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Romina Boccia and Dominik Lett

On the heels of a new Congressional Budget Office (CBO) report that highlights the need for Congress and the White House to get serious about reining in federal spending and debt, it’s critical to understand that high debt levels are not just numbers on a page; they have real‐​world consequences. As debt grows and interest costs rise, irresponsible spending by Congress and the White House is taking a larger toll on American workers, reducing economic opportunity and their take‐​home incomes significantly. It also puts our nation at greater risk of a sudden fiscal crisis.

The High Price of High Debt

Under highly optimistic assumptions that do not reflect already anticipated congressional moves to adjust tax and spending policies, the CBO projects that debt will reach 122 percent of GDP by 2034, as interest on that debt will exceed spending on defense this fiscal year. A previous CBO report illustrated how rising debt would make Americans poorer, reducing per‐​person income by $14,500 in the year 2054, based on CBO projections that assume the debt will rise to nearly three times the size of the US economy. Excessive government debt drags down the economy by crowding out more productive investments that improve American living standards.

Additionally, as debt grows unabated, there is the risk of a sudden loss of confidence in bond markets, with investors demanding much higher interest rates that could trigger a debt doom loop and broader fiscal crisis. The 2009 Greek debt crisis and the UK’s 2022 bond market turmoil demonstrate how a relatively small catalyst can disrupt financial markets and lead to a rapid surge in interest rates that forces severe austerity measures, from sudden spending cuts to ill‐​conceived tax increases.

Congress and the Biden administration should cut spending now while the economy is growing and conditions are favorable for deficit reduction, alleviating pressure on interest rates and the federal debt to grow, and before a fiscal crisis forces their hands. US legislators should learn lessons from what happened in the UK and Greece where a sudden change in investor perceptions triggered crises, instead of repeating their mistakes.

Beware of Entering a Debt Doom Loop

If Congress and the White House continue to spend with reckless abandon, high and rising US debt may trigger a debt doom loop, which might play out like this: Something could trigger investors to determine that the risk of holding US government debt has increased, whether that’s a change in perception about a higher risk of default, greater inflation, or some other economic or political event. At that point, investors would demand higher bond yields to continue lending to the US government. Higher bond yields can then create a feedback loop by increasing the cost of servicing the national debt, which then leads to more borrowing just to pay the additional interest on the debt. Should a bond yield surge be sudden, large, and unmitigated, this self‐​perpetuating cycle can quickly escalate into a fiscal crisis.

The classic example of this doom loop dynamic is the 2009 Greek debt crisis. As Cato’s Ryan Bourne explains:

“Greece was able to borrow relatively cheaply until suddenly it wasn’t (Figure 7). There, the trigger for the crisis was the newly elected government’s revelation that in 2009 the country was running a mammoth deficit of almost 12.5 percent of GDP, much higher than the previous government had estimated.24 That shifted perceptions about the country’s fiscal sustainability and creditworthiness, leading to its 10‐​year bond yield jumping from 6.5 percent to 29.2 percent within two years. This was a precursor to a severe dose of enforced austerity alongside three international bailouts.”

Of course, the US has many advantages that set it apart from Greece, including providing the world’s primary reserve currency, strong financial institutions, transparent government fiscal reporting, a large economy, and debt that is primarily held by domestic institutions and investors. This limits US exposure to a Greek‐​like debt doom loop, but it doesn’t insulate it from doom loop dynamics completely.

Over the long run, an expectation that the US might come to rely on money‐​printing to inflate away its unsustainable debt obligations may result in sudden shifts in investor sentiment with potentially dire economic consequences. To better understand how poor fiscal governance can rock the boat, it’s worth considering recent occurrences in the UK, which offers a much better comparison with the US.

In late September 2022, the UK government unveiled a mini‐​budget that included energy subsidies (with large, unbounded costs), unfunded tax cuts, and increased borrowing. The announcement led to a sharp sell‐​off in the UK’s sovereign bonds (gilts), and investors demanded higher yields to compensate for the perceived increase in risk. The pound dropped to a 37‐​year historic low, and mortgage rates surged. The Bank of England stepped in, temporarily expanding its balance sheet by purchasing £19.3 billion of gilts. The government also walked back its irresponsible deficit spending plans, contributing to a subsequent decline in 30‐​year gilt yields.

One key takeaway from these incidents is that a sudden bond crisis can propagate from a single catalyst in unanticipated ways. Fiscal crises can often be difficult to predict, even if they appear obvious in hindsight, and can cause unforeseen financial disruption. In the UK, for example, the bond yield surge exposed over‐​leveraged pension funds, threatening the UK’s retirement system. In Greece, the fiscal crisis and the following austerity resulted in social unrest and economic stagnation. The key takeaway lesson for the US should be to err on the side of caution by addressing the unsustainable growth in the US debt before bond markets force corrective action.

