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Colin Grabow

Writing in National Affairs, Senator Marco Rubio (R‑FL) recently made the case for a more vigorous—some might even say intrusive—government role in encouraging the development of US manufacturing. Such an effort, Rubio claims, is necessary to ensure the United States is not beholden to foreign actors for critical goods. While the importance of manufacturing to national security shouldn’t be discounted, realizing Rubio’s vision would entail a vast expansion of government power in pursuit of addressing a problem that is, at best, greatly overstated.

Perhaps more importantly, the essay suffers from errors of both fact and logic that call into question his premises and overall proposal. Here’s a closer look at eight myths that undergird the Florida senator’s call for robust industrial policy and the reality behind them.

Myth 1. U.S. manufacturing has crumbled. Rubio’s call for more muscular government intervention to rebuild domestic manufacturing implies the sector is in dire straits. Rubio twice references the “collapse of American manufacturing,” necessitating what he describes as a “serious effort to rebuild American industry.” But his entire premise is wrong. Domestic manufacturing is doing pretty well.

Whether measured in terms of value‐​added or output, US manufacturing is at or not far off from record highs. The United States accounts for a greater share of global manufacturing output than any country save China, with more output than Germany, India, Japan, and South Korea combined. US manufactured goods exports in 2022 totaled nearly $1.6 trillion, including tens of billions worth each of autos, medical instruments, integrated circuits, and aerospace. In 2021, the United States was the world’s fourth‐​largest steel producer, second‐​largest automaker, and largest aerospace exporter.

To be sure, American manufacturing has experienced a decline in employment even while output has increased. This mostly reflects productivity improvements—the sine qua non of rising living standards—that allow US firms to produce more with fewer workers. The US steel industry, for example, saw production rise by 8 percent from 1980 to 2017 even while steel employment over the same period declined by 79 percent (399,000 to 83,000).

American manufacturing may be many things, but a sector in collapse—or anything close—it is not.

Myth 2. Declines in manufacturing employment led to widespread social problems. Rubio’s inaccurate claims about manufacturing feed into another argument: that the sector’s alleged decimation is responsible for wider societal ills, such as declining marriage rates and childbearing. Even if one (very generously) grants that Rubio’s armchair theorizing accurately diagnoses falling manufacturing employment as a key driver of such trends, it’s unclear to what policy conclusions this leads.

Given that the primary explanations for declining manufacturing employment are productivity growth, and technology‐​related trends such as dematerialization rather than trade (notably, China Shock authors David Autor, David Dorn, and Gordon Hanson state in a 2017 paper that their analysis “does not imply that surging import competition from China over the last two decades has been the sole or primary driver” of the changing structure of marriage and childbirth), how does Rubio propose putting those genies back in their respective bottles? A reversion to productivity levels (and, necessarily, living standards) of past decades seems no kind of desirable (or workable) solution. Exactly what should come next, even assuming Rubio’s thesis is correct, is unclear.

Indeed, any notions that a manufacturing renaissance would reverse falling rates of childbearing, for instance, must reckon with the fact that China—by far the world’s leading manufacturing country—is struggling with its marriage and birth rates. The country is hardly alone, with birth rates falling around the world. And if a lack of manufacturing employment lies behind many societal ills, how is that reconciled with the nearly 600,000 manufacturing job openings that existed as of February? Such jobs are certainly out there for those with the desire and qualifications for them.

Myth 3. The Biden administration has gotten industrial policy wrong, but we can do it right. Rubio blasts the Biden administration for alleged missteps in its industrial policy efforts, arguing that they “reek of special‐​interest favoritism and progressive ideological capture” and have been self‐​sabotaged by “burdensome regulations, red tape, and activist mandates.” Maintaining that such outcomes are not an industrial policy inevitability, Rubio claims they can be remedied by “identify[ing] the Biden administration’s particular failures, which are not endemic to industrial policy broadly [emphasis added], and [correcting] them with conservative insights.”

But even if one grants that Rubio and his fellow Republicans possess unique gifts that allow them to deftly implement industrial policy and enjoy special immunity from activist forces—a proposition that warrants deep skepticism—such thinking is still fatally flawed. Unless Rubio has a plan to permanently exile Democrats from office, they are bound to spend significant amounts of time manipulating the industrial policy machinery that Rubio seeks to implement. The ship of state will inevitably be steered by people whose views and policy goals sharply contrast with those of Rubio and his fellow travelers. And what then?

Myth 4. Industrial policy has an easy and obvious limiting principle. One of Rubio’s rationales for industrial policy is the need to ensure the domestic production of “goods that are essential to maintaining a free and prosperous republic.” Hearkening back to the country’s earliest days, Rubio notes that Alexander Hamilton “favored using subsidies to foster domestic manufacturing and ‘render the United States, independent on foreign nations, for…essential supplies’” and highlights the use of a national arsenal to produce “small arms that made our nation less reliant on foreign powers for defense.”

This starts to sound pretty reasonable. Rubio doesn’t want to require that everything be American‐​made but rather just those items that are essential. However, even leaving aside that, as noted in the above table, US production of defense‐​related goods has expanded significantly since the 1990s, the Florida senator has a tellingly expansive view of what that entails. Among those sectors he places in this category are “mining, oil and gas, metallurgy, agriculture, chemistry, medicine, etc [emphasis added].” These are not bit players in the US economy, and it’s easy to see how other industries—after extensive lobbying, of course—could also find themselves deemed “essential.” In this regard, it’s worth recalling that Rubio has previously argued US sugar protectionism is a national security issue.

In reality, “essential” can mean almost anything and surely means different things to different people. Anyone with a modicum of ability to manipulate the levers of government would have a field day bending the term to their desired ends. Recall, for example, that the Trump administration deemed imports of low‐​value steel from close allies to threaten national security. No great imagination is required to envision Rubio’s industrial policy designs becoming a Trojan Horse for politicians of every stripe, including those with views antithetical to his own.

