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Walter Olson

The Federal Communications Commission (FCC) has launched an investigation of all-news San Francisco radio station KCBS 740 AM over its coverage of a Jan. 26 federal immigration raid in San Jose. Speaking on the “Fox & Friends” show, FCC Chairmen Brendan Carr cited conservative claims that the station, in relaying reports from persons at the scene, had identified the locations and car models of ICE officials while the raid was in progress. Carr said the raid took place in a part of East San Jose “known for violent gang activity.” It is not recorded that any violence occurred during the raid. 

The FCC is conducting the investigation under its “public interest” standard, whose meaning, as Brent Skorup noted in this space last month, “is constantly changing and depends entirely on who sits on the commission.” The imprecision is especially damaging here because when it comes to live reporting on police street activity, the public interest can figure on both sides. 

In 2015, the International Association of Chiefs of Police published a useful background guide on the role and rights of the media and others who report on police activity. It observes that “individuals have a First Amendment right to record police officers in the performance of their public duties. This right extends to recording of police activity in public or where an individual has a legal right to be present.” Motivation for reporting can include curiosity, personal interests at stake, or strong opinions, even including animus toward police, none of which nullify otherwise applicable First Amendment rights. 

That is not to say that rights to report override every prudential factor: for example, police can rightly object to observers’ physical presence when it obstructs or delays them, and they can establish reasonable, marked perimeters around situations and require those reporting to stay behind those lines. Reading through the IACP examples, however, it’s hard to see any exception that would apply to the situation with KCBS. “Police are on our block right now and I saw three of them get out of an unmarked blue Chevy” is not a statement that stands outside the First Amendment. 

It would be nice to know more exactly about what the station aired that day, but according to one report, “KCBS-AM scrubbed their coverage of the January 26 raids from their website.”

But here’s the point: while some time-place-and-manner rules are appropriate, there is an obvious public interest in there being live media coverage of police street activity. Newsworthiness aside, such coverage can expose bad practices by police, and it can also reassure by helping to establish that police practice was proper. Allowing the media to be scared away from reporting on police raids, perhaps by all-purpose speculation that some listener in the audience might be inclined to violence, takes us closer to a society where the media dare not report in real time on police raids at all, or even to one in which there might happen secret raids. 

The investigation inevitably invites comparison with other speech-chilling steps taken under the new chairmanship of Brendan Carr. In particular, the FCC filed a complaint against CBS over supposedly biased editing of a Kamala Harris interview that had enraged President Donald Trump, who sued CBS (and who appointed Carr FCC chair). 

The editorialists of the Wall Street Journal recently wrote a vigorous rebuttal to the Trump-Carr depiction of CBS’s conduct, saying, “this looks like editorial judgment, not an instance of splicing footage to create a misleading response that never happened.” Yet Trump is holding his related lawsuit over the head of CBS’s parent company, Paramount, which is reportedly ready to settle the suit so as to obtain clearance for a merger. 

“Mr. Trump clearly wants to intimidate the press,” writes the WSJ, “and it’s no credit to the FCC to see it reinforcing that with an inquiry.” Vigilance is always in order when it comes to the FCC and speech rights, and perhaps more now than ever. 

Nicholas Anthony

Both the House and Senate held hearings on the issue of debanking last week. Perhaps the most disappointing occurrence was the repeated claim by some members of Congress that debanking is a “fake” issue. Were that not enough, other members of Congress took this moment as an opportunity to promote levying even more restrictions on the financial system. Still, there were some things to be optimistic about. 

Choke Point or Hoax Point?

First, is Operation Choke Point 2.0 real? In the House, Representative Al Green (D‑TX) said, “The name “[Operation Choke Point] 2.0” refers to a fake program… to restrict the cryptocurrency industry’s access to the banking system.” Later on, Representative Nikema Williams (D‑GA) echoed a similar statement, saying that the hearing was about “fake oversight.”

Had these members of Congress been open to the testimony of the witnesses, they would have learned from Paul Grewal, Coinbase’s chief legal officer, that the Federal Deposit Insurance Corporation (FDIC) sent dozens of letters to banks instructing them to “pause all crypto asset-related activity.” They would have further learned that even the Office of Inspector General found issues with this practice. Furthermore, they would have learned that this information only became public after Coinbase took the FDIC to court. 

As Grewal pointed out in his testimony, the court stated it was “concerned with what appears to be FDIC’s lack of good-faith effort in making nuanced redactions” and that the FDIC “cannot simply blanket redact everything that is not an article or preposition.”

With that said, there is a distinction to be made between what is known as “Operation Choke Point” and “Operation Choke Point 2.0.” Operation Choke Point was an official government program. It began with a Department of Justice memo written in 2012 and did not end until 2017. Operation Choke Point 2.0, however, is a name that was coined by investor Nic Carter and has been used widely as an unofficial title for the general sweep of government pressure on cryptocurrency. So, while there is no evidence (at least not yet) that there is an operation officially running under the Choke Point banner, there is evidence that the FDIC repeatedly pressured banks to stay away from cryptocurrency. 

