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Colin Grabow

Some members of Congress believe that US servicemembers suffer from an excess of choice in the boots they use—and they’ve got the solution.

Last month saw the introduction of the Better Outfitting Our Troops (BOOTS) Act, a bill that would prohibit servicemembers from using “optional boots” manufactured outside the United States or without US materials. While presented as a means of ensuring footwear quality, the legislation appears more concerned with the welfare of US bootmakers—and one manufacturer in particular—than those in uniform.

A comfortable pair of boots is essential for members of the armed forces. But those issued by the military are not necessarily the best fit for each person’s feet. To accommodate individual needs (for example, those with wider feet), the military permits the use of so‐​called “optional boots” (defined on page 122 here) purchased from retailers that meet military specifications. It’s an approach that enables those in the armed forces to find the best‐​fitting footwear while ensuring that standards are met.

That ability to find comfortable footwear, however, would become more difficult if the BOOTS Act is passed.

Introduced by Representatives Nikki Budzinski (D‑IL), Mike Bost (R‑IL), and Rick Crawford (R‑AR), the bill restricts optional boots to those manufactured in the United States with domestic materials and components. Although the legislation’s sponsors claim the measure seeks to promote safety, it’s unclear how reducing servicemembers’ options in selecting footwear advances that goal. Indeed, the opposite seems a more likely outcome.

So why was the bill written? A press release announcing the BOOTS Act holds some clues.

Beyond emphasizing safety, the announcement warns that foreign manufacturers have “taken over the market for Army soldier footwear” (“taking over a market” is protectionist‐​speak for providing a valued good or service at an affordable price). The BOOTS Act’s passage, it adds, would “support domestic military footwear production at places like the Belleville Shoe Manufacturing Company”—a manufacturer with facilities in or near the bill’s sponsor’s districts.

It’s difficult not to conclude that driving business to the company, one highly reliant on government contracts touted by Bost and Budzinski, is a primary motivation for the bill. Even, it seems, if that means members of the armed services are left with fewer choices in critical footwear—choices they like as evidenced by the fact that manufacturers not compliant with the BOOTS Act dominate the market.

Although the BOOTS Act’s fate is uncertain, its passage would be only the latest example of Congress engaging in self‐​serving protectionism at the military’s expense.

The 2017 National Defense Authorization Act (NDAA), for example, reduced servicemembers’ choice of athletic shoes by requiring that such footwear be American‐​made. With the military providing $180 million in allowances for those in uniform to buy athletic shoes between 2002 and 2014, firms positioned to meet the restrictions were elated. Shoe manufacturer New Balance said the new rules could increase its annual sales by 250,000 sneakers—not a bad return on the firm’s $500,000 lobbying push for the change.

As with the BOOTS Act, the bill was championed by members of Congress whose districts included companies that stood to gain from the change. Such considerations trumped the fact that Department of Defense officials had previously argued servicemembers should have a variety of brands to choose from to find the most appropriate shoes.

Similarly, the 2020 NDAA mandated that the military purchase 100 percent domestically produced stainless steel flatware. Unsurprisingly, the language was championed by a member of Congress whose district was home to the only manufacturer able to meet the new requirements.

The benefit to companies that produce goods compliant with such protectionism is obvious. The upside to the military from reduced choice and competition, however, is less apparent.

Indeed, former Rep. Mac Thornberry (R‑TX)—ranking member on the House Armed Services Committee when the flatware restriction was added—blasted the measure for its lack of a national security justification and hurting US troops.

Yet the language passed.

Congress has repeatedly given greater weight to the desires of special interests than the military’s needs when evaluating protectionist measures. Let’s hope it doesn’t make the same mistake again with the BOOTS Act.

Justin Logan

Fiscal hawk Brian Riedl, a senior fellow at the Manhattan Institute, has an article in The Bulwark titled “In Defense of Defense Spending.” He argues that critics of US defense spending possess “a fundamental misunderstanding of federal budgeting, they also ignore looming threats to our national security.” I think he’s completely wrong about the national security questions, but I want to focus here on some of his economic analysis.

As the coauthor of an article titled “Why the U.S. Military Budget Is Foolish and Sustainable,” I have never been someone who thinks US defense spending is the root of all fiscal woes, or that cutting military spending can solve the national debt.

However, Riedl makes several missteps in his economic analysis. He protests that defense spending isn’t a problem because it

“has been the slowest growing category of federal spending” (emphasis in original) and
“has in fact declined from half of all federal spending in 1962 to just 13 percent this year,” and “as a share of the economy… from 6 percent to 3 percent of GDP.”

A few thoughts. First: Who cares how quickly defense spending has grown compared to other programs? The sizes of other federal programs’ increases are irrelevant to spending the right amount on defense. Measuring defense spending as a share of overall federal spending or as a share of national economic output can tell us nothing about whether our defense spending is too high, too low, or just right. The country could be broke and threatened, rich and safe, or any combination of those factors.

