Stock

Travis Fisher

Disclaimer: I served as a staff economist at the Federal Energy Regulatory Commission from 2006 to 2013 and as a commissioner adviser from 2018 to 2020.

On Monday, the Federal Energy Regulatory Commission (FERC) issued a “watershed” new ruling addressing electricity transmission and the need to expand America’s power grid. The commission claims the new ruling, titled Order No. 1920 (a nod to FERC’s statutory roots), will cost‐​effectively ensure a more reliable grid. However, if the rule is effective in getting a new wave of transmission projects built, it will be a gift to developers of solar and wind projects at the expense of consumers and taxpayers. In any case, the rule is a step away from true competition and a step toward a convoluted, partisan mess.

What Order No. 1920 Does

This new rule establishes a minimum 20‐​year planning horizon for regional transmission expansion (largely to accommodate new wind and solar facilities). Despite some sugarcoating from FERC, this plan: (1) mandates that regional transmission plans socialize the cost of the most aggressive climate and renewable energy goals of some states and corporate customers at the expense of consumers and taxpayers everywhere, (2) derives from no clear authority granted by Congress, and (3) was rushed to avoid further scrutiny under the Congressional Review Act.

In other words, FERC is unlawfully supporting climate goals that Congress never approved. The need to upgrade electrical infrastructure in the United States is not controversial, but the political methods employed in this ruling are. FERC, an ostensibly independent agency tasked with ensuring reliable power at “just and reasonable” rates, goes far beyond that narrow task with this new ruling.

FERC Commissioner Mark Christie said the following about Order No. 1920 at the May 13, 2024, open meeting: “This is not about promoting reliability. This rule is a shell game designed to disguise its true agenda, which is about the money. It’s a 1,300-page vehicle to socialize the trillion‐​dollar cost of the rule’s sweeping policy agenda.” For the record, the trillion‐​dollar cost estimate is not hyperbole, and much of the cost is hidden in tax credits.

Is FERC Doing What Congress Can’t?

Senate Majority Leader Chuck Schumer (D‑NY) gave away the shell game. When asked about the new rule, Schumer stated, “We always had FERC in the back of our minds because it could be done without congressional Republican approval.” He added that “FERC is doing just about everything we asked,” regarding the new rules that bolster the Inflation Reduction Act (IRA). Notably, Congress was unable to subsidize transmission in the IRA by including a lucrative investment tax credit (although the IRA did offer some new grants related to transmission).

This is not the first political push for more transmission at FERC when Congress comes up short. Partisan leaders both past and present have found FERC to be an easier vehicle than Congress for enacting energy policy. Although convenient politically, this directly violates FERC’s independent and nonpolitical role. Both major parties have tried to politicize FERC—President Trump’s Department of Energy proposed a fiercely partisan rulemaking in 2017, which was unanimously rejected, and rightly so. The difference seems to be that Democrats are more effective at turning their preferred policies into FERC rules. Much like Order No. 1000, FERC’s recent rulemaking promises to socialize the cost of state and corporate decarbonization policies.

Order No. 1920 Probably Won’t Enhance Reliability or Reduce Costs

Uncertainties around Order No. 1920’s cost‐​effectiveness and ultimate impact are reason enough to oppose it. With this rulemaking, FERC has again failed to address its role in the ever‐​increasing cost of electricity and ever‐​weakening grid reliability. Commissioner Christie said during the open meeting:

This rule could not come at a worse time for consumers. It is indisputable that power bills are rising faster than the overall inflation rate, which is itself very high. It is indisputable that transmission rates are now the fastest‐​rising part of those power bills.… It’s an historic failure to stay within our legal authority. And, worst of all, it’s an historic failure to meet our basic obligations under the Federal Power Act to protect consumers.

Commissioner Christie is correct. Over the past 12 months, US electricity costs have risen 5 percent, which is nearly 2 percentage points higher than the overall Consumer Price Index. A common refrain from FERC is that the agency does not regulate retail sales of electricity—while technically true (the agency regulates wholesale markets), FERC cannot pretend its rulemakings have no impact on the cost of delivered power, especially when transmission costs continue to grow as a share of the total cost of electricity, as Commissioner Christie aptly noted.

Consumer advocates have been asking FERC to grapple with these cost impacts for years, to no avail. In other words, the commission has never understood how its rules impact the all‐​in cost of electricity paid by retail customers and taxpayers, so we have no reason to believe its claims that Order No. 1920 is cost‐​effective.

Further, there is no evidence that pushing the grid toward additional intermittent resources like wind and solar will enhance reliability or reduce costs. The exact opposite is more likely to be true. It is pure political propaganda to frame transmission expansion as a reliability imperative rather than a handout to developers of solar and wind projects. FERC Chairman Willie Phillips said the following in a news release:

Over the last dozen years, FERC has worked on five after‐​action reports on lessons learned from extreme weather events that caused outages that cost hundreds of lives and millions of dollars. We must get beyond these after‐​action reports and start planning to maintain a reliable grid that powers our entire way of life. The grid cannot wait. Our communities cannot wait. Our nation cannot wait.