Fair Access, Again

The Fair Access to Banking Act also made an appearance amidst the hearings after being reintroduced by Senator Kevin Cramer (R‑ND) and Representative Andy Barr (R‑KY). In the press release for the bill, Senator Cramer said, “Financial institutions are backed by taxpayers, for crying out loud! The Fair Access to Banking Act ensures that banks provide fair access to services and enacts strict penalties for categorically discriminating against legal industries and individuals.”

By “strict penalties,” he refers to how the bill would revoke a bank’s access to deposit insurance, the automated clearing house, the discount window, and more. In other words, if a bank violates the bill’s requirements, the bank would effectively be shut down and all its customers would effectively be debanked due to the bill.

When discussing the idea behind the bill, former Senator Pat Toomey (R‑PA) recently warned how impractical it would be to limit business decisions to strictly quantifiable financial information. “I sit on several boards, and every company in America rightly takes into account reputational risk, and … there’s other hard-to-quantify risks banks have to take in mind,” said the former senator. “I don’t want to put that decision in the hands of government.”

Yet, it’s not just a matter of impracticality. It’s also an example of how the government seems to only get more involved in Americans’ daily lives over time. Across the country, there are legitimate concerns about regulators cutting off access to financial services, but the approach in the Fair Access to Banking Act would only give regulators the authority to levy even more restrictions on how people use the financial system.

Something to Be Optimistic About

With that said, there were also some positive moments during the hearings.

Senator Andy Kim (D‑NJ) and Aaron Klein of the Brookings Institution had a great exchange regarding the role the Bank Secrecy Act regime plays in pushing people to the financial fringe. Pointing to my previous work, Klein explained that this system is both inefficient and costly. In short, despite financial institutions spending $59 billion a year complying with this regime and filing over 27 million reports, those reports only initiated 372 criminal investigations. However, while the Bank Secrecy Act regime is not catching criminals, it is making it harder for financial institutions to serve customers.

Another notable moment was that many members of Congress recognized the distinction between operational and governmental debanking. In other words, they recognized that there is a difference between private businesses deciding how they wish to conduct their day-to-day operations and government officials deciding how those private businesses should operate.

Finally, Old Glory Bank CEO Mike Ring did well to repeatedly caution senators against levying even more restrictions on the market. He noted that “additional regulations telling banks who they must bank” will certainly lead to unintended consequences. Instead, he explained that the free market is the solution, citing his bank as an example. Ring told Congress, “[I]nstead of sitting around complaining about what the Big Banks were doing, we created Old Glory Bank to be a market response.” This type of attitude is what’s needed, not calls for even more restrictions.

Conclusion

So, while some officials see this moment as a case of “fake news” or as an opportunity to restrict the financial system even further, there is an opportunity to carve a better path. Representative Ann Wagner (R‑MO) said it well, noting that individuals should be free to seek services just as banks should be free to make decisions about the customers they serve.

To do that, Congress should expose how widespread debanking has become and cut out the tools that the government has used to pressure banks and other financial institutions. As I have explained in a recent paper, that means reforming the confidentiality that has long kept customers in the dark and reforming the larger Bank Secrecy Act regime. Doing that will help reveal more areas for reform, remove the tools used in governmental debanking, and reduce the burdens that have limited financial services. 

Mike Fox

As a former public defender, my clients often faced an impossible choice: plead guilty to a crime they knew they didn’t commit or one I believed the prosecution couldn’t prove or go to trial and fight it. To the uninitiated, the answer might seem obvious. But that couldn’t be more wrong. 

Take the case of seventeen-year-old George Alvarez. Mr. Alvarez was accused of assaulting a Texas corrections officer. Four years later, in an unrelated case, it came to light that the government had in its possession a video exonerating Alvarez, conclusively showing that the officer had actually attacked him. With a ten-year mandatory minimum looming over his head, Alvarez pleaded guilty. After nearly four years confined to a cage, he was finally exonerated.

According to the US Supreme Court, “[p]lea bargaining is not some adjunct to the criminal justice system; it is the criminal justice system.” Prosecutors, particularly at the federal level, have a plethora of tools at their disposal to coerce defendants into pleading guilty. In Florida, federal prosecutors have threatened an excited soccer fan with a seven-year mandatory sentence for lighting two flares at a game, causing minimal damage.

Federal prosecutors are the most powerful—and least accountable—actors in our criminal justice system. And the unwavering ability of federal prosecutors to coerce guilty pleas is a salient contributor to sheer injustice. 

Shortly after President Trump assumed office, Acting Deputy Attorney General Emil Bove circulated a memorandum containing a standard directive: that federal prosecutors “[p]ursue the most serious, readily provable offense.” There is no plausible rationale to mandate that federal prosecutors always charge the most serious provable offense beyond strengthening their hands to induce guilty pleas—a skill that federal prosecutors have proven themselves incredibly adept at given that 98.3 percent of all convictions in the federal system result from guilty pleas.

Last week, immediately after being sworn in, Attorney General Pam Bondi issued a memorandum of her own. While Bondi reiterated Bove’s standing directive to always charge “the most serious, readily provable offense”—there may be a glimmer of hope. Bondi stressed that “prosecutors may not use criminal charges to exert leverage to induce a guilty plea.” Additionally, Bondi stressed that “prosecutors may not abandon pending charges to achieve a plea bargain that is inconsistent with the prosecutor’s assessment of the seriousness of the defendant’s conduct at the time the charges were filed.”