But the overall size of other federal programs is relevant. Voters frequently oppose tiny programs like foreign aid, but cutting those tiny programs can do little to help pay down the debt or close the nation’s yawning budget deficits. Riedl has been someone who argues for massive reforms to the biggest programs—Social Security and Medicare—to help fix the problem (we agree on this one!) but people who have to win elections haven’t been listening to us. Given that, it seems foolish to put much hope in huge reforms to those programs to fix the problem. It seems more likely it will get worse.

As this graphic makes clear, if Social Security and Medicare/​Medicaid aren’t politically ripe for major cuts, that leaves you with interest on the debt, which isn’t amenable to many policy reforms, as well as defense spending and “income security,” which includes things like unemployment compensation, TANF, SNAP, and other welfare programs. The defense budget is going to be an increasingly appetizing target for deficit reduction. If forced to choose between Aunt Sally’s hip replacement and an exquisite new defense project, I suspect I know which voters will choose.

Riedl veers into full military Keynesianism when he defends aid to Ukraine on the basis that “much of what is categorized as ‘Ukraine aid’ stays in the US, replacing, upgrading, and modernizing American military supplies.” The suggestion here is that the US weapons being sent to Ukraine have little or no value to us, but quite a bit to Ukraine, and that the money spent replacing those missing weapons spurs US economic growth somehow. It’s the military‐​industrial version of Keynes’ call to pay workers to dig holes and then to fill them up again.

Finally, Riedl draws on the work of Australian economist Peter Robertson to argue that Russia and China combined, when using the proper currency valuations, spend roughly as much as the United States spends on defense. Everyone hates defense economics, but there are real issues here. Robertson’s more recent work alleges that China’s defense spending is roughly 59 percent as much as US defense spending—about $476 billion. Robertson’s figure is the highest figure worthy of consideration. I haven’t figured out what, exactly, I think of it, but let’s accept it for the sake of argument here.

Riedl pockets that figure and moves on to an AEI report which takes the “military PPP” conversion rate that Robertson uses, then brings onto the books a number of (para)military Chinese programs, then compares overall Chinese spending to the US DOD budget. The report concludes that spending on the PLA is roughly equivalent to US defense spending.

Including China’s off‐​book defense expenditures suggests you should also consider off‐​book US expenditures, which are substantial. As MIT’s Eric Heginbotham explained at Cato in 2022, “if you’re going to go there, you have to compare that to a full notional US defense budget.” As Heginbotham showed, going there shows you a US defense expenditure at or above $1 trillion. The AEI report does not do this, instead comparing the assembled Chinese figure to the DOD base budget. Apples and oranges.

I’m happy we’re beginning to have a debate about defense spending. For me, the strategic questions are central. But Riedl’s piece was a useful opportunity to look at some of the curious economic judgments that underpin the case for ever‐​higher military spending.

David Inserra

Jack Dorsey, the founder and prior leader of Twitter, now X, had a remarkable conversation on how social media companies face massive pressure from governments around the world to censor speech and expressed his hope for a decentralized future. It should serve as a reminder to policymakers that alternatives to the current social media structures are possible without government regulation. Indeed, this is one of the topics covered in my new Cato paper, A Guide to Content Moderation for Policymakers.

Jack spoke about the need for innovation and decentralization after announcing that he was leaving the board of alternative social media company Bluesky and deleting his account. Mike Solana, head of the tech media outlet Pirate Wires, discussed what happened with Jack in an interview that is worth reading in full.

Rather than recapitulate the interview, I want to note a few takeaways for policymakers and how they align with some of the observations in my new paper.

First, it is worth remembering that when the internet first exploded onto the scene, it was nearly universally lauded for the way it expanded the ability of users around the world to express themselves and access information while avoiding government censorship. It was optimistically thought that the internet couldn’t be controlled. Fast forward to today, and authoritarian nations, such as China, have their internet siloed from the rest of the world. Other nations expansively regulate the internet, making increasingly aggressive demands of large tech companies to suppress speech.

One of the reasons this is possible is because most online services are centralized, i.e. each service sets the rules and policies that govern what users can say and do on their platform, runs massive enforcement systems to uphold their policies, and determines how their platforms will offer up content and services.

But what if Facebook couldn’t delete your profile? What if YouTube simply didn’t have the ability to centrally demote or remove your content? If users, rather than platforms, were ultimately responsible for their social media experience, then governments could make demands, but companies would simply lack the technical ability to comply. Governments could decide to go all the way and drastically block certain internet services, but that would force them to reveal themselves as authoritarian censors. Plus, a decentralized network could likely avoid the block.