It’s worth noting that the Bank of England’s intervention was compelled by the government’s tone‐​deaf fiscal policy. Legislators should pay closer attention to the interactions between fiscal policy and monetary policy, especially if they are serious about getting interest rates under control. With above‐​target US inflation that has only recently slowed down, the Biden administration and Congress would be wise to put forth credible deficit‐​reduction plans sooner rather than later to signal to investors that the US is getting its fiscal house in order and to reduce interest rates and inflation in a proactive manner.

Stabilize the Debt

Now is not the time to be sanguine about high debt and deficits. With interest rates unlikely to dip back to the lows seen in the 2010s as federal debt expands, government borrowing costs will rise. Legislators should be more wary of the risk of a debt doom loop, where a sudden loss of investor confidence can cause a feedback loop of surging bond yields, interest spending, and borrowing that leaves policy‐​making decisions between a rock and a hard place. The UK and Greece offer cautious tales about how economic conditions can suddenly turn sour in response to changing investor sentiments about a country’s fiscal stability.

US legislators should take measures today to stabilize the US debt‐​to‐​GDP ratio at no higher than 100 percent of GDP, putting downward pressure on interest rates by reducing spending and addressing unfunded entitlement program obligations. A fiscal commission offers the most promising pathway to overcome the political barriers to reform and avoid a sudden fiscal crisis and economic decline.

Jeffrey Miron and Jacob Winter

In January 2023, British Columbia decriminalized possession of small amounts of some drugs. Last month, the province recriminalized possession in public spaces. This is a mistake.

An upcoming election has motivated politicians to blame decriminalization for rising public drug use. But it’s not clear public use has risen; data are scare, and police officials have said conflicting things about public use trends. Moreover, the death rate so far this year is down relative to the previous three years.

Reversing decriminalization is a mistake partly because authorities are not giving the policy enough time to produce the data necessary for its evaluation. Canada began drug prohibition over 100 years ago, and it’s clearly not working. Opioid overdoses have claimed more than 42,500 lives in Canada since 2016. Now, less than a year and a half into decriminalization, authorities are abandoning it.

We agree that decriminalization is not the ideal policy—because it doesn’t go far enough.

In 2022, we wrote about Oregon’s decriminalization policy, which the state unfortunately rolled back in April. Like Oregon, British Columbia decriminalized the possession of drugs without legalizing supply. As we pointed out with Oregon:

This means most standard harms from underground markets are likely to remain.

Prohibition encourages violence because illicit suppliers cannot use the legal and judicial systems to resolve disputes.

Prohibition also incentivizes high potency products because traffickers can more easily conceal these from law enforcement. Most consumers cannot easily assess potency because reliable suppliers cannot legally advertise, and consumers cannot sue over faulty or mislabeled products. So accidental overdoses from high potency drugs, especially those laced with fentanyl, are common under prohibition.

The Canadian government seems to recognize that prohibition makes the drug supply far more dangerous. It funds “safer supply” services throughout the country where doctors prescribe “medications as a safer alternative to the toxic illegal drug supply to people who are at high risk of overdose.”

This initiative has the right idea but misses the mark. Canada should make its entire drug supply safer by legalizing the manufacture, distribution, sale, and use of drugs.

Jeffrey A. Singer

Yesterday, June 17, a bipartisan supermajority of Vermont lawmakers overrode Governor Phil Scott’s veto of H.72, authorizing an overdose prevention center pilot program in the state’s largest city, Burlington. The OPC may be either stationary or mobile. The Vermont City Council and the Vermont Department of Health must approve it before it begins operating.

The bill appropriates grant money for the OPC through fiscal year 2028, which the state must obtain from its share of the Opioid Abatement Fund resulting from the legal settlement between states and drug manufacturers and distributors. Additionally, the bill taps the Abatement Fund to contract with researchers to assess the OPC’s impact on drug overdoses in the community.

When Governor Scott vetoed a 2022 bill that would have created an OPC lawmakers did not attempt a veto override. When he vetoed H. 72 on May 30, 2024, the governor claimed OPCs were an untested harm reduction strategy. However, Vermont’s health commissioner, Dr. Mark Levine, had voiced support for the OPC provision in the bill.

As I wrote in a Cato briefing paper last year,

OPCs have a more‐​than‐​30‐​year track record of preventing overdose deaths, HIV and hepatitis, and other diseases, and of helping people with substance use disorder find treatment. As of August 2022, 147 OPCs are providing services in 91 communities in 16 countries. They continue to gain acceptance as an effective tool for reducing the dangers of using drugs obtained through the increasingly deadly black market.

