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Nicholas Anthony

Between its proposal to restrict overdraft fees and nonsufficient fund (NSF) fees, the Consumer Financial Protection Bureau (CFPB) has created a mess.

When I testified before Congress, I warned that establishing price controls would likely lead to two outcomes: shortages of the restricted service and higher costs elsewhere. Still, the CFPB pressed ahead with its proposal to restrict overdraft fees to a soon‐​to‐​be‐​determined “benchmark fee.”

Yet that is not to say that the CFPB does not recognize the consequences I warned about. In fact, in a separate proposal to restrict NSF fees, the CFPB admits that restricting overdraft fees may lead financial institutions to raise fees elsewhere:

[If] the Overdraft Proposed Rule is finalized and reduces overdraft fee revenue for covered financial institutions, it may lead some institutions to consider imposing new fees. Increasing the prevalence of NSF fees on covered transactions could be one way that covered financial institutions respond, while market forces could lead even non‐​covered financial institutions to begin charging NSF fees on covered transactions.

Were it not for that, it seems unlikely that the regulator would have ever sought to restrict NSF fees given they are so uncommon. For example, the CFPB repeatedly stated that “many financial institutions in recent years have stopped charging NSF fees,” “NSF fees are rarely charged,” and the “CFPB understands that it is currently uncommon for financial institutions to charge NSF fees on covered transactions.” In other words, this proposal is a preemptive prohibition based on the expected, extended consequences of the CFPB’s other price controls.

Rather than begin a never‐​ending game of “regulatory whac‐​a‐​mole,” the CFPB (and the Biden administration) should drop its price controls.

Are you interested in learning more about price controls? Ryan Bourne’s latest book, The War on Prices, is available for pre‐​order here and will be released on May 14, 2024.

Eric Gomez

On March 11, 2024, the Stockholm International Peace Research Institute (SIPRI) released an annual update to its Arms Transfers Database, which is the primary data source that our arms backlog dataset uses to track US weapon deliveries to Taiwan.

As shown in Figure 1, the SIPRI database update brings the current backlog of US arms sales to Taiwan to at least $19.17 billion—$66 million higher than our February 2024 update. See the tabs in Figure 2 to compare the February and March versions of backlog.

There were no new US arms sales to Taiwan announced in March 2024. Instead, the change in value from last month is due to new information about previous sales.

Removing Torpedoes, Adding Anti‐​Tank Missiles

For the March 2024 update to the Taiwan arms backlog dataset, we removed a 2017 sale of lightweight torpedo conversion kits while adding a 2019 sale of TOW-2B anti‐​tank guided missiles.

In June 2017, the Defense Security Cooperation Agency (DSCA) announced a $175 million sale of equipment to upgrade 168 MK-46 Mod 5 lightweight torpedoes to the MK-54 configuration. This sale is coded in our dataset as a munition. These torpedoes are launched from aircraft and warships to attack enemy submarines. Besides the initial DSCA announcement, there was very little publicly available information on the lightweight torpedo sale. Even the 2023 edition of SIPRI’s Arms Transfers Database did not include any information on these torpedoes.

The 2024 update to SIPRI’s Arms Transfers Database indicates that the final delivery of the lightweight torpedo conversion kits occurred sometime in 2022. Based on this new information, we have marked this sale as completed and removed it from the arms backlog, reducing the backlog’s value by $175 million.

However, this reduction in the arms backlog dataset is offset by an addition. On July 8, 2019, DSCA notified Congress that it was modifying a 2015 sale of TOW-2B anti‐​tank guided missiles to add 1,240 missiles and associated equipment valued at $241 million. Based on the other equipment mentioned in the arms sale announcement, these TOW missiles will likely be mounted to relatively light military vehicles, like Humvees, to improve their anti‐​armor capabilities. We code the TOW missiles as an asymmetric capability instead of munitions, as the sale includes other equipment in addition to the missiles.

