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Walter Olson

For decades auto clubs formed the basis of a thriving system for the provision of group legal services to ordinary Americans. They handled not only property disputes after collisions but often criminal defense, some personal injury practice, and even strategic legal challenges that would benefit their members against practices such as local police‐​run speed traps. Then during the Depression of the 1930s competition‐​averse bar associations drove the clubs from the field, wielding charges of unauthorized practice of law (UPL). Nora Freeman Engstrom of Stanford Law School and law clerk James Stone tell this nearly forgotten story in a forthcoming Yale Law Journal piece that I highly recommend. Abstract:

In the early 1900s, the country’s 1,100 automobile clubs did far more than provide the roadside assistance, maps, and towing services familiar to AAA members of today. Auto clubs also provided, free to their members, a wide range of legal services. Teams of auto club lawyers defended members charged with driving‐​related misdemeanors and even felonies. They filed suits that, mirroring contemporary impact litigation, were expressly designed to effect policy change. And they brought and defended tens of thousands of civil claims for vehicle‐​related harm. In the throes of the Great Depression, however, local bar associations abruptly turned on the clubs and filed scores of suits, accusing them of violating nascent legal ethics rules concerning the unauthorized practice of law (UPL). In state after state, the bar prevailed—and, within a few short years, auto clubs’ legal departments were kaput.

Drawing on thousands of pages of archival material, this Article recovers the lost history of America’s automobile clubs, as well as their fateful collision with the bar.… [T]he bar’s concerted campaign decimated a once‐​thriving system for the provision of group legal services to ordinary Americans, which, we argue, ultimately consigned millions of individuals with legal problems to face them alone, or not at all.…

In the bar’s relentless campaign to shutter auto clubs, not because they harmed members but, rather, because they threatened lawyers’ livelihoods, we unearth direct proof that today’s UPL bans, which continue to stymie the delivery of affordable legal services, have fundamentally rotten roots. And ultimately, we show that the present‐​day access‐​to‐​justice crisis—a crisis that dooms the vast majority of Americans to navigate complex legal processes without any expert assistance—isn’t a product of inattention or inertia. The crisis was, rather, constructed by the legal profession of which we are a part.

Were lawyers provided by auto clubs less competent or less ethical than their independent‐​practice counterparts? Most of their customers didn’t seem to think so. In fact, the Chicago Motor Club argued (in vain) that its staff lawyers actually worked under better ethical incentives, because they didn’t earn more if a case dragged on, nor did contingent compensation give them a reason to win at all costs.

Unauthorized practice of law rules are a keystone of contemporary occupational licensure in the American legal profession. This paper should help put them under overdue scrutiny.

Jack Solowey and Jennifer J. Schulp

On March 27, the US District Court for the Southern District of New York ruled that most of the Securities and Exchange Commission’s (SEC) claims against Coinbase—alleging the crypto exchange engaged in various unregistered securities transactions—could proceed to trial.

While it’s tempting to treat this as a W for the SEC in the game of SEC v. Crypto, there are key innings left to play in SEC v. Coinbase itself (and defendants always face an uphill battle under the motion to dismiss standard). More broadly, it’s premature to interpret the order as vindicating the SEC’s general approach to crypto regulation.

Taking the long view, the SEC’s current approach to crypto—aggressive enforcement against crypto projects and passive‐​aggressive refusal to develop practical rules—is anathema to sound public policy and the rule of law. Critically, the SEC’s approach is also incompatible with Congress’s exclusive legislative authority, and Congress must bring it to an end.

Legal challenges to this untenable status quo are being briefed in federal courts around the country, and not just by defendants but also by litigants affirmatively pursuing relief. Among their core arguments are that the SEC has improperly extended its authority over a significant part of the US economy without a clear mandate from Congress, as well as flouted Congress’s existing mandates regarding securities regulation and administrative procedure by failing to engage in appropriate rulemaking.

It’s important for the courts to hear these arguments. But lawmakers must hear them too.

There’s a wide gulf between a regulator insisting it has jurisdiction over certain crypto transactions and a regulator creating the conditions for a de facto ban on Americans’ lawful use and development of a broad class of tools.

