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Jeffrey A. Singer

A December 12 report in the UK Independent implies Elon Musk thinks most homeless people are “violent drug zombies with dead eyes, and needles and human feces on the street.” That’s an oversimplification, to say the least.

The report claims President-elect Donald Trump wants the government to force homeless people into drug treatment and mental institutions or face arrest. It cites the Trump/​Vance Agenda 47 website:

[W]orking with states, we will BAN urban camping wherever possible.

Violators of these bans will be arrested, but they will be given the option to accept treatment and services if they are willing to be rehabilitated. Many of them don’t want that, but we will give them the option.

We will then open up large parcels of inexpensive land, bring in doctors, psychiatrists, social workers, and drug rehab specialists, and create tent cities where the homeless can be relocated and their problems identified…

…And for those who are severely mentally ill and deeply disturbed, we will bring them back to mental institutions, where they belong, with the goal of reintegrating them back into society once they are well enough to manage.

Both Musk and Trump appear to give short shrift to a major cause of homelessness: a growing shortage of affordable housing. As Vanessa Calder Brown wrote in a Cato briefing paper, “Reforms that eliminate zoning, improve permitting speed, legalize greater housing density, and remove barriers to housing innovations—including co-living units, tiny homes, and manufactured homes—are all part of a successful strategy to reduce homelessness.” Building codes and land use and zoning laws are largely state-level issues.

Another key contributor to homelessness is mental illness. Two-thirds of homeless people have a mental illness, and up to 20 percent of the homeless may have schizophrenia. In many cases, mental illness is the force driving alcohol and illicit drug use. The Substance Abuse and Mental Health Services Administration points out that, in many cases, people with mental health problems “misuse these substances as a form of self-medication.”

Contra President-elect Trump’s proposal, the government coercing people, directly or indirectly, to undergo mental health or drug addiction treatment flagrantly assaults their autonomy. As psychiatrist and civil libertarian Thomas Szasz wrote in his classic work The Myth of Mental Illness: Foundations of a Theory of Personal Conduct, “Involuntary psychiatric interventions violate the fundamental moral and political principles of free societies and turn psychiatric authority into a species of despotism.”

Numerous studies have also failed to find evidence that involuntary mental health treatment is effective. There is some evidence it may increase suicidal tendencies.

Studies on the efficacy of mandatory drug rehab have also had negative results. Compulsory drug rehab has high relapse rates. There is also evidence that it increases the risk of subsequent overdose deaths among people released from rehab.

Enforcing public nuisance laws or penalizing actions like blocking streets, creating public health hazards, or disturbing the peace is not inappropriate or unjust. Incarcerating peaceful people who choose to live unhoused is. And coercing people with substance abuse and mental health problems to undergo treatment assaults their autonomy.

President-elect Trump’s pick for Secretary of Health and Human Services, Robert F. Kennedy, Jr, is seriously interested in reforming the public health agencies. Trump’s pick for the Food and Drug Administration, Dr. Marty Makary, has a history of challenging conventional narratives and welcoming outside-the-box ideas. One reform that both should consider, which can help mitigate the homelessness crisis, is ending the FDA’s Risk Mitigation and Evaluation Strategy (REMS) program it imposes on the drug clozapine—the only drug that the FDA has approved for treatment-resistant schizophrenia.

As Josh Bloom, PhD of the American Council on Science and Health, and I wrote in The Hill last month, “the REMS program has unintentionally created barriers that disproportionately affect individuals with severe mental illnesses like schizophrenia, further compounding the significant challenges they already face, including unemployment, substance abuse, heightened suicide risk and homelessness.”

An estimated 30 percent of schizophrenic patients do not respond to first-line antipsychotic drugs. Yet, clozapine is prescribed to only 4 percent of these patients in the United States—a situation that underscores a significant gap in treatment.

Bloom and I argue that REMS programs mandated by the government are redundant. Once the FDA approves a drug for marketing, manufacturers will monitor it for long-term risks to protect their reputation and avoid liability. Additionally, physicians prescribing high-risk medications routinely monitor their patients, as failing to do so constitutes malpractice.

There are about 653,000 homeless people in the US today. That population could be potentially reduced by 60,000–120,000 with easier access to a long-used, effective drug for schizophrenia. If the incoming Trump administration is serious about reducing homelessness, eliminating the FDA’s REMS program is a good place to start.

Mike Fox

Carrying large amounts of cash is not a crime in the United States. But tell that to Stephen Lara, a Marine Corps combat veteran who was stopped by the Nevada Highway Patrol for allegedly following a truck too closely. A trooper interrogated Lara, who acknowledged having $87,000 in cash in the trunk of his car. Lara was never arrested or charged with a crime. But that did not stop the Nevada Highway Patrol from seizing his life savings and handing it over to the US Drug Enforcement Administration (DEA).

Civil forfeiture is the practice by which the government seizes people’s money or property supported only by probable cause, a bare-bones suspicion of wrongdoing—without securing a criminal conviction or even filing charges. Upon seizing property, the government initiates a civil suit—not against the owner but against the property itself—and owners must navigate a costly and convoluted process to get their property back.

