‐​born Americans (Figure 2).

Those statistics are only for the state of Texas, which uniquely keeps data on the immigration statutes of those arrested and convicted of crimes. Texas is a great state for many reasons (no state income tax, great food, good housing policy, etc.) and for social scientists seeking to understand illegal immigrant criminality. Texas has the second‐​highest illegal immigrant population behind California, shares the longest state border with Mexico, has a reputation for strictly enforcing criminal laws, is governed by Republicans, and doesn’t have any sanctuary jurisdictions.

It’s not certain that the low Texas illegal immigrant crime rates generalize to all other states, and there may be a few states where they have higher rates than native‐​born Americans, but it will likely hold in most states because Texas is an excellent sample.

Crime rates are the best way to judge whether immigrants make the United States a more dangerous country. Ken Cuccinelli, the former attorney general of Virginia, who also served in various capacities at the Department of Homeland Security, submitted written testimony to Congress about the impact of illegal immigration on crime, stating, “Crime rates do not matter, only the raw number of crimes and the harm caused by those crimes.”

Cuccinelli isn’t correct; crime rates are more important. Crime rates are calculated in my new policy analysis by taking the number of crimes committed by a subgroup divided by that subgroup’s population. The quotient is then multiplied by 100,000 to get a rate per 100,000 of the population. This controls for the size of the population and, therefore, allows the reader to compare crime rates between the different groups.

My policy analysis focuses on homicide for two main reasons. First, the Texas crime data are better for homicide. State authorities spend the most resources investigating the immigration statuses of the worst criminals, like those convicted of murder, so there’s less of a chance of an undercount. Second, murder is the worst crime, so understanding how crime‐​prone immigrants are is of paramount importance for estimating their effect on the United States and how to allocate scarce law enforcement resources to maximize public safety. My policy analysis presents the overall conviction and arrest data for all illegal and legal immigrants, but readers should more skeptically interpret those results because Texas state authorities don’t investigate the immigration status of those convicted of lesser crimes as thoroughly.

Lost in the debate over immigrant criminality is that legal immigrants have an exceedingly low homicide conviction rate of 1.2 per 100,000 during the 2013–2022 period. If native‐​born Americans had the same homicide conviction rate as legal immigrants, there would have been about 4,265 fewer homicide convictions in Texas during that period.

Every large population is going to contain some criminals. The relative criminality of these different groups does not affect whether a criminal should be punished or how harshly he should be punished. Even if there were only one murder in the United States each year, that murderer should be severely punished. However, crime rates matter when considering the costs and benefits of different immigration enforcement policies. Illegal immigrants are less likely to be convicted of homicide than native‐​born Americans, and legal immigrants are less so still. The findings here imply that more immigration enforcement will not bring down crime rates.

Besides continuing to arrest, punish, and remove illegal immigrants convicted of crimes, my paper contains another policy recommendation: Every state should copy Texas and start keeping data on the immigration status of those arrested and convicted of crimes. One limitation of my research here is that it is confined entirely to Texas, but illegal immigrants live in every state in the union. Texas is a great sample and it’s not unreasonable to infer that illegal and legal immigrants in most other states typically have a lower homicide and criminal conviction rate based on these data, but the public, policymakers, and residents of other states should be certain. There very well could be states where illegal immigrants have a higher homicide or criminal conviction rate than native‐​born Americans.

From my paper:

The state of Texas should invite representatives from other states’ departments of public safety, criminal justice, and corrections to Austin to show them how to record, maintain, and track the immigration statuses of those arrested, convicted, and incarcerated for crimes. At the same time, or prior to that convening, Texas DPS should invite members of the National Research Council who work on crime and immigration, along with statisticians, social scientists, criminologists, and others with expertise in crime data, to closely examine how Texas DPS records and organizes its data to see whether its methods can be improved to ensure clarity, maximize accuracy, and minimize errors.29 If an invitation from the Texas state government is not forthcoming, other states should take the initiative and ask Texas for guidance.

That policy recommendation isn’t as exciting as those in our other research on immigration, but it’s important to know the facts here.

Thomas A. Berry and Jennifer J. Schulp

In March 2022, the Securities and Exchange Commission (SEC) proposed a rule requiring public companies to disclose climate‐​related information in their registration statements and annual reports. This rule proposal was broad and unprecedented. It sought disclosure of a company’s climate‐​related risks; climate‐​related effects on the company’s strategy, business model, and outlook; the company’s board and management oversight of climate‐​related issues; the company’s plans for energy transition; and the company’s greenhouse gas emissions (including not only its direct emissions but also the “indirect” emissions of companies it buys from or sells to), among other things.