Congress should be extremely skeptical that the SEC is simply coloring inside the lines of statutory authority when its “enforce first, make rules never” strategy works to effectively ban crypto in the United States. That’s because it’s difficult to find a clear congressional mandate in nearly century‐​old securities laws for the SEC to bar the door to future innovations in capital market tools and, more generally, to technical infrastructure for decentralized and cryptographically secure computing.

For instance, the Securities Exchange Act of 1934 begins with the statement that it’s in the “national public interest” to “provide for regulation and control of” securities transactions. So even if a non‐​trivial subset of crypto transactions were indeed securities transactions, the lesser power to regulate and control them would not include the greater power to, in practice, prohibit them writ large.

At the very least, such an expansive interpretation of the SEC’s powers should not come without a public rulemaking process, which requires consideration of whether the rulemaking “will promote efficiency, competition, and capital formation.” A de facto ban on crypto is incompatible with promoting any of these goals.

How specifically is the SEC’s current approach, in effect, a de facto ban? The answer lies in both current SEC practice and the nature of the legacy obligations it applies to crypto.

As for current practice, the SEC simply has not afforded major crypto platforms a practical registration pathway. Statements from SEC Chair Gary Gensler that crypto firms “should come in and register,” are, as we’ve written, entirely misleading. Multiple major crypto platforms have publicly stated that they did indeed “come in,” only to be rebuffed by the SEC. Indeed, in a recent speech, SEC Commissioner Hester Peirce noted that market participants asking the SEC about the “application of an old [rule] to new circumstances, too often now … are met with … well, crickets,” and given the message of “New product ideas? ‘Not now.’”

To date, the only special‐​purpose digital asset broker‐​dealer that has successfully registered with the SEC is apparently yet to launch trading. Moreover, there are unresolved questions about whether the first asset that this lone registrant intends to handle—Ether—is even eligible to trade with an SEC‐​registered platform. Notably, the Commodity Futures Trading Commission considers Ether to be a commodity. The confusion has prompted dozens of House lawmakers to write Chair Gensler with pointed questions. It’s fair to ask whether the SEC is offering Potemkin registration.

As for legacy securities obligations, many such requirements do not fit the risks or reality of crypto. Applying them in their entirety to crypto projects in practice, then, isn’t so much regulation as it is prohibition. For example, disclosure obligations related to balance sheets and cash flow statements for corporate entities often won’t make sense for software projects that are, fundamentally, distributed recordkeeping systems lacking traditional assets or business lines. All the more so when the development and/​or operation of those software projects is decentralized—meaning no single party or unified group maintains discretionary control over the project or its code.

Moreover, disclosures that would be relevant to crypto users—e.g., the determinants of token supply and governance mechanisms for software updates—are not covered by legacy securities rules. The refusal to devise tailored rules is of no help to these consumers.

Don’t take our word for it. Chair Gensler has repeatedly signaled that there are areas where legacy rules could use tailoring for the crypto context, recognizing, for example, that “it may be appropriate to be flexible in applying existing disclosure requirements” in light of “the nature of crypto investments.” Yet there’s no sign of this targeted relief coming any time soon.

Congress should say enough already. It should legislate an end to the de facto ban on crypto development and use in the US, taking up its proper place in our constitutional structure.

How? First, Congress should clarify when crypto tokens are and are not subject to SEC jurisdiction based on a clear test for whether the token projects are decentralized. Such legislation could tackle head‐​on the issue of inapt legacy obligations and the novel questions raised by decentralized projects by providing for tailored, crypto‐​specific disclosures by projects in the process of decentralizing.

In addition, Congress should provide clear pathways for crypto‐​exchange platforms to operate lawfully and with clarity about who regulates them. Importantly, crypto exchanges that are themselves decentralized—e.g., marketplaces that do not custody users’ crypto assets and are composed of self‐​executing software tools—should be eligible for voluntary, not mandatory, registration. Notably, this approach would be thematically consistent with the recent ruling in SEC v. Coinbase that the provider of user‐​directed and non‐​custodial technical infrastructure for crypto transactions—a self‐​hosted crypto wallet in the Coinbase case—is not, without more, required to register as a broker.