Jack believes this decentralized version of social media and internet services offers a censorship‐​resistant vision of the future. It’s an important reminder to policymakers that governments worldwide are vying for control over social media, whether it be the multitude of tech regulation and expression restrictions in the EU, a judiciary‐​turned‐​speech‐​police in Brazil, various government efforts in India, Australia, and elsewhere to block “problematic” content, and even informal pressure and coercion by US officials to sway content decisions—not to mention plenty of fully authoritarian states.

Those who truly want greater expression online shouldn’t join the ranks of these censors. They should instead support the power of the market and innovation to create new tools and technologies that can resist government demands

A second related observation is that even when the government isn’t twisting the arm of tech companies, these businesses are very capable of making bad and biased decisions. Whether it be botched “woke” generative AI rollouts, suppressing significant political stories at the height of an election, or crafting policies that explicitly favor one ideological viewpoint on controversial issues, such as gender, abortion, or various forms of extremism, tech companies aren’t perfect. For myriad reasons, including advertising incentives, the demands placed by outside activists, or internal structural and ideological preferences, many tech companies have increasingly found ways to limit expression and who is allowed to use their products.

To be clear, it is their right to determine the rules for their services. But that doesn’t mean it’s been beneficial for a culture of expression, fostering diverse views, or even helping their business long term. As a result of increasing restrictions on various platforms and services, there have been demands for change. Elon Musk bought Twitter, and new services like Bluesky, Rumble, Truth Social, and others have sprung up in popularity. But again, Jack notes that as long as these companies have centralized policies, there will always be pressures to moderate speech and remove users. Indeed, he left Bluesky because he felt like it was repeating the mistakes of Twitter by starting to centralize content moderation tools and the ability to remove people from the system.

So, once again, we see the value of a more decentralized social media environment. Right now, the mainstream social media companies face the moderators’ dilemma. Some folks want more content to be taken down, others want less to be suppressed, and still others want moderation done differently. With one centralized set of rules, there will always be groups lobbying tech companies to favor their group’s perspective and the companies will never be able to break out of this dilemma because they will always be accused of favoring one group and offending another.

But if users gain control over what appears in their newsfeed and how different types of content are moderated, then we’ve started to solve the problem. Those who want to see more types of controversial content can see it, while those who don’t want such content can protect themselves. It’s a customizable set of rules that each user can adopt and change at will.

A decentralized future for social media can address government censorship as well as market demands for greater expression and better experiences online. Before policymakers try to “solve” various problems and harms with social media, they should recognize that the medium is already changing and will continue to evolve and innovate—but only if government regulations don’t get in the way. Policymakers may feel that tech companies are biased against them. In some cases, this may be true. But rather than advance expression or better protect users, new government restrictions on social media companies will likely stifle the innovations that would bring about much‐​needed improvements.

If policymakers want to see users protected online, then they and civil society should encourage existing and new social media companies to embrace more user expression and greater user controls.

Jennifer Huddleston and Jack Solowey

On May 15, a bipartisan group of senators led by Majority Leader Chuck Schumer (D‑NY) released a long‐​awaited roadmap for artificial intelligence (AI) policy (the Roadmap). The 31‐​page report follows the Senate hosting several months of closed‐​door insight forums on various AI topics.

Both AI technology and policy have advanced rapidly since the forums began. On the tech front, the week of the Roadmap’s release saw OpenAI and Google each demo their latest AI products, which featured advanced capabilities like interpreting the world for the blind and detecting fraudulent calls on a user’s device.

On the policy front, the Roadmap follows notable AI proposals and actions at the state, federal, and international levels. Specifically, it comes after the California legislature introduced potentially impactful AI legislation on a national scale in the form of SB 1047, the Biden administration issued a significant AI Executive Order, and the European Union passed its AI Act. (That’s not to mention dozens of bills introduced in Congress, and hundreds more at the state level, with proposals ranging from limits on AI applications to new regulatory agencies, to AI licensing requirements.)

Against this backdrop, what does the Roadmap herald for the future of US AI policy? In short, by looking before leaping, the Roadmap compares favorably to the do‐​something! approaches of Sacramento, the Biden White House, and Brussels. In its better moments, the Senate report recognizes that many of the risks related to AI already may be addressed by preexisting laws or policy debates. Nonetheless, while the report asks many of the right questions—e.g., where is AI already regulated and how do we preserve innovation?—it leaves plenty of room for counterproductive answers, including disruptive regulation for important industries, politically motivated federal spending, and unhelpful new authorities.

Roadmap Highlights: Some Steps in the Right Direction

Many debates around AI are neither new nor really about AI. The Roadmap recognizes this to a large extent by not presuming that fundamentally new policies are always necessary when it comes to AI.

Helpfully, the Roadmap supports investigating where existing federal laws affect AI innovation. This is a positive step in that it recognizes AI is already regulated in a variety of ways and provides an opportunity to understand how existing law stymies AI research and development.