Those of us who worry about grid reliability agree with the words above, but the logic is backward. As Robert Bryce has pointed out many times, if we expect extreme weather to worsen, there is no good reason to build a grid around weather‐​dependent resources.

FERC is right, of course, to point out that state and federal laws mandating decarbonization and electrification are “key drivers of Long‐​Term Transmission Needs.” (Paragraphs 432, 440, 442, and 481 of the final rule.) But let’s not pretend that these laws—or the FERC rulemakings that enable them—will promote grid reliability. According to the North American Electric Reliability Corporation (the reliability watchdog that reports to FERC), these policies are a growing risk to grid reliability.

Conclusion

Increasing the society‐​wide cost of energy—either directly through higher electricity prices or indirectly by magnifying taxpayer‐​funded IRA subsidies—is not only undesirable but goes against the mission of FERC. With this week’s rulemaking, the commission has decided to shape energy policy (which is the job of Congress, not independent agencies) rather than adhere to its mission of ensuring reliability while keeping energy costs reasonable. This naked partisanship is an argument for reducing the role of agencies like FERC in the energy sector at a minimum, optimally abolishing FERC and agencies like it, and devolving their legitimate functions to markets.

If FERC truly wanted to pay homage to the 1920s, it would not have issued a 1,363-page rule that imposes burdensome regulations. Rather, it would heed the wise words of 1920s President Calvin Coolidge in promoting the idea that “this country would not be a land of opportunity, America could not be America, if the people were shackled with government monopolies.” With this new rule, FERC adds yet another heavy chain to the shackles of government monopoly.

Cato research associate Joshua Loucks contributed to this article.

Neal McCluskey and Colleen Hroncich

On May 17, 1954, something necessary but not sufficient for American liberty happened: The US Supreme Court struck down de jure racial segregation in public schools. After the Civil War ended legal prohibitions against black Americans receiving even basic literacy, finally Brown v. Board of Education took the next step, declaring forced government separation in public schools anathema. But that only brought African Americans up to a better but still unfree status quo—government-controlled education—and not real educational freedom.

Of course, the road from Supreme Court declaration to desegregation was not an easy one. Many southern states refused to comply with the ruling, and the concrete structures of centuries of rank governmental and social discrimination, from segregated housing to yawning economic inequality, remained firmly in place. And, yes, “freedom of choice,” in the form of supposed choice of public schools, and vouchers for students to attend segregated private schools as public schools were shuttered, were part of this resistance.

But choice—freedom—was not the enemy.

As desegregation proceeded, and especially as it turned to mandated integration through such means as compelled busing, many African Americans embraced choice not just to get the education they wanted for their children, but for the inherent good of self‐​determination.

For one thing, African Americans lost a lot during desegregation. Compelled separation by race was repugnant but blacks had true community schools, not just with children from the community, but teachers and administrators as well. As one woman from Wilmington, North Carolina, reminisced about her once all‐​black alma mater, “We were in a cocoon bathed in a warm fluid, where we were expected to excel.”

But when integration of the school was mandated, “We went from our own land to being tourists in someone else’s. It never did come together.” Meanwhile, tens of thousands of black educators lost their jobs, a process Horace Tate, long‐​time head of the Black Georgia Teachers and Education Association, referred to as “outergration.” As “black schools” were closed, white administrators and, often, white politicians, took over.

White political majorities, just by size if not also entrenched power, exerted influence sufficient to control many integrated public schools. This, too, exasperated some African Americans. Indeed, no less a desegregation icon than Kenneth Clark, of the famous “doll test” integral to the Brown decision, called for the creation of myriad new, independent schools of choice to give black people power in education they could not exert in politically controlled, bureaucratic district schools.

Even today, some African Americans simply want to attend schools run by black people, staffed by black people, suffused with black culture, and serving black children. Indeed, many may resent what seemed to be the underlying academic assumption for mandated integration: for black children to learn, they must be in the same buildings as large numbers of white children. The refrain might be familiar: Who says that for black children to learn they must be sitting next to white children?

There’s good news for black families who are looking for different educational environments for their children. Inspired in part by the increase in black homeschoolers and in part by the expanding availability of school choice programs, education entrepreneurship in the black community is growing.

For example, Anthony Brock and his brother opened Valiant Cross Academy, an all‐​male school in Montgomery, Alabama, in 2015. “It’s the birthplace of the civil rights movement. It’s also known as the cradle of the Confederacy,” Anthony explains. “There’s so much change happening right here in Montgomery. Right now we have 200,000 residents, and we’re averaging about 70 homicides a year. And most of those are African American males.” So he and his brother felt called to open a school that would reach young black men and put them on a better path.

The desire for community. The desire for empowerment rather than assignment to undesirable schools. Both likely explain why school choice, including independent charter schools and private choice vehicles, such as vouchers and education savings accounts, typically garner more support from African Americans than other racial and ethnic groups. They are also likely the reasons why black families disproportionately choose charter schools over conventional public schools.

Of course, many black families and children no doubt want to attend integrated schools and might well be very comfortable in the minority. And they should have the ability to seek that out unrestrained by the government. This is in keeping with what Brown helped to drive forward: freedom for African Americans.