Equitable sharing is a program administered by the Department of Justice under which state and local law enforcement agencies can share their forfeiture proceeds with federal agencies who then pursue forfeiture under federal law. It is common for state and local law enforcement agencies to use the equitable sharing program to sidestep state laws that seek to limit civil forfeiture. By handing Lara’s money over to the DEA, the Nevada Highway Patrol would see 80 percent returned to them. In exchange for “sharing” the remaining 20 percent with the DEA, the Nevada Highway Patrol can circumvent the state’s comparatively more robust legal protections regarding civil forfeiture, including Nevada’s requirement that the government meet a higher standard of proof. Nevada law requires prosecutors to provide clear and convincing evidence connecting seized property to a forfeitable crime, meaning it must be highly likely that seized property is connected to a crime. On the contrary, the federal standard is a mere preponderance of the evidence, a more deferential evidentiary standard, meaning it is more likely than not that seized property is connected to a crime.

Represented by the Institute for Justice, Lara challenged the forfeiture and immediately got his money back after the case garnered significant media attention. Unfortunately, most victims of civil forfeiture are not able to retain effective counsel and find the process so cumbersome that they end up hoisting the white flag in defeat.

Civil forfeiture traces its roots back to 16th-century England and beyond, where its antecedent was used to seize ships and uncustomed goods from foreign smugglers. Congress likewise initially authorized civil forfeiture to go after pirates and smugglers. But it was not until the war on drugs that civil forfeiture became widely used by law enforcement. While proponents claim civil forfeiture is an effective tool for going after drug kingpins, the data tell a different story. The Institute for Justice found that in Philadelphia between 2012 and 2018, the median cash forfeiture was a paltry $178 and that civil forfeiture was disproportionately used against poor people of color with little recourse to fight back.

The Fifth Amendment Integrity Restoration (FAIR) Act sponsored by Sen. Rand Paul (R‑KY) and Sen. Cory Booker (D‑NJ) is an effort to reign in these abuses. The FAIR Act would

eliminate the equitable sharing program to guarantee that state efforts to protect the rights of their citizens are not defeated by federal overreach;
remove financial motivations for seizures by redirecting all forfeiture proceeds from the Justice Department’s Assets Forfeiture Fund to the Treasury’s General Fund;
raise the evidentiary standard from a preponderance of the evidence (more likely than not) to the less deferential clear and convincing (highly probable) evidentiary standard; and
make it easier to challenge forfeitures by ensuring access to counsel for indigent property owners and requiring judicial oversight.

Civil forfeiture is both easy to initiate and difficult to challenge. The ability of the government to strip a person of their property by simply alleging it may have been connected with a crime in some way eviscerates property rights and runs afoul of the fundamental concept of due process as enumerated in both the Fifth and Fourteenth Amendments. Americans should be able to rest assured knowing that their government will not be able to steal their life savings on a whim. 

George Selgin

Having questioned, in a previous post, some proclaimed benefits of a Strategic Bitcoin Reserve, and specifically the claim that building such a reserve would strengthen the US dollar, I now wish to say something about what the proposed Bitcoin reserve will cost. In particular, I wish to discuss the cost of the BITCOIN Act’s plan to have the US government buy up to a million Bitcoins over the course of the next five years.

Too Good to Be True

“Cost?” you may be thinking; “What cost?” After all, as a recent report on the plan points out, it and some other proposals plans for establishing a Strategic Bitcoin Reserve neither require any increase in taxes nor add to the national debt. “Instead,” the report explains, “the government could leverage its existing resources, particularly gold certificates held at the Federal Reserve’s 12 banks.”

No new taxes? No more government borrowing? Glory and hallelujah! The authors of the BITCOIN Act have discovered a way to treat the taxpaying US public to a one-million Bitcoin (or, at today’s Bitcoin price, approximately $100 billion) free lunch! It seems too good to be true!

Alas and alack, and as usual, it is. Despite not calling for any new taxes or for any addition to the national debt, the BITCOIN Act is no free lunch. Instead, the proposed Bitcoin purchase will actually end up costing the government more than if the Treasury raised the necessary funds by selling securities. 

To understand why, we must delve into the details of the BITCOIN Act’s “Bitcoin purchase plan.” That plan, which would have the government acquire up to 200,000 Bitcoin every year for five years, actually consists of three components. First, for five years, it would tap into the Federal Reserve System’s Treasury remittances—the interest the Fed earns on its security holdings minus Fed banks’ interest and operating expenses—devoting up to $6 billion of those remittances per year to Bitcoin purchases. Second, it would transfer $4,425 billion from the Federal Reserve System’s capital surplus account to the Treasury’s general fund, also to be spent on Bitcoin, reducing the Fed’s surplus to less than $2.4 billion. Finally, by changing gold’s official price from its present level of just over $42.22 per fine troy ounce to something like gold’s present market price of almost $2,700 per ounce, and having the Fed monetize the resulting circa $700 billion gain in the official value of the Treasury’s gold stock, it would supply the Treasury with ample funds with which to purchase up to 200,000 Bitcoins per year for five years. Were the Treasury able to buy all those Bitcoins at an average price of $100,000, those purchases would cost $100 billion, or about one-seventh of the Treasury’s golden gain. Put another way, were it to end up having to pay an average price of $700,000 per Bitcoin, the government could still afford to buy a million coins without having to draw on existing tax revenues, raise taxes, or float more debt.

Run Dry

Because the BITCOIN Act mainly relies on the third gold-revaluation method for financing a one-billion coin Strategic Bitcoin Reserve, I want to devote most of this post to assessing that part of the act’s Bitcoin purchase plan. But let’s first consider the plan’s other components.

