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Peter Van Doren

The Washington Post recently described a Nebraska Supreme Court case challenging so-called certificate-of-need (CON) laws that require state permission to operate a health care facility.

From 1965 until the early 1980s Medicare encouraged health care expenditures because of its cost-plus reimbursement framework. Rather than change the incentives in the reimbursement framework, the federal government responded with requirements that states enact CON programs that required permits for all large health care facility expenditures. The thinking was that because all medically necessary expenditures were reimbursed, one could constrain health care spending by restricting unnecessary capital expenditures. If you don’t build it, they won’t come.

Medicare changed its reimbursement practices in the mid-1980s and repealed the CON requirements in 1987. However, 35 states still retain CON programs.

An article in the Fall 2024 issue of Regulation examines the effect of CON entry restrictions on non-hospital surgery centers (also called ambulatory surgical centers or ASCs). In 1980, most surgeries took place in hospitals as in-patient procedures, with only sixteen percent performed on an outpatient basis in a few hundred ASCs nationwide. The market for surgeries looks dramatically different today. Eighty percent of surgeries occur in outpatient settings across almost 6,000 surgical centers nationwide.

Between 1991 and 2019, six states repealed their CON laws on ASCs. The article concludes that repealing ASC CON laws caused an increase in ASCs per capita of 44–47 percent and 92–112 percent in rural communities. By limiting the number of available ASCs, CON laws not only reduce competition between ASCs but also direct surgeries to the substantially more expensive hospital setting, increasing healthcare expenditures and burdening taxpayers. 

Ryan Bourne and Sophia Bagley

California’s wildfire crisis isn’t just a natural disaster; it’s also a policy failure.

In recent years, state price control regulations have driven private home insurance providers like State Farm and Allstate out of offering new products in the state and led to the nonrenewal of thousands of existing home insurance policies. This has left many homeowners exposed to catastrophic financial losses from the recent wildfires and created a huge strain on the state-run Fair Access to Insurance Requirements (FAIR) plan, the insurer of last resort.

California’s price controls, whereby regulators must approve proposed premium increases, require insurers to submit detailed justifications for their rate increases to the California Department of Insurance (CDI). Crucially, those companies have until recently had to demonstrate that proposed premiums are based on historic losses, not analysis based on forward-looking risk assessments.

Designed to keep insurance premiums affordable, through rates that are never “excessive, inadequate, [or] unfairly discriminatory,” these regulations—introduced through Proposition 103—led to rules preventing companies from recalibrating prices to fully reflect what they believed were higher future wildfire risks after 2017.

The CDI rejected or delayed approval for substantial rate increases in many cases, creating a de facto price cap. Previous research from scholars at the International Center for Law and Economics shows that the average delay was 293 days between 2020 and 2022—a significant worsening from the average of 157 days between 2013 and 2019.

In fact, between 2017 and 2022, California was the worst state in the country for “rate suppression,” having the biggest gap between “the actuarially indicated rate and the rate approved by regulators.”

Firms weren’t just unable to reprice to reflect the new perceived risk of wildfires. California’s laws also limited insurers’ ability to reflect their own reinsurance costs into rates. Reinsurance, essential for shielding insurers from catastrophic events, has become increasingly expensive as wildfires grow more frequent and severe. Unable to pass these costs on to policyholders, insurers faced an untenable situation.

As detailed extensively in The War on Prices, prices aren’t just arbitrary numbers set by greedy corporations; they are signals that convey vital local knowledge and information. When an insurer raises premiums, it’s responding to both real-world data and its own expectations—about claims, rising reinsurance costs, high inflation, and worsening fire conditions.

Market prices thus serve as signals, telling homeowners, policymakers, and developers about the true costs of building and living in wildfire-prone areas. By capping insurance rates below what market conditions demanded, California muted these warning signals for some homeowners, forcing companies to price below expected cost and making consumers feel safer than they were. This encouraged development in fire-prone areas and reduced the incentive for homeowners to, say, purchase supplementary private fire insurance services.

But these capped prices have obvious detrimental consequences for other customers too. The result of holding prices below market rates saw insurers simply pull back from the highest-risk areas, where potential losses loomed large. State Farm, for example, announced plans to non-renew tens of thousands of policies in high-risk areas like Pacific Palisades, where 69 percent of properties were dropped​. Millions of homeowners were thus forced into surplus lines insurers and onto the bare-bones FAIR plan (both of which, by the way, are allowed to use catastrophe models in setting their premiums). As a result, the FAIR plan’s exposure to losses statewide has ballooned to $458 billion​, including an estimated $5.9 billion in Palisades alone and $24 billion in Los Angeles.

Tragically, tales are already filtering out about homes worth tens of millions of dollars not being insured at all. Not only will those families today face huge losses, but the FAIR plan itself is facing massive payouts. What if it can’t meet them all? Well, Politico reports that “it would draw from primary insurers to recoup its costs under state law, raising rates across all private policies and sending rates skyrocketing across the state.” 

In other words, those who did get insurance in lower-risk areas will pay more to reflect the lack of insurance caused by price controls in high-risk areas.

California has belatedly recognized the problems its own rules are creating. That same Politico report details how, in recent weeks, the state’s insurance commissioner finalized rules that “gave insurance companies permission to pass along the costs of reinsurance to customers and use forward-looking so-called “catastrophic models” that take into account the likelihood of the type of climate-fueled fires raging in Los Angeles to raise rates.”