Clark Neily

“I have a theory: Qualified immunity has already been bitten by one of the walkers in the Walking Dead, and it’s in the zombification process.”

So said David French on last week’s episode of The Dispatch’s Advisory Opinions podcast while discussing a recent Fifth Circuit decision denying qualified immunity to a pair of Houston police officers in an utterly bizarre false‐​arrest case. Though he doesn’t elaborate, the idea seems to be that qualified immunity’s vital essence has been drained over the years, leaving the dead‐​on‐​its‐​feet doctrine to stagger around menacing victims of government misconduct and searching for brains to eat.

It’s a whimsical image, and I hope David’s right. But here’s an even simpler take: judicial enthusiasm for qualified immunity is starting to wain because not only is it a legal, practical, and moral failure that flies in the face of bedrock conservative convictions about limited government and personal responsibility, it’s an embarrassment to boot—as this latest Fifth Circuit case vividly illustrates. Here are the facts in a nutshell.

The plaintiff, whom we’ll call GS for “Good Samaritan,” is an Uber driver and former police officer who sees a pickup truck careening across I‑610 in Houston in the wee hours of the morning, and suspects, correctly, that the driver is stinking drunk. Worried the other motorist might kill someone, GS calls 911, manages to get the truck stopped and performs a lawful citizen’s arrest when the driver tries to flee on foot across the highway. Two officers arrive at the scene and conduct separate interviews of GS and DD (“Drunk Driver”), while also administering a field sobriety test to DD, which he fails spectacularly.

The two officers then release both men, allowing the obviously intoxicated DD to drive home in his pickup truck. Two days later, the officers, Michael Garcia and Joshua Few, swear out a thoroughly rotten probable‐​cause affidavit in which they credit DD’s incoherent and contradiction‐​riddled story that GS impersonated a police officer during the encounter on the highway. Warrant in hand, they then go to GS’s house at 3 a.m., wake him up with a ruse, and arrest him for felony impersonation of a police officer—for which he is duly charged and prosecuted until the charges are quietly dropped a few months later.

GS sues a passel of defendants, including officers Garcia and Few, who promptly—and predictably (“How are we supposed to know you can’t make bogus arrests based on fraudulent warrant applications?”) assert qualified immunity. The district court rejects that defense, and, in a surprise twist, the Fifth Circuit (which is hands down the most QI‐​friendly court in the country) not only affirms the denial of qualified immunity but does so with an uncharacteristic tone of dismay and disdain for the officers’ unseemly attempt to avoid accountability for their blatant misconduct.

Indeed, the panel begins the opinion with a snarky parenthetical, noting that it affirms the district court’s denial of qualified immunity “(Obviously”), and concludes with a scathing critique of the officers and their counsel that is honestly a bit difficult to process for anyone familiar with the Fifth Circuit’s work in this area:

It is unclear which part of this case is more amazing: (1) That officers refused to charge a severely intoxicated driver and instead brought felony charges against the Good Samaritan who intervened to protect Houstonians; or (2) that the City of Houston continues to defend its officers’ conduct. Either way, the officers’ qualified immunity is denied, and the district court’s decision is AFFIRMED.

As noted, the panel’s indignant tone is striking, particularly in light of the extraordinary largesse routinely shown to members of law enforcement by the Fifth Circuit, including granting qualified immunity to cops who deliberately tased a gasoline‐​soaked man, burning him to death in front of his wife and son, and to guards who kept a prisoner in a frigid open sewer of a prison cell for nearly a week. (Notably, the grant of qualified immunity in the latter case was so egregious that the Supreme Court reversed the Fifth Circuit without briefing or argument. Cato filed its famous cross‐​ideological amicus brief in support of that result.)

Where on earth could officers Garcia and Few and their lawyers have gotten the idea that even patently absurd assertions of qualified immunity in defense of breathtakingly unprofessional behavior by law enforcement might find receptive ears on the Fifth Circuit? It boggles the mind. (Not.)

So. What if anything does the Fifth Circuit’s remarkable volte‐​face in this recent case tell us about the status of qualified immunity: Has it really joined the ranks of the walking dead, “[like] some ghoul in a late‐​night horror movie”?

Unfortunately not. Despite constantly mounting evidence of qualified immunity’s utter jurisprudential illegitimacy—including recent scholarship that indicates the as‐​enacted (but subsequently bowdlerized) text of § 1983 explicitly rejected background immunity doctrines of any kind—and a growing chorus of academic and judicial critics, qualified immunity continues to fulfill its mission of letting rights‐​violating government officials off the hook for their misconduct and ensuring they never have to justify themselves to a jury of their fellow citizens.

But here’s the thing: Even though qualified immunity hasn’t been formally overruled or dialed back, one gets the distinct impression that it has fallen into disfavor among its berobed friends—that it has come to resemble not a zombie so much as the drunken guest at a party whose initially amusing antics are now causing the hosts to blush and wish they had never invited him to the party. If so, that would be progress. And if judges of the Fifth Circuit and other courts express contempt for government lawyers whose unseemly requests for qualified immunity underscore what a garbage policy it has always been—well, that too is progress.