Ultimately, it’s too early for anyone to declare victory in the myriad legal battles spawned by the SEC’s scorched‐​earth approach. Importantly, the issues being litigated in federal courts are not only of critical significance to crypto developers and users, but also to Congress itself. Congress need not, and should not, wait to restore lawful process, clarity, and sanity. For when the SEC rides roughshod over both the crypto ecosystem and the separation of powers, we all stand to lose.

Neal McCluskey

Yesterday, Cato’s Public Schooling Battle Map—an interactive database of values‐ and identity‐​based conflicts in America’s public schools—surpassed 4,000 entries. At almost the exact time, we saw elite media coming to terms with divisive battles in public schools, including in such progressive strongholds as New York City:

The New York Times: “Name‐​Calling and Calling the Police: How N.Y.C. Parent Meetings Got Mean”

The New Yorker: “The Meltdown at a Middle School in a Liberal Town”

The Washington Post: “America has legislated itself into competing red, blue versions of education”

What still has not been widely acknowledged is that culture war is inherent to public schooling, which forces people with differing values, desires, and needs to fund a single system of government schools. Perhaps this is because the fundamental nature of public schooling has not been clear to many reporters and commentators, who tend to focus on the combatants, such as Moms for Liberty, not the system that ignites the combat. Or perhaps the‐​system‐​as‐​root‐​cause is too abstract for daily reporting.

Or maybe public schooling still seems relatively peaceful.

While the Battle Map upends the presumption that public schooling is a unifying force, it only includes a small minority of school districts: 1,636, or roughly 12 percent of the nation’s 13,318. Most districts might seem peaceful, and many probably are—most people would probably prefer not to fight, if avoidable.

But 12 percent is a floor. The Map is populated almost exclusively by finding media reports, confirming there are conflicts, then cataloging the battles. But many school districts have small enrollments— about half have 999 or fewer students—and likely get little media coverage. This is reflected in the districts on the Map accounting for 46 percent of all public school enrollment, despite the small share of districts. We have also improved our sweep of news over the years, so we have likely missed many conflicts.

As I discuss in The Fractured Schoolhouse, local control has always been a way for people with different beliefs and backgrounds to congregate with like‐​minded families and avoid much conflict. However, that has grown harder over the years as the number of districts is roughly a tenth of what it was less than a century ago and the population has gotten much larger.

Then there is this: As the Washington Post article above shows, a lot of education policy, including on hot‐​button issues, is made at the state level. The Battle Map catalogues about 800 conflicts at that level, with every state having at least one and the average having nearly sixteen. When state government makes decisions, everyone in the state is on the battleground.

To defuse warfare in education and foster harmony, we need to move away from zero‐​sum public schooling. Instead, funding should follow children to educational options their families choose, as is increasingly happening. It will not bring total peace, but as we have seen elsewhere, it will certainly help.

Peace, though, is not the primary reason to support educational freedom. That is liberty: Government taking money from everyone to fund schools it controls is fundamentally at odds with a free society. This is true even if families are allowed to consume private education after they have paid for government education. That still puts a massive thumb on the scale of government shaping children, and discriminates against families that want or need something different from what government provides.

The good news is many people are waking up to the divisive reality of public schooling. But we are still not seeing the critical examination we need.

Colleen Hroncich

Earlier this week, I had the opportunity to serve as a judge in the Pennsylvania Personal Finance Challenge, which brought high school students from across the state to Pittsburgh to compete on a variety of personal finance topics. The event was the state qualifying tournament for the Council for Economic Education’s National Personal Finance Challenge.

The Pennsylvania competition started with each team acting as financial advisors for a fictitious family. Prior to the competition, the students received a packet that gave comprehensive financial information on the fictitious family. Using the details on the family’s income, savings, debts, and other expenses, the students had worked in teams of three or four to create a budget designed to meet the family’s stated financial goals. They presented their plans to a panel of judges and answered questions about it. The top two teams faced off in a 30‐​question quiz bowl, and the winning team earned $500 scholarships and an all‐​expense paid trip to the national competition.

Derek D ‘Angelo is director of curriculum development at the Foundation for Economic Education, which sponsored the Pennsylvania competition starting last year. But Derek has been involved in Michigan for many years. “When I was a teacher, before becoming Executive Director of the Michigan Council on Economic Education, I inquired about starting up a Personal Finance Challenge event in Michigan, but there was no support,” he explains. “Then I became Executive Director of the Michigan Council in 2015. My first order of business was to get a Personal Finance Challenge started and in 2016 we hosted the first event in Michigan. We have hosted it every year since for a total of eight annual events. We even were one of the very few states that still hosted the event virtually when everyone was out of school for Covid!”