In the final month of 2021, New York City defied the federal law that blocks OPCs (21 U.S.C. Section 856—the “crack house statute”) and authorized OnPointNYC, a harm reduction organization, to establish two OPCs, one in Washington Heights and one in East Harlem. By the summer of 2023, OnPointNYC reported that the two sites had already reversed more than 1,000 overdoses. Kailin See, the Implementation Lead for the two OPCs and the Senior Director of Programs for OnPointNYC, spoke about the project in a Cato online policy forum with other harm reduction experts last year that you can view here.

The US Department of Justice has not yet taken steps to thwart New York City’s successful OPC projects.

Last year, Minnesota’s governor signed a law authorizing its Department of Health Services to establish OPCs, but the agency has hesitated to open them, stating that “federal law has been interpreted as prohibiting safer use spaces.”

Rhode Island lawmakers approved OPCs in 2022; its first one will soon open in Providence.

Vermont now becomes the third state to defy federal law and authorize OPCs. Hopefully, as more states rebel against the federal ban on this proven harm‐​reduction strategy, it will prod Congress to repeal it.

Walter Olson

On May 30 a Manhattan jury convicted Donald Trump on 34 counts of falsifying business records with the intent of concealing a crime.

Of the major legal proceedings against Donald Trump this year, four criminal and two civil, you’ve described this as the one you find least persuasive. Why?

To begin with, the prosecution hinged in substantial part on campaign finance laws that libertarians think should not exist. (As has been widely observed, the hush money payment was by itself perfectly legal.) Unlike the three other criminal prosecutions, this one also had nothing to do with Trump’s abuse of presidential powers.

I’ve argued that while prosecuting a former president can be a needed and legitimate step, the offenses in question should be at least clear and serious enough for prosecutors to have charged them against an ordinary citizen. Yet Manhattan D.A. Alvin Bragg never convinced me, as an outside observer, that the novel legal theories he used to step up stale misdemeanor counts into felonies would have been deployed, other things being equal, against a Joe Schmo defendant.

Were you predicting the case would fail, then?

No, I refrained (and still do refrain) from making predictions on this. One reason is that, as a libertarian, I’m well aware that prosecutions with which I am unsympathetic convince juries every day, and then are often upheld on appeal.

A second reason I hold back from making predictions is that the case hinges on complexities I’m not well positioned to evaluate, including the niceties of federal campaign finance law and New York’s distinctive culture of white‐​collar crime prosecution, which diverges in many respects from that in other states as well as federally.

You must have had some reaction to the trial.

Oh, plenty. Trump engaged in his usual stream of outrageous and vicious abuse aimed at officers of the court, combined with the factual lies we’ve come to expect from him. Bragg, in a spirit of grandstanding, “stacked” the 34 accounting entries into separate felony counts and went on to insist that the cover‐​up might have stolen the presidential election, a highly implausible proposition that was not needed to prove his case and could have inflamed the jury. I could go on about both.

No, please return to the drier stuff. If you’re not an expert yourself, can you refer us to others who are?

On the federal campaign finance angle, I always take note when experts in a decidedly polarized policy area break from what is imagined to be “their” side. When the indictment was announced last year, Richard Hasen of UCLA, whom no one will mistake for a Trump supporter and who unlike me tends to favor vigorous enforcement of campaign finance laws, wrote an article in Slate entitled “Donald Trump Probably Should Not Have Been Charged With (This) Felony.”

Hasen did favor the filing of federal charges against Trump over the hush money accounting, but concedes that those charges “would not have been a slam dunk, because there were big legal and factual issues.” In the event, of course, the US Department of Justice chose not to prosecute, while New York did. And the New York version of the case, Hasen wrote, would have not only the old problems but also “new, more serious ones,” all of which could lead to reversal on appeal. It’s hard for me to find fault with his argument, which I recommend in full.

Okay. Was the trial “rigged”?

Writing in the New York Times, defense and appellate lawyer Roger Stavis, who boasts decades of relevant local practice experience, agrees that the cluster of legal theories boosting misdemeanors into felonies will be the prosecution’s chief vulnerability on appeal. But his good news for Donald Trump ends there. He predicts that challenges on other grounds, based on such things as Judge Juan Merchan’s procedural and evidentiary rulings, are unlikely to work and at most may result in a ruling of harmless error. (More from criminal law experts here.)

At Lawfare, attorney Lee Kovarsky also says Trump has non‐​frivolous grounds for appeal related to the step‐​up theories. But he rejects the widely bruited idea that the defense was not given ample notice of which “object crimes” (crimes that the record falsification was meant to conceal) the prosecution intended to rely on (see also). And he says Trump’s familiar assortment of other complaints—bias in the judge or jury pool, selective prosecution, and so forth—will not get him anywhere on appeal.