The first of those other components—the plan to devote some of the Fed’s Treasury remittances to Bitcoin purchases—can be dealt with quickly because it’s unlikely to be taken advantage of. That’s so because, instead of earning a profit as it almost always used to, thanks to having to pay higher rates on bank reserves than it earns on the long-term securities it gobbled up during past crises, the Fed has lately been losing money hand over fist. As a result, it hasn’t sent the Treasury any money since September 2023, and it won’t do so again until it has first paid down over $200 billion in accumulated paper losses. Since the Congressional Budget Office was already predicting in June that doing so would take until 2030, the BITCOIN Act’s Fed remittance component isn’t likely to fund any substantial Bitcoin purchases.

Budgetary Slight-of-Hand

That the Fed has been running in the red doesn’t altogether prevent the Treasury from taking advantage of it to fund a Strategic Bitcoin Reserve. In fact, all three components of the BITCOIN Act’s Bitcoin purchase plan have the Fed helping out in some fashion, if only unwillingly, while the remittance-diversion plan alone depends on its turning a profit.

Instead of relying on those profits, the Bitcoin purchase plan’s second component has the Treasury grabbing most of the Fed’s capital surplus. Even now, at $6.8 billion, that surplus is paper thin compared to its $29.3 billion level when the FAST (Fixing America’s Surface Transportation) Act was passed in December 2015. Having failed to agree to legislation that might have allowed the FAST Act’s $305 billion price tag to be fully paid by traditional means, Congress chose instead to limit the Fed’s surplus capital to $10 billion. Doing so forced the Fed to immediately fork $19.3 billion over to the Treasury, which added it to the Highway Trust Fund. Two 2018 appropriation bills transferred another $3.2 billion of the Fed’s surplus capital, capping it at its remaining, lowered level of just $6.8 billion.

Although the FAST Act wasn’t the first time Congress treated the Fed’s surplus as a source of off-budget funding—in 1933, it drew on it to provide the FDIC’s working capital—the 2015 measure marked the first use of the Fed’s capital to fund activities having nothing to do with monetary or bank regulatory policy. So it’s pretty obvious that the BITCOIN Act’s plan to once again raid the Fed’s capital was inspired by the FAST Act precedent.

What’s wrong with that? The same thing that was wrong with the FAST Act’s own Fed raid, namely, that even if it did the Fed no harm, it amounted to what former Fed Chair Ben Bernanke called “a form of budgetary sleight-of-hand that would count funds that are already designated for the Treasury as ‘new’ revenue.” As Bernanke explained when the FAST Act was in the works, to actually come up with the $19.3 billion it owed the Treasury, the Fed had to sell securities, thereby reducing its future earnings and future Treasury remittances. “The net effect,” Bernanke says, “is precisely the same as that resulting from the issuance of fresh government debt.” Cato’s Center for Monetary and Financial Alternatives adjunct scholar Jeff Hummel reached the same conclusion while supplying further details. So did a 2002 GAO study of the general fiscal consequences of reducing the Fed’s surplus capital. “Amounts transferred to the Treasury from reducing the [Fed’s] capital surplus account,” the study says, “would be treated as a receipt under federal budget accounting but do not produce new resources for the federal government as a whole.” 

Nor is it certain that reducing the Fed’s surplus capital to avoid raising taxes or increasing the national debt does no harm. Although it’s true that fiat-money issuing central banks can operate without capital, as a 2017 GAO investigation reports, academics and Fed officials worry that the practice “might lead the public and financial markets to question if the Federal Reserve was independent from the executive and legislative branches.” The GAO also concluded that such questioning becomes more likely when recurring transfers threaten to eventually reduce the Fed’s capital to zero.

Striking Gold

So we come to the third and most important component of the BITCOIN Act’s Bitcoin purchase plan: the funding of Bitcoin purchases using the proceeds from gold revaluation and monetization. Although the Federal Reserve banks haven’t owned any gold since January 1934, their assets include Treasury gold certificates worth over $11 billion. Those certificates are backed by an equal sum of gold, according to its official price of just over $42.22 per troy ounce. The gold itself is owned by the Treasury and stored at Fort Knox and various other Treasury depositories. Were the BITCOIN Act to pass, gold’s official price would be raised to its market price. Assuming a market price of $2,700 per ounce, that would make the Treasury’s gold officially worth almost 64 times its present value. The Treasury would then swap new gold certificates reflecting gold’s higher official price for the ones now in Fed banks’ possession. Upon receiving the new certificates, the Fed banks would have 90 days in which to “remit the difference in cash value between the old and new gold certificates to the Secretary for deposit in the general fund,” thereby monetizing the Treasury’s accounting profit.

Still assuming gold to be worth $2,700 per ounce, these transactions would yield the Treasury a tidy sum just shy of $700 billion. Were the Treasury able to buy a billion Bitcoin at an average price of $100,000, or somewhat more than Bitcoin’s actual market price as I write this, the gold monetization scheme would give the Treasury seven times the sum needed for the purchase, without the government having to raise more tax revenue and without adding a nickel to the national debt!