5. China’s economic might is the result of industrial policy and the United States must depart from market economics to address the country’s challenge. While fear of China animates much of Rubio’s call for industrial policy measures, he also evinces at least a certain grudging respect for the country’s accomplishments. As he states:

Our adversaries are implementing ambitious industrial strategies to take advantage of this moment. The phrases “Made in China 2025” and “Military‐​Civil Fusion” denote Beijing’s plan to use industrial dominance to displace and degrade the United States. Even if we dismiss Beijing propagandists’ exaggerated claims about this strategy’s success and account for the waste and corruption endemic to China’s communist system, it’s hard to argue with the results: While our industrial base has shrunk, China’s has grown many times over.

Indeed, our greatest adversary is now the world’s largest ship‐ and steel‐​making power by several orders of magnitude. It’s the world’s largest producer and exporter of cars. It seeks to become the number‐​one producer of microchips and aerospace technology as well, though it has been denied the top spot for now.

China’s economy and manufacturing sector have indeed grown by leaps and bounds in recent decades. Where Rubio errs, however, is in highlighting this impressive performance while failing to note its correlation with significant market liberalization. Centrally‐​planned Chinese attempts at industrialization under the Communist Party are nothing new, going at least as far back as the Great Leap Forward’s employment of millions of backyard furnaces to smelt steel. That didn’t work. Proving more fruitful has been the paring back of laws that inhibited the dynamism and innovation of private enterprise.

Regarding China’s primacy in areas such as automaking and shipbuilding, there is no doubt that the country’s government has firmly placed its thumb on the scale through the employment of export credits and other subsidies. But that’s far from the entire story. For example, China is—by some distance—the world’s largest auto market. Logically, it should also be home to a sizeable amount of automaking given the propensity of manufacturers to serve domestic markets.

Similarly, the world’s second‐​most populous country is not just a leading steel producer but also a massive consumer of it as well.

It’s also not a great surprise that China is a dominant shipbuilder given its success in related manufacturing sectors, such as steel (a key shipbuilding input). Even as far back as the 1980s predictions were being made that China would supplant South Korea as a shipbuilding leader.

None of this is to deny that certain policy measures may have benefitted particular industries. Perhaps they have even played a decisive role. But it should also be recognized that the story goes beyond industrial policy and that such policies have produced many downsides.

A 2019 study, for example, found that China’s shipbuilding industry received 550 billion renminbi (RMB)—approximately $80 billion at the time—in government support between 2006 and 2013, but that these subsidies generated only 145 billion RMB ($21 billion) of net profit for domestic producers. Furthermore, a large share of the subsidies (230 billion RMB/$33 billion) benefitted mostly non‐​Chinese global ship owners in the form of lower ship prices. These subsidies may have artificially expanded the size of China’s shipbuilding industry but at a significant economic cost.

Such costly adventures in industrial policy contribute to the corruption, debt, low productivity, malinvestment, overcapacity, youth unemployment, fading consumer, foreign investor confidence, and other economic and social problems facing China today. Notably, Rubio himself begrudgingly acknowledges China’s current economic challenges (“China may yet collapse under the weight of its own contradictions”) yet ignores industrial policy’s role in creating many of them.

More generally, there should be a great wariness about taking economic lessons from a country whose per capita GDP is roughly one‐​sixth that of the United States.

Myth 6. Deregulation is industrial policy too. One high point of Rubio’s essay is his recognition of the costs imposed by runaway red tape and his embrace of deregulation to boost US competitiveness. His insistence that “deregulation is industrial policy,” however, is misguided. As my colleague Scott Lincicome has documented, both advocates and critics agree that “industrial policy” has certain requisite elements, but these do not include broad (“horizontal”) policies such as corporate tax rate reductions or regulatory reform. In general, industrial policy entails governments targeting specific domestic manufacturing companies, industries, or products for special treatment (subsidies, tariff protection, etc.) to beat the market and achieve certain national objectives. If reforming, say, the National Environmental Policy Act were to fall under the banner of “industrial policy,” then the term would lose all meaning.

That said, any talk about US economic revitalization should certainly use deregulation as a starting point. Before dreaming up new laws and spending initiatives to implement industrial policy, legislators like Rubio should first examine what existing policies—including regulations—are holding US industries back.

Myth 7. Foreign “reliance” is always dangerous. Strongly implied in Rubio’s essay is the notion that turning to foreign sources to meet “vital” and “essential” US needs is inherently dangerous. True security, goes the thinking, can only be found in self‐​reliance. But this rests upon questionable logic. Canada and China are both foreign countries yet assigning them similar risk profiles would seem an obvious mistake.

Should Americans be concerned, for example, that Canada—a longtime NATO ally with whom the United States shares the world’s longest undefended border—is overwhelmingly the top source of imported aluminum? Probably not. Yet Rubio gives little indication of seeking to distinguish between different countries, instead relying on a vastly oversimplistic foreign‐​domestic dichotomy. Furthermore, it’s not apparent how great the risk is even for countries with whom the United States enjoys less than cordial relations.

As one 2023 paper found, even in those limited sectors where the United States finds itself dependent on non‐​friendly countries for critical items, experience during the COVID-19 pandemic suggested that “countries regarded as non‐​friendly alleviated rather than caused critical bottlenecks.”

Far from advancing US national security interests, policies rooted in US self‐​reliance often undermine it. Eschewing more efficient sourcing from US allies and partners means overpaying, in turn harming the US economy and—in the case of defense outlays—generating less bang for the national security buck. Furthermore, access to foreign goods from geographically diverse sources provides critical redundancies (as seen, for example, during 2022’s baby formula shortage). Far from strengthening the United States, blocking access to foreign products in many instances makes the country poorer and weaker.

Of course, this is not to suggest that risk should have no bearing on US sourcing decisions. Even if attractive from a cost perspective, the US military shouldn’t purchase naval vessels from Chinese shipyards. But neither should this mean that vast swathes of foreign goods should automatically be placed off‐​limits. Free and open trade—particularly with trusted partners and allies—should be the default position and a high bar placed on any deviation.