Prosecutors’ charging decisions set the parameters for subsequent plea negotiations that are often palpably coercive. Federal crimes can carry mandatory minimums, and habitual offender laws dramatically increase a defendant’s exposure. Likewise, federal statutes such as the Armed Career Criminal Act provide for sentence enhancements for “crimes of violence” or “serious drug offenses” committed with a firearm. These types of laws are designed to tie judges’ hands—a reality that prosecutors know and take full advantage of. 

An official policy of always charging the “most serious, readily provable offense” ensures prosecutors will remain free to threaten defendants with draconian, inflexible sentences if they presume to exercise their Sixth Amendment right to a jury trial.

Plea bargaining was entirely unknown at the founding. The Framers understood the potential for abuse when a single player wields unchecked power. So they carefully devised a framework where a jury comprised of ordinary citizens could pass judgment on the legitimacy, fairness, and wisdom of a given prosecution. Today, prosecutors are permitted to do just about anything short of physical torture to exert plea leverage and deter a defendant from going to trial. Prosecutors can seek a superseding indictment, charging a defendant as a habitual offender, or tack on additional charges to punish them for refusing to plead guilty. Prosecutors can threaten to indict the defendant’s family members. Prosecutors can threaten the accused with a life sentence—or even the death penalty—simply for exercising a right that the Constitution confers upon them.

Attorney General Bondi’s charging and plea-bargaining directives are difficult to reconcile. Continuing a longstanding policy commonly used to facilitate plea-driven mass adjudication contradicts her directive to not use charging decisions as leverage to induce guilty pleas. Furthermore, it is unclear whether the prohibition on abandoning charges may lead the Justice Department to always stand by the highest charge. For example, absent significant mitigating or intervening circumstances, it will rarely be appropriate for a prosecutor to seek racketeering or terrorism charges at the outset of a case and then abandon those charges in connection with a plea deal. 

This could cut both ways—discouraging prosecutors from stepping back from serious charges once filed. But it’s possible that taken together, these directives may discourage prosecutors from overcharging at the onset with offenses that aren’t “[r]eadily provable”—and that could make a meaningful difference.

Jai Kedia

The Federal Reserve recently released a Monetary Policy Report to Congress which discussed, among other items, policy rules. Unfortunately, although unsurprisingly, the Fed criticized monetary policy rules instead of embracing them. Here is the Fed’s assessment of the limitations of such rules-based monetary policy:

As benchmarks for monetary policy, simple policy rules have important limitations. One of these limitations is that the simple policy rules mechanically respond to only a small set of economic variables and thus necessarily abstract from many of the factors that the FOMC considers when it assesses the appropriate setting of the policy rate. In addition, the structure of the economy and current economic conditions differ in important respects from those prevailing when the simple policy rules were originally devised and proposed. Relatedly, the prescriptions of the rules incorporate values of the unemployment rate in the longer run and the neutral real interest rate in the longer run, which are economic concepts that are not only difficult to measure but can also change over time as the economy evolves. Finally, simple policy rules are not forward-looking and do not allow for important risk-management considerations, associated with uncertainty about economic relationships and the evolution of the economy, that factor into FOMC decisions.

In the rest of this article, I address each of these critiques and explain why they are invalid.

Policy rules only respond to a small set of economic variables.
It is important to note that most macroeconomic variables are interlinked. This is most clear when the US economy is viewed through the lens of a sophisticated model, such as those the Fed already employs. These models show that most variables are linked in a predictable manner and are all simultaneously determined. This is why most standard rules usually offer similar prescriptions. It is likely that the inclusion of several other variables will not change rate-setting decisions much. Even if they did, this still does not prove that Fed discretion is better than simply announcing a rule that incorporates these variables that the FOMC purports to consider before setting the funds rate. Importantly, the FORM Act of 2015—the last serious congressional attempt to impose rules-based monetary policy—never forced a specific rule upon the Fed. The FOMC would (and should) be allowed to pick a rule that incorporates as many or as few variables as it desires. The point of the rule is to provide clarity; this Fed critique only advocates for more obfuscation.
The structure of the economy is different from when rules were first devised.
There are numerous ways to circumvent the changing nature of the economy and still maintain rules-based policy. The economics profession is constantly offering new and improved models that are updated to current conditions. For instance, the global financial crisis led to the proliferation of large economic models that incorporate a financial sector. The New York Fed’s in-house macro model uses precisely such an updated and modern framework. Other models incorporate the housing sector or behavioral features. Each of these models can be tested on US data using Bayesian estimation methods, allowing the Fed to determine which fits the current structure of the US economy best. Once a model is chosen, the Fed can simulate the model under various policy rules—as we did in a recent CMFA policy analysis—to decide which rule it prefers. The Fed can then stick to that rule. It can repeat this exercise at regular intervals (at each of its five-year policy framework reviews, for example), thus providing transparency and predictability to the public that it currently does not provide.
Natural value assessments for unemployment and interest rates are unreliable
Strangely, it seems this critique of the Fed is out of date. It is true that the Fed’s assessments of the natural rate of unemployment (NAIRU) were often incorrect in the past. But as our CMFA policy analysis shows, the Fed’s forecasts of the output gap (the inverse of unemployment) are more accurate than most other macro indicators.[1] Regardless, there are numerous ways to design rules that require none of these variables. For instance, most academic versions of rules peg the current period rate to the prior period’s rate to some degree, allowing for a smooth transition of interest rates over time. This method eliminates the need to know the natural real interest rate. Furthermore, difference rules or nominal income rules that have the Fed target real output growth instead of the output gap could be used to avoid information issues with potential GDP (or NAIRU). In fact, such rules have been shown to perform better than the standard output gap or unemployment targeting frameworks in some cases.
Rules are not forward-looking
This problem can be easily remedied if the Fed so desires. As mentioned above, the Fed can tailor rules to account for any number of factors. Among these can be forecasts of macro variables. The Fed routinely makes such forecasts for a variety of macro indicators and publishes them in its Tealbooks. In fact, some research has shown that including forecast variables in a rule could boost the Fed’s performance [see Beckworth and Horan (2024)]. 