Derek says he’s seen amazing results from this event. In Michigan, they have a Certified Financial Planner meet with students virtually the week before the presentation, which led to one student job shadowing with the financial planning advisor they met with during their preparations. And the educational value is immense.

“The students who participate have to learn about every aspect of personal finance. It is like a crash course in adulting,” he says. “Students have to know every aspect of budgeting, investing, insurance, credit, and more. I know a handful of students who have told me they have opened up a Roth IRA for their retirement from what they learned preparing their case study presentation.

“Additionally, students learn soft skills beyond the personal finance content. They spend a lot of time practicing their presentation skills. They learn to work as a team with their partners. They learn the role of visuals and other materials that may help them sell their solution to the judges.”

Encouraging students to learn beyond the terminology is also important to Derek. He advises discussing things like the average credit score, median price of a home, average age for a first‐​time home buyer, and median starting salary coming out of college. He points out that this knowledge will help them not only in the quiz bowl, but it will also help them develop realistic expectations and not be overwhelmed as they enter adulthood.

The Council for Economic Education provides a robust toolkit that teachers, parents, or other coaches can use to help students prepare for the challenge. It includes essential lessons and activities, supplemental lessons and activities, training videos, and quizzes. The materials cover six knowledge areas: earning income, spending, saving, managing credit, investing, and managing risk. These resources are designed to minimize the work for coaches who are helping students with the challenge.

Derek encourages teachers to give the National Personal Finance Challenge a try.

There will always be an excuse or reason you can find to not participate. It is much like the mentality of going to the gym and working out or running. You can say you are too busy, or that the students won’t have a chance at winning, or that it is hard to get a substitute teacher, etc. But the Personal Finance Challenge event provides a perfect environment for student learning. It has a real‐​life application. It is authentic. There is no one correct answer and often the answer is messy and not perfect. You are providing students with a positive experience and memory they will have forever about their time in your class. And it doesn’t even matter if they win or lose. The students will learn something and have fun doing it. Everything has a cost. In this case the benefits of participating far exceed the costs.

Nicholas Anthony

Many people have expressed concerns that a central bank digital currency, or CBDC, is going to be used to replace cash. In fact, those concerns seemed to have been confirmed both in theory and in practice. For instance, some CBDC policies actively depend on there being no alternatives available (cash included). This theory was partially seen in practice when the Nigerian government pulled cash off the streets in a bid to spur CBDC use.

Yet, central bankers and other proponents of CBDCs have tried to distance themselves from these concerns. Rather than introduce a CBDC to end cash, some proponents claim cash is already ending so a CBDC must be introduced (a subtle distinction but a distinction nonetheless). For example, the European Central Bank has come out with statements that a CBDC is needed to preserve “a public means of payment” as cash use declines and a CBDC is needed to preserve the euro’s role as an “anchor of the monetary system.”

Yet why is cash use declining in the first place? Of course, the convenience of quickly tapping, inserting, or swiping a card is enough to sway many people. However, what often goes overlooked in this story is how many governments have worked hard over decades to make using cash more difficult. For example, Greece has a restriction that prohibits cash transactions over 500 euros and France prohibits citizens from paying taxes in cash for amounts over 300 euros. In fact, the thresholds and specific conditions can vary, but many countries within the European Union have instituted restrictions on cash payments (Table 1).

The US government is not as restrictive as European nations, but it’s no secret that it doesn’t love cash. For example, if someone is interested in paying taxes in cash, the Internal Revenue Service (IRS) first recommends using that cash to purchase a prepaid card or open a mobile app to make the payment.

In other words, the IRS first recommends not paying in cash.

If that doesn’t work, the IRS then recommends going to one of their retail partners to effectively have the cash converted and sent electronically. After that, the IRS suggests taxpayers consider using a money order or cashier’s check. It’s only after considering these examples that the IRS finally says an appointment can be made at select Taxpayer Assistance Centers, or TACs, as long as they have 30–60 days heads up.