Congress or the Supreme Court should formally rid us of this unjust, unlawful, and immoral doctrine. (Obviously.) And the more well‐​deserved scorn we heap upon it now, the sooner that day may come. (Hint, hint.)

Nicholas Anthony

Governments around the world are weighing whether to launch central bank digital currencies, or CBDCs. But are CBDCs even a good idea? That was one of the questions NPR hosts Paddy Hirsch and Adrian Ma asked this week on the Indicator from Planet Money.

As Hirsch pointed out, “[CBDCs] are generating a frisson of excitement in some quarters. But in others, they are sounding alarms.” Among central bankers, CBDCs are very much the latest craze. Just look at how interest has skyrocketed in recent years (Figure 1). Or look at how central bankers have been featured at conferences around the world just to discuss CBDCs.

Yet, for others, the rise of CBDCs has been deeply concerning. On financial privacy alone, Ma framed the issue well, saying, “When you spend your dollars today, those transactions are generally private. As in, the government does not know about them unless it asks, and even then, it’s not a cinch to find out what you’ve been doing with your money. That could change if we had a digital currency controlled by the central bank.” As Norbert Michel and I have explained in the past, those concerns are only the beginning. CBDCs pose risks to financial freedom, markets, and even cybersecurity.

Considering the risks here, the question “Are CBDCs a good idea?” is easy to answer. No, they are not a good idea. Without being able to offer substantial benefits that are not already offered by the market, the risks posed by CBDCs are not worth incurring.

Speaking of the market, Hirsch and Ma also shared an important note about cryptocurrency. Many listeners likely raised an eyebrow when seeing the show’s title, “Is ‘Government Crypto’ a Good Idea?” Given that CBDCs are nearly the opposite of cryptocurrency in terms of their respective principles (Table 1), it’s unfortunate that the title used the term “government crypto.”

However, the hosts did well to acknowledge the contradiction during the show. Ma said, “Of course, ‘government crypto’ is kind of a misnomer because, like we said, the whole point of cryptocurrency was that it was supposed to decentralize money. Now governments are talking about centralizing money even more than it already is.”

Ma is right. It’s no coincidence that the skyrocketing interest in CBDCs seen in Figure 1 occurred shortly after Meta announced its cryptocurrency project. Furthermore, it’s no coincidence that jurisdictions around the world have been pushing forward on CBDCs while simultaneously clamping down on cryptocurrency.

Central bankers and other government officials have even said as much. Abroad, Juda Agung, the assistant governor of Bank Indonesia, said, “A CBDC would be one of the tools to fight crypto.” Here at home, Daleep Singh, former economic advisor to President Joe Biden, said, “One of the efforts we made was to … push our government to launch a digital dollar, which I think is the single best step … because it would crowd out the ecosystem of crypto.” Similar anti‐​cryptocurrency motivations can be seen across China, the European Central Bank, France, Ghana, India, Israel, and more in the Human Rights Foundation’s CBDC Tracker.

So whether your concerns rest with preserving privacy, improving financial freedom, or embracing innovation, it seems clear that a CBDC is not a good idea.

Scott Lincicome

Today we’ve published two new essays for Cato’s Defending Globalization project:

The More Resources We Consume, the More We Have by Marian L. Tupy, explains that globalization supercharges the process of knowledge creation and knowledge dissemination, thereby leading to greater resource abundance.

How Global Markets Helped the Video Game Industry by Juan Londoño, shows that globalization has made video games more abundant and accessible and has opened avenues for gamers to monetize their hobby.

This content joins twenty‐​eight other essays and additional multimedia features on the main Defending Globalization project page.

Make sure to check it all out and stay tuned for future releases.

Nicholas Anthony

President Biden’s “war on junk fees” is only picking up steam. On May 9, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing to focus on fees charged for financial services, and it unfortunately showcased many of the core problems with this “war.”

Senator Sherrod Brown (D‑OH) opened the hearing by claiming corporate greed was the reason for inflation and that financial services are plagued by junk fees that are “surprise, often last‐​minute charges that drive up the cost of products [with] no justification.”

There is a case to be made if financial institutions are handing customers receipts that say one price, but then charge those same customers something much higher behind their backs without any notice. In most cases, that would be fraud. Yet that doesn’t seem to be what he had in mind. Instead, Senator Brown pointed to credit card late fees saying, “Credit card late fees are the most costly and frequently applied junk fee.”

Yet late fees do not seem to track with Senator Brown’s definition of junk fees. For instance, how can a late fee be considered a surprise or without justification? As a penalty, late fees are common. As Representative Brad Sherman (D‑CA) pointed out earlier this year, if “you don’t pay the IRS on time, you expect a fee.” So late fees are hardly a surprise—especially considering the possibility of being charged fees must be disclosed up front. The justification is clear: a late fee is meant to recoup costs incurred due to a payment coming in late and discourage customers from being late in the future.

So, it’s a mystery how “late fees” can be termed “junk fees,” according to the senator’s definition. And it’s an even greater mystery how this definition can be used to restrict late fees in the private market and yet officials remain silent on late fees charged by the government (Table 1).