Rules do not allow for risk or uncertainty considerations
Rules were first devised precisely because they are robust to changes in or misperceptions of the underlying structure of the US economy. This is because it is unreasonable for any agent, such as a small group of central bankers, to have full information about all economic conditions. Nor should economic fine-tuning be the goal of the Fed. At best, the Fed can get out of the way of private enterprise and avoid serious mistakes. Rules help with this. They may not lead to optimal outcomes, but they never leave the public guessing what the Fed will do next, thus allowing people to more easily adjust their behavior to changing economic conditions. In any event, there is no evidence that, in the absence of rules, Fed discretion correctly diagnoses the structure of the US economy. When central bankers are wrong about the nature of economic relationships, as they were post-pandemic when they labeled inflation “transitory”, rules offer a superior choice to discretion.

None of these criticisms from the Fed are new. They have been levied by the Fed and have been answered time and again by academics and policy experts alike. It is well past time for the Fed to adopt a policy rule and its upcoming framework review is the perfect opportunity to do so. If not, Congress must rein in the Fed by imposing rules-based policy.
 

Romina Boccia and Dominik Lett

On February 7, Senate Budget Committee Chairman Lindsey Graham (R‑SC) released a budget resolution for fiscal year 2025. A budget resolution is meant to establish a responsible fiscal framework that sets priorities for federal spending and revenue. With this year’s deficit approaching $2 trillion as Congress is running up against the federal debt limit in a few months, a responsible budget resolution would reduce spending significantly, extend and enhance pro-growth tax cuts in a deficit-neutral manner, and stabilize the US debt. 

The Senate plan is a far cry from that ideal. It is little more than a procedural shell to pave the way for partisan policy goals through reconciliation—a fast-track process that circumvents the usual 60-vote threshold in the Senate.

While unlikely to be the final reconciliation vehicle, the Senate resolution proposal sets the stage for $342 billion in new spending over four years, supposedly to be offset by unnamed spending cuts. Eagerly laying out plans for new spending without a real plan to offset the resulting deficits is hardly sound fiscal policy, especially as the national debt soars ever higher.

We reached out to Cato Institute experts to evaluate the budget resolution’s approach in several key policy areas, including border security, energy production, national defense, and tax reform. Below are their assessments.

The budget resolution drops the ball on tax policy, setting the stage for fiscal uncertainty. As Adam Michel, Director of Tax Policy Studies, explains:

The Senate’s budget resolution sets up the American people for continued uncertainty over how much money the federal government will take from them next year. It does this by splitting tax permanence from Republicans’ other priorities. The billions in unspecified spending cuts will not reduce taxes but instead, fund new expansions of government spending.

The budget also introduces a novel “current policy” revenue baseline, assuming—outside the binding resolution—that the Trump tax cuts will be extended with no fiscal impact. This sets the stage for no net spending cuts in the next package, letting the government grow on autopilot, effectively raising taxes on future Americans. The Senate budget will make pursuing a permanent, pro-growth tax bill more challenging by cannibalizing the easiest spending cuts for new spending instead of tax relief. This will increase the likelihood a second reconciliation tax bill will be delayed until December or, worse, January, making it impossible for employers and families to plan for the future.

Senator Graham proposes a huge and unwarranted increase in defense spending. As Justin Logan, Director of Defense and Foreign Policy Studies, explains:

To paraphrase PJ O’Rourke, giving Sen. Lindsay Graham input on defense policy is like giving whiskey and car keys to teenage boys. As chair of the Senate Budget Committee, Senator Graham has drawn up a defense budget that reads like a Dick Cheney fever dream.

The Graham proposal would increase defense spending by hundreds of billions of dollars in real terms just over the next five years while running massive budget deficits. US defense spending would be higher in real terms than it was during the height of the Cold War, comparing to the bloodiest years of the Iraq War.

The United States, combined with its treaty allies, accounts for about two-thirds of global military spending. If that isn’t enough, something is drastically wrong with our foreign policy.

The budget resolution gives Trump a slush fund for mass deportations. As David Bier, Director of Immigration Studies, explains:

Congress cannot pretend this $175 billion will be used to apprehend criminal public safety threats. The administration has spent its early weeks mostly arresting immigrants without criminal records and stripping immigrants of their legal status. The president has made clear that his deportation agenda will not be constrained by acts of Congress and that he wants a slush fund for untargeted deportation of millions of peaceful people. This budget resolution ignores America’s outdated and failing legal immigration system—the true source of illegal immigration.