Wait a minute. You can’t appeal a criminal conviction on the grounds the prosecution was selective or the judge was against you?

On appeal, you will nearly always have to show legal insufficiency of the charges or judicial error that affected the outcome, not just that someone had it in for you. Welcome to the state of criminal justice as experienced by everyone.

Nicholas Anthony

The Cato Institute has officially published my first book, Digital Currency or Digital Control? Decoding CBDC and the Future of Money.

The book offers a one‐​stop shop to get up to speed on all things related to central bank digital currency (CBDC). It breaks down the idea, explores the benefits that proponents claim, and then examines the risks that critics see. And for those working in Congress, there’s an entire appendix full of legislative recommendations dedicated to creating a freer financial system.

Launching a CBDC in the United States would mean effectively reinventing the money in everyone’s pockets. Such a radical change should not be a surprise and it should not require an advanced degree to understand what is at stake. Therefore, while the subject can quickly become technical, the book was specifically written to be as accessible as possible.

The book has already received praise from people working in journalism, academia, finance, and human rights activism:

“In Digital Currency or Digital Control, Nicholas Anthony masterfully dissects the rise of central bank digital currencies (CBDCs) and their potential implications. This book is a timely wake‐​up call, revealing how CBDCs threaten to undermine financial privacy, personal freedom, and market stability. Anthony’s rigorous analysis and compelling arguments make this an indispensable read for anyone concerned about the encroaching digital transformation of money and the erosion of individual privacy.”
—Naomi Brockwell, tech journalist and creator of NBTV.media

“Beautifully written and laced with the author’s laconic wit, Nick Anthony’s book Digital Currency or Digital Control? Decoding CBDC and the Future of Money provides US policymakers and their staff and advisors with all they need to know about central bank digital currencies and their potential to create an authoritarian dystopia controlled by the Federal Reserve. Everyone in the beltway area working on money and banking policy should read it carefully, from the president and the Fed chair down. Central bank digital currencies are a truly terrible idea that have no place in a free society.”
—Kevin Dowd, professor of finance and economics, Durham University

“This book is going to help many policymakers and congressional leaders finally make sense of the dangers of CBDCs. Nigeria, Ghana, Kenya, and South Africa have all undertaken varying levels of CBDC development, with Nigeria being the first African country to launch a CBDC, the e‑Naira, in 2021. The e‑Naira’s frequent technical issues, lack of public transaction data, ID‐​based tiered withdrawal limits, and low adoption rates not only raise questions about its use but also its potential impact. Further, these challenges show that the CBDCs have a flawed premise that seeks to use a democratic technology to further centralize government power. As currently designed, CBDCs are a threat to the financial freedom and human rights of all citizens.”
—Charlene Fadirepo, CEO, Mango Digital Strategies

“Nick Anthony has written a critical primer to the unfolding evolution of currency, as it continues its evolution from a paper or metal bearer instrument with privacy and freedom protections to an electronic mechanism of surveillance and control. More than 100 governments are experimenting with CBDCs today, and dozens have already built them or are already rolling them out to the public. For hundreds of millions of people, CBDCs are not some future threat, but a current danger. The world of money with insta‐​surveillance, blacklists, expiration dates, calorie counts, and political on‐​and‐​off switches is here and this book is a valuable resource to help us understand why we must fight back.”
—Alex Gladstein, chief strategy officer, Human Rights Foundation

You can order your copy here!

Jeffrey A. Singer

Finnish researchers published the results of a randomized controlled trial in today’s JAMA Internal Medicine, comparing varenicline (Chantix) to nicotine e‑cigarettes in helping tobacco smokers quit smoking. The researchers concluded, “This randomized clinical trial found that varenicline and nicotine‐​containing ECs were both effective in helping individuals in quitting smoking conventional cigarettes for up to 6 months.”

Varenicline works on receptor sites in the brain to reduce the craving for and satisfaction with nicotine. The Food and Drug Administration denies tobacco smokers wishing to quit access to varenicline unless they get a permission slip (prescription) from a government‐​approved gatekeeper (usually a physician, nurse practitioner, or physician assistant). However, as of 2022, eight states allow pharmacists to prescribe varenicline, sparing smokers the expense in time and money of a visit to the doctor’s office to get a prescription.

This is a significant study because most studies compare varenicline to placebo or e‑cigarettes to placebo. However, this was a high‐​quality comparative effectiveness study. The study was randomized and placebo‐​based, and the participants, study nurses, and researchers were all masked as to group assignment. One group received nicotine e‑cigarettes plus placebo tablets; another group received varenicline and an e‑cigarette that did not contain nicotine; the third group received a nicotine‐​free e‑cigarette and a placebo tablet.