At a broader level, this example captures a wider issue with the Biden administration’s war on junk fees—something my colleagues Ryan Bourne and Sophia Bagley have described at length. The administration might wish the term “junk fee” was an established term to describe fees that are objectively wrong, but the administration has instead used it in practice to essentially describe anything it doesn’t like.

Senator Tim Scott (R‑SC) addressed this issue well at the hearing when he warned against taking the “politically expedient” route in calling for price controls:

Sure, it might be easy, or even politically expedient, to slap a label of “junk” or “excessive” on additional costs for legitimate products and services in an effort to villainize business in America…. But it is long past time that Democrats stopped playing political games with price controls and trying to micromanage the business operations.

Senator Scott is right. It’s too easy to fall back on the idea that the government simply needs to set the right price and everything will be okay. That’s not how things work in practice. The world is far too complicated and information changes far too much for any singular entity to plan the entire economy. Furthermore, as Ryan Bourne’s new book, The War on Prices, demonstrates, it doesn’t matter if we are talking about financial services or health care, price controls are bad policy.

Are you interested in learning more about how price controls distort the market? Ryan Bourne’s latest book, The War on Prices, is available here and features 24 chapters that will walk you through price controls large and small.

Clark Packard

Today, the Biden administration announced it is quadrupling tariffs on imported electric vehicles (EVs) from China, while also imposing new tariffs on steel and aluminum, certain critical minerals, solar cells, batteries and battery components, ship‐​to‐​shore cranes, medical products, and semiconductors. The tariffs will shield from Chinese competition many of the very US industries the Biden administration showered with protectionist subsidies as part of its industrial policies enacted in the Inflation Reduction Act and CHIPS and Science Act. And they raise several problems.

A (Political) Solution in Search of a Problem

First, the United States already levies a 27.5 percent tariff on Chinese‐​made EVs—a 25 percent tariff already imposed under Section 301 plus a 2.5 percent most‐​favored nation tariff—which explains why Chinese producers’ share of the US EV market is currently around 1 percent. New Section 301 tariffs of 100 percent will likely ensure that Chinese‐​made EVs are effectively banned from the United States, but they were never really here in the first place.

Thus, the new EV tariffs are similar to the steel tariffs also announced today by the Biden administration, which I covered with my Cato colleagues Scott Lincicome and Alfredo Carrillo Obregon last month. In the case of steel, the US has essentially eliminated Chinese products from the market using antidumping and countervailing duties. And like the new steel tariffs—and President Biden’s opposition to the purchase of US Steel by Japanese‐​based Nippon Steel on bogus “national security” grounds—the new EV tariffs are driven mainly by domestic political calculations and the 2024 presidential campaign, not economics or geopolitics.

Citing anonymous administration officials, Politico confirmed as much last week: with the Trump campaign promising a 60 percent tariff on all imports from China, the Biden administration apparently feels compelled to respond with its own tariffs, in the hope of appealing to unionized auto workers in the Midwest. (Trump, meanwhile, responded to reports about Biden’s 100 percent EV tariff last Saturday with a promise to levy a 200 percent tariff on Chinese EVs made in Mexico.)

It’s truly a race to the protectionist bottom.

Bad Policy

Second, Biden’s EV tariff move is terrible policy.

Most obviously, the EV tariffs will harm American consumers, similar to how US auto protectionism did in the 1980s. Back then, high oil prices had driven American consumers to purchase smaller, more fuel‐​efficient cars (a segment largely dominated by Japanese producers). The Reagan administration responded to the competitive threat to US “Big Three” automakers by pressuring Japan to impose limits on automobile exports.

As Lincicome explained last year, research shows that those restrictions raised the price of Japanese automobiles in the United States by an average of about $3,700 (in 2022 dollars). But by restricting lower‐​priced suppliers’ access to the US market, the import restrictions also allowed domestic automakers to raise prices by an estimated $2,138–$2850 per car (2022 dollars). And European automakers raised their US prices even more. Overall, the restrictions on Japanese cars cost American consumers more than $16 billion (2022 dollars) per year throughout much of the 1980s.

Chinese EV imports today raise some different issues than did Japanese cars in the 1980s, but the consumer harms of US protectionism will likely be similar. Today, by many accounts, China is producing some pretty good quality EVs at prices well below those for most EVs in the US market (even with generous IRA subsidies). Effectively banning Chinese EVs will thus give remaining automakers in the United States room to keep EV prices higher than they’d otherwise be, to American consumers’ detriment. And, unlike the case of Japan in the 1980s, it’s all but certain that Chinese automakers will be barred from investing in the United States to jump this new tariff wall.

The tariffs will thus eliminate potentially important competitive pressures on US automakers, which—other than Tesla—are largely laggards in the EV market. (Bloomberg just reported, for example, that Ford lost more than $100,000 per EV during the first quarter of 2024 as demand and prices fell.) That’s also bad for American consumers—and the long‐​term health of the US industry.

Furthermore, by raising the price—and thereby stunting the deployment—of EVs, the tariffs undermine the Biden administration’s stated goals of reducing carbon emissions (as many US environmentalists and EV fans have recently lamented). In this regard, the EV tariffs (and also‐​announced solar tariffs) would continue the administration’s habit of choosing politics and protectionism over their environmental agenda.