But even then the state cannot resist meddling. Those changes would come with a quid pro quo that “in exchange” insurers should meet “a certain quota of policies in disaster-prone areas.”

Will we never learn about the damage of price controls? Distorting market prices to lie about risk doesn’t make risk disappear. It simply leads people to make worse decisions and creates shortages of the product in question. California’s failed experiment in price controls has left homeowners paying the ultimate price in the face of an increasingly dangerous wildfire reality.

Walter Olson

According to multiple reports, Republicans “plan to move quickly” to move election legislation early in the new Congress. Supporters of constitutional liberty should watch closely to make sure that such legislation is shorn of the punitive enforcement provisions and unrealistic timelines that riddled last year’s Republican bill on citizenship verification, and that it does not let the federal government draw unto itself too much discretionary regulatory power over local election administration. Reports AP:

The main legislation that Republicans expect to push will be versions of the American Confidence in Elections Act and the Safeguard American Voter Eligibility Act, said GOP Rep. Bryan Steil of Wisconsin, chair of the Committee on House Administration, which handles election-related legislation. The proposals are known as the ACE and SAVE acts, respectively.

The political logic in starting with those two is clear enough. A requirement to show a government-issued photo ID at the polls is consistently popular with the public across party lines, leaving aside scholars’ doubts as to whether it actually matters much to outcomes. Indeed, most states already have it. Noncitizen voting in federal elections is already unlawful, and there is a broad political consensus on the principle of the thing, if not necessarily on the details of enforcing it.

By contrast, some other ideas floated by Donald Trump and allies, such as requiring that all voting be done on Election Day, are deeply unpopular both with the public and with election administrators of both parties. AP again:

[Republican Georgia Secretary of State] Raffensperger and Michigan Secretary of State Jocelyn Benson, a Democrat, said it would be a mistake to move the country to a single day of voting, something Trump has said he would like to see happen, because it would eliminate early voting and limit access to mail ballots. Both methods are extremely popular among voters. In Georgia, 71% of voters in November cast their ballots in person before Election Day.

Even if there’s more of a consensus in principle behind the ACE and SAVE bills, the question is whether that consensus extends to the details. As I wrote last summer when House Republicans were pushing SAVE as a messaging bill: 

the fact is that it’s hard for much of the population to lay hands on high-level documentary proof of citizenship. Drivers’ licenses, government employee IDs, and the like generally don’t record citizenship status. Passports are better, and so are domestic birth certificates bearing someone’s current legal name, but much of the population cannot easily lay hands on either, especially given that many married women have changed their legal names.

For all the polarized talk in this area, the SAVE Act itself acknowledges that less-than-perfect compromise solutions would be necessary. It “requires states to establish an alternative process under which an applicant may submit other evidence to demonstrate US citizenship.” Will this involve some combination of second-best documents, sworn attestations, in-person interviews, or maybe something else? The bill is sparse and vague on these crucial details.

Aside from whether the unrealistic and punitive timelines and penalties for administrators get softened, a particular issue to watch is whether the bill or bills attempt to transform the obscure federal Election Assistance Commission, currently configured as a cheerful helper to local election authorities, into something closer to a regulator empowered to give them orders. Last summer’s SAVE Act authorized the EAC to begin issuing guidance to states on how to apply the law, a potentially broad power.

AP quotes Rep. Steil as saying he “expects there will be ‘some reforms and tweaks’ to the original proposals and hopes Democrats will work with Republicans to refine and ultimately support them.” But as reporter Pam Fessler noticed, the citizenship verification bill is listed among twelve initial bills in a new House Rules package “to be considered with no amendments.” Let’s hope the voice of state and local administrators—and all those concerned with keeping elections decentralized, as contemplated by the US Constitution—is given a chance to be heard. 

Colleen Hroncich

“We can do this better,” thought former public school teacher Rachel Frevert when she saw her children’s assignments during the pandemic. Her oldest son has autism, and she knew the back and forth of sometimes being at school and sometimes virtual wasn’t going to work for him. He needed more consistency and something more engaging than what his school was doing.

She decided to homeschool her kids, and a neighbor asked if her kids could join them. A few friends heard about it and asked if Rachel could include their children in her group. She launched a microschool in her home with nine kids and soon outgrew the space. Her Integrative Learning Academy is now operating out of a separate house on an acre of land that she and her husband purchased in Peoria, Arizona. She has 32 kids this year and expects 38 next year, which is getting close to the maximum she feels will work in her space. 

“Somewhere along the journey, it really turned into this inclusive model, where neurodivergent students can learn alongside neurotypical peers,” she explains. “We strive for a healthy balance to allow both sets of students to really learn and grow together in a space that fosters kindness and community and engagement.”

To meet the varied needs of her students, Rachel organizes the schedule so everyone is doing subjects like math and reading at the same time. This allows kids to go to the class that best fits their academic needs. She adds that they all study the same theme, which encourages discussions and enables kids to move in and out of groups as needed. For example, they’re currently studying geology. Different classrooms may be focusing on different areas of geology, but they’re all doing the same general topic.

The students also spend a lot of time outdoors. “We really let the kids do a lot of risky play. We’ve got shovels out there. We’ve got wheelbarrows. The kids have a whole bunch of bricks—they’re building with bricks and pipes and a whole digging zone. They climb trees,” Rachel says. “We spend as much time as we can outside and really let them get their hands dirty. It’s kind of like Waldorf style.” 

When new teachers come in, it sometimes takes them a while to get comfortable with kids having so much freedom for risky play.