Between this understanding and the report’s stated goal of furthering US innovation in AI, one can detect an implicit openness to paring back barriers to technological progress. Still, it would be far better if the Roadmap made this explicit. The fundamental AI policy two‐​step should be determining (1) when existing laws already are sufficient and (2) when deregulatory action is needed.

An example of where the Roadmap makes progress on the first step while stumbling before the second, however, is in the financial services context. Specifically, the Roadmap supports surveying the current state of AI regulation in finance (through reference to an earlier Senate bill sponsored by report co‐​author Senator Mike Rounds (R‑SD)). In addition to analyzing relevant laws already on the books, the proposed survey has the benefit of identifying when AI implicates financial regulators’ redundant authorities, seemingly in the hope of clarifying matters. Nonetheless, the proposed survey’s shortcoming lies in calling for a gap analysis to identify where new authorities are needed while simultaneously overlooking a deregulatory analysis to spot and remove outmoded regulations. Highlighting and excising counterproductive rules should be an essential aspect of any AI policy roadmap.

Moreover, many AI policy debates ultimately stem from ongoing tech policy debates that remain unresolved. In this regard, the AI Roadmap recognizes that many AI policy issues inevitably point back to longstanding questions around a federal consumer data privacy law. For example, the proposed American Privacy Rights Act’s provisions on algorithm design likely would have a clear AI nexus. Ideally, such legislation would provide clarity to both innovators and consumers regarding data use in AI by, for example, helping to rationalize the ever‐​growing patchwork of state privacy laws.

Importantly, any such consumer privacy legislation should adopt a far more flexible approach than that of the EU’s General Data Protection Regulation (GDPR), as the GDPR’s static and prescriptive data policies threaten to hold back AI’s evolution.

Hazards of Roadmap Proposals: Government Spending, Speech Concerns, and Roadblocks to Innovation

While the Roadmap contains some potential positive signals regarding the Senate’s approach to AI, there are areas where the Roadmap risks laying the groundwork for policies that would have negative long‐​term consequences for both consumers and innovators.

Federal Spending. The roadmap considers, and in many instances supports, making significant government investments in AI. The government itself modernizing its procurement of technology is not inherently inappropriate. (Indeed, there likely will be plenty of areas where AI can help to achieve efficiency gains over current bureaucratic processes.) However, significant public expenditure in emerging technology could come with unintended costs beyond simply those to taxpayers. Where the government seeks to play the role of a general capital allocator for AI technology, it would be in a position to pick a disproportionate share of winners and losers according to political considerations (such as special interest and constituent preference), as opposed to dynamic market signals about the most promising AI research and development paths. In addition, private‐​sector investment has yielded far more consumer applications of AI than we likely would have seen from tools simply piggybacking off of public‐​sector AI use cases.

Free Speech. The Roadmap’s implications for civil liberties are mixed. On the one hand, it proposes the positive step of seeking to head off the use of AI to create a People’s Republic of China‐​style social credit system. On the other hand, other sections, particularly regarding the use of AI in the election context, raise free‐​speech concerns.

Political speech is core protected speech, and policymakers must ensure that legislation does not constitute a form of government censorship by limiting the types of speech available in the marketplace of ideas, including through campaign advertising.

As Jennifer Huddleston discussed in her written statement to the AI Insight Forum — in which she participated in November 2023 — AI can be applied in a variety of ways to election‐​related speech without having anything to do with what we typically would consider deception or manipulation. It’s important to ensure, for example, that content benefiting from basic AI applications (like summary and translation tools) does not get swept into warning label regimes for AI‐​generated content. In addition, norms on how to handle the credibility and reliability of claims also evolve over time. In the age of the internet, many online platforms now provide further context around election‐​related speech and manipulated media. The precise private rules vary depending on the tools available on a platform, as well as its audience or users. This flexibility allows different platforms to come to different decisions around the same piece of material and adjust to the specific needs of their users and societal expectations most relevant to their products.

Financial AI and the new Roadmap

Another typically fraught AI policy area into which the Roadmap wades regards who (or what)—e.g., the AI developer, provider, user, or?—should be liable for any AI‐​caused harm. The Roadmap leaves this particular question open, with different congressional committees perhaps to provide different answers. Yet the possibility of imposing strict liability on AI developers and providers is a cause for serious concern. The threat of such legislation is not hypothetical. The Financial Artificial Intelligence Risk Reduction (FAIRR) Act, for example, would universally deem AI providers liable when their tools are used to violate securities laws unless the providers took reasonable preventive measures. Such a provider liability regime would run roughshod over the time‐​tested economic and legal principles for efficiently and fairly assessing liability.

On the economic front, it would impose compliance costs on parties ill‐​positioned to bear them; risk AI providers; and incentivize plaintiffs to go after parties with the biggest names and deepest pockets—not the ones most to blame. On the legal front, it would dustbin the highly nuanced exceptions, mitigating circumstances, and state‐​of‐​mind requirements of product liability, agency law, and securities regulation. A sound AI policy roadmap should shut the door on such ham‐​fisted proposals, not give them an opening.