Myth 8. Government can “get out of the way” and still allow industrial policy to work its magic through private enterprise. Laudably, Rubio concedes that waste and abuse is an industrial policy inevitability. He argues, however, that it can be minimized by “thinking clearly about the incentives that public funding creates and establishing enforceable metrics.” As he elaborates:

We can do this without dictating to companies how to invest and compete in minute detail. Instead, our standards should focus on what companies must accomplish (i.e., meeting meaningful production benchmarks) and whom those accomplishments must benefit (i.e., the American people). Establishing clear expectations and rewards and then getting out of the way is the right tack here.

The problems here are obvious. For starters, production benchmarks—even “meaningful” ones—can mask real business successes or failures (e.g., productive companies that went years without making a profit) and can also be easily manipulated (e.g., “research” tax credits). Furthermore, if an industry policy initiative can continue by merely benefiting the “American people”—a subjective standard if there ever was one—then oversight would surely be problematic. No great difficulty is required to see how lobbyists and other self‐​interested parties could use such language to their advantage, or how politicians who’ve staked their reelection or legacies on the success of an industrial policy project could work to keep it going long after failure has become obvious. (Both problems, in fact, are common to U.S. industrial policies.)

Indeed, if this is the best standard that Rubio could construct in a piece advocating for industrial policy, what kind of language might we expect when such initiatives are hashed out in Washington backrooms?

Rubio wants to have his industrial policy cake and eat it too, effectively combining the federal government’s power and resources with private sector know‐​how and innovation—all with minimal waste. But doling out money to private sector actors with vague instructions to meet random benchmarks and benefit the “American people” is a standard ripe for exploitation—exploitation we’ve seen time and time again with US industrial policy. Conversely, strict oversight by an oft‐​plodding bureaucracy brings with it attendant downsides. Such tradeoffs cannot be avoided.

Summing up: Senator Rubio admits that waste and abuse are inevitable byproducts of industrial policy. He maintains, however, that they can be minimized provided that—as he wrote in a condensed version of his thesis published in the Washington Post last week—we “get industrial policy right.” But how can Rubio be trusted to get industrial policy right when his essay championing it gets so much wrong?

Patrick G. Eddington

Late yesterday (April 9), the House Rules Committee held a marathon hearing to set the terms of debate, including allowable amendments, for the controversial Reforming Intelligence and Securing America Act (RISAA, H.R. 7888), the bill to reauthorize the soon‐​to‐​expire Foreign Intelligence Surveillance Act (FISA), and specifically the repeatedly abused Section 702 of the law. And as you can see from the screenshot from TruthSocial, former President Trump weighed in very early this morning against FISA even being reauthorized.

For surveillance reformers, the news out of the Rules Committee is mixed. An amendment to require the FBI to get a probable cause‐​based warrant to access the stored communications of Americans collected under Section 702 was made in order. However, the also much‐​sought ban on the ability of the FBI to simply buy US person information from data brokers (like RELX) was not among the amendments approved for floor action. Instead, it will (theoretically) be brought up for a vote on Friday under what’s known as “suspension of the rules,” which in House procedural parlance means the bill (offered by Rep. Warren Davidson (R‑OH)) would need to get the support of two‐​thirds of House members to pass.

There are concerns among privacy and civil liberties advocates that vehement scare‐​tactic lobbying against Davidson’s bill by the Biden administration and federal intelligence and law enforcement agencies might frighten enough House members into voting against it to doom it on the House floor. And even if the House passes Davidson’s bill, it faces an uncertain future in the Senate.

House Intelligence Committee leaders succeeded in getting some of their amendments approved for floor action, including a provision that would change the definition of electronic surveillance in a way that would vastly increase the scope of Section 702 collection. The Center for Democracy and Technology (CDT) has an excellent explainer on why this amendment would be catastrophic to privacy and civil liberties if adopted.

The same is true for a proposed amendment that would add narcotics trafficking to the list of allowed uses of 702 collection, a move that seems guaranteed to expand the number of people (including Americans) whose information will be swept up by the 702 program. Proponents of the amendment seem not to understand that further securitizing America’s approach to drug addiction will not solve what is by definition a condition requiring medical treatment and counseling, not more privacy‐​violating surveillance.

Finally, as of the morning of April 10, it’s unclear whether the rule (i.e., the legislative vehicle setting the terms of the debate and allowable amendments) will itself actually pass the House. Rep. Matt Gaetz (R‑FL) has indicated his intention to vote against the rule. As House Democrats can be expected to vote against the rule, given the House GOP’s one‐​vote margin right now, if Gaetz carries out his threat (and especially if even a few of his House GOP colleagues join him) the rule vote would fail—restarting the entire process at the House Rules Committee.

Thomas A. Berry

The selection of Matthew Whitaker to be acting attorney general in 2018 directed unprecedented attention toward a previously little‐​studied constitutional question. Whitaker was a relatively obscure figure in the Department of Justice, and he was not serving in a Senate‐​confirmed position at the time of his selection. How could it be constitutional for someone whom the Senate had neither vetted nor approved to lead the Department of Justice?

Yet challenges to the constitutionality of Whitaker’s service all failed in court. Whitaker’s service seemed in clear tension with basic constitutional principles, but courts felt bound by a century‐​old precedent to uphold it. That unusual state of affairs is the subject of my new article in the Georgetown Journal of Law & Public Policy.

“Acting officers” are officers who temporarily fill a vacancy in a position without having been confirmed by the Senate to that position. In my article, I argue that acting cabinet members may only serve if they have been previously confirmed by the Senate to a related position (such as a deputy head of a department). I argue that this rule is required by the Supreme Court’s leading case on appointments, Edmond v. United States.

That case held that cabinet members are “principal officers,” officers who require Senate consent because they have no superior but the president. Edmond did not suggest there was any exception for officers who serve temporarily, and Edmond’s logic applies just as much to acting officers as it does to permanent ones.

However, as I recount in the article, there is a much older precedent that points in the opposite direction. In 1898, the Supreme Court decided United States v. Eaton. A diplomat named Sempronius Boyd was in Bangkok serving in a Senate‐​confirmed consul position. Boyd became seriously ill and sailed back to America, but before he did he tapped a missionary named Lewis Eaton to serve as the acting vice‐​consul general for a short time, during which Eaton effectively exercised all the powers of a consul. Eaton was never confirmed by the Senate to any position, and the question in the case was whether this lack of confirmation meant Eaton’s service was unlawful.