Backdoor Borrowing

As I noted before, this sounds too good to be true. The catch is that, although it’s strictly true that the plan calls for no increases in taxes or the national debt, it’s no bargain; because despite not raising the national debt, it turns out to be equivalent to having the Treasury borrow $100 billion (or whatever its Bitcoin purchases end up costing) directly from the Fed (putting-up gold as collateral), and indirectly from the nations’ banks, at interest rates that are higher, and perhaps much higher, than it could get by selling securities.

To see why, let’s consider how the various operations just described affect both the Fed’s and the Treasury’s balance. Once again I’m assuming that revaluing the Treasury’s gold stock raises the value of its gold by $700 billion. To monetize that gain, the Treasury takes back the Fed’s existing gold certificates and gives the Fed new ones worth that much more. The Fed then credits the Treasury General Account (TGA) by the same amount. So we have, in billions:

Federal Reserve: 

Assets (Gold Certificates) + $700; Liabilities (TGA Balance) +$700

Treasury: 

Assets (TGA Balance) + $700; Liabilities (Gold Certificates) +$700

So far, so good. But the Treasury still has to buy a million Bitcoins. Let’s assume, as before, that doing so costs $100 billion. Let’s also assume, heroically, that the Treasury resists spending any more of its apparent $700 billion windfall. The new dollars spent on Bitcoin get deposited with US banks, increasing their reserves. The changes are:

Federal Reserve: 

Liabilities (TGA Balance) -$100; Liabilities (Bank Reserves) +$100 

Treasury: 

Assets (TGA Balance) -$100; Assets (Bitcoin) +$100

Once again, what the government has done is finance a $100 billion Bitcoin purchase with what amounts to a permanent $100 billion interest-free Federal Reserve loan, collateralized by that much of the Treasury’s increased nominal gold hoard. Although the Fed doesn’t directly charge the Treasury any interest on the $100 billion credited to the TGA, the Fed itself finances that credit by borrowing $100 billion more from the nations’ banks. And those banks do charge interest, as it were, at whatever rate the Fed pays on bank reserves. Since gold certificates earn no interest, the whole operation reduces the Fed’s profits and Treasury remittances by the full amount of those additional interest payments. The overall fiscal burden is therefore much as it might be were the Treasury to borrow $100 billion directly from the banks at the same rate the Fed pays them. But since the lending is financed by bank reserves instead of new Treasury securities.… Hey presto! It isn’t counted as part of the national debt.

Yet national debt it is, economically if not officially. And costly national debt at that. How so? At 4.65 percent, the current interest rate on bank reserves is higher than six-month and one-year Treasury bill rates of 4.26 percent and 4.27 percent, respectively. And it is much higher than the rate on three-year Treasury notes, which is now just 4.08 percent. Nor is the present situation unusual: The interest rate on reserves, being an overnight rate, is generally higher than rates on longer-term Treasury securities. Assuming that the Treasury holds all the Bitcoins it purchases for 20 years instead of selling any to pay off the national debt (the only options the BITCOIN Act allows), during that time banks will have earned, and the Fed will have lost, more than $150 billion as a result of the government’s Bitcoin investment. Were the Treasury instead to raise the money needed to buy a million Bitcoins by selling $100 billion worth of three-year Treasury notes, the interest cost would be about $125 million, or $25 billion less.

It’s $25 billion less, but more visible, for were the Treasury to finance its Bitcoin purchase by issuing more securities, the national debt would go up; and it is precisely in order to avoid having the debt go up, to skip past the ordinary appropriations process, and to otherwise pull the wool over Americans’ eyes, that the BITCOIN Act relies on so much gold-plated hocus pocus. What better way, after all, to gain the public’s support for a plan that may only serve to pump Bitcoin holders’ bags than by making it look like it won’t cost a thing?

David J. Bier

This is the five-minute spoken summary of my written testimony before the House Homeland Security Committee’s December 10, 2024, hearing, titled “Given the Green Light: Open Border Policies and Threats to Law Enforcement.”

Chairman, ranking member, and distinguished members of the subcommittee, thank you for the opportunity to testify.

For nearly half a century, the Cato Institute has produced original research showing that in a free society, people—whatever their background, ancestry, or birthplace—are directed toward activities that benefit mankind.

As they have for centuries, America’s new immigrants are contributing to our success, working for us and with us to build a stronger, wealthier, and safer country.

But immigrants are people, and in any large group, some people will commit crimes. Is mass deportation the answer?

No, mass deportation would make Americans—including law enforcement—less safe.

In 2023, immigrants, legal and illegal, were half as likely to have committed crimes serious enough for them to be incarcerated in the US.

Data from Texas show that in 2022, the average illegal immigrant was 36 percent less likely to commit and be convicted of murder. Legal immigrants were even less likely.

Not surprisingly, crime rates and murder rates have been shown to fall in response to immigration.

In my written testimony, I show that homicides have fallen in 83 percent of the 72 cities receiving most of the new illegal immigrants from January 2021 to June 2024.

Cities with more new illegal immigrants were slightly more likely to see a decline in homicides.

Salt Lake City was the top city for immigration court filings as a percentage of its population, and its murders fell 53 percent—twice as fast as the national average.

Cato also reviewed every instance of a law enforcement officer being shot and killed in the line of duty in 2024, finding no illegal immigrant shooters.

We looked at every NYPD officer killed for the last decade—again, no illegal immigrant killers. In fact, immigrants were more likely to be killed serving as NYPD officers than they were to kill NYPD officers.