In addition, the Roadmap’s discussion of AI “black boxes” and transparency addresses a central policy question for AI’s use in financial services. It also provides an example of how over‐​indexing on previous regulatory frameworks can lead to counterproductive policy outcomes. As the Roadmap picks up on, existing fair lending laws, such as the Equal Credit Opportunity Act, require lenders to explain with specificity their reasons for adverse credit decisions (e.g., denying a loan). It’s important to distinguish such a policy’s goal—prohibiting invidious discrimination against loan applicants based on their membership in a protected class—from its mechanism‐​required explanations. That’s because there may be circumstances where the mechanism undermines the goal.

For instance, advanced machine learning techniques analyzing alternative datasets have the potential to expand credit to the previously underserved. And where such techniques are less explainable than manual processes, prohibiting their use may inadvertently serve to restrict credit to the individuals the fair lending laws seek to protect. Therefore, instead of unthinkingly applying existing prescriptions to new technologies, AI policy should take an outcome‐​oriented approach.

When it comes to the use of AI in lending, such an approach could include providing a safe harbor from certain explainability requirements where AI models demonstrably (e.g., through pre‐​launch testing and/​or post‐​launch observation) tend to increase credit access to the historically credit deprived. To be fair, the Roadmap recognizes that the need for future transparency requirements may remain an open question in some contexts. Yet when transformative new technologies are on the table, policymakers must ask that same question (i.e., is this requirement necessary) retrospectively as well as prospectively.

Conclusion

At its best, the Roadmap appropriately asks what longstanding policy concerns (such as data privacy generally) underlie an AI policy question. Similarly, the report also seeks to examine the role of existing laws rather than presume AI immediately demands expansive new regulation. Nonetheless, one should not assume that a more regulatory approach—which ultimately could stifle the beneficial applications of AI along with any harmful ones—is off the table in the US.

Ideally, when considering the potential implementation of this Roadmap—or any other AI regulatory framework—policymakers should seek to support the light‐​touch approach that has long led to Americans’ success in a wide range of technological fields.

Chris Edwards

State and local subsidies and narrow tax breaks for businesses are growing. These benefits—called incentives—include grants, loans, tax credits, and tax exemptions to favored businesses investing in a jurisdiction.

It makes headlines when governments give incentives to big corporations such as Amazon. But the states routinely dish out subsidies and tax breaks to thousands of businesses of all sizes under a vast array of programs.

In researching Cato’s governor report cards, I’ve found that high‐​tax states appear to hand out the most special‐​interest breaks and subsidies. Let’s look at some supporting data.

The Council for Community and Economic Research maintains a database of 2,425 business subsidy and tax break programs in every state. New York has a tax credit for digital games businesses, Virginia has a tax credit for vineyards, California has a tax credit for cannabis businesses, and Georgia spends more than $1 billion a year on film tax credits.

We can compare the number of such programs in each state to how pro‐​growth the overall state tax climate is. The Tax Foundation (TF) business tax climate report gives the highest scores to states with the lowest rates and most neutral and simple tax systems. That is, systems that minimize burdens and are fair to all businesses.

The chart shows my regression results using the TF rank of the 50 states to explain the number of business incentive programs. The rank of “1” is the best tax climate. (The regression was highly significant with an F‑statistic of 12.7 and a t‑statistic on the rank variable of 3.6.)

States with the best tax climates have the fewest subsidies and breaks. Wyoming (TF rank #1) and South Dakota (TF rank #2) have low tax burdens, few incentives, and no corporate or individual income taxes.

The most business handouts are in Maryland, which has a poor business tax climate (TF rank #45). On Cato governor reports, I criticized former Maryland Governor Larry Hogan for pushing narrow business breaks rather than overall tax reforms.

Why are these two variables related? Some states favor a big‐​government approach that includes both high taxes and interventionist economic development. Leaders in these states favor raising taxes to increase spending, but they also want photo‐​ops at factory openings to highlight how their special‐​interest incentives are creating jobs.

Politicians in high‐​tax states know that to attract investment under a bad tax structure they need to cut special deals. At the same time, politicians in low‐​tax states know that they do not need to dish out special‐​interest benefits because their economies are booming without them.

The bottom line: if you don’t like corporate subsidies and favoritism, you should support the simple low‐​tax structures of Tax Foundation’s top‐​ranked states.

Jeffrey Miron and Jacob Winter

Standard economic reasoning suggests that prohibitions reduce the production and consumption of the outlawed good or activity. Penalties for possession shrink demand, while penalties for production and distribution shrink supply. Thus, the quantity bought and sold should fall.

Existing evidence, however, suggests that such policies have a modest impact, whether the prohibition is of alcohol, drugs, gambling, immigration, or insider trading, to name a few. 