The Supreme Court held that Eaton’s service was constitutional. The court held that even though vice‐​consuls sometimes performed the duties of consuls during vacancies, they were nonetheless still only “inferior” officers, not principal officers who must be confirmed by the Senate. In the key passage, the Court held that Eaton was only “charged with the performance of the duty of the superior for a limited time and under special and temporary conditions” and therefore was “not thereby transformed into the superior and permanent official.”

The Supreme Court relied not on the original meaning of the word “inferior” for this holding, but rather on a functionalist and pragmatic argument. The court predicted that holding vice‐​consuls to be principal officers “would render void any and every delegation of power to an inferior to perform under any circumstances or exigency the duties of a superior officer, and the discharge of administrative duties would be seriously hindered.”

In my article, I argue that Eaton should be overruled. Compared to modern textualist and originalist decisions, Eaton’s reasoning is not persuasive. Eaton fails to engage with the meaning of the word “inferior,” and its holding is apparently based more on pragmatic concerns than constitutional text. The fact that neither scholars nor courts can coalesce on a concrete length of time past which Eaton’s exception no longer applies strongly suggests that its exception lacks a principled grounding in the Constitution in the first place. While Edmond’s rule is clear and textually grounded, Eaton’s exception to the rule is vague and its origin is unclear.

So long as Eaton remains good law, presidents can fill cabinet positions with unconfirmed officers, a practice at odds with Edmond and with the original meaning of the Appointments Clause. If the Supreme Court’s lack of appetite to overrule Eaton arises from pragmatic concerns, those concerns should not be determinative. In my article, I explain how the federal government can stock itself with enough Senate‐​confirmed career officials to fill every possible vacancy among the principal offices. The Supreme Court should recognize that Eaton is a relic of a different constitutional era. The federal government will survive bringing the constitutional law of acting officers into the twenty‐​first century.

Alex Nowrasteh

The annual chance of being murdered in a foreign‐​born terrorist attack in the United States was about 1 in 4.5 million during the 1975–2023 period, according to my new policy analyst published by the Cato Institute. During that time, 230 foreign‐​born terrorists murdered 3,046 people in attacks on US soil.

The 2,979 people killed in the 9/11 attacks account for almost 98 percent of all people killed in foreign‐​born terrorist attacks during that timeframe. Since 9/11, 44 people have been killed by foreign‐​born terrorists in domestic attacks. The annual chance of being murdered in a non‐​terrorist homicide is about 323 times as great as in a foreign‐​born terrorist attack during the entire period.

My analysis counts the visas that the terrorists had upon entry to the United States, which is where the immigration‐​security failure occurred. Terrorists who entered on tourist visas are responsible for 93 percent of the murders because 18 of the 19 9/11 hijackers entered on tourist visas. Five percent were murdered by terrorists on student visas, mainly because one of the 9/11 hijackers entered on a student visa. Terrorists who entered on other types of visas all account for less than one percent of the murders committed in foreign‐​born terrorist attacks.

Illegal immigrant terrorists murdered zero people in attacks.

Figure 1 shows the annual chance of being murdered by a foreign‐​born terrorist based on the visa he used to enter the United States. There are two zeros in Figure 1 because my analysis includes terrorists who attempted attacks, were thwarted, or whose attacks did not murder anyone. I do not include the deaths of terrorists in the body count.

Terrorism is the threatened or actual use of illegal force and violence by a nonstate actor to attain a political, economic, religious, or social goal through coercion, fear, or intimidation. In modern debates, one often hears people label especially heinous or persistent criminals as “terrorists.” But this doesn’t make much sense unless you think terrorism is just a synonym for “really bad crime.” It isn’t.

Thus, terrorists have religious or other ideological motivations for their attacks that are different than the motivations for most other crimes. Unsurprisingly, terrorists motivated by Islamism account for 3,028 of the murders committed in the US by foreign‐​born terrorists, or about 99.4 percent. Islamist terrorists also comprised 66.5 percent of all foreign‐​born terrorists.

It was challenging to separate hate crimes from terrorism, but I did my best. If you think I missed any foreign‐​born terrorists, please look at the Appendix and let me know.

My new paper is an update of older papers I wrote on the same topic. An interesting tidbit lost in the analysis is that most foreign‐​born terrorists don’t kill anyone in terrorist attacks. Of the 230 foreign‐​born terrorists, 76 percent did not manage to murder anyone in their attempted, planned, or actual attacks. Figure 2 includes the distribution of murders by individual terrorists. Outside of the 9/11 hijackers, Tashfeen Malik was the deadliest foreign‐​born terrorist who murdered 14 people. She and her US‐​born husband murdered 14 people in an attack in San Bernardino, California, on December 2, 2015. I credited Malik with all the murders, as I did with all attacks involving a foreign‐​born terrorist and a native‐​born American, to bias the analysis against the foreign‐​born and thus blunt criticism.

Figure 2

Murders by Individual Terrorists and Their Distribution

Updating my data on terrorism takes an enormous amount of research, including reading Department of Justice press releases, court documents, news reports, government analyses, reports by other researchers, and much more. Thousands of pages and more hours than I can count. So why do all this work when the results are about the same every year? Because the political debate over immigration spends an excessive amount of time worrying about the hazard posed by foreign‐​born terrorism. Foreign‐​born terrorists pose a threat, and terrorists could cross the border as illegal immigrants to kill Americans.

However, the threat is low compared to normal crime, other hazards, and other ways foreign‐​born terrorists enter the country.

Furthermore, the government has spent trillions of dollars on anti‐​terrorist activities here and abroad to reduce an already small risk even further. That misallocation of resources kills people directly through foolish foreign wars and indirectly by changing individual behavior, to say nothing of the waste of taxpayer dollars, our diminished civil liberties, and the deadweight loss from increased immigration restrictions.

Facts aren’t sufficient to produce better public policy, but they are often necessary. The facts in my policy analysis should help.