Integrative Learning Academy follows a shorter school schedule—Monday through Thursday, 8:30 a.m. to 2:00 p.m.—to give kids more time to be kids. This year, they added an optional enrichment program after school and on Fridays for an additional fee.

Arizona’s school choice programs, especially the Empowerment Scholarship Accounts, have been crucial for the families who are attending Integrative Learning Academy. “I recognize that we’re super blessed, and I know that a big reason why we’re flourishing is because of the ESA. And because we have such a robust program that not only provides universal ESA but also provides our students with autism with quite a bit of funding, which helps sustain our model and what we’re able to provide students,” Rachel explains.

While Rachel acknowledges that starting and running a school is hard work, she says it’s worth it. “I hear instruction in each of the classrooms, and I hear the kids playing, and it’s just so rewarding. I can’t even believe that this is my life, that I built this,” she says. “When I was in the public school, I would joke, you know, ‘I’m going to create a school’ and then I’d laugh. Like how does someone even do that, right? And I can’t even believe that I’m here. So I think that’s just my biggest piece of advice—if it’s been placed on your heart, it’s possible. Do it.”

Daniel Raisbeck

In November 1881, Juan José Dardo Rocha, governor of the Province of Buenos Aires, passed a decree that forbade the use of a widely used torture device called the cepo. The Cambridge Dictionary defines a cepo thus: “formerly a wooden frame in which a criminal was fastened as a punishment.” The Spanish Royal Academy Dictionary goes into greater detail:

Cepo: An instrument made of two thick pieces of wood, which when joined together form round holes in the middle, in which the prisoner’s throat or leg was secured by joining the wood pieces.

So ubiquitous was the cepo in 19th-century Argentina that it features prominently in Gaucho literature, as author Emiliano Tagle notes. Thus, in Juan Moreira (1879), a classic novel about the legendary, gun-slinging outlaw—perhaps the Argentine version of Billy the Kid—author Eduardo González writes that the “inquisitorial instrument” is always found outdoors and beneath a tree. As the prisoner’s neck or legs were exposed, foliage was his “only protection against the sun and frost.” Juan Manuel de Rosas, the much-feared tyrant of Buenos Aires (from 1829 to 1852), would mandate two hours of throat-fastening under the cepo for anyone caught carrying a knife on a religious holiday (so writes the comandante Gregorio Aráoz de Lamadrid).

The inconvenience of carrying the heavy wooden device across long distances led to adaptations of the cepo on military campaigns, Tagle adds. Hence the “rope” cepo, whereby the prisoner’s ankles were tied with a rope, with a half-muzzle at each end tied firmly to a stake; or the so-called “Colombian cepo,” which involved tying a sitting prisoner’s wrists and passing the arms outside his knees, with a stick placed in the space between the back of the knees and the bends of the elbows. Yet another version, the estaqueada, involved forcing the prisoner onto the ground with all four limbs outstretched, and tying each arm and leg to a wooden stake. It features in José Hernández’s epic, Martín Fierro (1872), the most renowned of Gaucho poems. 

As nearly a century and a half have elapsed since Dardo Rocha’s humanitarian ban, one would think that the cepo would incite merely antiquarian interest. And yet the word appears prominently in Argentina’s daily economic discussions. Today’s cepo refers not to the 19th-century torture device, but rather to a series of currency and capital controls that severely restrict the flow of US dollars and other hard currencies in and out of the country. Call it the currency clamp. 

Indeed, a year into Javier Milei’s presidency, the economic debate in Argentina hinges on when and how the government will end the cepo, as it has committed to doing.

Argentina’s Currency Clamp

At its most basic level, the clamp consists of an official, fixed exchange rate that is held at an artificially low level compared to all others. The government maintains multiple exchange rates although, arguably, the most important dollar rate is that found in the black market. The official rate is used only for direct transactions with the central bank, which are subject to its approval, and is available mostly for the purposes of international trade. The system generally punishes exports (exporters must sell their dollars earned abroad at the official, low rate) and rewards importers (who have privileged access to buy cheap dollars at the official rate).

Last December, President Javier Milei’s newly installed government adjusted the official dollar rate from ARS $400 to $800, announcing a “crawling peg” that devalued the peso by a further 2 percent per month (still well below the monthly inflation rate). At the time of writing, the official rate stands at ARS $1065 per dollar.

But the official rate and the crawling peg are but two of the clamp’s pieces. Its other elements include:

Limits on Dollar Purchases: A $200 limit for individuals on the monthly purchase of US dollars, which are known as “savings dollars” (dólar ahorro) and are only sold at the official rate.
Taxes on Dollar Purchases: All dollar transactions, including the purchase of “savings dollars,” are subject to a withholding of 30 percent on the income tax (ganancias) and personal property or wealth tax (bienes personales), the rates of which vary according to income levels and net worth. Withholdings can be deducted from property or income taxes when applicable. Individuals who are not subject to these taxes can obtain a refund. But because the process can take several months to complete, the exempt individual is still subject to a de facto inflation tax.
Taxes on Credit Card Use Abroad: Argentines who use their local credit card to make payments abroad are subject to the 30 percent withholding on income and personal property tax. This is a means for the government “to discourage Argentine consumers from spending foreign currency overseas,” according to the Cash Management Group.
Repatriation Requirements: Exporters are allowed to make profits abroad in foreign currency, but they are required to repatriate 100 percent of their earnings within a given time to avoid penalties and fines. The government thus gains a share of the exporters’ profits by forcing them to sell their dollars below the market value, at the official exchange rate.
“Financial” Exchange Rates: Argentines can access dollars by buying and selling bonds in domestic and international financial markets. In the domestic market, peso-denominated bonds are bought and then sold in dollars. The rate is the so-called “electronic payments market” dollar or “dólar MEP” (mercado electrónico de pago). If bonds are bought in pesos and then sold in dollars in the international market, then the applicable rate is the so-called “blue-chip swap rate” (dólar contado con liquidación or CCL). As one journalist explains, large numbers of people entered this seemingly complex market due to the strong demand for dollars and the availability of trading apps: “Once relatively obscure terms, ‘MEP’ and ‘blue-chip’ are now mainstream and in the last couple of years, everyone has become a trader.”
Capital Controls: Foreign companies that carry out business in Argentina are not allowed to transfer profits or dividends abroad without the central bank’s permission.
Trapped Dividends: Since the central bank is keen on preventing the outflow of capital, the latter restriction has left around USD $5 billon in trapped dividends in Argentina, according to some estimates. In effect, this amounts to an expropriation, however temporary, of holders of Argentine assets who are abroad.