We shouldn’t be surprised by these findings. Immigrants are more likely to be engaged in activities not associated with crime, such as working, starting businesses, marrying, having kids, attending church, and avoiding drugs.

Mass deportation would remove a population less likely to commit serious crimes, which would increase the crime rate and victimization rate for Americans and US law enforcement.

But let’s just suppose I’m wrong, and immigrants are more likely to commit crimes.

Mass deportation would still harm public safety. Mass deportation means indiscriminate enforcement.

It means targeting both threats and peaceful people. It deprioritizes serious offenders.

We saw how that played out during four years of Trump, who removed the requirement to target criminals on his first week in office.

He doubled arrests of noncriminals—pizza delivery drivers, domestic violence victims, and spouses of US citizens.

He released these criminals, many with violent histories, while Immigration and Customs Enforcement released twice as many convicted criminals as Biden has.

Trump separated families and prosecuted parents, which US attorneys said allowed sex offenders to go free.

When you’re only interested in deporting as many people as possible, you’ll downplay public safety.

As a result, the number of criminals trying to enter illegally tripled to record highs under Trump.

The threat of mass deportation won’t deter criminals. But it would threaten immigrant victims and witnesses who work with law enforcement to stop and solve crimes.

Let me be clear: When noncitizens victimize people in the US, their welcome is over. Even one such instance is too many.

That’s why law enforcement should be laser-focused on those threats.

Don’t ignore illegal immigration. Fix it. But rather than mass deportation, what we need is legal immigration.

Create legal ways for peaceful people to apply, get vetted, and live here legally.

Then, cops can be cops and focus on threats to public safety. That’s something we can all agree on.

Thank you.

Erec Smith

Norbert Michel and Jerome Famularo

In the aftermath of the COVID-19 pandemic, the United States experienced a much higher rate of inflation than at any time during the prior few decades. Like the prices of many goods and services, the cost of housing rose rapidly, with the median home price increasing almost $100,000. (Figure 1.) Unsurprisingly, many potential homebuyers were—and still are—shocked and upset.

As they have in years past, many politicians have latched on to the anger surrounding the recent housing market turmoil. During the presidential debate, Vice President Kamala Harris said. “Here’s the thing: we know that we have a shortage of homes and housing. And the cost of housing is too expensive for far too many people.” Prior to the election, Donald Trump outlined his own solutions, and now federal officials want to implement a host of policies, ranging from subsidies to selling federal land.

But is the United States really facing a housing crisis? Or a shortage of homes? And should Americans really expect recent federal policy proposals to make housing more affordable?

This Cato at Liberty post is the third in a series that examines these questions. (Previous posts are here and here.) While the series presents evidence that the United States is not facing a true housing crisis or shortage, nothing in the series suggests that local officials should refrain from relaxing zoning restrictions and other regulations. 

Elected officials should reduce rules and regulations to make it easier and less costly for people to live. Additionally, federal officials should end the many demand-side policies that place upward pressure on prices across the nation.

Just as important, nothing in the series ignores that many Americans have taken an economic beating these past few years—real wages have fallen, and prices have not reverted to pre-COVID levels. It is no surprise that so many people have been calling for increased government intervention.

As previously, though, if federal officials answer those calls, it will likely increase Americans’ economic burden. Evidence shows that over the long term, people have overcome the many federal roadblocks that increase the nominal cost of housing, but affordability would be much improved in the absence of those policies.

Fortunately, federal officials have an excellent opportunity to make it easier for Americans to afford housing because the lessons learned from the post-COVID-19 inflationary episode are directly applicable to the housing market. In both cases, federal policies that distort both demand and supply result in harmful outcomes. The housing market is just a microcosm of what can go wrong—and how difficult it can be to fix—when the federal government interferes with markets.

This post focuses on affordability and whether consumer preferences might have been driving prices higher over the past few decades. While the previous post considered several important adjustments to nominal (and real) home prices, several other changes in consumer preferences and quality suggest that people have been choosing to pay for more with respect to housing.

For instance, in the 1980s, most newly constructed homes had three bedrooms. Now, most have at least four bedrooms, even though household sizes have been decreasing. (Figure 2.) Similarly, in the 1980s, many homes were still built without air conditioning or garages, but those numbers have trended downward. Now, almost all new homes are built with both air conditioning and a garage (Figure 3). These kinds of changes suggest that consumer preferences—and thus, demand—drive prices in the housing market. 

Renters Also Paying for More Housing

Interestingly, some policymakers concede that changing consumer preferences might explain Americans’ increased expenditures on housing but still claim that housing has become unaffordable. The 2024 Economic Report of the President, for instance, acknowledges that “increased spending on housing could be a rational consumption choice.” It then argues, without much evidence, that this higher spending is not by choice.

To support its claim, the president’s report uses a US Department of Housing and Urban Development benchmark (developed in 1969 and last updated in 1980), which defines a family as “rent burdened” if it spends more than 30 percent of its income on housing (rent/​mortgage, utilities, and other housing needs). Using this metric, the report shows that the “share of households burdened by housing expenses has risen steadily over the last 60 years” and that “nearly 45 percent of renters are rent-burdened.” The report also shows that, since 1960, the percentage of renter households spending more than 40 percent and 50 percent of their income on rent, respectively, has steadily risen.

These shares did rise, but they merely confirm that people have been spending more on housing. So, despite acknowledging consumer preference changes (such as choosing to spend a greater portion of their income on larger homes or those with more amenities) could have been driving the trend, the president’s report does nothing to account for those changes.