Romina Boccia and Dominik Lett

To date, the US has committed about $114 billion in Ukraine‐​related emergency funding, equivalent to the combined 2023 budget for the Department of Homeland Security and NASA. Should Congress decide to pass additional emergency funding, Ukraine aid plus interest could top $240 billion. With the US running excessively high deficits of 5.6 percent of gross domestic product (GDP) in fiscal year (FY) 2024 as debt projections are on track to exceed historic highs, Congress should fully offset new spending to avoid contributing to our nation’s deteriorating fiscal health.

With annual appropriations finally out of the way, Congressional attention is turning back to Ukraine aid. In February, the Senate approved a $95 billion foreign aid bill, which included about $60 billion for Ukraine. Recent reporting suggests House Speaker Johnson might pitch additional Ukraine funding as a loan. While there is a historical precedent for such war‐​related loans, the proposal should invite skepticism. More on that below.

Tracking US Aid to Ukraine

Based on an appropriations deep dive by Elizabeth Hoffman, Jaehyun Han, and Shivani Vakharia at the Center for Strategic and International Studies, four supplemental bills account for $113 billion in humanitarian, financial, and war‐​related emergency funding for Ukraine.

Most of the funding provided thus far has been military‐​related, with the Department of Defense receiving $62 billion. The remaining funds are distributed across multiple agencies, with the second and third largest sums going to the United States Agency for International Development (USAID) and the Department of State.

Additionally, the latest round of discretionary appropriations provides a further $1.3 billion in emergency designations that the administration could use to respond to Ukraine or to support US allies in the region.

Passing the unmodified Senate foreign aid package of $60 billion for Ukraine would bring the total aid to $174 billion without interest. If we assume that all Ukraine spending will be borrowed, the cumulative debt‐​servicing costs will reach $66 billion by 2034. In other words, the short‐​term interest costs generated from failing to offset this spending will exceed the Justice Department’s entire 2023 budget. In total, we estimate that past and proposed Ukraine spending (plus interest) costs up to $240 billion.

It’s now been two years since Russia invaded Ukraine. If Congress is committed to supporting Ukraine over the long term, it should do so in a fiscally responsible manner.

Loaning Money to Ukraine

Recently, Speaker Mike Johnson suggested providing some portion of Ukraine aid via an interest‐​free loan. The loan idea, originally pitched by former President Trump, is supposed to recoup the costs of new spending. Such ideas should be looked at skeptically.

Let’s consider the potential upsides. During the two world wars, the US provided loans to many countries, including the UK, USSR, and others. In most cases, countries paid their debts in full. Whether payment was provided in dollars or via other channels, the US could assist its partners and allies in conflicts without simply granting them blank checks. So, there is a historical precedent to the loan approach. Under the right circumstances, a loan could eventually claw back some of the money the US is effectively borrowing on Ukraine’s behalf.

Now, the problems. First, a loan to Ukraine would only offset a fraction of overall emergency spending. About $35 billion in the Senate foreign aid package concerns non‐​Ukraine‐​related aid, including funding for Israel and countering China. Second, Johnson and others have suggested a favorable, simple loan, including low or zero interest rates, to avoid overburdening the already financially stressed Ukraine. Given that the US would need to borrow any additional funds, US taxpayers would still get stuck with the interest costs.

Some lawmakers are further questioning whether Ukraine would be able to pay back such a loan, calling the proposal a political “fig leaf.” According to Sen. Mitt Romney (R‑UT), “It’s a distinction without much difference because it’s unlikely Ukraine would ever have [to] pay it back. It would be forgiven.”

Substantive Cuts, Real Offsets

There is no clever policy trick to offset new spending. Offsets require tough choices about what Congress wants to prioritize. Without cuts in other areas, the US would increase taxpayer deficits to provide new emergency funding. This new deficit spending will contribute directly to the nation’s mounting debt problem at a time when fiscal forecasts are gloomy, threatening America’s long‐​term fiscal and economic security.

Here are four spending reforms that would produce real savings:

Rollback pandemic‐​era programs. As of September 2023, $120 billion was unobligated in the Covid State and Local Fiscal Recovery Fund per the Economic Policy Innovation Center’s Paul Winfree. With the pandemic over, unspent COVID-19 funds should be rescinded to offset new spending. Likewise, the Employee Retention Tax Credit (ERTC) has been plagued with problems, including excessive cost overruns. As Cato’s Adam Michel has argued, “Over three‐​quarters of that cost is likely a windfall to business owners and tax preparers.” According to the Committee for a Responsible Federal Budget, reforming the ERTC could generate $180 billion in savings.

Repeal farm subsidies. Federal subsidies for farm businesses and agriculture cost roughly $30 billion a year. As Cato’s Chris Edwards explains, “Farm subsidies are costly to taxpayers and can distort planting decisions, induce overproduction, and inflate land values. The programs discourage farmers from innovating and cutting costs, and they steer resources to households with incomes much higher than average US incomes.”

Cut the Small Business Administration (SBA). In FY 2023, the SBA spent $32 billion. Given the SBA’s questionable track record, transferring entrepreneurial development programs to the states or the private sector could be a sensible way to generate some cost savings. As Edwards points out, “State governments are in better financial shape than the federal government, and many SBA activities appear to duplicate activities provided in markets and the nonprofit sector.”

Alternatively, Congress could establish future offsets by adopting new discretionary spending limits and lowering the current Fiscal Responsibility Act (FRA) targets. The FRA, passed last June, set statutory caps on discretionary funding for FY 2024 and 2025. The FRA also includes nonbinding spending targets for four more years, equivalent to optimistic suggestions.

Congress could revise the FY 2025 topline to be lower than the FRA target and extend discretionary spending limits into the future. Congress should also establish a mechanism to track and automatically reduce discretionary spending limits to account for repeated emergency spending abuses, establishing offsets for emergency deficit spending as a matter of policy.

It is important to note that future offsets are more uncertain than immediate offsets because politicians often renege on future spending cuts for current spending increases. Case in point: to date, legislators have used a series of side deals, budget gimmicks, and emergency spending to bypass the topline limits outlined in the FRA.