The currency clamp’s total elimination is required merely to put Argentina on a par with other Latin American countries, let alone to fulfill Milei’s ambitious plan to fully liberalize the Argentine economy. After a year in office, his government has kept the clamp in place, albeit with significant adjustments.

The government scrapped import licenses, which were hard to obtain, slowed the flow of goods into the country, and delayed payments. It also lowered certain tariffs, streamlined some trade operations, and got rid of the “stamping system,” an obsolete means “to control the illegal possession of foreign merchandise” as per Baker McKenzie. 

The government allowed the so-called PAIS tax to expire last month. In December 2019, former President Alberto Fernández’s Peronist government introduced this 30 percent levy on the purchase of foreign currency (including “savings dollars”) as well as the purchase of goods and services from abroad by means of credit and debit cards. Online purchases made in foreign currency, including the payment of streaming services, were taxed at 8 percent. Fernández added an additional income and personal property tax withholding of 30 percent for all transactions that fell under the PAIS tax. Subsequently, in July 2023, Fernández broadened the PAIS tax’s scope to include, inter alia, a 7.5 percent levy on imported goods with certain exemptions, such as basic food items and oil industry material.

Upon taking office in December 2023, Milei’s government initially raised the PAIS tax rate on imports to 17.5 percent, but it reinstated the original 7.5 percent rate in September 2024. More recently, in December 2024, the government allowed the PAIS tax to expire (as originally scheduled), but it kept in place the additional, 30 percent withholding on dollar transactions, which include “savings dollars” purchases as well as airfare, holiday packages, and goods and services acquired abroad. 

Plus, in recent days, the tax and customs authority announced strict controls, beginning in January 2025, to ensure that Argentines returning from abroad do not exceed the legal limit of a single mobile telephone and tablet computer per person, and up to USD $500 in personal goods bought abroad (with an additional $500 allowed for purchases in duty-free shops). Any excess will be taxed at 50 percent of the exceeded amount. The official rationale, beyond halting the entry of illicit goods, is the protection of the Argentine industry.

Although progress has been made, the clamp’s interference in people’s lives is still inconsistent with free market principles. It is also expensive to keep in place. So why not simply free the exchange rate (arguably the most important price in the market), do away with currency and capital controls, and truly free the economy?

Peso Strength: Interventionist Factors

The government fears that ending the clamp would undo its efforts to lower the spread between the official dollar rate and the black-market, so-called “blue” dollar. The blue dollar rate is considered the closest approximation to a free market rate. And, in an economy that is de facto dollarized, as is the case in Argentina, the clamp has left hard currency readily available only in the parallel, blue dollar market.

Last June, the spread surpassed forty percent when the blue dollar sold for over ARS $1,400. It now sells for ARS $1,220, leaving the spread with the official dollar (at $1055) at 16 percent, a low level by Argentina’s standards. The blue dollar’s steadiness has been matched in the “financial” exchange rate, with the MEP dollar having gained eight percent against the dollar between December 2023, when Milei became president, and November 2024. This is an outlier in global terms since the dollar has strengthened with respect to most currencies since early 2020. It is also a sign of Argentina’s improving fortunes under Milei. Still, the Milei government has maintained currency market interventionism.

The official exchange rate/​crawling peg combination has encouraged the carry trade, the practice of borrowing at a low interest rate in one currency to invest at a higher rate in another. Although Finance Minister Luis Caputo has lowered the benchmark interest rate to 32 percent from well over 100 percent in 2023, Argentina’s rate remains high compared to much of the world. And the crawling peg, with its innate predictability, gives speculators confidence that an imminent, drastic devaluation—an event that could make the carry trade unprofitable— is unlikely.

This has spurred the carry trade even among Argentine crop exporters, who have privileged access to dollars thanks to the currency clamp, whose rules to restrict the flow of capital do not apply equally across the board. Thus, as Bloomberg notes, crop exporters “can borrow dollars from their banks, unlike most Argentines hampered by capital controls. They then sell those dollars and invest the pesos they receive in return in high-yield local currency assets.” While current policies remain in place, the carry trade will remain a factor in the peso’s relative strength. 

In a more direct form of interventionism, the central bank has used pesos to buy over USD $20 billion in currency markets. As recently as December 19, the central bank intervened in the CCL/​blue chip swap rate market, buying over USD $500 million worth of dollar-denominated bonds while selling an equivalent bond amount in pesos. The aim was to halt a sudden spike in the spread between the official rate and the “financial” rate, which had increased from as low as one percent to 16 percent in a matter of days. A similar rise was seen in the official/​blue dollar spread.