This rule proposal intended to create an extensive parallel disclosure regime relating to the impact of climate change on a company and the company’s impact on the environment. By the SEC’s estimates, the rule would have more than tripled the cost of disclosure.

After receiving a historic number of comments on the rule proposal—including one filed by Cato Institute scholars critical of many aspects of the proposal—the SEC finalized a scaled‐​back version of the disclosure rule in March 2024. The finalized rule limited emissions reporting by companies, including dropping the disclosure of the most “indirect” category of emissions, and alleviated other proposed prescriptive disclosure requirements. But the core of the proposal remained: the finalized climate disclosure rule establishes a burdensome separate disclosure regime for climate‐​related information.

The SEC rule was immediately challenged by the state of Iowa (and eight other states), Liberty Energy, and the US Chamber of Commerce, among others, who asserted that the SEC’s rule exceeded the agency’s authority. Two environmental groups also sued (and then dismissed their cases), asserting that the SEC failed to require sufficient environmental disclosure. Nine suits are currently pending in the United States Court of Appeals for the Eighth Circuit, where the litigation was consolidated.

Now Cato has joined Andrew Vollmer of the Mercatus Center (himself a former deputy general counsel at the SEC) to file an amicus brief in the Eighth Circuit supporting the challengers in arguing that the SEC lacks the authority to impose climate‐​related disclosures.

In our brief, we make three key points. First, the SEC claims legal authority by taking an isolated statutory phrase out of its surrounding context. Two statutes grant the SEC the authority to impose disclosure rules that are “necessary or appropriate in the public interest or for the protection of investors.” The SEC argues that this single sentence gives it broad authority to implement a system of mandatory climate‐​related disclosures.

But as our brief explains, the text, structure, and context of the statutes limit the SEC’s power to issue disclosure rules. Such rules must be narrowly targeted to disclosures of information about certain internal characteristics of a company, such as its financial statements, its core business information, its directors and management, or descriptions of the securities being sold. The proposed rule would mandate disclosures that extend far beyond the SEC’s statutory authority.

Second, our brief bolsters this interpretation of the statutes by looking to contemporaneous discussions of the provisions in question. A US House report noted that one of the statutes should not give a “mere general power to require such information as the [SEC] might deem advisable.” And a second House report said the SEC was not to have “unconfined authority to elicit any information whatsoever.”

Third and finally, our brief notes that the SEC itself has, in earlier decisions, disclaimed the authority to implement a climate‐​disclosure regime. In 1975, the SEC considered a variety of “environmental and social” disclosure matters but concluded that “it is generally not authorized to consider the promotion of social goals unrelated to the objectives of the federal securities laws.” In 2016, the SEC reaffirmed that decision, noting that Congress had not given new statutory authority for disclosures in these areas.

The statute remains the same today, yet the SEC has now found statutory authority where it had consistently conceded that none exists.

For all these reasons, our brief urges the Eighth Circuit to find that the SEC lacks the statutory authority to implement the climate disclosure rule and thus block the rule from taking effect.

Colleen Hroncich and Jamie Buckland

Educational freedom is expanding. Last week, Louisiana became the seventeenth state to enact education savings accounts (ESAs), which allow parents to use a portion of state education dollars for a variety of educational expenses. In all, thirty‐​three states plus Washington, DC, and Puerto Rico now offer some form of school choice, including ESAs, tax credit ESAs, tax credit scholarships, and vouchers. The advocacy group EdChoice estimates that more than one million US students are currently participating in a K–12 private school choice program.

This spread of educational freedom—along with new learning options like microschools and hybrid schools—means many parents are faced with a more diverse educational landscape than they experienced growing up. ESAs, in particular, are opening new avenues for students. While programs such as vouchers and tax credit scholarships pave the way for kids to attend a nonpublic school, they don’t allow parents to customize their children’s education the way ESAs do. Depending on the state, participating students can use ESA funding to pay for part‐​time classes at public and private schools, tutoring, curricula, services for special needs, and more.

While the new opportunities available to students are tremendous, the changing landscape can be difficult to understand. That’s why there is a growing movement to include “choice navigators” as an eligible expense in ESA programs. Choice navigators can inform parents about the various ways to satisfy a state’s compulsory education requirements, what funding programs and educational options are available, and how to customize an education program for their children.

Access to navigation support can be very helpful for parents, but it is crucial that states include utmost flexibility when incorporating a navigation option. Florida is the only state that specifically includes choice navigators as an eligible ESA expense, but the current definition of a choice navigator is largely based on requirements to teach in Florida public schools. This limitation doesn’t make sense when the goal is to help parents navigate educational options beyond the public school system.