The IRS isn’t the only place where the US government has made paying in cash more difficult. Under the Bank Secrecy Act, many businesses are required to report cash transactions to the federal government.

Technically, the law only applies to “financial institutions,” which might make you think it only applies to banks and credit unions. However, the law defines “financial institutions” as including a much broader list of companies. Banks and credit unions are included, but then there are also credit card companies, investment companies, brokers, dealers, currency exchanges, and money transmitters. The list doesn’t end there. It also includes jewelers, pawnshops, travel agencies, insurance companies, finance companies, telegraph companies, car dealerships, casinos, trust companies, and more.

Were that not enough, there are other laws that also require businesses to track and report cash use to the government. For example, under 26 U.S.C. § 6050I, anyone engaged in a business transaction of $10,000 or more in cash is required to report the transaction to the IRS within 15 days. The report must include the name and address of the payer, as well as their taxpayer identification number, the amount paid, the date, and the nature of the transaction. Failure to comply can result in a $25,000 fine or five years in prison.

These examples are not as harsh as outright restrictions, but the costs the US government has imposed affect people’s choices. As central bankers continue to try to tout the decline of cash as a reason to introduce a CBDC, let’s not forget the role governments have had in spurring that trend.

The author thanks Nicholas Thielman and Elan Rosen for their assistance collecting data on cash restrictions levied by European nations.

Patrick G. Eddington

Two items of note today from prominent inside‐​the‐​Beltway publications regarding the ongoing fight over whether Congress should reauthorize the serially abused Foreign Intelligence Surveillance Act (FISA) Section 702 electronic mass surveillance authority. The first from Punchbowl News:

The bill in question can be viewed here.

The second item is from POLITICO from late last night:

And whether you prefer the term “surveillance capitalism” or “corporate welfare,” the data broker industry is working hard to keep its 702‐​related contracts viable. Also from POLITICO yesterday:

Data collection on Americans has become a giant business over the last 30 years, one that law enforcement agencies benefit from enormously as it allows them to effectively circumvent the Fourth Amendment, outside of circumstances requiring the most intrusive surveillance techniques. For the corporate data brokers, it’s easy money from government agencies. It’s a toxic mix that FISA reformers are trying to end. Before spring 2024 ends, we’ll know whether or not they’ve succeeded.

Johan Norberg

I am honored to have written the first‐​ever cover story for Free Society, Cato’s new quarterly magazine. Titled “Through Progress and Peril: The Precarious State of Human Freedom,” the article addresses the subject that keeps lovers of liberty awake right now: The worrying decline of freedom, the rise of illiberalism at home and authoritarianism abroad, and what we can do to turn the tide.

I document the disheartening trends in personal and economic freedom in the last few years and suggest several reasons that explain why this has happened, including COVID-19 and the heavy‐​handed state actions that accompanied it. Emergencies, as F. A. Hayek argued, “have always been the pretext on which the safeguards of individual liberty have been eroded.” 

The Human Freedom Index 2023, published by the Cato Institute and the Fraser Institute, concluded that almost 90 percent of the world’s population has seen its liberties circumscribed in recent years. In terms of economic freedom, a decade of global progress was erased in the year 2020 alone.

But the picture is mixed. Throughout this time, individuals, entrepreneurs, and activists have adapted to difficulties and threats, and have crafted innovations and creative solutions to problems caused by increased government interference. The result is that indicators of human living standards are still improving at a rapid pace. 

This is where we find hope: Free men and women accomplish great things. Open societies fail only when we don’t believe in our ideals, defend them, and apply them. Authoritarians and statists have a more serious weakness: they fail when they manage to implement their ideas. Look around the world! Dictators, authoritarians, and populists are making such a huge mess out of things that they’re already writing the best arguments against their own policies—we hardly have to do it for them.

I think people are willing to listen to our case. Contrary to some commentators’ suggestions, most people have not joined the dark side; they are just exhausted with our increasingly tribal and ill‐​tempered parties and tune out. Only four percent of Americans say they experience excitement when they think of politics. 

So, the key message is that we should not despair. These kinds of backlashes against liberty have occurred regularly throughout history, but most of the time they haven’t prevailed. And they won’t this time if friends of liberty step up to the challenge and fight back. Nothing is hopeless—unless we assume that it’s hopeless and decide to give up. I know that Cato won’t and I trust that others will join us in this crucial intellectual battle for human liberty and dignity. 