We should have captured the additional TOWs in our January 2024 update because that is the first update that uses the Congressional Record as a data source. The mistake came to our attention when we reviewed SIPRI’s new data, which prompted us to double‐​check the Congressional Record and locate the TOW notification. However, these additional TOWs will not be in the backlog for long. Reporting from last year citing Taiwan’s Ministry of National Defense indicates that delivery of the missiles should occur sometime this year.

To sum up, based on SIPRI’s new data, we removed a $175 million sale of lightweight torpedo conversion kits from the backlog and added a $241 million sale of TOW anti‐​tank missiles, which increased the overall value of the US arms backlog to Taiwan by $66 million. As with other updates to our data, these additions and subtractions result from new information coming to light rather than newly announced sales or recent deliveries. Table 1 contains the itemized composition of the backlog.

Deliveries in Progress

The new SIPRI data include some interesting details about the arms backlog that are worth mentioning.

Our January 2024 arms backlog update mentioned that Taiwan purchased 18 additional HIMARS launchers after canceling an order of Paladin mobile howitzers. According to SIPRI’s data, this modification also included a purchase of 864 guided rockets, which would be a major boost to Taiwan’s asymmetric capabilities. Unfortunately, SIPRI does not mention a dollar figure for the rockets or additional HIMARS launchers.

There are three arms sales in the backlog that SIPRI reports as partially delivered. Three of six MS-110 aircraft reconnaissance pods, sale announced in October 2020, were in Taiwan’s hands by the end of 2023. Taiwan also received its first two Abrams tanks in 2022, likely for initial familiarization and training before the remaining 106 tanks arrive in tranches between 2024 and 2026. Finally, Taiwan received five MK-48 heavyweight torpedoes in 2023. According to SIPRI, the remaining 41 torpedoes should be delivered by 2026.

Thus far, our arms backlog dataset has removed items once final delivery is complete rather than trying to partially reduce dollar amounts based on partial delivery. We will continue using this method, but the SIPRI update does provide a look at partial deliveries that we do not typically see.

Taiwan Arms Backlog Dataset, March 2024

Andrew Gillen

Mass student loan forgiveness is terrible policy (see this report for a comprehensive list of reasons), but that hasn’t stopped the Biden administration from trying to forge ahead. While the Supreme Court overturned the administration’s student loan forgiveness plan, every few weeks the Biden White House announces another batch of loans that have been forgiven. In fact, the administration recently celebrated that since taking office, it has succeeded in forgiving $143.6 billion of student loans for around four million borrowers by transferring the responsibility to repay from the students who took out the loans to taxpayers who did not.

But if student loan forgiveness lost in the Supreme Court, how are so many student loans still being forgiven? The answer is that there isn’t a student loan forgiveness plan, there are many plans, some of which are already up and running. Previous laws had already left a plethora of methods to forgive student loans, and many of those laws give the Secretary of Education the ability to expand those programs.

The administration also claims existing law gives it the authority to create new ways to forgive student loans. So the student loans the Biden administration already has or wants to forgive are a combination of existing programs, existing programs the administration has expanded, and new programs the administration is trying to implement.

Here’s a rundown of the administration’s student loan forgiveness plans and actions, which I’ll update monthly.

HEROES (New plan—overturned in court)

This was the big plan that got a lot of attention in 2022 and 2023. The plan was to forgive $10,000 for borrowers making less than $125,000, and $20,000 for borrowers who received a Pell Grant, at a total cost of $469 billion to $519 billion. The alleged authority for the plan was the 2003 HEROES Act. While designed to alleviate loan‐​related hardships for soldiers and reservists serving in Iraq and Afghanistan, the law also covered national emergencies, and the Biden administration argued the COVID-19 emergency gave it the authority to give virtually everyone loan forgiveness.

Most observers were skeptical of this supposed authority. But it was unclear who had standing to sue (standing is the requirement that those filing the suit have a concrete injury from the policy). The companies that service student loans would be the most obvious injured party. However, there was a perception that the Biden administration would punish any servicer that challenged the policy in court, a perception that now appears accurate.