The explanation is presumably that laws do little to change behavior unless enforcement substantially raises the costs of engaging in the outlawed behavior, and governments have generally been ineffective in this regard.

A recent analysis of border walls (Cato Research Brief no. 381) illustrates:

[O]ur study uses United Nations High Commissioner for Refugees data on global refugee flows from 1970 to 2015 and data on all border walls built from 1945 to 2015. Our results corroborate the scholarly skepticism over the effectiveness of walls: border fences do not appear to have the effect that leaders frequently use to justify their expensive construction. Our research finds no evidence that border fences affected refugee flows between 1970 and 2015.

Even if prohibitions do reduce the targeted good or activity, they are often ill‐​advised, partly because they have adverse, unintended consequences, and partly because they lack sensible objectives in the first place.

When prohibitions fail to suppress the thing they prohibit, they make no sense whatsoever. One alternative — “sin” taxation — has its own potential negatives, but in moderation is far more likely to move outcomes in desired directions, with fewer adverse effects.

Walter Olson

In a pair of cases decided within weeks of each other in 2022, federal judges ruled that private schools’ tax‐​exempt status under section 501 (c) (3) of the tax code constituted “federal financial assistance” and thus subjected the schools to federal regulation under Title IX. For a while, it began to look as if the independence of schools that do not take federal money—among them Michigan’s Hillsdale College, as well as thousands of private and religious K‑12 institutions—was at risk. Now, in welcome news, a unanimous panel of the Fourth Circuit has reversed one of the rulings.

Donna Buettner‐​Hartsoe and her daughter sued the Baltimore Lutheran High School Association after the daughter was allegedly subjected to bullying and sexual harassment at Concordia Prep, a Lutheran high school in Towson. They sought to invoke the federal Title IX law on the grounds that the school was organized under the familiar tax exemption provisions of 501(c)(3) of the tax code, which apply to much of the nonprofit sector (including the Cato Institute).

Although considerable precedent suggested that tax exemption did not by itself constitute “federal financial assistance,” and the federal government itself had not sought to press such a claim, a Baltimore federal judge nonetheless agreed. Weeks later, a California federal judge adopted the same view in a case against a school called Valley Christian Academy. In that case, which is still pending, the judge also ruled that accepting money under the federal government’s Payroll Protection Program (PPP), which was intended to avert layoffs during the Covid pandemic, also separately constituted federal financial assistance for which it would have to submit to Title IX regulation.

Advocates were soon raising similar arguments elsewhere, including in a suit against Hillsdale College, the Michigan institution famous for spurning the federal dollar and the regulations that go with it. In December of last year, I spoke with Tunku Varadarajan for a piece he wrote on the Hillsdale College case for the Wall Street Journal. I said:

The proposition that nonprofit tax status should subject private institutions to the regulations applied to government grantees would be a radical departure from longstanding tax and legal principles and would put at risk the fundamental independence of America’s private charitable and educational sectors, to say nothing of its religious institutions.

Fortunately, back East, the Fourth Circuit panel was having none of it. In a ruling based on statutory interpretation, as opposed to the Constitution, the court marched through the text and its application over time, and distinguished cases in which federal financial assistance had been found in programs that granted students money to attend a school, thus assisting it indirectly. The court also distinguished the famous Bob Jones University case, in which a tax exemption was stripped for an institution for acting against settled public policy, as resting on an entirely different basis. (More here on why the logic of the Bob Jones case did not spread as far as some predicted.)

Let’s hope the Valley Christian Academy ruling from California is speedily reversed as well. America’s nonprofit sector should not be subjected to prolonged uncertainty about its legal status.

Colleen Hroncich

Jeana Wilson didn’t plan to get into education. But her daughter has special needs that her local school district wasn’t able to meet. She spoke with the state department of education and her daughter’s teachers, did a lot of research on individualized education plans, and joined online parent forums trying to find a solution. “That’s when a lot of moms said, ‘hey, you kind of have to piece this together yourself.’ And I saw so many moms struggling, especially ones living in underserved and lower‐​income areas where those services weren’t available,” she recalls. “And I said, ‘you know what, I’ve never taught before, but I better figure it out—for the sake of not just my daughter, but other children who need access to those services, too.’”

Three years ago, she started TwiddleU, a nonprofit organization that provides education for autistic and neurodiverse children in the greater Atlanta area. “It started off because we were trying to address learning loss during the pandemic for neurodiverse children, specifically nonverbal autistic children and children with ADHD,” Jeana says.

They initially met at a local park and community center because they were low on funds and looking for a cost‐​effective approach. They brought in a speech therapist and an occupational therapist, and it became very popular. They even received a VELA Education grant to help them get started.

“The following year we ran it out of the third floor of my house, but there are so many rules and regulations to operating anything involving children out of a home,” says Jeana. “We reached out to VELA again for the second time, and they actually gave us the funds to get into a commercial space. And it’s been phenomenal.” She expects to officially open the doors to her microschool this fall.