Our new Cato Policy Analysis, Helping Families Navigate the Changing Education Landscape, delves into the issue of choice navigators. We examine several key elements, such as determining the types of navigation services that parents need in the changing education landscape; identifying best practices that states can adopt to simplify ESA navigation; tapping into the experiences of current ESA users and traditional homeschoolers; and discussing policies that can encourage an adequate supply of navigators without creating counterproductive rules.

The spread of educational freedom, especially ESAs, is exciting because it is opening new options to millions of children. But if these programs stumble or if parents find them too cumbersome, it will stymie efforts to pass new programs or expand existing ones. Giving families the ability to fund navigation services is one way to help ensure these programs succeed in the goal of enabling families to access the educational options that work best for them.

Patrick G. Eddington

Monday evening (June 24), news broke that Wikileaks founder Julian Assange, under indictment by the United States government since 2019 on Espionage Act charges related to his role in the exposure of US war crimes during the Iraq War, had reached a plea deal with American authorities. In return for pleading guilty to one count of Conspiracy to Obtain and Disclose National Defense Information (18 U.S.C. § 793(g)), Assange will be sentenced to time served in Belmarsh Prison, United Kingdom, where Assange has been held for over five years.

As I wrote last month when fresh chatter about a possible end to the Assange prosecution bubbled up from various sources inside and outside the federal government:

American national security bureaucrats and prominent political figures have never forgiven Assange and WikiLeaks for exposing clear‐​cut war crimes committed by US forces in Iraq during the George W. Bush administration. The US government used its own document classification system and policy to conceal those war crimes, which included the murder of journalists and Iraqi civilians caught on video from a U.S. Army helicopter.

Yet the coverage of the High Court’s most recent decision in Assange’s favor by outlets such as the BBC, the Associated Press, ABC, and The New York Times includes no reference to that fact. There’s no mention of how the “leader of the free world” used patently undemocratic methods not only to hide criminal conduct by its military but also to politically and legally destroy Assange and Chelsea Manning—the whistleblower who leaked the helicopter murder video to WikiLeaks.

Once again, Justice Department and US Intelligence Community (USIC) officials have succeeded in punishing a whistleblower for daring to expose the federal government’s own criminal conduct during wartime.

Assange may soon return to freedom in Australia, but he will no doubt arrive a broken man from the experience—physically and psychologically. The US government’s successful multi‐​year pursuit of Assange was meant to send a message to any others considering exposing federal government wrongdoing in the national security arena: we will make the story about you, not our crimes, and we will get you, one way or another.

Romina Boccia

The Congressional Budget Office’s (CBO) recently released budget projections cast a harsh light on the precarious financial future of the US. Politically entrenched old‐​age benefit programs, primarily Medicare and Social Security, are the key drivers of exploding federal debt. If Congress fails to act, seniors will face a 21 percent cut to their Social Security benefits in 2033 and an 11 percent cut to Medicare Part A benefits in 2036.

While these potential cuts underscore the need for legislative action, Medicare and Social Security are already contributing significantly to US deficits and debt. See the updated fact sheet at the link or at the end of this piece to better understand Medicare’s and Social Security’s finances.

The new CBO numbers are stark. According to the nonpartisan agency: “rising spending for Social Security and Medicare boosts mandatory outlays, discretionary spending as a share of GDP falls to historic lows, and higher interest rates and mounting debt cause net outlays for interest to increase.” In sum: major entitlements are driving the US deeper into debt and exploding interest costs in the process.

As CBO explains, “Beginning in 2025, interest costs are greater in relation to GDP than at any point since at least 1940 (the first year for which the Office of Management and Budget reports such data) and exceed outlays for defense and outlays for nondefense programs and activities.” In short, CBO has never seen interest costs of this magnitude in US history. Further reform delays will hurt Americans’ economic prospects, undermining growth and risking an eventual fiscal crisis that could unleash out‐​of‐​control inflation.

A Bipartisan Effort to Stabilize US Debt

There is, however, a glimmer of hope. The House Budget Committee recently passed a bill that proposes the creation of a bipartisan fiscal commission. This commission, comprising lawmakers from both parties, would be tasked with developing solutions to stabilize the US debt and address the unfunded obligations of Social Security and Medicare. While the Fiscal Commission Act of 2024 has yet to be considered by the full House of Representatives, its passage in committee is a positive step.

At a recent House Budget Committee hearing on Medicare and Social Security, Stephen Goss, the Social Security Administration’s chief actuary, expressed optimism about the potential of such a commission: “We have a large list of provisions and proposals up on our website to sort of look at and choose from. A commission that would look through all of those possibilities and come to a consensus would be a really good thing.”