Much of the total peso amount that the government has deployed to buy dollars was freshly printed, as the year-on-year growth rate of the monetary base grew rapidly during the first half of the year. Despite Milei’s campaign promise to shut down the central bank, its printers were kept busy during the first six months of his presidency.

Peso Strength: Free Market Factors

Beginning in July, though, the central bank has implemented a zero-emission policy, which, as Reuters reported, involves no longer issuing pesos “to pay interest on certain debts.” This has slowed down the year-on-year growth rate of the monetary base and helped to reduce monthly inflation from 25 percent last December 2023 to 2.4 percent in November 2024, an achievement that, though commendable, would still leave annual inflation for 2025 well into double digits. 

Markets do expect a further fall in inflation, however, with bond prices rising over 150 percent and country risk falling to below 600 from nearly 3,000 in 2022. Argentina’s economy exited recession in the third quarter of 2024 (with an impressive growth rate of nearly 4 percent) amid a cascade of bullish signals from global players. In recent weeks, Fitch upgraded Argentina’s debt to CCC (still the lowest junk bond category), J.P. Morgan predicted 8.5 percent growth in 2025 (as industrial activity picks up), and The Economist referred to the country’s “economic miracle” under Milei.

The zero-emission policy also helps explain the local currency’s recent strength. The dollar’s past premium to the peso arose from uneven competition between a monetary base that increased boundlessly and one with carefully restricted growth by comparison. The abrupt stop in the growth of the monetary base suddenly made the currency competitive even against the dollar and other strong, developed-world currencies, especially insofar as market participants expect that the policy has staying power.

Other factors stem from Milei’s free-market reforms. For the first time since 2008, there is a primary fiscal surplus after an impressive 30 percent cut in government spending. The government is also carrying out a vigorous deregulation campaign, which has delivered terrific results. For example, the abolition of rent controls led to a drastic increase in the supply of apartments and a corresponding drop of nearly 50 percent in the price of rent in Buenos Aires. And this was before Milei created the Ministry of Deregulation and State Transformation, a team—led by economist Federico Sturzenegger— in charge of undoing the heaps of bureaucratic clutter that made Argentina one of the world’s most regulated economies.

A tax amnesty, which the government announced earlier this year, has also bolstered the peso. Individuals and businesses were allowed to deposit up to USD $100,000 in undeclared funds free of tax or penalties, with a 5 percent surcharge for sums above that amount. The result was an influx of USD $18 billion in amnestied funds, this despite the government’s own claims in January that Argentina did not have enough dollars to dollarize.

As I mentioned at the time along with my colleague, Gabriela Calderón de Burgos, Argentine individuals and businesses hold substantial amounts of dollars outside the formal banking system: $277 billion—over 50 percent of GDP—in the first quarter of 2024, according to official data. Under the right conditions, we argued, much of that money would be deposited in Argentine banks.

The tax amnesty was overly restrictive in our view: why the $100,000 limit, or the tax on sums above that amount? Yet its results only confirm that Argentines have plenty of dollars even if the Argentine state is customarily strapped for cash. As a result, the tax amnesty, together with the fiscal and deregulation factors, has strengthened Argentina’s currency under broadly free market conditions.

Sophia Bagley and Ryan Bourne

David Inserra

Meta just made a big announcement that it will be making a series of significant changes to its content moderation regime in service of greater expression on Meta’s platforms. These changes should be largely celebrated as they contribute a far more vibrant culture of free expression online.

But it’s also worth examining the talking points to more clearly understand what Meta is doing next and how impactful these changes will be. Meta CEO Mark Zuckerberg laid out six ways that Meta will be changing to better favor free expression:

Replacing fact-checkers with community notes. Zuckerberg didn’t shy away from the hard truth here. While fact-checkers might have been conceptualized as a well-meaning way to give users better information and combat the threat of misinformation, the reality, argued by many and finally affirmed by Zuckerberg, is that the fact-checkers have been “too politically biased and have destroyed more trusted than they created.”

Zuckerberg is exactly right. Meta’s fact-checking system turned fact-checking decisions into labels and demotions of content. The age-old problem, though, is “who watches the watchers?” Fact-checkers were comprised almost entirely of left-leaning academics and media who felt it was appropriate to moderate away false or misleading content. Free speech advocates and conservative voices did not join the program, and since arbitrating misinformation is often a subjective process, the fact-checker’s own biases were an inherent part of the process. Furthermore, the fact-checks couldn’t meaningfully be appealed, meaning that fact-checkers were effectively unaccountable private censors. Rather than building trust, such a process only undermined faith in expertise and created more problems for Meta. 

In place of top-down fact-checking, Meta has proposed adopting the Community Notes program used by X that harnesses the deliberative power of users across the political spectrum to identify helpful information and context. It’s not a perfect system, but it is far more likely to minimize bias and build trust with users. And perhaps Meta can improve the system.
 
Simplify and reduce content moderation of contentious topics. Meta also announced its plans to streamline its content policies that govern some of the most contentious topics in our society, such as immigration and sexuality. As someone who used to be one of Meta’s policy experts, I can say that these appear to be some significant changes. For example, saying that a man shouldn’t be in a boxing competition against a woman was previously a violation of Meta’s policies, but now the policy clearly allows for users to call for sex-based restrictions in “spaces commonly limited by sex or gender, such as restrooms, sports and sports leagues.” Or, previously, it was considered a hate speech violation to state that one group of people had less education than another, but it appears that line is gone. You might expect these types of statements to come up when discussing various social issues. Now, we can’t fully understand the scope of these changes since some internal policies are not publicly available, but the public changes indicate that some of Meta’s rules are becoming more permissive.
 