Romina Boccia and Dominik Lett

With entitlement spending growth driving a worsening fiscal picture, the US could enter a new period of fiscal dominance where monetary policy serves fiscal ends, threatening central bank independence and America’s economic future. Following aggressive fiscal and monetary stimulus during the pandemic, legislators should avoid the siren’s call of elevated deficit spending or risk higher inflation.

During the COVID-19 pandemic, Congress unleashed a deluge of emergency spending—roughly $6 trillion, according to the Committee for a Responsible Federal Budget (CRFB)—bringing deficits to new heights. For context, the deficit in 2020 was nearly 15 percent of Gross Domestic Product—deficits haven’t been that severe since World War II.

At the same time, the Federal Reserve increased the broad money supply (M2) by 40 percent and massively increased its asset holdings, including government bonds and mortgage‐​backed securities, by $4 trillion. Record‐​high deficits and an intense bout of inflation accompanied the unprecedented fiscal and monetary expansion as the pandemic came to an end.

Eventually, the Fed responded to elevated inflation with interest rate hikes and by reducing its asset holdings. While inflation appears to have slowed, it remains a problem, underscoring the challenge of using monetary instruments to deal with a fiscally driven problem. The pandemic episode illustrates an example of fiscal dominance whereby, as the Mercatus Center’s Eric Leeper puts it, “some fiscal action forces the central bank to react in ways that it otherwise would not.”

With Congress currently unwilling to seriously address the entitlement spending problem that’s driving the US toward a fiscal cliff, it’s worth evaluating the possibility of more frequent episodes of fiscal dominance and their consequences.

History as a Guide

To understand whether we live in a fiscal or monetary dominance regime, we should ask: is the central bank’s prime directive to maintain an inflation target, or is the central bank primarily focused on accommodating government spending? When fiscal dominance reigns supreme, countries experience higher inflation and sometimes hyperinflation (high and accelerating inflation). Several historical examples illustrate the dangers of fiscal dominance.

During emergencies, central banks may temporarily accommodate expansionary fiscal policy, such as during World War II or the COVID-19 pandemic. As Cato’s James Dorn points out, “Fiscal authorities normally dominate central banks during wartime. That was certainly the case during the two world wars. The Fed kept yields low on government securities by monetizing a large share of the US debt. Dorn further highlights the 1960s and early 1970s, when the “Fed engaged in easy monetary policies to fund fiscal deficits, which led to inflation.”

Fiscal dominance can also be observed abroad. According to Greg Ip, writing in the Wall Street Journal, Argentina is a textbook case of fiscal dominance. To finance fiscal deficits, the Argentine treasury issues bonds that are bought up by the central bank. This debt monetization has led to devastating inflation, reaching a 12‐​month rate of 276 percent in February.

Leeper identifies two more examples of fiscal dominance overseas. After World War I, Germany realized it could not pay off its debts through conventional taxes alone, so it rapidly printed money to finance new spending. Likewise, President Erdoğan of Turkey eroded central bank independence, pushed for lower interest rates, and expanded government spending in recent years. As Leeper stated, “Erdoğan effectively converted an independent inflation‐​targeting central bank into a fiscal ATM.” In both cases, fiscal dominance resulted in severe and economically damaging inflation.

The US Threat of Fiscal Dominance

Fiscal dominance has a track record of triggering severe inflation and leading to economic decline. With US deficits at crisis levels in the face of rising entitlement spending, and with the federal debt to GPD ratio exceeding its record high of 106 percent in 2028 (Figure 1), the risks of fiscal dominance in the United States are rising. An excessive and rising debt, high interest rates, and a political landscape hostile to entitlement spending reductions create a dangerous fiscal environment that may exhaust the US fiscal space over the next 15–20 years.

If Congress leaves spending corrections to the last minute, legislators may perceive the draconian fiscal consolidation necessary to bring debt under control as less desirable than monetizing the debt. In such a scenario, printing more money might become the easiest or only politically feasible way out.

At a recent House Budget Committee hearing on the need for a fiscal commission to resolve the US debt challenge, former chairman John Yarmuth suggested just such a policy, stating on the record,

We are a sovereign currency, we can print all the money we want to serve the people whom we serve. … [W]hy are we paying interest on the money we borrow? And why do we borrow money anyway? We can print it and put it in the Treasury.