The group of 458 adults (age range 25–75) were given these treatments, along with tobacco cessation counseling, for twelve weeks. After twenty‐​six weeks, the researchers assessed the participants’ quit rates. They found no statistically significant difference between the quit rates of those on varenicline alone vs those on nicotine e‑cigarettes alone (43.8 percent and 40.4 percent, respectively).

In the UK, the National Health Service considers nicotine relatively harmless, considers nicotine e‑cigarettes to be an effective tobacco cessation strategy, and encourages primary care practitioners to suggest it to their patients who smoke. Australia, on the other hand, highly regulates nicotine e‑cigarettes, tightly restricts their supply, and requires people to get a doctor’s prescription for them. Unfortunately, very few Australian doctors will prescribe it, and even if adults who want to quit are fortunate enough to get a doctor’s permission slip, most pharmacies don’t stock them. Australia now has a black market and the associated violent crime one would expect to see with such prohibition.

This study vindicates the NHS’s position regarding e‑cigarettes.

Meanwhile, as the FDA continues its painfully slow process of deciding which e‑cigarettes American adults will be free to buy, and as some politicians wage war on nicotine products, a black market in illicit e‑cigarettes grows.

Adam N. Michel

At the end of 2017, Congress passed the Tax Cuts and Jobs Act (TCJA). The law included wide‐​ranging reforms that simplified and cut taxes for Americans at every income level. By lowering business taxes, the law boosted investment, wages, and economic growth.

At the end of 2025, basically all the individual tax cuts and some of the most economically consequential business provisions expire.

The coming 2025 fiscal cliff presents both challenges and opportunities for tax and budget reform. President Joe Biden recently floated “principles” for dealing with the tax cut’s expiration, pairing them with unspecified tax hikes on Americans earning over $400,000 a year. Former President Donald Trump has also suggested he’d extend and expand the tax cuts, pairing them with potentially extensive new tariffs. Whether paid for with tariffs or new taxes on investment and wealth, both 2025 presidential candidate’s proposals would come with high economic costs that would undermine any economic gains from extending the TCJA.

A new Cato Policy Analysis presents a more aggressively pro‐​growth proposal for post‐​TCJA tax reform. The Cato plan lays out a roughly revenue‐​neutral reform that slashes tax rates to near 100‐​year lows while dramatically simplifying and streamlining the tax code by repealing more than $1.4 trillion in annual tax loopholes. The plan also discusses the dire need for spending cuts to ensure taxes can stay low for the long term.

The Road To (and From) the TCJA

Before the TCJA, congressional Republicans built consensus around the reform’s main parameters. In 2014 and again in 2016, Dave Camp and Paul Ryan, the chairmen of the Ways and Means Committee, each released comprehensive tax reform discussion drafts. Presidential campaigns, including Trump’s 2016 campaign, also released proposals. These proposals were primarily motivated by a consensus—which was also widely shared by Democrats, including then‐​President Barack Obama—that the US business tax system was globally uncompetitive. America’s high corporate tax rate and outdated international tax rules resulted in significant losses of domestic investment, business headquarters, and jobs.

While deficit concerns from some senators in 2017 limited the size of the TCJA’s revenue reduction to $1.5 trillion over ten years, the 2017 fiscal outlook was very different than today. Since 2017, the federal government has almost doubled the size of the national debt, adding more than $12 trillion to the national credit card, due primarily to additional spending.

In the current fiscal environment, with spending projected to increase faster than the economy, extending the tax cuts without offsetting spending or tax changes is fiscally unsustainable. Congress cannot keep tax revenue flat while increasing spending year after year.

Despite this reality, there is general bipartisan agreement on keeping a majority of the 2017 tax cuts. Republicans and Democrats both agree on keeping the tax cuts for Americans earning less than $400,000 a year—which would reduce revenue somewhere in the ballpark of $2.8 trillion, depending on the details, or about 60 percent of the roughly $4.8 trillion ten‐​year total cost of extension.

It’s not just politicians who have begun outlining how they might deal with the TCJA’s expiration—albeit with serious details lacking. Washington, DC, policy groups and individual scholars have also released plans to deal with the TCJA expirations.

The Tax Foundation outlines two revenue‐​neutral, pro‐​growth options for extending the TCJA, working within the law’s broader framework. The Tax Foundation has also proposed an entirely new tax system modeled on the Estonian flat tax.
Kyle Pomerleau and Donald Schneider outline two revenue‐​neutral, pro‐​growth options for extending the TCJA, one working within the law’s framework and another proposal that includes a new tax system for business income.
Kimberly Clausing and Natasha Sarin outline a plan to extend and expand some of the TCJA low‐​income tax subsidy programs, let many of the individual tax cuts expire, increase taxes on businesses, estates, and investment income, and add a carbon tax to raise more than $3 trillion in new revenue over 10 years.
Other notable mentions include revenue proposals within larger budget reform blueprints, such as by the Heritage Foundation, American Compass, and a series of older proposals from the Peterson Foundation’s Solutions Initiative.