The bottom line: Congress should offset additional deficit spending, including for domestic and foreign emergencies.

Patrick G. Eddington

Last June, the Cato Institute filed a Freedom of Information Act (FOIA) request with the Department of Justice (DoJ) seeking the underlying internal FBI audits of its own compliance with the Foreign Intelligence Surveillance Act (FISA) Section 702 program. Months went by. Via email, I asked the DoJ FOIA office what the hold‐​up was. In October 2023, they said they’d identified the records and would send them to the FBI for review. More months went by with no records.

Earlier this year, Cato filed a FOIA lawsuit and a preliminary injunction seeking the release of the records. Our intent was (and remains) to make those records public once they’re in our hands. We wanted those records made public before any final vote on the FISA reform legislation currently pending before the House is acted upon.

As a former House staffer, I’m old‐​fashioned that way—I believe Members should have the full facts before voting on a bill that might compromise the Fourth Amendment rights of Americans. And action on FISA will take place this week in the House.

Late on Friday, April 5, the federal district court finally released the oral argument transcript in Cato’s FOIA case, which you can read here. As you can see for yourself, DoJ officials admitted publicly what they’d told me privately: they’d identified and segregated the records for review in October 2023 but never actually reviewed them. DoJ officials claimed to the court that it was due to staffing shortages, which Judge Tanya Chutkan clearly thought was a lame response. Even so, Chutkan has yet to rule on Cato’s PI. As a result, House and likely Senate members will be voting on a critical surveillance authority without having the full facts about it, and the DoJ will have gotten away with literally violating the law (i.e., FOIA) in the process.

Episodes like these demonstrate why current federal officials cannot be trusted to protect the constitutional rights of Americans.

Anastasia P. Boden, Brent Skorup, and Christopher Barnewolt

The Supreme Court has said that political speech “occupies the ‘highest rung of the hierarchy of First Amendment values,’ and is entitled to special protection.” Yet lawmakers frequently target political speech and advocate for special regulation. A recent case, No on E v. Chiu, raises the question: When Americans want to engage in political speech, to what extent can the government compel them to include its own desired speech as well? According to the Ninth Circuit Court of Appeals, the answer seems to be that there is no limit—localities can even make the government‐​mandated speech the primary message in someone else’s political ad. Such a result flies in the face of the First Amendment.

This case arose because San Francisco campaign finance law is stricter than state law. Critically, local rules require campaign ads to name the top two donors to each of the speaker’s top three donors, if any of those donors is also a committee. These disclaimers are required on video, audio, and print ads.

This means that political ads in San Francisco are required to name up to nine donors (and donors’ donors), those parties’ contribution amounts (for print ads), and a statement that financial disclosures are available online. Violations of these local laws are punishable by civil, criminal, and administrative penalties.

Not surprisingly, these mandated disclosures take up much time and space in a typical advertisement. Todd David, founder of the local “No on E” political campaign, found that the requirements consumed over 30 seconds. In all, San Francisco’s compelled speech would consume over half of the screen for portions of video ads, most of the time of No on E’s short video ads and huge portions of their print ads and mailers.

In addition to the displacement of political speech caused by San Francisco’s commandeering of No on E’s political ads, these regulations seriously burden people’s freedom of association. That’s because a mandate to publicize donors’ donors can mislead and confuse voters since those donors‐​once‐​removed may have no knowledge of the political campaign in question, let alone support it. For instance, one of No on E’s top donors—the Ed Lee Dems PAC—withdrew its support from the No on E campaign because the mandated disclaimers would give voters the false impression that the PAC’s donors supported the campaign.

Todd David sued the government, alleging that San Francisco’s rules violate the First Amendment. When David’s case, No on E. v. Chiu, reached the Ninth Circuit Court of Appeals, the court determined that “exacting scrutiny” applies to San Francisco’s regulations of political speech and found that the law was constitutional under this standard. No on E appealed that ruling to the US Supreme Court.

The Cato Institute submitted an amicus brief to the Supreme Court in No on E. v. Chiu, urging the court to grant certiorari and make clear that strict scrutiny—not exacting scrutiny—is the correct standard for evaluating compelled speech laws like San Francisco’s. While the court has applied exacting scrutiny in the narrow context of campaign finance disclosures and disclaimers, San Francisco’s regulations are fundamentally different.

San Francisco’s mandated combination of disclosures and disclaimers—extended even to donor’s donors—directly burdens core political speech and the freedom of association.

The Ninth Circuit’s decision opens the door to onerous new state and municipal restrictions on Americans’ right to participate in the political process. The Supreme Court should grant No on E’s petition and prevent this type of novel interference with First Amendment rights.

Marc Joffe

Although often demonized, the core idea of 15‐​minute cities is not necessarily objectionable: living within a short walk or bike ride from the places we most often visit is attractive to many. Urbanists often conceive of these cities as a collection of dense, mixed‐​use low‐ and mid‐​rise buildings. But if we ignore the need for elevators (which I’ll get to below), high‐​rise buildings can deliver the same benefits, as is now being demonstrated by the founders of Flow and other entrepreneurial real estate developers.

Local governments can encourage the development of more vertical 15‐​minute cities by getting out of the way.

Amenity‐​rich high rises are nothing new. I used to live in a northern New Jersey complex called The Galaxy Towers, built in 1976, which has 1,075 apartments, tennis courts, a park, and a small shopping plaza. Novy Okkervil is a 3,708-unit complex near St. Petersburg, Russia. According to one resident, the complex has “seven grocery stores, three beauty salons, one nalivayka [draft beer store], a florist, a construction material store, a private kindergarten, three cafes, a post office, an online pick‐​up point, a pharmacy, an out‐​patient hospital, a children’s sports center, a pet store, children’s store, a stationary store, and a computer game club.”