Consumer subsidies in the IRA, for example, are limited to purchases of a small handful of North American‐​made EVs, and the Biden administration has already maintained many of the (ineffective) solar tariffs it inherited from the Trump administration and, in addition to increasing tariffs on Chinese solar cells, is actively considering new tariffs on imported solar products from Vietnam, Cambodia, Thailand and Malaysia that are allegedly subsidized and/​or dumped into the US market, as my Cato colleague Jim Bacchus recently explained.

Wrong Legal Tool

Third, Biden’s tariff announcement is legally dubious (to put it nicely). Section 301 of the Trade of 1974 allows the US Trade Representative to investigate and attempt to remedy “unfair” actions and policies taken by foreign governments that violate US trade agreements or unreasonably hurt and/​or burden US commerce. The statute is designed to create leverage to pry open foreign markets by forcing targeted governments to remove the offending actions or policies. Section 301 was widely used in the 1980s but fell out of favor once the World Trade Organization (WTO)—with its binding dispute settlement system—replaced the General Agreement on Tariffs and Trade in 1995. That is until the Trump administration dusted off the statute.

Six years ago, the Trump administration utilized Section 301 to levy its tariffs on imports from China. The crux of the case was that Beijing’s intellectual property abuses harm US commercial interests to the tune of about $50 billion per year, and that tariffs of an equivalent amount were needed to induce changes in Chinese IP policy. Now, as part of the two‐​year, statutorily‐​mandated review of those tariffs—during which many American firms thoroughly documented the harms of the Trump administration’s tariffs—the Biden administration will use the same Section 301 authority and findings to levy the new EV and other tariffs. But Chinese subsidies for EVs—and supporting “strategic” domestic sectors—have nothing to do with Beijing’s IP abuses as documented in the original Section 301 Report.

As already noted, the main motivation for new EV and other tariffs is politics, but even more legitimate US concerns about Chinese EVs have nothing to do with IP. Instead, they mostly center around cybersecurity and shielding American’s privacy from Beijing. As the New York Times recently reported, “Mr. Biden has previously raised concerns about Chinese electric vehicles, saying that internet‐​connected Chinese cars and trucks posed risks to national security because their operating systems could send sensitive information to Beijing.”

If policymakers in Washington want to argue that imported Chinese‐​made EVs pose a security risk to the United States, they should utilize Section 232 of the Trade Expansion Act of 1962 (which the Trump administration used to impose tariffs on steel and aluminum from virtually every country in the world, including allies like Canada), not Section 301. Section 232 requires the Commerce Department, in consultation with the Defense Department, to investigate whether imports of a particular product pose a national security risk to the United States and if so, grants the executive branch virtual carte blanche authority to restrict the importation of that product.

On the other hand, if the administration wants to argue that tariffs are needed to counteract Chinese subsidies, we have a law for that too: the US countervailing duty law, which lets the US government—consistent with WTO rules—apply remedial duties on subsidized imports (from China or any other country) that injure or threaten to injure American manufacturers of the same product. The European Union is currently considering whether to apply countervailing duties on subsidized EV imports from China.

Taking this sort of blasé approach—flippantly ignoring the procedural and substantive difference between Section 301 and Section 232—for political expedience further undermines the rule of law concerning US trade policy. Such abuse not only dims the substantial benefits of international trade and investment over the long run but also makes it easier for a new Trump administration to further abuse US trade law and impose their tariffs.

Conclusion

New tariffs on imported EVs and other products from China are driven mostly by domestic political calculations in the run‐​up to the 2024 presidential election. At the same time, the tariffs are bad news for American consumers and broader climate goals, and they’re a blatant misuse of the Section 301 statute. The US desperately needs a return to sound, rules‐​based trade policy.

Jeffrey A. Singer

Last March, a report from the Association of American Medical Colleges (AAMC) projected a shortage of up to 86,000 physicians, including as many as 40,000 primary care physicians. The report noted that, as of 2021, as many as 17 percent of active physicians were over age 65, with an additional 25 percent of the physician workforce between age 55 and 64, concluding, “it is very likely that more than a third of currently active physicians will retire within the next decade.”

According to a study of 15 major metropolitan areas by Merritt Hawkins, the average wait for a first‐​time appointment with a primary care physician (PCP) is now 26 days. The wait is 31.4 days for an Ob‐​Gyn appointment, 26.6 days for a cardiology appointment, and 16.4 days for an orthopedics appointment.

Most state licensing boards require physicians to graduate from an accredited medical school and complete at least one year in an accredited residency program before they are licensed to practice medicine. State licensing boards grant the Accreditation Council on Graduate Medical Education (ACGME) a monopoly on accrediting residency programs. In 1981, the American Medical Association (AMA), AAMC, American Hospital Association, and a few other medical specialty societies created the ACGME.

I have argued for expanding the scope of practice of other health professionals, from nurse practitioners to pharmacists to doctorate‐​level clinical psychologists, to the full extent of their training to expand patients’ access to health care services.