The Cato Tax Plan

The Cato Tax Plan adds another option for policymakers who would prefer a more aggressively pro‐​growth tax plan that eliminates all tax loopholes and slashes tax rates as low as possible.

The starting premise of the Cato plan is that Congress should approach TCJA expiration by targeting a deficit‐​neutral reform. Ideally, Congress reduces the size and scope of government by cutting spending and cutting taxes. However, the plan also shows that dramatically lowering tax rates is also possible if Congress chooses to pursue a revenue‐​neutral reform option.

Cato’s plan calls for Congress to repeal $1.4 trillion in annual tax loopholes and:

cut the top marginal income tax rate to 25 percent for workers and small businesses;
cut the corporate tax rate to 12 percent, making the United States the most competitive place in the world to do business;
cut the capital gains and dividends tax rate to 15 percent;
allow permanent full expensing for all investments;
create universal savings accounts for nonretirement savings; and
repeal all alternative minimum taxes, additional investment taxes, and the estate tax.

The full Policy Analysis includes a summary of the TCJA, outlines principles for future pro‐​growth reforms, and a menu of more than 60 options to improve the tax base that would raise revenue to offset rate reductions. The options include repealing business and energy subsidies, family and education benefits, itemized deductions, exclusions for government and fringe benefit income, and more.

The analysis is intended to serve two purposes. First, to provide a comprehensive tax proposal that shows how far tax rates can be cut if Congress eliminates all the junk in the tax code. Massively pro‐​growth, fiscally responsible tax reform is only constrained by a political preference for keeping the current level of spending and the hundreds of billions of dollars in tax subsidies littered through the tax code.

Acknowledging there are political preferences for some tax loopholes, the second purpose is to provide a comprehensive list of options for tax reform from which less aggressive tax reforms can be assembled. Congress can and should go further by cutting spending, which would allow deeper reductions in taxes.

Congress cannot tax its way back to fiscal health. However, deficit‐​neutral, pro‐​growth tax reform that increases economic growth will make necessary spending reforms easier.

Colleen Hroncich

“I feel like I fell into my mission in life without really knowing that I was going to be doing it. I don’t ever think of it as work,” says Elmarie Hyman, creator of Learn Beyond The Book, a homeschool and hybrid school resource center in California.

Elmarie grew up in South Africa, where she says schools were very militaristic with strict teachers. “It wasn’t until I moved to the United States that I even knew that there was such a thing as homeschooling,” she recalls. Then she met some friends who were homeschooling, and she noticed their children seemed really happy, engaged, and excited about learning. Her children were young at the time, but she knew she wanted to eventually homeschool them.

“I have four kids. The older two would do school while the younger two were taking naps and were occupied. It was working fine until the younger ones started school,” Elmarie says. Then it was hard and she thought, “We need some help here. We need some friends and some extra teachers.”

They joined a small homeschool co‐​op that kept growing. “Eventually I ended up being the person who made up the schedule every semester. At the same time, I also had a co‐​op in my own house. So we had two co‐​ops going for the two different age groups. And it was a busy life because I was driving all around the town,” she says. So they decided to find a place where they could all meet at the same time and save a lot of driving.

At first, Learn Beyond The Book started in just two rooms of a church in Elmarie’s town. “As it grew, we just kept on renting more and more rooms, getting more and more teachers,” she says. Eventually, they started up a new location in the San Fernando Valley. And this fall, they’re opening a third location. They offer Zoom classes, which started during COVID-19. Depending on location, classes are offered three, four, or five days a week. There’s a lot of flexibility built into it, as Elmarie explains:

Classes are à la carte and parents just pick and choose what they want or need. Like if they don’t really want to teach science, they sign up for science class. But we have all the classes. So we have math and English and science and history. But then we also have cooking and art and theater and music. There’s even the Sword Fighter Society, which teaches historical fencing, so learning about history and then learning fencing techniques.

Learn Beyond The Book’s teachers function like independent contractors although California law requires them to be on payroll. “They tell me when they want to teach and what they want to teach. They have a lot of autonomy over the material, though we obviously talk about it,” says Elmarie.

Around 500 students participate each semester between all of the locations. Elmarie says 80–90 percent of them homeschool through a charter school, which allows them to get funding to pay for educational expenses like Learn Beyond The Book classes. She likens it to education savings accounts that many states have adopted.