She also joined KaiPod for an extra boost. “Having that support is absolutely fantastic,” she says. “There are so many other blossoming microschools who are in similar positions and want to help neurodiverse children as well. And we’re just kind of holding each other’s hands, trying to get through this.”

Jeana’s background is in computer science and cybersecurity, and around ten years ago she started an IT staffing and consulting firm. “Having that entrepreneurial spirit has helped me through this venture,” she says. “I don’t get too disheartened because I’ve been through the ups and downs and the roller coasters of working through and trying to manage a business.” As a bonus, having run a staffing firm, she has access to the platforms and resources she needs to find teachers and other staff.

Because she focuses on neurodiverse students, Jeana plans to have a wide range of offerings. For her summer programming last year, she brought in a curriculum specialist who created a customized plan for every student. “It’s so interesting when you see the range of where these children are. We had three children around the same age but on different levels in different things,” says Jeana. “She sat down with each child and met with each parent. And she found out what their goals were—where they were and where they’d like to be. Then she worked with them that entire summer, and it was so nice because I think that’s what they need.”

Given the special needs of her students, TwiddleU will also emphasize life skills. “The curriculum is very important, but we also want them to grow and become independent adults,” Jeana explains. “That’s where the occupational therapy comes in. And our teachers are phenomenal with helping with that as well. So you know simple things like being able to warm up, maybe, a bowl of mac and cheese in the microwave and operate that properly. Or to bend down and tie a shoe. You know, simple things that sometimes neurotypical people don’t think about. But those are the things that they need to succeed in life.”

The schedule at TwiddleU is also designed to meet the needs of the neurodiverse students Jeana wants to serve. The original schedule was a rather typical 9 a.m.– 3 p.m. “But we noticed the kids got so exhausted,” Jeana says. So they switched to a 10 a.m. – 2 p.m. schedule. “We noticed the shorter days worked so much better for these kids. But at the same time, I had to keep in mind we have working parents. So what we’re in the process of doing now—in addition to reopening as a fully functioning microschool—is adding before‐ and after‐​school programs for those parents.” Families also have the flexibility of choosing to attend three, four, or five days a week.

Being accessible to disadvantaged families is very important for Jeana. “It has always been my passion to help families who are low income or living in underserved areas where they don’t have access to as many therapies and assistance for their children,” she explains. So she is planning to participate in Georgia’s Special Needs Scholarship Program and the new Georgia Promise Scholarship education savings account (ESA).

Considering she never expected to get into education, Jeana’s efforts with TwiddleU are all the more amazing. She’s taking individualized education to a whole new level, and neurodiverse children in the Atlanta area are going to be the beneficiaries of her vision.

Nicholas Anthony

Under the Biden administration, the government has launched an all‐​out “war on junk fees.” This “war” has covered fees charged by airlines, concert venues, and much more. It has even spread to financial services. For instance, Senator Sherrod Brown (D‑OH) has said, “Credit card late fees are the most costly and frequently applied junk fee.”

Yet the administration has been curiously silent on all of the fees charged by the government itself. From the Internal Revenue Service to local libraries, there is no shortage of fees charged by the government. To get a better sense of these fees, the table below features 101 different late fees charged by the government. Rather than jump to restrict the freedoms of the private Americans trying to operate businesses, the administration should take some time to reflect on its own activities.

Erec Smith

Recently, the University of North Carolina‐​Chapel Hill Board of Trustees voted, unanimously, to divert money from its Diversity, Equity, and Inclusion (DEI) initiatives into public safety. This is on the heels of other institutions shuttering diversity offices and laying off or repurposing positions focused on DEI work. Are we starting to see a trend? Is this the beginning of a “Great Diversion”?

Contemporary DEI initiatives have been a point of contention for years now. Anti‐​DEI sentiment, which does not necessarily mean an aversion to the concepts of diversity, equity, and inclusion per se, grows with every exposition of DEI’s driving ideology, Critical Social Justice, which is inherently, divisive, illiberal, and, actually, racist.

However, any opposition to DEI programs is usually seen as a right‐​wing attack on anything that can improve the lives of minoritized groups. That accusation holds more water in response to calls for the eradication of DEI initiatives. But the diversion of DEI funds to another worthwhile endeavor—that is, trading one good for another good—is harder to scrutinize.

Yes, UNC‐​Chapel Hill has chosen to divert DEI’s funding to public safety to prevent disruption of university operations. Whether the good of public safety constitutes a “good for good” trade is understandably debatable. However, DEI funds can also be diverted to initiatives more clearly aligned with diversity, equity, and inclusion in the true sense of those words. Initially, I thought of outreach and immersion programs.