But Flow, a startup established by WeWork founder Adam Neumann and funded by Andreesen Horowitz, promises to add new elements to high‐​rise communities. Flow’s first property, Society Las Olas in Ft. Lauderdale, FL, includes coworking spaces that facilitate remote work and networking. The facility is also designed to attract younger residents: rather than condominium units, Society Las Olas offers rental apartments, including micro‐​units of only 360 square feet renting for less than $2000 per month. Residents of these small apartments might be expected to spend more time in the building’s abundant common spaces, where they can develop personal and business relationships with their neighbors.

Flow is also building a 41‐​story tower at Miami Worldcenter, which bills itself as “a compelling and unique blend of exceptional entertainment, retail, residential and commercial offerings set among a pedestrian‐​friendly environment and green spaces.” According to a recent bond offering document, Miami Worldcenter is expected to have 8,574 residential units on its 23 acres in addition to approximately 608,362 square feet of office space and approximately 490,032 square feet of retail space. The development is also within walking distance of a sports arena, a college campus, and public transit. Notably, it will only include just over 2,000 parking spaces, a small fraction of the number of residential units, suggesting that many residents are expected to live car‐​free.

The complex is being built by virtue of what can only be described as a very liberal land‐​use regime. Buildings are not required to provide a minimum number of parking spaces per resident and are subject to lenient height, density, and setback requirements by Miami’s city government.

If we define 15‐​minute cities as ones connected solely by human‐​powered transportation modes (walking and biking), high‐​rise communities are excluded because residents use elevators to get around. But since elevators are powered by electricity, they do not necessarily contribute to greenhouse gas emissions. They can derive at least some of their power from rooftop solar panels and can minimize their electricity use through such innovations as regenerative drives, which recapture electricity during descent.

So, for the small cost of tolerating elevators, urbanists can facilitate the development of new communities that allow people to live, work, dine, recreate, and shop without relying on cars. Urban high‐​rise communities can thus play an important role in reducing greenhouse gas emissions and reducing further sprawl.

While not everyone will want to live in dense places like Society Las Olas or Miami Worldcenter, the trend toward smaller households suggests that demand for this type of housing will continue to grow. By offering lenient zoning in enough places, cities can accommodate this trend without committing public funds or changing the character of their single‐​family residential neighborhoods.

David Kemp and Peter Van Doren

The Federal Rail Administration (FRA) just finalized a rule that would require freight trains to operate with at least two‐​person crews. Transportation Secretary Pete Buttigieg said the rule would improve safety and stop railroads’ potential plans to reduce crews to one even as trains are getting longer. Referencing these plans, he said, “It defies common sense and that changes today.”

But there is no evidence that reducing train crew size would defy common sense, much less that requiring two‐​man crews has any benefit. The new rule is an election‐​year giveaway to labor unions disguised as a rail safety regulation.

Minimum crew‐​size requirements have been one of the key points of contention in historic disagreements between labor unions and railroads. To maintain high demand for labor, the unions have opposed any attempt to reduce the size of train crews, forcing railroads to continue staffing positions long after technology has made them obsolete. For example, railroads were able to eliminate the locomotive fireman, a crewman whose role was shoveling coal and tending to the fire on steam‐​powered locomotives, only in the 1960s, thirty years after railroads first used diesel engines. And it was not until after deregulation of freight rail in the 1980s that railroads were able to reduce crews from four to two.

Historically, however, the issue has been negotiated through collective bargaining. The new FRA rule is the first time that crew‐​size requirements have been mandated by regulation.

There is nothing to suggest, however, that the rule would do anything other than preserve the use of union labor. When the FRA first proposed a minimum crew‐​size rule in 2016 it acknowledged that it could not “provide reliable or conclusive statistical data to suggest whether one‐​person crew operations are generally safer or less safe than multiple‐​person crew operations.” The final rule “qualitatively discusses the benefits” of the regulation, but provides no estimate of the monetized safety impacts because the FRA “does not have sufficient data to quantify those benefits.”

The FRA’s only empirical justification for the rule is that “the latest annual rail safety data reflects some troubling trends that point toward a need for heightened caution and awareness in railroad safety and operation planning.” As we discussed after last year’s highly publicized derailment in East Palestine, Ohio, freight rail safety has improved dramatically over the past several decades. And though data from last year suggest a small increase in accidents, the trend in accidents over the past 10 years gives no indication that rail safety is deteriorating.

But assume rail safety were deteriorating. Most freight trains in the United States currently operate with at least two‐​person crews as required by existing union contracts. Thus, any worrisome trends in rail safety would not stem from railroads’ intentions to move to one‐​person crews.

Railroads have long argued that one‐​person crews would not be less safe. First, many Amtrak and commuter trains in the United States operate with only one person in the locomotive. Second, freight trains in Europe and Australia also operate with only one person. Research funded by the Association of American Railroads found that Amtrak and European trains with one‐​person crews were as safe as US multi‐​person crewed freight trains. Thus, the important safety question is whether United States freight trains have characteristics not found in either US passenger trains or European freight trains that require two people to operate safely.

One possibility is that US freight railroads operate longer heavier trains. Freight trains have been getting longer, and the Government Accountability Office has concerns about the safety of longer trains. But, to date, there is no evidence that longer trains are less safe or that they have special considerations that require two‐​person crews.

So, if no real safety justification exists, why issue the new rule? The most obvious explanation: this is the latest installment in the decades‐​long struggle between labor unions and railroads. The most recent flare up was in late 2022, when Congress, at the urging of the Biden administration, averted a rail strike by enacting legislation imposing a union contract.

In our analysis of the economics of freight railroads, we found that declining revenues induced railroads to cut costs. Because of union wage rigidity railroads have reduced costs through employment reductions, which resulted in staffing shortages and increased burdens on the remaining railroad workers.

In the last round of the fight, the government stepped in on the side of railroads by imposing a contract that largely ignored the union’s main complaints. The new two‐​person crew rule appeases unions in an election year.

But the union victory may be hollow. Increasing train size is a railroad response to collective bargaining‐​based crew‐​size requirements given declining revenues and wage rigidity. Lengthening trains increases worker productivity given those constraints. The new rule locks in those incentives more permanently. In addition the rule may result in increased use of trucking, which is both less safe and less environmentally friendly.

Regulatory interventions to enhance safety should be utilized only when market forces clearly are inadequate rather than to reward interests for electoral support.