The report also fails to account for whether renters are now able to spend more of their budgets on housing for other economic reasons, such as higher real earnings or lower cost of non-housing items.

In fact, the president’s report contains evidence—though it ignores it—that households have not been losing the ability to spend more during the past few decades. Specifically, the report presents a graph (figure 4–3 in the report) of the minimum monthly hours of work needed to pay for the median monthly rent. The graph shows that the hours needed essentially remained the same in 2002 and 2012 (for the median wage earner, the minimum wage earner, and someone at the federal poverty level, respectively).

The hours needed only increased in 2022, after the COVID-19 pandemic—a problem that occurred for nearly all goods and services. For the median worker, the number of hours increased to “more than 70 hours in 2022,” up from 55 in 2002.

Figure 4 confirms this finding. It shows that work hours needed to afford rent were very stable from 2007 to 2019. Additionally, both rent and food as a percentage of income varied little until the pandemic. (Figure 5.) That is, the recent spike is anomalous—it has certainly been harmful for many people, but it was not indicative of a long-term trend. To the extent that nominal incomes continue to rise, the real effects from this spike will continue to dissipate.

The president’s report also ignores that the share of workers in poverty and the share of workers earning at or below the minimum wage were both smaller in 2022 versus 2012. According to the BLS, the 2012 share in poverty was 15.9 percent, but it declined to 12.6 percent in 2022, while the share of Americans making at or below the minimum wage declined from 1.1 percent (3.55 million workers out of 314,725,000 Americans) in 2012 to 0.3 percent (1.023 million workers out of 333,568,000 Americans) in 2022.

Various other metrics also contradict the idea that households have steadily become more economically burdened because of housing costs during the past few decades. For example, the square footage that the average householder can afford has increased slightly, with little variation, from 1975 to 2024. (Figure 6.) (The metric displayed in Figure 6 is merely an alternative way to view the data presented in the second post of this series.)

Comparing Costs

Separately, outside of housing costs, most consumer goods and services have become more affordable over time, suggesting that Americans can afford to spend more on housing than they did in the 1960s and 1970s.

The second largest expenditure for most Americans (after housing but before necessities such as food) is vehicle costs, and those have declined. For example, in 1992, a Toyota Camry cost 55 percent of median household income. But by 2023, a Camry cost just 34 percent of the median household income. And, as with other vehicles, the 2023 Camry is much different than it was a few decades ago—it is more powerful (203 vs. 130 HP in 1992 model) and more efficient (it averages 32 MPG vs. 21 MPG), and it has more standard convenience and safety features.

These findings are consistent with the work that our Cato colleagues have done at Human Progress. They show, for example, that “basic food items in America have become almost eight times cheaper relative to unskilled labor over the last 100 years.” Together, this kind of evidence supports the idea that consumer preferences do explain at least some of Americans’ increased expenditures on housing.

Separately, it is possible to compare the portion of annual median household income needed to buy the average-priced home to the portion of income needed to pay 12 years of average rent. Figure 7 plots both of these series. Although both series spiked during the COVID-19 pandemic, the rent series was otherwise stable for the full period, and the only other spike in the home purchase data was prior to the 2008 crisis. (Based on the standard deviation, a common measure of variation, the increases in 2021, 2022, and 2023 were anomalous.)

To date, this series has presented a great deal of data that goes well beyond just the nominal cost of housing. That’s partly because it is so difficult to tell when something has become “less affordable” over time. But after analyzing the affordability question from many angles, the United States is not suffering from a long-term housing crisis.

Though the recent spike in prices has surely harmed many Americans, that spike does not justify a massive federal effort to “fix” the housing market. Indeed, long-term housing affordability would be much improved in the absence of the many federal policies that distort the market.

Nonetheless, the housing shortage story remains part of the conventional wisdom. The next post in this series will examine the data behind that supposed shortage.

Marc Joffe

The new Department of Government Efficiency (DOGE) is a promising adjunct to the second Trump administration that proposes to identify and root out billions or even trillions of dollars of federal waste, fraud, and abuse. To properly manage the problem of government inefficiency, it is best to measure it with big data on federal spending. But as those of us who have been studying wasteful federal programs know, getting the necessary data has become more and more difficult.

The primary tool available to outside analysts is the Freedom of Information Act (FOIA), a 1966 law that allows members of the public to obtain government documents. Sadly, the heydays of executive branch compliance with FOIA are long behind us. Today, departments and agencies rarely respond to complex requests within the twenty working days specified by the law and often have to be taken to court to disclose anything at all. FOIA includes a variety of exceptions that bureaucrats interpret liberally, claiming the right to heavily redact documents or withhold them.

While FOIA abuses related to federal mismanagement of the COVID-19 pandemic are now well known, there are many low-profile cases of unjustified secrecy. For example, any government that receives more than $750,000 of federal funds in a given year must provide the federal government with audited financial statements. In 2016, the Obama administration made all of these audits publicly available, but Native American tribes were exempted. As a result, outside researchers cannot assess wasteful spending directed to tribal governments.