Outreach programs geared toward K‑12 students are created by colleges and universities in collaboration with local high schools to help students understand what is necessary to get into college, what they need to do to prepare, and what to expect when they get there. When I say “immersive,” I refer to outreach programs where students visit campuses and experience what it is to be a college student or a particular major. According to the Compass Education Group’s “Guide to Successful Outreach Programs,” students and colleges benefit from such programs in distinct ways.

According to Compass, outreach programs can achieve the following for students: clarify career goals, assistance with access to resources, assistance with the application process, academic advising, introduction to a college’s academic support services, and, obviously, better prepare students for college‐​level work. This kind of outreach can assuage any “culture shock” that may set in among students from marginalized communities. It can also introduce students to the necessary merits for college success at a younger age, thus demystifying academic merits.

The benefits to participating colleges include greater student readiness, better resource management, and increases in enrollment, retention, and, of course, diversity. Regarding diversity, Compass does not mince words: “Helping these students prepare for and transition to postsecondary education helps colleges meet their diversity goals.” Redistributing money from DEI initiatives to outreach programs that can be geared toward underrepresented students may be a better way to achieve diversity, equity, and inclusion. Perhaps outreach programs are the new—and more effective—DEI initiative.

Several colleges already have outreach programs that, typically, take place in the summer. However, with sufficient funding, these programs can become more robust. In fact, non‐​profit organizations exist to do that. For example, The Hidden Genius Project, started by five black professionals, “trains and mentors Black male youth in technology creation, entrepreneurship, and leadership skills to transform their lives and communities.” This project has locations all over the country and offers a variety of programs to introduce students to entrepreneurs, leaders, and technologists through either single or multiday events or deeper and longer immersion into a professional culture. What’s more, this project’s effects align with concepts important to DEI initiatives, like cultural representation.

Hidden Genius alum, Tehillah Hephzibah says,

Growing up, I was never really in a place where a majority of the people looked like me. In the program, I enjoyed being around people who look more like myself and connecting with them. Throughout my life, all of the schools I attended were predominantly white or Hispanic students so joining The Hidden Genius Project was a sigh of relief and comfort for me.

Another program graduate, Brandon Bazile, shares a similar sentiment.

As a Black man who has only ever had at most two other Black boys in my grade, to suddenly having a group of Black males who look like me was eye‐​opening. Being taught and surrounded by excellent Black minds, inspired me to believe that I could always better myself, which was a feeling I had never felt before.

This program is a clear source of agency and empowerment for young black students, a goal DEI proponents claim to have.

MIT’s Introduction to Technology, Engineering and Science (MITES) is an outreach program that has strong partnerships with universities nationwide. The program “provides transformative experiences that bolster confidence, create lifelong community, and build an exciting, challenging foundation in STEM for highly motivated 7th–12th grade students from diverse and underrepresented backgrounds.” As with the Hidden Genius Project, representation and confidence building are some of the most salient effects of MITES.

Indigo Davitt‐​Liu, a graduate of the program, stated, “I’ve always loved math, but I always saw STEM kids as a group removed from me, a type of person I could never be. Through this program, I realized the true amount of diversity there is in STEM fields. I now see myself as part of a STEM community.” Also similar to the Hidden Genius Project, MITES immerses students in environments indicative of a given STEM field. This immersion helps students gain merits they would not have otherwise. MITE graduate Moses Stewart says,

MITES connected me with so many other brilliant and passionate people and gave me an avenue to explore a brighter future for myself. It gave me the opportunity to learn about career paths that would have otherwise been inaccessible. And, to apply and assert myself in challenging courses. Most of all, it gave me guidance and helped me grow into someone who is more confident, hard‐​working, and optimistic about the future.

The outcomes of MITES, the Hidden Genius Project, and comparable programs strongly suggest that funding for DEI programs that have proven to be more ineffective than effective could be put to better use elsewhere.

I must be clear, current DEI initiatives are often undergirded by Critical Social Justice, an ideology that frames the world into an oppressor/​oppressed dichotomy and insists that oppressive forces are present in every human interaction. Surely, funds should be diverted to initiatives that don’t promote divisiveness, resentment, and even a kind of racism. However, I believe diverting funds to immersive outreach programs for K‑12 students is so important that even DEI initiatives steeped in classical liberal values cannot be justified. Workshops on the history and nature of discrimination, cultural differences, and policy are important and should take place, but these things need not be expensive or necessarily whole offices.

No matter what ideological foundation a DEI program has, funds are better spent on programs like The Hidden Genius Project and MITES.

A great diversion is in order. DEI programs have proven relatively ineffective at enhancing diversity, equity, and inclusion, thus proving to be a waste of money. Continuing to spend money on these programs is indefensible, especially when better ways to help our students abound. The day after UNC‐​Chapel Hill diverted funds away from its DEI initiatives, Virginia Commonwealth University and George Mason University did away with required DEI courses for students. The tide is turning when it comes to diversity, equity, and inclusion. Let’s make sure it turns in a healthy and generative direction.