Now Jay Greene, an education policy analyst at the Heritage Foundation, has weighed in on the issue by bringing attention to the critical fact that, for decades, the allopathic and osteopathic medical professions have kept a tight lid on the production of new MDs and DOs through the government‐​granted monopoly they wield on medical school accreditation. For decades, the Liaison Committee on Medical Education (LCME), created by the AMA and the AAMC, and the American Osteopathic Association Commission on Osteopathic College Accreditation (COCA) have restricted the number of medical schools they accredit.

Greene correctly points out that this artificially reduces the number of domestic medical school graduates and suggests that, over the years, it has led to a growing proportion of doctors entering residency programs who have graduated from foreign medical schools. However, after reading Greene’s “Backgrounder,” I can’t help but conclude that he is more concerned about the number of doctors who are immigrants and graduated from foreign medical schools than he is about increasing patients’ access to health care services.

Graduates of foreign medical schools accredited by the Educational Commission for Foreign Medical Graduates (ECFMG) may apply to ACGME‐​accredited residency programs in the United States, providing they obtain a J‑1 immigration visa. These graduates comprise most international medical graduates (IMGs) who seek residency slots in this country. American nationals who attended ECFMG‐​accredited medical schools overseas don’t need a visa. The ECFMG was created in partnership with the National Board of Medical Examiners (NBME). States granted the NBME a monopoly on administering the standardized US Medical Licensing Exam (USMLE). Can you see a pattern emerging?

Upon completing their residency, international medical graduates who obtain H1B visas or permanent legal resident status (green card) may enter practice providing medical care to Americans.

State licensing boards require that fully trained foreign doctors who are licensed, working, and experienced in other countries repeat the residency training they already received in the foreign country in an ACGME‐​accredited program in the US, which increases the number of med school grads competing for the scarce number of residency slots.

The Residency Bottleneck

Greene contends that medical school graduates have a surplus of residency programs to choose from. Yet, every year, roughly 8 percent of MD and DO med school graduates are left without a residency position during Match Week in the National Residency Matching Program. These graduates are left in a state of limbo: they can’t get the required residency experience they need for a medical license, and they can’t work in medicine. At the same time, while they must wait another year for Match Week, they owe hundreds of thousands of dollars in student loans. Several states have created a position called “Assistant Physician,” which enables these graduates to work as apprentices to doctors and gain experience taking care of patients while earning some money and waiting for the next Match Week.

Greene proposes that lawmakers rescind the monopoly they have granted medical school accreditors. This would open the accreditation market, make it more competitive, and likely result in a greater number and diversity of medical schools. This, in turn, should produce a greater number of American doctors. Stimulating free markets and consumer choice is always a good idea, and medical education is no exception.

Greene argues that if there were more American medical school graduates, fewer residency slots would be available for foreigners because graduates of American medical schools would gobble them up. There’s a good chance he’s correct.

To ensure he’s correct, Greene proposes that the government require residency programs to offer positions based on nationality rather than merit. He wants residency programs to accept Americans first and immigrants only after they have run out of American applicants—sort of DEI in reverse.

Greene argues for increasing the number of domestic med schools but dismisses the notion that there aren’t enough residency positions to accept all the new graduates, contending there are plenty of slots available for all the American med school grads.

However, unless states rescind the monopoly they grant the ACGME on accrediting residency programs, the doctor production bottleneck will persist, no matter how many more students graduate from US med schools.

If lawmakers adopt Greene’s proposal, the only change will be the increase in the number of IMGs driving Ubers relative to the number of American grads practicing medicine. People will still have to wait an average of 26 days for a first‐​time appointment with a PCP. However, it will be more likely that the PCP will be an American rather than an immigrant. Perhaps, over several years, as more medical schools open to produce more doctors, the number of residency programs will increase to accommodate them, and the total ratio of doctors to patients will improve. But that won’t happen quickly.

If Greene is interested in creating access to a free, growing, and dynamic market for health care services, he should also call on states to rescind the ACGME residency accreditation monopoly. This would make opening more residency slots in response to demand easier.

Greene should also support granting provisional licenses to fully trained, licensed, and experienced foreign doctors who migrate to the US, sparing them from repeating their residency (and needlessly competing with recent med school grads for residency positions) and adding to the pool of physicians who offer services to Americans. Tennessee became the first state to enact such a reform in 2023. This year, several more state legislatures have enacted provisional licensing for IMGs. These foreign doctors receive full medical licenses after two or three years of practicing under a licensed physician’s supervision.

Let Markets Work, Let Patients Choose

The best way to increase access to health care would be to not only adopt Greene’s proposal to rescind the medical school accreditor monopoly but to add to it by rescinding the ACGME residency accrediting monopoly, granting provisional licenses to experienced foreign doctors already practicing in other countries, and removing government‐​imposed scope of practice limits on the various other health professions so they can practice to the full extent of their training.

We would welcome more American medical school graduates. We should welcome international medical school graduates able and eager to provide health care services. And we should also welcome non‐​physician health professionals trained to competently provide health care services. As with other goods and services, more choices and competition benefit consumers—in this case, health care consumers.