Reduce errors in enforcement. The sheer amount of content that is posted online means that when any online platform moderates content, it often makes use of automated systems. Previously, Meta’s automated and proactive systems were scanning nearly every piece of content for every policy violation and removing or demoting content accordingly. But even if only a tiny fraction of content is actioned in error, that still means millions of mistakes are made. Meta announced it would only be using those automated systems to find the illegal and highest severity types of content. This will dramatically reduce the amount of content that is being automatically removed or demoted for lower severity violations, instead depending more on users to report lower severity violations. This decision represents a trade-off Meta is making. More content that violates a low-severity policy will be left online until it is reported, but in turn, less nonviolating policy will be mistakenly suppressed.
 
Restoring and improving users’ ability to access political and civic content. Over the past few years, Meta has demoted what it calls civic content, as many users seemingly didn’t want to see political or social content that might be divisive. But on the other hand, other users want to see such content. Meta announced that users who want to see such content will be able to better personalize their feeds. Meta’s prior one-size-fits-all approach meant that certain users were always unhappy. But giving users greater choice and control over their news feed is a wise way to avoid this moderation dilemma. Meta might consider giving users even greater control of their experience to further avoid moderation challenges.
 
Moving content moderation teams to Texas and elsewhere. Meta is moving content moderation and trust and safety teams out of California to other points in the United States, notably Texas, ostensibly to reduce worries about bias in the content moderation teams. While the teams within Meta certainly have a strong left-wing bias as previously testified by Zuckerberg himself, it is worth noting, however, that Meta already had a significant presence in Texas for its content moderation and policy teams, not to mention many other places around the world. While it might be nice to have a geographically diverse workforce outside of California, locating your staff in Texas or elsewhere seems like mostly an attempt to signal to conservatives that Meta will be more understanding and accepting of conservative beliefs. Without a deeper and long-standing commitment to ideological diversity, however, this action on its own will likely have little to no impact on free expression. 
 
Pushing back against foreign censors. While the prior actions are all efforts by a private company to improve its product by choosing to suppress less content, the last action Meta is taking is to partner with the Trump administration to fight back against foreign regulators that are censoring and impacting increasing amounts of speech. Specifically, Zuckerberg put European and Brazilian censors on notice. 

The EU, with its Digital Services Act, member states’ hate speech and misinformation laws, and other regulations, has put significant rules around online speech in Europe. Indeed, rather than new businesses, regulation has been the main technology export of the EU, and it has significant impacts on how, primarily American, technology companies operate. This is known as the Brussels effect, in which the EU’s rules may spread and be adopted beyond the EU, impacting Americans’ speech. One of the most egregious recent examples was when an EU commissioner, Thierry Breton, threatened Elon Musk and X for having the audacity to have a conversation with President Trump live on X in the lead-up to the 2024 US election. While Breton is now out of a job, nothing in the EU’s laws or structures prevents this type of blatant abuse of power in the future. 

And Zuckerberg also alluded to Brazil’s secret court orders that censor important political content with little to no legal justification. Under the guise of “protecting democracy,” Brazil’s judiciary has acted with impunity to censor and jail ordinary citizens, political opponents, and those who dare to criticize the court’s authoritarian power grab. When X attempted to resist these secret orders, the courts banned X and froze the assets of other American companies as punishment. Whatever form the censorship takes, Meta is right to join the fight against governments that are forcing online platforms to silence users.

As a private company, Meta has the right to set up its rules as it wants, and I believe that most of these changes to its rules and programs should be applauded. But if Meta wants to more fundamentally embrace free expression, its institutions need to change as well. Here’s what Meta should change:

Create an internal institution dedicated to free expression. Much of the discussion about these moves, from the right and the left, is that they are being done opportunistically to avoid the wrath of the incoming Trump administration. And these changes are likely at least somewhat a calculated business move. Zuckerberg, though, has been vocal on the importance of free expression in the past, giving a speech at Georgetown in 2019 on just this topic. That said, the impulse to suppress speech was strong over the past few years, and Meta made its prior policy decisions to suppress more speech in a less speech-friendly political climate. Whether explicit censorship abroad, or more subtle censorial pressures here at home, online platforms were not prepared or willing to resist. 

To help better resist arguments and logic for suppressing speech coming from both sides of the political aisle, Meta should create an internal organization dedicated to researching and advocating for free expression. Regardless of the political party in charge or the social pressures of the moment, this organization would exist to make the case for why in the long run, Meta is better served by consistently advancing freer expression. Meta already has plenty of organizations that are politically and institutionally focused on limiting certain kinds of expression. One would expect, for example, Meta’s trust and safety specialists to argue for taking down more content they believe could make some people unsafe. It makes sense that risk-averse communications or legal teams might prefer taking down certain types of controversial speech. And even though Meta has internal teams dedicated to advocating for human rights and civil rights, those organizations embrace international, European, or modern progressive views of expressive rights. 