Indeed, the establishment of a bipartisan commission could pave the way for the comprehensive reforms needed to ensure the longevity not only of these programs but of the engine that fuels the US economy.

Fast Facts about Medicare and Social Security

Medicare and Social Security, the two largest and fastest‐​growing government programs, are unsustainable as currently structured. Medicare consists of four parts which provide inpatient care (Part A), outpatient care (Part B), prescription drug coverage (Part D), and subsidies for seniors to choose alternative health insurance providers through Medicare Advantage (Part C). Social Security consists of Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). For the purposes of this fact sheet, Social Security will refer to OASI. Here are key fiscal details legislators and the public should know about Medicare and Social Security to examine their finances.

Medicare

Medicare is the second largest federal government program, spending $1 trillion in 2023, or an amount equal to 3.8 percent of gross domestic product (GDP).

Medicare spending will double to $2 trillion or 5.1 percent of GDP by 2033.

That’s twice what the US government is estimated to spend on defense that year.

67 million Americans receive Medicare at an average cost of $16,698 per beneficiary, with taxpayers covering $13,150 on average. By 2033, Medicare will spend an average of $27,890 per beneficiary.

One‐third of Medicare spending provides no value for patients: it makes them no healthier or happier.

Medicare increased total hospital spending by 37 percent over five years.

Medicare adds significantly to federal deficits and faces increasing budget shortfalls.

Medicare was responsible for $449 billion in deficits (including associated interest costs), or 27 percent of the entire 2023 federal budget deficit.

Medicare’s trust fund holds no real assets, and only Medicare Part A is funded by payroll taxes. The majority (65 percent) of Medicare spending is financed by other taxes and borrowing.

When the Medicare Hospital Insurance (Part A) trust fund ledger goes to 0 by 2036, inpatient providers will face a reimbursement cut of 11 percent.

$48.5 trillion or 62 percent of the $78.4 trillion in 75‐​year unfunded obligations for Medicare and Social Security is due to spending on Medicare Parts B and D, with taxpayers on the hook for the difference between what beneficiaries pay in premiums and the benefits they receive. For context, Medicare Part A accounts for $4.6 trillion in 75‐​year unfunded obligations.

If Congress raised payroll taxes just to cover Medicare Part A’s 75‐​year unfunded obligations, a median wage earner ($48,000/year) would face an additional $168 in payroll taxes, annually.

Social Security

Social Security is the single largest federal government program, spending $1.2 trillion in 2023 or 4.4 percent of GDP.

Social Security spending will double to $2.1 trillion or 5.1 percent of GDP by 2033. By then, the government is estimated to spend more on Social Security annually than on the entire defense and nondefense discretionary budget.

By 2025, the number of beneficiaries will exceed a record 60 million.

The average monthly benefit for an individual was $1,760 in 2023.

The maximum monthly benefit for an individual is $4,873.

Because initial benefit levels are indexed to wage growth, Social Security benefits are growing much faster than inflation. A maximum‐​benefit‐​eligible beneficiary, retiring in 2045, would receive over $23,000 more in annual benefits that year, after adjusting for inflation, than a comparable worker who retired in 2020.

Since the program’s inception, life expectancy at birth has increased by nearly 16 years. Yet, Social Security’s eligibility age has only increased by 2 years.

Social Security is already contributing to federal deficits with rising cash‐​flow shortfalls.

Social Security was responsible for $106 billion in deficits (including associated interest costs), or 6 percent of the entire 2023 federal budget deficit.

Social Security’s trust fund is a liability, not an asset. Social Security holds no real assets beyond IOUs against future US taxpayers. Those IOUs, which amount to $2.6 trillion as of 2024, are part of the $34.7 trillion gross national debt.

When the Social Security trust fund ledger depletes by 2033, all beneficiaries, regardless of age, income, or need, will face a 21 percent benefit cut.

Social Security’s 75‐​year unfunded obligation (combined OASI and DI)—the difference between the present value of tax revenues and spending—is $25.2 trillion, comparable in size to nearly the entire publicly held debt of $27.6 trillion in 2024.

If Congress raised the payroll tax to cover 75 years of Social Security’s unfunded obligations, median wage earners ($48,000/year) would have to pay an additional $1,598 in payroll taxes, annually.

Further reading:

Cato Handbook for Policymakers: Medicare
“In dollar terms, Medicare is the largest purchaser of medical care goods and services in the world—in part because it pays excessive prices to health care providers and wastes hundreds of billions of dollars on medical care that provides no value to enrollees.”