Instead, Greene makes a nativist/​protectionist argument (“These foreigners are taking our medical jobs!”) for increasing the proportion of doctors who are domestically born and trained. Yet he does not address the problem of not having enough doctors to meet the growing demand of an aging American population while an aging physician population retires more quickly than it gets replaced. 

Ryan Bourne

Today the Cato Institute publishes a new book that I’ve edited, The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy.

The multi‐​author volume* debunks a host of popular misconceptions about the recent inflation, documents the harmful consequences of current and historical government price controls, and pushes back on the misguided moral and economic arguments driving these pricing interventions.

Among other contemporary controversies, the chapters document that:

The recent US price level surge was primarily caused by excessive macroeconomic stimulus from Washington DC, not corporate greed, “supply shocks,” wage‐​price spirals, or other specific prices “driving” the overall price level.
Politicians and central bankers have nevertheless deflected blame for this inflation onto corporations and external forces, legitimizing and encouraging a “war on prices” through damaging proposals against supposed “price gouging,” “junk fees,” and “shrinkflation.”
Federal, state, and local governments already institute damaging price controls in a range of individual markets, including on rents, interest rates on short‐​term loans, minimum wages, prices amid emergencies, healthcare premiums, credit card late fees, and much else.
From ancient Egypt to the modern US, the most common incarnation of price control, price caps, have created shortages, lower‐​quality products, and black markets, and can be especially harmful to the poor.
Far from being a free market, US healthcare is riddled with effective government price controls that typically drive up market prices.
Supposed “junk fees” often have an important economic rationale, and restricting or banning them can produce a range of unintended consequences.
Even when increasing minimum wage rates does not cause job layoffs, firms can adjust by cutting non‐​wage benefits, introducing less flexible work schedules, and lowering the quality of the work environment, all to the detriment of workers. A higher government wage floor also typically does very little to reduce poverty.
Both the “pink tax” (women paying more for seemingly similar products) and the “gender pay gap” (women being paid less than men, on average) overwhelmingly reflect choices families make, not business “sexism.”
Uber‐​style dynamic pricing, far from being something customers should fear, can be highly beneficial to them in a range of sectors.

There’s much more of interest in the book, including analysis of price controls in World War II, Modern Monetary Theory, water pricing, CEO pay, oil and gas price controls in the 1970s, the morality of market prices, the relationship between prices and value, and the deadly consequence of banning trades for money in kidney markets.

The War on Prices has received some excellent reviews from a diverse range of economists and commentators. See the advanced praise or read a longer introduction. You can order your copy here!

*Contributors include Brian Albrecht, Pedro Aldighieri, Nicholas Anthony, David Beckworth, Eamonn Butler, Vanessa Brown Calder, Michael Cannon, Jeffrey Clemens, Bryan Cutsinger, Alex Edmans, Peter Jaworski, Pierre Lemieux, Deirdre McCloskey, Jeffrey Miron, Liya Palagashvili, Joseph Sabia, J. R. Shackleton, Peter Van Doren, and Stan Veuger.

Michael F. Cannon

Rena Conti, Richard Frank, and David Cutler recently published a very useful piece in the New England Journal of Medicine under the title, “The Myth of the Free Market for Pharmaceuticals.” Conti, Frank, and Cutler shatter the common myths that the United States has “largely unregulated prices” for medical care (Los Angeles Times) or is “one of the only developed countries where health care is left mostly to the free market” (The Economist).

The authors detail multiple ways that government intervenes in and distorts the pharmaceutical market and conclude, “The net effect of these deviations from the free‐​market ideal is that prices are high.” When drug manufacturers like Merck claim, “Congress has long been committed to a free‐​market approach based on market‐​driven prices,” these producers are merely trying to protect the government interventions that let them charge higher prices than would prevail in a free market.

This problem is not unique to the pharmaceutical industry but pervades the entire US health sector. In the new Cato Institute book The War on Prices (release date May 14), I contribute a chapter with the title, “Government Price Fixing Is the Rule in U.S. Health Care.” I explain that—contrary to industry propaganda that holds government price controls only result in inefficiently low prices—US medical prices are often high because government controls them. For example, “studies conducted in the USA generally conclude that price setting by a regulator…improved hospital financial stability.”

Remember that the next time the hospital lobby comes calling.

Still, it’s hard not to quibble with what Conti, Frank, and Cutler describe as some of the features of free markets.

When they write, “In free markets, consumers are assumed to be fully informed,” the passive voice betrays that they are conflating the concept of real‐​world free markets with the theoretical concept of perfectly competitive markets. Free markets can and do exist. In contrast, there are few markets, if any, that satisfy all the requirements for perfect competition. To conflate the two deprives the term free market of utility.

It is likewise imprecise to enumerate that drug ads “are often misleading,” that “most consumers are insured,” or that “doctors may be financially rewarded for using more expensive drugs even when less expensive drugs are equally effective” as among the pharmaceutical market’s “deviations from the free‐​market ideal.” As much as I like the authors’ main conclusion, misleading advertising, health insurance, and conflicts of interest would all exist in a free market. Indeed, misleading advertisements might indicate the market is too free because government is not doing its job of preventing producers from using fraud to overcome the will of consumers.