A free expression policy team should unabashedly focus on advocating for greater expression in all situations for all users. This team would have access to Meta’s data to show through original research and stories how expression has helped users. It would build partnerships with free expression organizations around the world to better inform policymaking. It would provide a devil’s advocate in escalation situations in which there is a push to remove speech and no one within the company is willing to say “hold on a minute.” The billions of dollars Meta spends on its broader Trust and Safety initiatives are focused on removing content—and there is a lot of content that should and will be removed. But given Meta’s products are essentially about giving people a voice, expression deserves its own advocate within Meta. 

Mark Zuckerberg called the recent election a cultural tipping point for free expression. While some may decry this as a craven appeal to win approval from the incoming Trump administration, many of the changes being made by Meta support norms of greater expression and resist clear government censorship. As such, they should be lauded. That said, Meta should go even further in giving users greater control over their online experiences and create internal institutions that are proud champions of free expression regardless of the cultural moment or the political winds. 

Mike Fox

As the world rang in the new year, a terrorist attack shook New Orleans to its core, taking the lives of fourteen innocent people and wounding at least thirty-five more. Revelers on Bourbon Street, known for its laid-back, party-like atmosphere, encountered an individual “hell-bent on causing mass carnage,” in the words of Mayor LaToya Cantrell. Later that same morning, a man detonated a Tesla Cybertruck outside the Trump Hotel in Las Vegas. Both perpetrators crossed state lines in the process of committing their crimes, both used explosives, and both served in the US Army. Both were heinous crimes that left a wake of destruction in their paths.

Juxtapose that with an ongoing federal case in Florida. Those familiar with soccer know that pyrotechnics—including flares and smoke bombs—have long been a prominent feature of the sport and are used by fans to express support for their team and drum up enthusiasm from the crowd. In February 2024, Giovanni Isai Ramirez Reyes lit two flares at an Orlando stadium while attending an Orlando City soccer game. Both flares were extinguished within a minute, and although a child reportedly suffered superficial burns that did not require medical attention, the fire department was never even called. And the match continued uninterrupted. 

But the US Department of Justice nevertheless decided to charge Reyes with arson for leaving scorch marks on aluminum bleachers—a federal “crime” for which he now faces a seven-year mandatory minimum prison sentence.

Relentless overcriminalization has allowed prosecutors to bring the full weight of the government to bear on people whose conduct is just barely, if at all wrongful, in the sense that it presents genuine harm to other people. As Justice Gorsuch notes in his recent book, “[c]riminal laws and longer sentences are not the solution to every problem.” Also, some “crimes” are so inconsequential that they are unworthy of a court’s consideration and merit some other societal response than a full-blown prosecution.

Reyes’s case implicates a significant and deliberate limitation on federal power. Our federal government is one of enumerated powers and—notwithstanding its spendthrift ways—finite resources. Why the federal government has any lawful or practical business prosecuting the alleged misuse of a flare at a soccer game in Florida is unclear. 

Arson is a quintessentially state-law crime, and nothing in the Constitution expressly empowers the US government to make it a federal crime as well. Florida officials have the ability to charge Reyes pursuant to state law, should they deem criminal prosecution appropriate—as they did last month in a similar incident where the same US attorney’s office did not file federal charges.

To the extent the federal government has lawful jurisdiction over potential terrorist acts like those in New Orleans and Las Vegas (there is footage of the New Orleans perpetrator planting at least two IEDs before launching his attack that thankfully did not detonate), prosecutorial and investigative resources should prioritize preventing these types of attacks and swiftly bringing those responsible to justice. Likewise, precious judicial resources should be reserved for cases that truly merit a court’s attention. 

Reyes has asked a federal judge to make a pretrial determination that the term “damages” in the statute incorporates the common law de minimis rule, which prevents the law from intervening in trivial matters. Pursuant to the de minimis rule, Reyes has asked the judge to dismiss his indictment, arguing that the plain meaning of the word “damages” requires a loss of something’s value or usefulness, which the government has not been able to show.

Before, during, and after America’s Founding, it was widely understood that criminal juries played a vital injustice-preventing role. The historic conception of criminal juries was in part to assess both the wisdom and fairness of a given prosecution. This included the power to acquit a factually guilty defendant against the evidence in the interest of justice. Today, however, criminal jurors have been relegated to the role of mere fact finders. 

The profound injustice the US government has orchestrated against Reyes illustrates precisely why restoring the criminal jury to its historic injustice-preventing role is so essential. Should Reyes’s case proceed to trial, it is doubtful that a Founding-era-informed jury—i.e., aware of the fact that a conviction would result in at least a seven-year mandatory minimum sentence—would vote to convict because that sentence is so grossly disproportionate to what Reyes actually did and the de minimis harm he caused. 

Thus, it’s a safe bet prosecutors will do everything in their power to ensure the jury remains ignorant of the draconian punishment the system will inflict on Reyes if they convict and of the fact that the judge will be powerless to do anything about it.

Adam N. Michel and Joshua Loucks

President-elect Donald Trump campaigned on lowering the US corporate income tax rate to 15 percent. He made the same request in 2017 when Republicans passed their tax cuts, but Congress only cut the federal rate to 21 percent—down from the worldwide high of 35 percent.

Data from the Organisation for Economic Co-operation and Development (OECD) suggest that cutting corporate taxes in 2025 will likely not result in steep revenue losses. Additionally, more competitive business taxes will make America an even more attractive destination for global investment and workforce expansion. Congress should deliver on Trump’s promise or eliminate the tax entirely.

Lower Corporate Tax Rate, Higher Revenue?

Lower corporate income tax rates encourage investment, increase productivity, expand job opportunities, and attract internationally mobile corporate profits. In many cases, cutting the corporate tax rate does not reduce revenue; it may increase it.