The budget resolution falls short of repealing the Inflation Reduction Act, leaving in place market-distorting subsidies. As Travis Fisher, Director of Energy and Environmental Policy Studies, and Joshua Loucks, Research Associate, explain:

Although Senator Graham’s framework for the budget resolution includes some necessary energy proposals, it falls short of delivering real energy reform. Any serious effort to unleash American energy—whether from the Senate or the House—must fully repeal the Inflation Reduction Act and address permitting restrictions across the board.

Meanwhile in the House

The Senate’s proposed budget resolution arrives as the House finalizes its own budget resolution, aiming for $2 to $2.5 trillion in cuts. Unlike the Senate strategy, which plans to break up tax reform and defense, energy, and border security into two separate bills, the House is pushing for one big bill that tackles all these issues together. The House also has a clearer picture of where spending cuts are likely to come from, including reforms to Medicaid, food stamps, and other welfare programs.

Per Punchbowl, some Republicans believe that extending the 2017 Tax Cuts and Jobs Act can only be done by reducing revenues by $4.7 trillion. This belief is misguided, overlooking trillions of dollars in loopholes and spending through the tax code. There are plenty of politically viable base broadeners that should be paired with tax cuts, from repealing green energy subsidies to limiting tax credits for noncitizens. A full list of roughly $14 trillion in offsetting tax options can be found here.

Assuming the House manages to agree on $2.5 trillion in cuts, setting revenue loss expectations at $4.7 trillion leaves $2.2 trillion in new 10-year deficits on a conventional scorekeeping basis. Congress can and should do better.

Balancing Policy Ambitions with Fiscal Realities

The Senate’s budget resolution is a missed opportunity to chart a responsible fiscal path. Instead of using this process to rein in spending, stabilize the debt, and create certainty for taxpayers, the Senate has opted for more spending, more deficits, and more political maneuvering. The contrast with the House’s approach—pursuing meaningful spending cuts and a unified fiscal package—underscores the Senate’s failure to take the nation’s fiscal crisis seriously. 

With the debt burden rising and the window for reform narrowing, lawmakers should reject budget gimmicks and prioritize policies that promote economic growth, fiscal sustainability, and long-term prosperity—this starts with a deficit-neutral path to extend and enhance the 2017 pro-growth tax cuts. Hopefully, the House will offer a more promising budget framework in the coming days.

Travis Fisher, Adam N. Michel , and Joshua Loucks

In 2022, President Joe Biden and congressional Democrats passed the Inflation Reduction Act (IRA)—one of the most brazen political projects in recent memory, designed to remake the American energy sector. As Congress faces tough negotiations over how to bring the American people a “big, beautiful” budget reconciliation bill that is also fiscally responsible, we urge lawmakers to listen to the libertarians and conservatives who champion full repeal of the IRA.

Political Pressure to Purge the IRA

Not a single Republican in Congress supported the IRA, recognizing it as the linchpin of the partisan Green New Deal rather than an “unprecedented investment.” Despite evidence before the election that 18 House Republicans had warmed up to the idea of harvesting subsidies under the IRA, all but four Republican House members voted to repeal the vast majority of the IRA in the Limit, Save, Grow Act of 2023 (the four “no” votes were in opposition to raising the debt ceiling, not to IRA repeal), and President Trump was elected under a platform that included, as he put it, ending the “Green New Scam.”

A recent coalition letter led by the Competitive Enterprise Institute and signed by more than 50 other organizations argues that full repeal of the IRA is necessary as “Congress needs to put the interests of the American people over the interests of wealthy special interests who are trying to keep their handouts flowing at the expense of taxpayers.” They argue that failure to repeal the entire IRA would be tantamount to the failure of one of President Trump’s and the Republicans’ signature campaign promises.

We wholeheartedly support the intent of the letter, which is to ensure Republicans in Congress deliver deep cuts—ideally full repeal—of the costly IRA. A key point the letter only touches on briefly is that IRA repeal could also be the centerpiece of a fiscally responsible reconciliation bill that extends Trump’s first-term tax cuts. In addition to all the other reasons to cut energy subsidies, the IRA is a massive source of spending that could be used to offset tax cuts.

The Paid-for Path to Extending TCJA

The key legislative accomplishment of the first Trump administration was the Tax Cuts and Jobs Act (TCJA) of 2017. It cut taxes for Americans at every income level and boosted the US economy. Trump campaigned on extending these expiring tax cuts to prevent a massive tax increase on nearly every American.

Republicans have made clear that TCJA extension is a top priority in 2025. However, there is one major barrier to its passage—cutting taxes without reducing spending will increase the budget deficit. Full extension will cost nearly $5.5 trillion over the next ten years, and many Republicans have said that these extensions need to be deficit neutral—meaning the tax cuts need to be paired with spending cuts or similar reforms.

This is where the IRA fits in. The IRA was initially touted as a deficit-neutral bill, with its ten-year energy and climate-related provisions projected to cost about $370 billion, offset with tax increases. However, in an upcoming Cato policy analysis, Travis Fisher and Joshua Loucks estimate that the IRA will cost between $936 billion and $1.97 trillion over the next ten years and up to $4.67 trillion by 2050 (and perhaps even more in later years because the subsidies are uncapped). A fiscally responsible reconciliation package is more likely if Congress can repeal these IRA subsidies.