Social Security Pays Excessive Benefits to the Highest‐Income Earners: A UK Comparison
“Reducing benefits for higher‐​income earners to keep program costs in check, and especially as part of a more fundamental rethinking of the proper purpose of an old‐​age‐​income support program, is a better alternative than raising taxes on current workers.”

Medicare and Social Security Are Responsible for 100 Percent of US Unfunded Obligations
“[L]egislators will make little progress on averting a fiscal crisis until they grapple with excess spending growth in old‐​age benefit programs.”

Walter Olson

In one sense, this hasn’t been a big term for business law at the Supreme Court. That may seem paradoxical since businesses are litigants in many of the term’s biggest cases. But in fact, most of the headline cases like that are better categorized as cases about such matters as separation of powers (CFPB, Jarkesy), the First Amendment (Vidal v. Elster, the pending NetChoice/Murthy cases), or administrative law generally (Loper Bright/Relentless, also pending). Where the court has tackled labor, employment, securities, and even arbitration matters this term, its decisions have mostly been low‐​profile and unanimous or nearly so (Bissonnette, Muldrow, Starbucks, CoinBase, and others).

For the next term, however, the court has already granted certiorari in an array of business litigation cases that could make important law:

In E.M.D. Sales v. Carrera, reviewing the Fourth Circuit, the court has agreed to decide whether employers must satisfy an elevated “clear and convincing evidence” to avail themselves of statutory exceptions to the applicability of the Fair Labor Standards Act, or can instead prove it by the simple preponderance of the evidence otherwise familiar in litigation. High‐​stakes battles over FLSA exemptions make it to court regularly.

The Court has agreed to hear two securities litigation cases from the Ninth Circuit. In NVIDIA Corp. v. E. Ohman J: or Fonder AB, which has attracted considerable amicus interest, critics say the Ninth Circuit’s ruling eroded Congress’s requirement in the Private Securities Litigation Reform Act (PSLRA) that claims be pleaded with particularity. Facebook, Inc. v. Amalgamated Bank concerns the scope of risk disclosure that may give rise to liability.

In Medical Marijuana, Inc. v. Horn, reviewing the Second Circuit, the court will decide whether civil RICO treble damages can extend to economic harm arising from personal injury, such as lost earnings, even though the text of the statute seems to exclude personal injury claims.

In other cases accepted for the October 2024 term, the Court will consider the range of conduct prohibited by the federal mail and wire fraud statutes, the scope of “claims” under the much‐​litigated False Claims Act, the scope of the expropriation exception to the Foreign Sovereign Immunities Act, and the scope of disgorgement under the Lanham Act.

Still waiting in the wings pending a certiorari grant, and with high stakes indeed, is Sunoco LP v. City and County of Honolulu, from the Hawaii Supreme Court, on whether federal law precludes state‐​law claims seeking redress for the effects of nationwide and international carbon emissions on climate. On June 10 the high court invited the US Department of Justice to submit a brief expressing the views of the United States in the case.

The court’s well‐​known ideological dynamics are sometimes, though not always, muted in business law cases. But these merit watching as cases, many of which bear on the proper role of state power in a market economy, and that bring with them high stakes in the certainty and predictability of business planning.

Matthew Cavedon

Ashtian Barnes was driving a car his girlfriend rented, which had unpaid toll fees. Constable Felix stopped him. When the car started to pull away, Constable Felix decided to stand on its runner and fire his gun into the car before he could even see inside. Then, he fired a second shot. A bullet struck Barnes in the head and he died.

Barnes’s mother filed a lawsuit claiming that Constable Felix violated her son’s constitutional rights by killing him. The district court granted Felix qualified immunity. The Fifth Circuit agreed, holding that the reasonableness of a police seizure is determined based only on the “moment of threat.” In other words, all that mattered was that Constable Felix was in danger the instant he opened fire; it didn’t matter that Felix put himself in harm’s way by stepping onto Barnes’s moving car, nor that he killed Barnes over unpaid toll fees.

Cato, the Law Enforcement Action Partnership (LEAP), and the Center for Policing Equity filed an amicus brief asking the Supreme Court to reverse the Fifth Circuit’s decision. The common law the Fourth Amendment is based on protected human life by limiting when officers could use deadly force. They couldn’t kill someone just for fleeing from being arrested for petty charges. Officers could only use deadly force to defend themselves if someone forcefully resisted them.

Upholding these traditional rules is important for restoring public confidence in police. A toxic combination of legal limits on liability and economic motives to collect tolls unfairly benefits Houston constables like Constable Felix. But the Supreme Court could promote better, safer policing by confirming that no one is above the law.

Ashtian Barnes didn’t die because he threatened anyone. He died because of Constable Felix’s bad decision, and the constable should be held accountable.

Read the brief here.