No amount of balance sheet manipulations will allow the US to print more money ad infinitum with no adverse consequences. Should this type of thinking become more mainstream, it is not entirely unrealistic to think that fiscal dominance and debt monetization might be willingly undertaken under the right political circumstances.

Avoiding Fiscal Catastrophe

Rising US spending and debt in light of heightened political polarization and congressional budgetary gridlock raise concerns about the sustainability of government finances. The recent credit downgrade by Fitch Ratings and Moody’s Investor Service lowering its outlook on the US credit rating is a reflection of the nation’s concerning long‐​term fiscal trajectory and poor fiscal governance. Without a political willingness to reduce the growth in old age benefit programs, the erosion of central bank independence to finance future spending represents a growing risk. Argentina, Germany, Turkey, and other historical cases serve as stark reminders of the dangers of fiscal dominance. Central bank money printing to finance government spending can lead to hyperinflation and economic ruin.

Fiscal dominance could also deteriorate the reputation of the US as a guarantor of its credit. The perception of Treasury securities as safe assets undergirds the entire financial system. US policymakers should not clumsily waltz into additional periods of fiscal dominance that could contribute to economic instability and reduce the global standing of the US dollar.

As Charles Calomiris notes, “Ultimately, the US may face a political choice between reforming entitlement programs and tolerating high inflation and financial backwardness.” Confronting the entitlement spending behemoth is politically daunting but necessary and can be done through a well‐​designed fiscal commission. Establishing smart fiscal guardrails, backed by a shared understanding of the budgetary future the US faces, can similarly reduce the risk of a fiscal crisis.

Time is of the essence to slow the growth in spending before fiscal dominance becomes the seemingly more attractive option.

Chris Edwards

There are eight federal programs remaining in Spending Madness 2024. These are high‐​priority spending cuts for Congress to consider, according to our crowdsourced tournament results so far.

Please vote today in the quarterfinals, and then we’ll move to the next round on April 4.

The failures of the eight remaining programs are summarized when you click the pictures here. One common failing of government programs is stagnancy. While market economies are always adapting and improving, the bureaucratic government falls behind. Outdated programs linger for decades consuming taxpayer resources and undermining the economy.

The Corporation for Public Broadcasting was launched in the 1960s but adds little value in today’s expansive media environment where vast educational content is available on YouTube. Even more outdated are farm subsidies, which were launched in the 1930s when many farmers were poor. Today, farmers are much wealthier than other people, and farm subsidies mainly go to large corporate‐​style operations.

And there is public housing. What do you notice in these photos (below) of a project in Alexandria, Virginia? When you walk around it, you see that all 13 buildings are the same, and they are unchanged in the seven decades since the government opened them in 1947. It apparently never occurred to the government managers to plant any trees, bushes, or flowers.

Because people in public housing are not owners, no one has put in bay windows, added an addition, painted their homes, built a deck, or made any other normal improvement. I wonder where tenants are even allowed to plant anything.

Government programs and policies tend to be stagnant and uniform. Many programs have outlived any usefulness their original supporters envisioned. Congress should end subsidies for activities—such as housing, broadcasting, and farming—that markets can tackle with diverse and innovative approaches.

Background. The photos are the Samuel Madden Homes built in an area called The Hump. The construction was part of Big Government “slum clearing” efforts in the mid‐​20 century, which used eminent domain and federal dollars. As one history notes, Alexandria “began a program of ‘slum’ clearance in 1939 and two years later condemned and demolished homes in two mixed‐​race neighborhoods, The Berg and The Hump, sending Black residents into substandard, segregated public housing.” The Samuel Madden Homes are finally being redeveloped after 77 years, and hopefully some lessons have been learned.

Scott Lincicome

Is the United States “losing” from international trade? Does globalization harm American workers or lead to a “race to the bottom” for the world’s poor? Are we really “de‐​globalizing” today? I recently sat down with John Stossel to discuss these and other popular myths, as well as the Cato Institute’s Defending Globalization project. The result of our conversation is this great new video from Stossel TV:

All of the data cited in the video, and plenty more, can be found at the Defending Globalization webpage.