More Than a Fiscal Problem

The IRA is not just a fiscal burden. It is a down payment on the Green New Deal, designed to push the US away from reliable, affordable energy sources under the guise of fighting climate change.

The IRA’s energy subsidies:

Enable aggressive regulatory mandates, distort energy markets, and undermine grid reliability.
Complicate and cause political fissures in what should be straightforward efforts to expand energy infrastructure across the country.
Deepen the crony capitalism in the energy industry by enriching well-connected special interest groups at the expense of taxpayers.

Repealing the IRA will protect taxpayers from open-ended energy subsidies that siphon off their hard-earned income, redistributing it to large, politically connected corporations.

Conclusion

The challenges of drafting a reconciliation bill should not deter Republican leadership from keeping their promises to voters and upholding their unanimous opposition to the IRA when it was passed on a party-line vote. The IRA is a cornerstone of big government economic planning and is wreaking havoc on the energy sector and taxpayers alike. Congress should reject the left’s Green New Deal in favor of simpler, lower, and fairer taxes for all Americans. 

Jon Hoffman

Summary: The ongoing co-option of Islam as a religio-political tool by authoritarian Middle East regimes is applauded by Western governments, who fail to see that such an approach ensures ongoing instability rather than the security it promises to deliver.

Islam continues to play an important role in Middle East politics. But how has this changed given the ever-evolving nature of the region’s political landscape? In particular, how have competitions for religio-political authority in the Middle East changed since the 2011 Arab uprisings, given the existential threat this wave of mass mobilization posed to ruling elites in the region? How have these competitions manifested in the Middle East amid the various regional upheavals since? These questions form the foundation of my new book, Islam and Statecraft: Religious Soft Power in the Arab Gulf States.

Competition for religio-political authority is nothing new in Islam or the Middle East. In fact, the struggle for religio-political authority in the “new” Middle East looks a lot like competition for the same in the “old” Middle East.

Struggles for religio-political authority in Islam are almost as old as the religion itself. This is due, in large part, to the fact that both historically and doctrinally, Islam is a varied and diverse tradition, with many different competing claims to authority. 

Debates within Islam regarding governance and legitimate authority have always been more political than religious in nature due to the fact that the Quran did not specify a particular form of government. This struggle for religious authority has considerable political ramifications and is a coveted resource.

State authorities have routinely asserted themselves in such competitions, attempting to establish greater hegemony over Islamic discourse and interpretation. Even nominally secular states in the Middle East insert themselves in such competitions to control the politicization of religion. Efforts by the state to control Islam have increased incrementally in the 14 years since the Arab uprisings as Middle East governments fear for their own authority and legitimacy.

States across the Middle East continue to utilise Islam as a form of statecraft. The varying ways in which states use religion are largely dependent on the context they are operating in and the audience they are trying to influence. This is particularly the case in the Gulf, where there is an intimate relationship between Islam and politics in the powerful monarchial states that inhabit the Arabian Peninsula. There has also been a more general shift in the regional balance of power in the Middle East toward the Gulf in recent decades, with several asserting themselves both regionally and globally as major political players.

Islam has played an important role in these regional and global contests for power. A relatively new and particularly lucrative strategy is the Saudi-UAE-led government-sponsored project of so-called “moderate Islam.” The project promotes a politically quietist and statist conceptualisation of Islam—one that stresses absolute obedience to established authority. It renders religion subservient to the state while delegitimising alternative sources of religio-political authority. This is often coupled with the strategic usage of interfaith tolerance—namely as a way to whitewash the regimes’ destabilising policies, present themselves as the sole legitimate representatives of the global Muslim community, and to curry favour with influential actors in certain key countries.

The West has embraced this project of “moderate Islam.” When engaging with its Western allies, political elites in the Middle East—who have a vested interest in the sustainment of the undemocratic status quo—lean heavily into the orientalist trope that the people of the Middle East are not “ready” for democracy, or that Islam is not “compatible” with a democratic system of governance. This form of “reverse orientalism” is meant to appeal to Western policymakers by presenting the region’s autocratic governments as the best guarantors of “stability” and the actors most capable of advancing the interests of Western political elites in the region. 

By keeping conversations centered around the supposed “deficiencies” of the people of the Middle East or Islam, these autocrats are able to deflect attention from how their authoritarian policies are often the underlying catalysts for regional instability while sustaining Western support for their own authority and painting any change to the prevailing status quo as “extreme.”

However, the state is not alone in the contest for religio-political authority. It operates within a broader matrix of other actors at the sub-state, non-state, and transnational levels, which can all serve to influence the foreign policy decision-making process and challenge the state’s attempted monopoly on religion. Such actors challenge the state’s efforts to establish a monopoly on religion.

One recent example is Syria. The downfall of Bashar al-Assad last December and the rise to power of Hayat Tahrir al-Sham (HTS) demonstrate the continued relevance of Islamist groups in the Middle East. Elsewhere in the region, more mainstream Islamist groups have been fiercely repressed over the past decade—driving many of them underground—but they remain resilient. Perhaps the greatest lesson Syria offers is that the grievances at the heart of the Arab uprisings have not disappeared. Across the Middle East, they have grown considerably worse. Islamism—both mainstream and radical—will remain a medium through which to challenge the status quo.