Travis Fisher

Electricity demand is growing again in America. Although many of us welcome such growth as a hopeful sign of a recovering economy, there is a new troubling debate over whether some uses of electricity are “parasitic.” Electricity policy debates have stumbled into the timeless struggle between good and evil where some are arguing that electricity should be rationed based on political “socially desirable” concerns rather than through the price system.

The poster child for politically disfavored electricity use is cryptocurrency mining. Some commenters characterize the “load” (electricity demand) from cryptocurrency mining as “parasitic,” and the White House wants to levy a high tax on its electricity use. This is a slippery slope. One person’s “parasitic load” is another’s livelihood, and it’s impossible for the government to parse the parasitic from the valuable.

Lysander Spooner’s 1875 essay Vices Are Not Crimes: A Vindication of Moral Liberty is a warning against labeling some legal uses of electricity as “parasitic.” Spooner wrote that it is “nearly impossible, in most cases, to determine what is, and what is not, vice” or “to determine where virtue ends, and vice begins.” Applying the label of virtue or vice to someone else’s electricity use is not only presumptuous and paternalistic—it is impossible because vice and virtue are unique to an individual’s circumstances.

Those who seek to reorganize the electricity sector according to the relative virtue and vice of different types of consumption should heed Spooner’s concern. If the rationing of electricity becomes driven by political determinations of parasitism, then it could be economically, socially, culturally, and politically costly for Americans without any discernible environmental benefits.

A Physical Challenge Decades in the Making

Throughout the twentieth century, electricity consumption rose steadily in the United States. In the early 2000s, however, electricity use appeared to “decouple” from economic growth. Observers credited structural shifts like increases in energy efficiency and an economy‐​wide shift away from heavy industry and manufacturing toward a service economy.

Source: page 54 here.

Today, electricity consumption is growing again, and power companies and grid operators claim that they’re not ready. Cryptocurrency mining is the politically convenient scapegoat even though its annual electricity use is only 0.6 percent to 2.3 percent of US electricity consumption.

Today’s Target: Unvirtuous “Computational Parasites”

Cryptocurrency mining’s comparatively small consumption of electricity hasn’t stopped the Biden administration from treating it like a mafia venture. In the Fiscal Year 2025 budget blueprint, President Biden again proposed a Digital Asset Mining Energy (DAME) tax, an excise tax of 30 percent applied to the electricity consumed in cryptocurrency mining. The stated reasons for the DAME tax are the White House’s concerns over greenhouse gas (GHG) emissions and increased energy prices due to the recent rise in cryptocurrency mining.

However, a cryptocurrency miner doesn’t emit more GHGs through his consumption than another grid‐​connected consumer who uses the same amount of energy at the same place and time, so this isn’t an issue with externalities. In fact, by using off‐​peak renewable energy that would otherwise be curtailed, cryptocurrency mining is probably less GHG‐​intensive than average consumption.

Another Biden‐​era challenge to cryptocurrency mining came from an unlikely source—the Energy Information Administration (EIA), an independent agency within the Department of Energy. The EIA tried to require certain Bitcoin miners to disclose information about their electricity consumption. The attempt was found unlawful by the courts and retracted by the EIA, but the cryptocurrency mining community certainly heard the shot across the bow.

Some states and Canadian provinces are also debating whether to tax or restrict cryptocurrency mining. In British Columbia, new cryptocurrency mining operations are no longer allowed to connect to the power grid operated by BC Hydro. Even Texas is not immune. The state hosts about half the mining for cryptocurrencies. Austin‐​based writer Russel Gold argues that crypto miners’ “gluttonous appetite is helping create an unprecedented demand for electricity.” A recent article in WIRED quotes Houston‐​based energy expert Ed Hirs as likening Bitcoin miners to parasites, calling them “the tapeworm on the [Texas] grid.”

One academic paper on cryptocurrency mining in the US Pacific Northwest says “Bitcoin miners in the region should be understood as parasites on the system.” The title—and I cannot make this up—is “Computational parasites and hydropower: A political ecology of Bitcoin mining on the Columbia River.” (Screen capture included below.)

These are the seeds of political conflict. If electric utilities and their regulators can refuse service based on political goals, who gets to decide which electricity uses are politically correct? The DAME tax and the BC Hydro ban on cryptocurrency mining each set a dangerous precedent. They are a political attack on an unpopular industry that is already being held up as a scapegoat for failures to meet climate goals. For example, the “Change the Code, Not the Climate” campaign, endorsed by Senator Elizabeth Warren (D‑MA), suggests that Bitcoin should fundamentally change its business model to be more climate‐​friendly.

What Could Conservatives Ration?

Now that progressives are judging the morality of electricity consumption and seeking to raise the price of electricity for unvirtuous “parasitic” industries, conservatives might follow suit. The possibilities are endless. If the next president dislikes electric vehicles, for example, perhaps there will be a moratorium on new connections for fast‐​charging stations. Ditto for heat pumps, indoor grow lamps for marijuana in states that have legalized it, data centers supporting foreign‐​owned websites, and the buildings of political organizations antithetical to the administration. For example, will Planned Parenthood be able to get electricity service at its next headquarters? In America, this question should be absurd.

But it’s not just the political fringe that would suffer. The impact on major industries could also be profound, and the spillover costs to American consumers could be significant. Businesses might have to ramp up political groveling just to keep the lights on. If the government can decide which electric loads are worthy, then the future of electricity‐​intensive industries will depend on their connections to political power.

Conclusion

Labeling certain types of electricity consumption as “parasitic” puts us on a slippery slope. Utilities should not be forced to discriminate against some legal uses of electricity and the government should not arbitrarily raise the price of electricity for politically disfavored industries. Doing so would open up a whole new front in the culture war that will hurt everyone for no discernible benefit. Such judgments of virtue or parasitism are always in the eye of the beholder (viewed through blue‐ or red‐​tinted partisan glasses). Policymakers on both sides of the aisle should recognize the danger in banning or punishing certain uses of electricity—this is an anti‐​energy arms race that no one wins.