When Ireland cut its corporate tax, revenue increased. Its corporate tax rate went from 40 percent in 1994 to 12.5 percent by 2003. Since 1993, Irish corporate tax revenue as a share of the economy has increased by 75 percent (2.1 percentage points).

In 2023, Ireland raised about $5,000 per person in corporate tax revenue, more than double the OECD average.[1] Figure 1 shows that the US only raised $1,700 per person despite a much higher tax rate of 25.6 percent (federal plus state taxes). This is not exactly a fair comparison because 60 percent of US business income is taxed under the individual tax system. Adjusting for this difference, US corporate revenues are still below Ireland’s but likely above the OECD average. 

Ireland’s commitment to a low corporate tax rate and other business-friendly policies have made it a haven for global businesses looking to escape the high taxes worldwide. According to one estimate, as much as 86 percent of Ireland’s corporate tax revenue is paid by foreign multinationals.

Foreign investment has brought more than just fiscal benefits; The Wall Street Journal reports that “around 15% of the Irish workforce is employed by just under 1,000 U.S. companies,” and OECD data show that over the past two decades, average annual wages in Ireland have grown faster than the OECD average and more than twice as fast as those in neighboring UK. 

The Irish story of lower tax rates and higher revenue is consistent across the OECD.

Figure 2 shows that the average OECD corporate tax revenue as a share of GDP increased from 1.9 percent in 1981 to 3.6 percent in 2023.[2] Revenue increased as the average corporate income tax rate across the same countries was cut in half, falling from about 48 percent in the early 1980s to 24 percent in 2023. There is also no consistent relationship between individual country tax rates and revenue collection. 

Since 2017, when the US cut the corporate tax by 14 percentage points, corporate tax revenue as a share of GDP has increased by 40 percent (from 1.5 percent to 2.1 percent in 2023). Revenue per capita also nearly doubled from $870 to $1,700.

The experience of Ireland, the United States, and the rest of the OECD bloc confirms estimates that find the top of the corporate tax Laffer Curve is in the mid-20 percent range and falling over time. It’s likely lower for the most economically sensitive industries. Under one optimistic scenario, Martin Sullivan shows how a 15 percent US federal corporate tax rate (about 20 percent with state taxes) could be close to revenue neutral. Policymakers should always set tax rates below the peak revenue-maximizing rate.

The Best Way to Target Domestic Manufacturing Is Expensing

During the campaign, Trump suggested that a lower corporate tax rate should only be available to “companies that make their product in America.” Such targeted tax cuts are a mistake.

The US tax code used to have a targeted deduction for manufacturers called the qualified domestic production activities deduction (DPAD). The TCJA repealed the deduction in favor of lower tax rates for all businesses and expensing, because DPAD was widely understood as ineffective and economically inefficient. It primarily subsidized existing activity, was difficult to target the intended manufacturers, and was associated with declining domestic employment. Historically, companies such as Apple, Disney, and Microsoft, along with tobacco company Altria Group, were the primary beneficiaries of the subsidy.

Pairing Trump’s lower corporate tax rate with full expensing for all US investment and neutral cost recovery for investment in structures will meet his goal of substantially increasing investment for the most capital-intensive firms, such as domestic manufacturing.

Cut the Corporate Rate As Low As Possible

At a combined rate of 25.6 percent, the United States’ corporate tax rate is still above the non-US OECD average of 24 percent.

Figure 3 shows the 2024 combined corporate tax rates for all 38 OECD countries. Trump’s proposal to cut the federal corporate income tax rate from 21 percent to 15 percent would lower the United States’ combined state and federal corporate tax rate to 19.6 percent. This would give America a lower corporate income tax rate than all but 5 OECD countries, put the US in the bottom third of all countries in the world, and undercut China’s 25 percent rate (China is a non-OECD member). 

Because corporate taxes are so economically destructive, lowering or eliminating the tax altogether may not have the fiscal consequences some fear. Trump and Congress should build on the success of the TCJA by repealing targeted subsidies, like those in the Democrat’s Inflation Reduction Act, and replace them with broad-based business tax cuts that will make America the most attractive place in the world to do business. 
 

Matthew Cavedon

Charged with the misdemeanor of unlawfully operating a vehicle on federal lands, social media influencer and outdoorsman David Lesh requested a jury trial. The government successfully opposed that request and the case was tried by a US magistrate judge, who convicted Lesh and then imposed the maximum fine of $5,025 and 160 hours of community service.

The district court affirmed, though it noted that but for the Supreme Court’s recognition of a “petty offense exception,” Lesh’s argument that he was constitutionally entitled to be tried by a jury was “not unpersuasive.” The Tenth Circuit likewise affirmed, with two members of the panel noting that the petty offense exception arose in “disregard of the text of Article III and the Sixth Amendment” and cautioning that it may well be “incompatible with the original public understanding of the Constitution.”

The Cato Institute filed an amicus brief urging the Supreme Court to review Lesh’s case and abolish the petty offense exception. The Constitution’s text explicitly commands that the trial of “all” federal crimes be by jury, and it underscores that command by repeating in the Sixth Amendment that “in all criminal prosecutions” the defendant has the right to a public trial by an impartial jury. 

The petty offense exception lacks any historical foundation. Eliminating it is not only feasible but vital to the rule of law.

The Emory Law School Supreme Court Advocacy Program (ELSSCAP) assisted the Cato Institute in preparing this amicus brief.