Another example is Israel’s ongoing war in Gaza, which was launched in retaliation for Hamas’ 7 October attack against Israel. The past 16 months have shown how interconnected the Middle East remains, with the war in Gaza sparking a wave of regional escalation. Islamist actors of all stripes have been vocal in expressing solidarity with the Palestinians while denouncing Israel’s behaviour. 

Moreover, Washington’s decision to bankroll Israel’s war has generated tremendous outrage toward the United States and its Western allies throughout not only the Middle East but the broader Muslim community. As my colleague Mustafa Akyol correctly argues, this undermines more liberal and reform-minded voices within Islam and fuels hardliners who use Western hypocrisy and indifference to the region’s suffering to promote extremist ideologies.

As popular discontent across the region grows and the likelihood of unrest increases, it can be expected that the strategic wielding of religion will continue to play an important role in Middle East politics.

This article was originally published in Arab Digest. 

Clark Packard and Alfredo Carrillo Obregon

On February 9, President Trump announced he would impose a 25 percent tariff on all imports of steel and aluminum this week. Protecting American steelmaking may make for good politics, but it’s a recipe for significant losses for the American economy, particularly manufacturing. 

One needs to look no further than the last time President Trump occupied the White House, when his administration imposed “national security” tariffs of 25 percent on imported steel and 10 percent on imported aluminum under Section 232 of the Trade Expansion Act of 1962. Several economic studies have found that those tariffs imposed high costs on Americans, particularly firms and workers in steel-consuming industries, and the costs dwarfed whatever gains the tariffs led to in terms of increased capacity utilization and employment in US steelmaking (Table 1).

These harms are compounded by the political dysfunction that Trump’s last attempt at blanket metals tariffs ushered in at home and abroad. As Scott Lincicome and Inu Manak documented in 2021, Trump abused the ambiguity of Section 232 to unilaterally extend the coverage of the steel and aluminum tariffs beyond their original scope. It is still not clear if he’ll invoke the same statute this time. 

There are significant risks that the president could abuse another one of the executive branch’s discretionary authorities. For example, President Trump recently threatened to invoke the International Emergency Economic Powers Act (IEEPA) to impose steep tariffs on all imports from Canada and Mexico (IEEPA has never been used to impose tariffs). Moreover, his February 9 announcement suggests that this next batch of steel and aluminum tariffs would cover imports from allies, too, including the aforementioned USMCA countries, the European Union, Japan, and the United Kingdom.

Should Trump move forward with these new tariffs, it would be the latest instance of a six-decade-plus trend of US policymakers showering the domestic steel industry with an unsavory mixture of protectionism measures, including price floors, creative methods of inflating antidumping and countervailing duties, and blocking foreign direct investment from allied countries like Japan, as Clark Packard documents in a forthcoming Cato paper.

While bad enough, the mere threat of more tariffs is giving license to domestic steel companies to further raise prices, and steel-consuming domestic producers are paying the price.

For instance, as the Trump administration threatened across-the-board tariffs on Mexico and Canada, which accounted for about 35 percent of all US steel imports in 2024, domestic steel producers responded by raising their prices. According to a recent Wall Street Journal story, US Steel increased a $50 per ton price increase for flat-rolled steel while Nucor raised its prices by $25 per ton over the last few weeks even amid a soft manufacturing environment.

The Journal’s story is noteworthy for two reasons.

First, it provides real-life examples of the dangers of more steel protectionism and uncertainty. In its reporting, the Journal profiled Riverdale Mills, a Massachusetts-based producer of steel wire mesh and wire fencing used in lobster and crab traps and other applications. Steel accounts for about two-thirds of the company’s production costs and about 80 percent of its steel was sourced in Canada because shipping costs to New England are lower than mills in South Carolina, Illinois, and Texas. The company currently employs about 120 people. Raising Riverdale Mills’ production costs through tariffs and threatened tariffs erodes the company’s competitiveness versus foreign makers.

The first Trump administration’s steel tariffs “hammered” the company’s profit margins. Though the company didn’t lay off employees or raise prices, it slashed planned investment in new equipment.

Riverdale Mills’ story is not unique. Using hot-rolled band as an example, Figure 1 below demonstrates that steel prices in the United States are consistently higher than the world price. This dynamic has plagued domestic manufacturers for years. 

Indeed, the largest American consumers of steel are the construction, automotive, and farm equipment industries. Steel-consuming manufacturing industries employ about 46 times the number of workers employed in steel production.[1] The Journal’s story also documents the cascading protectionism in the steel industry. After the Trump administration levied the previously mentioned costly “national security” tariffs on steel imports, the domestic steel industry added—or will shortly add—nearly 12 million tons of additional annual capacity to make flat-rolled steel. Despite softer demand, domestic steel companies are “counting on additional tariffs to squeeze more imports out of the U.S. steel market.” In other words, protectionism begets protectionism.

Sixty-plus years of American steel protectionism—and nearly seven since the first Trump administration’s “national security” tariffs—have not succeeded at reversing the industry’s long-term decline. Yet they have imposed and continue to impose significant costs on Americans. There is no reason to believe that even more tariffs can achieve anything of note other than extending the unholy alliance between Washington and Big Steel.
 