“Homeschoolers usually have one income, so it’s really helpful if there’s some assistance because they don’t have a lot of money lying around for extra things. If they didn’t have the charter school, they’d probably sign up for one or two classes. But if they have it, they can sign up for more. So it’s really helpful,” she adds.

Learn Beyond The Book continues to expand. “The latest thing that we’ve started doing is making custom classes for microschools and hybrid schools,” Elmarie explains. “If they don’t have, for example, a coding teacher, we have a great coding teacher so we can make up a class that’s just for them. It can be either just via Zoom, or they could potentially project it on the wall and the teacher could be interacting with students as a group as if he’s there, but he’s just not physically there. And then someone else is in the room to help them keep order.”

According to Elmarie, the community that grew out of Learn Beyond The Book is even more amazing than she ever hoped it would be. While she started it primarily to help her own children and ensure they had a place to make friends, the benefits have grown beyond that. “I just kind of fell in love with education,” she says. “And because we were getting all the casualties from public schools and private schools, I would just see the brokenness of that system. So I’m trying to figure out how we can make this more sustainable.” As part of this effort, she’s gotten involved with the National Microschooling Center and the Kennesaw State University Hybrid Schools Society.

Elmarie wants people who are thinking about homeschooling to know that they can do it. “There are resources that you can employ. You don’t have to do everything yourself. You don’t have to know everything, even if you’re doing it yourself. You can look things up. You can tell your kid, ‘I’m not actually sure,’ and you can learn with them. I loved homeschooling because I learned so much. I feel like I finally got educated. You’ll learn so much while homeschooling your own kids—just for that, it’s worth it. And you’ll have a great time bonding with your kids. And they bond with each other more,” she says. “It pretty much changed my world.”

Scott Lincicome

On June 12, I testified before the Joint Economic Committee (along with Cato’s own Adam Michel) on the current state of US industrial policy and the manufacturing “boom” its supporters assert has already begun. Below is my oral statement to the committee, which summarizes my longer written testimony. In both, I make the following points:

First, domestic investment in manufacturing and related construction indeed increased after the federal government enacted new US industrial policies—most notably, the CHIPS and Science Act, the Inflation Reduction Act (IRA), and the Infrastructure Investment and Jobs Act (IIJA)—but this spending requires the following context:

Before the IRA and the CHIPS Act became law, the pandemic, geopolitics, and other market‐​based factors had already increased companies’ interest in diversifying semiconductor sourcing, and both private demand for and investment in green energy was soaring. As Figure 1 shows, moreover, a large share of major US semiconductor and electric vehicle (EV) investment announcements trumpeted by the White House came months or even years before these laws were enacted. It’s thus unclear how much of these gains have been caused by, instead of being merely coincident with, new US industrial policy.

Furthermore, recent increases in industrial spending are still a small share of total private investment and economic output (GDP). The spending might still be important, but it’s not currently an economic game‐​changer. In the meantime, Figure 2 below shows that the actual US manufacturing sector has stagnated since 2022, thanks to higher interest rates, continued materials inflation, worker availability, economic uncertainty, tariffs and trade disputes, onerous regulations, and other headwinds. Private surveys, meanwhile, have been pessimistic, and 2024 investment projections are softening.

Maybe a “boom” eventually arrives, but it’s just as likely—if not more so—that we’re again seeing what critics of targeted tax credits, subsidies, tariffs, and other industrial policy measures have long cautioned: they don’t generate broad‐​based gains and sustainable, long‐​term growth, but instead re‐​distribute existing resources to favored companies at a net loss to the US economy.

Second, we must consider the actual return on these investments. When the government showers preferred companies with trade restrictions and trillions of taxpayer dollars, the policies will inevitably produce something. The real question is what, exactly, all that government support is getting us. Today it’s too early to say, but there are already warning signs here and abroad—ones we’ve seen before.

At home, for example:

The costs of building, staffing, and starting production within subsidized facilities have increased substantially—thanks in large part to industrial policies colliding with longstanding supply‐​side constraints, many of which have been caused or exacerbated by US policies like the National Environmental Policy Act (NEPA) and other permitting regulations; restrictions on legal immigration; and US trade restrictions.
Higher costs, changing market conditions, and other unforeseen issues have caused many semiconductor, EV, battery, solar, and other projects to be delayed or canceled outright, even where some construction had already begun.
There are already troubling signs that at least some US factories under construction might not produce innovative technologies that can compete in the global marketplace without endless government help. For example, even with subsidies and tariffs, US‐​made solar panels cost more than those made in Southeast Asia, so the industry is now seeking even more tariffs. Meanwhile, several high‐​profile semiconductor plants will not only be relatively small compared to ones in Asia, but also one or two generations behind the bleeding edge. Finally, President Biden’s recent EV tariffs were partly justified by US producers’ need to catch up to Chinese EV makers on both price and technology.
Finally, politics again appears to be undermining industrial policies’ implementation and raising subsidy recipients’ costs. Social policies have been attached to CHIPS Act funding; IRA subsidies and “place‐​based policies” have disproportionately targeted swing states; EV consumer subsidies, charging stations, and other favored products have been bogged down in complicated bureaucracy; and investors worry about political uncertainty in the run‐​up to this year’s presidential election.