Medicaid and Medicare are two very large programs that generate reams of data unavailable to the public. The Center for Health and Human Services has granular data detailing medical visits by public healthcare program beneficiaries, including amounts paid. These data can be linked to patient health outcomes (on an anonymized basis to avoid disclosing personal medical information), enabling researchers to assess the cost-effectiveness of various treatments and medical providers. However, this information is not accessible by FOIA and is instead made available only to a handful of academic researchers and corporate users who pay hefty subscription fees for the data.

Transit Capital Investment Grants are a major category of inefficient federal spending. For example, the federal government spent $1.55 billion to partially fund the construction of an elevated train line in the Honolulu suburbs. It opened several years late and only carries about 3,000 passengers per day. These riders could just as easily reach their destinations via express bus. Active federal transit grant programs are subject to a monthly review by an independent Project Management Oversight Contractor (PMOC). 

However, the Federal Transit Administration (FTA) rarely publishes these PMOC reports. At the Cato Institute, we FOIAed these reports three months ago and are still waiting for them. If researchers could obtain and systematically analyze a corpus of PMOC report data, they may better understand the early warning signs that transit projects will run far above budget and behind schedule.

Executive branch officials have a not unreasonable explanation for the slowdown in FOIA compliance: understaffed FOIA departments deal with a deluge of often complex and sometimes poorly formed requests. But modern technology provides a couple of solutions to this problem.

First, agencies should be able to use artificial intelligence to supplement or even replace FOIA liaison staff. If AI has access to a department’s full corpus of potentially responsive documents and can interpret FOIA requests, it should be able to fulfill these requests with limited or no human intervention.

A second, much simpler technology solution obviates FOIA entirely. Departments, especially those that do not deal with large volumes of documents with national security implications or contain personally identifiable information (PII), should just automatically publish all the documents they produce or receive to the public cloud. There, non-government organizations can apply crawlers and large language models to make the document stash digestible to a wider audience. Even documents with PII can be published by default if there is satisfactory technology to redact them automatically.

Because DOGE’s success will rely on access to an enormous volume of federal information, the creation of this department presents an incredible opportunity to open up government processes to external oversight. To be fair, a heightened level of transparency will not only expose government waste but may also reveal government agencies that function relatively well. 

But let the chips fall where they may: DOGE should act as a battering ram against the walls of federal secrecy.

Michael F. Cannon

I submitted the following recommendations to the “Department of Government Efficiency,” a private-sector organization that will advise President-elect Donald Trump on how to reduce inefficiency in the federal government. The following recommendations would cut federal health spending 49 percent below baseline over the next 10 years and erase the primary federal deficit by 2027, even after increasing military pay $100 billion per year (to pre-fund veterans benefits). I further submitted recommendations relating to federal tax policy and regulatory policy. The three sets of recommendations operationalize the reforms I propose in my latest book, Recovery: A Guide to Reforming the U.S. Health Sector (Cato Institute, 2023). 

The long-term federal debt problem is a health care problem. The Congressional Budget Office projects that only two categories of federal outlays will grow faster than gross domestic product (GDP): health care subsidies and interest payments on the debt. The former is, therefore, the primary driver of the latter.

Wasteful government health spending is rampant because nobody spends other people’s money as carefully as they spend their own. The best available data suggest that one-third of Medicare spending is pure waste (i.e., that Congress could cut Medicare spending by one-third without affecting overall health). 

Medicare sets and pays excessive prices for medical care. Spending on patients age 65 and up is more out of line with international norms than spending on patients below age 65. Medicare also has a large negative impact on health care quality.

Obamacare promised to make health care “affordable.” In reality, taxpayers are subsidizing enrollees earning up to $600,000 per year. Biden economic adviser Michael Geruso admits that Obamacare rations care for the sick and that “currently healthy consumers cannot be adequately insured.”

Pay-as-you-go funding of veterans benefits allows Congress to kick those costs into the future, which enables policymakers to ignore the largest fiscal cost of putting US troops’ lives at risk. Pre-funding and privatizing veterans benefits would force policymakers to justify those costs at the moment they are putting US lives at risk.

The House Republican Study Committee proposes to cut federal health spending 26 percent below baseline over the next decade.

The following reforms would cut federal health spending 49 percent below baseline over the same period and erase the primary deficit by 2027, even after increasing military pay $100 billion per year (to pre-fund veterans benefits). These reforms would deal a 100 percent cut to high-cost, low-quality health care providers and to the fraudulent schemes of providers and state officials. They would make health care more universal and give states flexibility to meet the needs of patients who cannot afford the medical care they need.

The federal government should do the following:

Cut Medicare spending by one-third; give Medicare’s remaining budget directly to enrollees as cash; give poorer and sicker enrollees larger “Medicare checks” than healthier and wealthier enrollees; and allow overall Medicare spending to grow no faster than GDP.
Adopt the Republican Study Committee proposal for Medicaid and Children’s Health Insurance Program spending in 2025 and give those funds to states as unrestricted, zero-growth block grants.
Repeal what’s left of the Patient Protection and Affordable Care Act of 2010 (i.e., Obamacare), including its grants to states and subsidies to private insurance companies.
Turn the Veterans Health Administration and its assets into a private, shareholder-owned corporation; give the $36 billion or so in shares away to current veterans; use the Department of Veterans Affairs existing budget to give current veterans annual, risk-adjusted subsidies sufficient to purchase private life, disability, and health insurance at actuarially fair premiums; increase military pay to enable active-duty military personnel to purchase such insurance that pays benefits once they leave active duty; allow that additional military pay to rise and fall automatically with those actuarially fair “veterans benefits” premiums.