Romina Boccia and Ivane Nachkebia

The Social Security Administration (SSA) recently released an FAQ on the so-called Social Security Fairness Act (HR 82), which eliminates the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). While the SSA focuses on the benefit increases that public sector workers can expect to collect (some in excess of $1,000 more per month!), the FAQ fails to mention that this legislation comes at a steep cost to younger workers—adding $196 billion to Social Security’s cash-flow deficits over the next decade and accelerating trust fund insolvency by six months. 

It’s not too late for Congress to backtrack before the SSA implements these unfair benefit increases. By the agency’s admission, “SSA expects that it could take more than one year to adjust benefits and pay all retroactive benefits.”

Before the repeal of the WEP and GPO, stabilizing Social Security’s finances without benefit reductions would have required an immediate and permanent payroll tax hike from 12.4 percent to 16.73 percent—an increase of $2,660 for someone earning $61,440 per year. Now, the necessary rate is 16.84 percent—costing the median worker an extra $68 per year (see the figure below). In other words, 180 million workers will pay more so 3.2 million retired public sector workers can collect more.

The SSA emphasizes the complexity of implementing these changes, warning that processing must be done manually on a case-by-case basis. Yet, instead of reconsidering the law’s impact, a bipartisan group of 28 senators is pressuring the agency to rush implementation, increasing the risk of costly errors and improper payments.

It’s not too late to reverse course. Congress should repeal this costly mistake before the damage is done.

Adam N. Michel

Some Republican members of Congress believe that extending the 2017 Trump tax cuts with anything less than $4.7 trillion in revenue reductions is impossible. This belief is misguided. Such a large tax cut—without equally large spending cuts—suggests Republicans may have given up on cutting spending and other subsidies in the tax code. The tax code still has trillions of dollars in loopholes and spending that should be easy to cut in reconciliation.

The Tax Cuts and Jobs Act’s (TCJA) net tax cut of $5.5 trillion was more than 70 percent paid for with other tax changes that increased revenue. This model of pairing base broadeners with tax cuts should be a road map for 2025. 

There is plenty of spending to cut outside the tax code, but those cuts should not preclude members from also cutting spending and loopholes in the tax code. House Republicans should push the Ways and Means Committee to look harder in their own backyard. There are trillions of dollars of spending in the tax code that should be repealed or reformed.

The House Budget Committee recently detailed 30 options to raise revenue and reform the tax base. In a recent Tax Foundation blog, William McBride explains how “curtailing tax expenditures could offset several trillion dollars of tax cuts.” I’ve detailed a list of twelve revenue-raising improvements to the tax code, and the Cato Tax Plan includes over $14 trillion to cut in distortion tax credits, deductions, and loopholes. There is no shortage of lists that detail ways to offset tax cuts with other changes to the tax code.

The political response is often that many of these reforms are not politically viable, which may be true of some. However, even the messy political process leaves many tax expenditures ripe for elimination or reform. For example: 

Green energy subsidies. The Inflation Reduction Act (IRA) of 2022 dramatically expanded tax subsidies for the environmental left’s favorite energy sources. Reforming a fraction of the tax code’s $1.2 trillion in ten-year energy subsidies could lead to substantial savings. Repealing all IRA and pre-IRA energy tax programs would offset more than 20 percent of the tax package. Just repealing the electric vehicle credits could raise as much as $224 billion over ten years.

Tax breaks for stadiums. President Trump recently asked Congress to eliminate “special tax breaks for billionaire sports team owners.” One subsidy many sports teams benefit from is tax-exempt bonds financed by state and local governments. According to one estimate, 57 stadiums benefit from a subsidy that resulted in a $4.3 billion loss in federal revenue. Repealing the broader category of tax-exempt muni bonds could raise as much as $400 billion over ten years.

Corporate SALT reform. In 2017, Congress put a $10,000 cap on the state and local tax (SALT) deduction for individual and pass-through businesses. As bad as it would be for sound policymaking, politics may require raising the cap for individuals. Whatever the level, the individual SALT cap should be paired with a similar limit on the deduction for large corporations and a rule against state workarounds to level the playing field between big and small businesses. Whatever size Congress decides the deduction should be, the cap should be evenly applied to all business types and sizes. Depending on design, business SALT reform could raise between $400 billion and $800 billion over ten years.

Other examples of tax offsets that should be easy to include:

Repeal the pandemic-era Employee Retention Tax Credit. Savings: $77 billion.
Limit noncitizen access to refundable tax credits. Savings: $28 billion to $230 billion over ten years.
Repeal limitation on the recapture of Obamacare exchange subsidy overpayments. Savings: $96 billion over ten years.
Limit deductibility of fringe benefits, such as commuting expenses, gyms, and meals. Savings: $157 billion to $300 billion over ten years.
Reform treatment of the tax-exempt economy. Savings: $400 billion over ten years.

This list is just a fraction of the roughly $14 trillion in distortionary loopholes, credits, deductions, and other spending in the tax code. Republicans should not give up on cutting spending across the entire federal budget, including in the tax code. More aggressive cuts will allow Congress room to design a permanent, pro-growth tax reform that allows Americans to keep more of their hard-earned money.