These and other issues remind us that there’s a huge chasm between celebrated investment announcements and actual, productive factories. They also show the risk that today’s industrial policies produce small, “seen” benefits at a massive budgetary and “unseen” economic cost, including the diversion of finite taxpayer and private resources away from better targets.

Finally, there’s the dysfunction that US industrial policy is generating abroad. Subsidies here have prodded Japan, South Korea, Taiwan, the European Union, India, and other countries to offer subsidies of their own while encouraging China to double‐ or triple‐​down on its industrial policy schemes. Since the CHIPS Act was passed, governments have offered more than $300 billion in grants, loans, tax credits, and other supports to keep or attract semiconductor investment (Figure 3). The IRA fomented a similar reaction abroad.

Overall, the IMF and Global Trade Alert, which tracks nations’ use of industrial policy and related measures, finds that there has been a dramatic increase in industrial policy measures in recent years—more than 2,500 last year alone—and that this wave was “primarily driven by advanced economies” with subsidies being “the most employed instrument.”

These uncoordinated and predictable “subsidy races” not only could offset or displace US investments, but also raise a serious risk of global overcapacity that would collapse prices and put US manufacturers in financial distress. (There are already signs that the global semiconductor, solar panel, EV, and battery markets are reaching a point of saturation or worse.) Should gluts materialize, domestic manufacturers in the US and other subsidizing countries could request government protection from foreign competition via “trade remedy” measures (i.e., antidumping or countervailing duties) or other import restrictions, which in turn set off retaliatory actions that inflict even more economic and geopolitical damage.

In the end, almost everyone—consumers, producers, investors, etc.—would be worse off. And in the case of “green” goods, so might the environment. Subsidy races and trade conflicts would also hurt poorer countries that can’t afford to subsidize production at a similar scale and depend on manufacturing and exports to move up the development ladder.

Overall, there are plenty of warning signs that US industrial policies’ ignominious history is repeating. This doesn’t mean, however, that Congress should sit back and simply hope that its trillion‐​dollar gamble pays off. Instead, there are many market‐​oriented reforms—to US trade, tax, immigration, regulatory, educational, and other policies—that Washington could pursue to boost US manufacturing and minimize problems associated with industrial policies. The list of such time‐​tested reforms is long, but it still doesn’t include subsidies and protectionism.

You can read my full testimony here.

Patrick G. Eddington

Over a decade ago, Congress passed and President Barack Obama signed into law the National Defense Authorization Act (NDAA) for Fiscal Year 2012, which became Public Law 112–81 (10 U.S.C. 801 note). Section 1021(b) of that mammoth bill included language allowing US military forces to indefinitely detain anyone who “planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored those responsible for those attacks” as well as “a person who was a part of or substantially supported al‐​Qaeda, the Taliban, or associated forces that are engaged in hostilities against the United States or its coalition partners, including any person who has committed a belligerent act or has directly supported such hostilities in aid of such enemy forces.”

It is the second clause, with its undefined terms of “aided,” “supported,” and “associated forces” that set off alarm bells among civil liberties defenders. Would someone who posted something online suggesting Taliban military operations against coalition forces were an act of self‐​defense be considered “aiding” or “supporting” the Taliban? In a much more contemporary context, would Americans expressing outrage against mass civilian casualties in Gaza as a result of Israeli military action be viewed as “aiding” or “supporting” Hamas, a State Department–designated terrorist organization?

The American Civil Liberties Union noted in late 2011:

The law is an historic threat because it codifies indefinite military detention without charge or trial into law for the first time in American history. It could permit the president—and all future presidents—to order the military to imprison indefinitely civilians captured far from any battlefield without charge or trial.

Ever since Section 1021(b)‘s enactment, there have been attempts to repeal or modify the language. This afternoon, the latest effort—led by Rep. Matt Rosendale (R‑MT)—succeeded when his amendment to the FY 2025 NDAA was adopted by voice vote. Rosendale’s amendment, if it survives the House‐​Senate NDAA conference process and remains in the bill, would prohibit American military forces from indefinitely detaining a US citizen under Section 1021(b). In a year with otherwise terrible news on the constitutional rights front, this is one victory very much worth celebrating.