Alex Nowrasteh and Ryan Bourne

Shortly after winning the 2024 election, President-elect Donald Trump announced the creation of a parastatal Department of Government Efficiency (DOGE) headed by Elon Musk and Vivek Ramaswamy. The goal of DOGE is to “pave the way … to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.” Those goals don’t just require tinkering around the edges or rooting out waste but shrinking the size and scope of the federal government.

Today, we released the “Cato Institute Report to the Department of Government Efficiency (DOGE): How to Downsize and Reform the Federal Government” to provide specific policy reform ideas to DOGE and, ultimately, Congress and the incoming administration.

The report covers 23 policy issue areas organized into three chapters focusing on bureaucracy and the administrative state, regulation, spending cuts, and tax reforms. Each chapter contains reform ideas with links to Cato’s longstanding research, incorporating recommendations for executive orders, regulatory changes, and spending cuts. Where possible, the chapters highlight budgetary savings from any spending cuts identified. We estimate that our initial annual proposed spending cuts are worth approximately $2 trillion.

Chapter 1 describes cuts and reforms to the Bureaucracy and the Administrative State, such as eliminating DEI programs, affirmative action, and collection of race data; ending government interference with online speech; privatizing or transferring to the states federally owned businesses and assets; and enacting wage, benefit, and headcount reductions for federal employees.

Chapter 2 details cuts to Regulation that would reduce costly overreach and boost economic performance. Those supply-side reforms should focus on energy production, environmental rules, the financial sector, health care, childcare, and the Jones Act and similar laws.

Chapter 3 proposes numerous Spending Cuts and Tax Reforms, such as ending aid to states and subsidies for politically favored sectors of the economy, sharply reducing federal involvement in education, streamlining national security spending, reining in emergency spending, and reforming entitlements.

The DOGE has an important and difficult mission, regardless of its eventual legal form. While some meaningful change can be achieved via executive actions and rulemaking powers, many other worthwhile reforms require Congress to change legislation.

DOGE should nevertheless encourage that action and recognize that eradicating waste, fraud, and regulatory duplication is not enough: A truly efficient government requires paring back the size and scope of the federal government. Cato’s report offers the most comprehensive guide to start that downsizing today.

Romina Boccia

This morning, December 11, I’ll testify before the House Committee on the Budget at a hearing on “Sounding the Alarm: Pathways and Possible Solutions to the US Fiscal Crisis.” The Honorable David Walker (former Comptroller General of the United States), Kurt Couchman (Americans for Prosperity), and Dr. Douglas Elmendorf (Harvard Kennedy School of Government) will also testify as witnesses. You can watch the hearing live on C‑SPAN, YouTube, or the Committee’s website.

The United States is speeding toward a fiscal reckoning, and policymakers seem content to look the other way. How long can a government keep recklessly borrowing without facing the consequences? Not forever—and the bill is coming due. In my upcoming testimony, I’ll address the perilous trajectory of federal debt, which threatens to erode the foundations of economic prosperity, deepen inequality, and undermine national security.

Unchecked borrowing by the federal government doesn’t just live in the abstract world of fiscal spreadsheets and Congressional Budget Office projections. It crowds out private investment, hobbling entrepreneurs and businesses that drive innovation and job creation. It raises the specter of runaway inflation and leads the Federal Reserve down a dangerous path of debt monetization. And when a fiscal crisis hits, it’s not Washington politicians who will pay the highest price—it’s American families.

The writing is on the wall: this path is unsustainable. The warning signs are flashing red. Credit rating agencies have sounded the alarm—Fitch and S&P have downgraded US sovereign debt, and Moody’s has shifted its outlook to negative, citing political dysfunction and fiscal irresponsibility. These are not distant, academic concerns. They reflect a real and growing fear that elected officials are incapable—or unwilling—to chart a sustainable fiscal course.

And yet, Congress remains indecisive. The United States has become a textbook example of how democracies without strong fiscal rules succumb to persistent deficits. But it doesn’t have to be this way. Countries like Germany, Switzerland, and Sweden have shown that effective reforms are possible. With debt brakes and deficit limits, they’ve reined in unfunded spending and stabilized their budgets.

The way forward is clear. Congress should adopt a fiscal stabilization plan with enforceable goals, like achieving primary balance or stabilizing the debt-to-GDP ratio. Entitlement programs, primarily Medicare and Social Security, which account for the entirety of America’s long-term unfunded obligations, must be reformed. Political gridlock is no excuse—establishing a fiscal commission modeled on the successful Base Realignment and Closure (BRAC) process can help Congress adopt necessary changes.

Long-term solutions require structural change. That means institutionalizing fiscal discipline through mechanisms like a debt brake or a balanced budget amendment. And these tools must be flexible enough to account for emergencies or economic downturns. Fiscal rules work best when they have broad-based support, clear targets, and built-in mechanisms to accommodate crisis deficits while aiming for long-term balance.

The stakes couldn’t be higher. Failing to act will leave working Americans footing the bill for today’s excesses, with fewer opportunities and greater economic uncertainty. By committing to reform, Congress can safeguard prosperity and ensure America’s fiscal health as a robust base for economic growth. But time is running out. Will lawmakers rise to the challenge—or will they let the debt crisis define our nation’s legacy?

Watch the Full Testimony Live