Fortunately, the Supreme Court ruled that Missouri had standing to sue (due to a quasi‐​public student loan servicer that would lose revenue under the plan) and that the plan violated the major questions doctrine (which holds that there needs to be clear congressional authorization for programs of substantial economic or political significance), preventing the policy from being implemented.

Higher Education Act (New plan—forthcoming)

Immediately after losing on HEROES, the Biden administration announced a new effort that would use authority under the Higher Education Act. The administration will likely announce the new plan within the next couple of months. Once announced, this plan will likely face the same fate in court as the HEROES plan because it too will likely run afoul of the major questions doctrine.

SAVE (New plan—still active)

Before diving into this one, it is important to understand the concept of income‐​driven repayment (IDR). Under traditional (mortgage) style loan repayment, the amount and length of repayment are fixed (e.g., $200 a month for 10 years). For the past few decades, the federal government has been introducing IDR plans, in which the amount repaid each month varies based on the borrower’s current income and the length of repayment varies based on how fast they repay their loan. The key features of an income‐​driven repayment plan are:

the share of income owed each month (e.g., 20%)
the income exemption that is protected from any repayment obligation (e.g., the poverty line)
the cap on length of repayment (e.g., 25 years)

IDR is a great idea, providing borrowers with better consumption smoothing across their lifetime and flexible repayment, which helps avoid defaults due to short‐​term liquidity constraints.

But we’ve also botched the implementation. To begin with, a cap on the length of repayment is completely inappropriate. Income‐​driven repayment ensures that payments are always affordable, and borrowers who make so little they do not repay will receive de facto forgiveness even without the cap, so there is no justification for a cap.

The other problem with how we’ve implemented income‐​driven repayment is political—the plans are tailor‐​made to allow politicians to give constituents big benefits today while sticking future taxpayers with the bill. Thus it is no surprise that these plans have grown more generous over time. The first IDR plan, introduced in 1994, had an income exemption equal to the poverty line, a share of income owed of 20 percent, and a cap on length of 25 years. Very few borrowers would receive forgiveness under these terms, and of those who did, they really wouldn’t have been able to repay regardless of whether they received forgiveness. The Obama administration introduced plans with an income exemption of 150 percent of the poverty line, a share of income owed of 10 percent, and a cap on length of payment of twenty years.

The Biden administration’s Saving on a Valuable Education (SAVE) plan took an existing plan (the REPAYE plan) and made it much more generous. It changes the share of income owed from 10 percent to 5 percent, increases the income exemption from 150 percent of the poverty line to 225 percent, and caps the length of repayment at as little as ten years for some borrowers.

By cranking every possible lever to the most generous settings in history, this plan would impose massive costs on taxpayers, estimated at $475 billion for just the next 10 years.

Parts of the SAVE plan have already been implemented, and full implementation is scheduled for July 2024. However, there will soon be two lawsuits that seek to overturn the plan. Kansas and ten other states have already filed suit, and Missouri and Arkansas are planning to file suit soon. The legal questions facing this plan are the reverse of the HEROES plan. For the HEROES plan, the main obstacle was standing. Once that hurdle was cleared, it was fairly obvious that the plan was well beyond what Congress had authorized. But for the SAVE lawsuits, this is reversed. Standing is easily established (for Missouri at least), but the plan does have a much stronger argument for being within the parameters of the law.

Student Loan Payment Pause (Existing and extended plan—now expired)

When COVID-19 hit in March 2020, student loan payments were paused. The pause was supposed to last two months but ended up lasting three and a half years after Trump extended it once and Biden extended it six times. A pause would not normally result in massive student loan forgiveness as it would delay, but not waive, repayment. There would still be a cost to taxpayers (driven by the government’s cost of borrowing), but it wouldn’t be huge.

But recall that IDR plans (unnecessarily) cap the length of repayment, and the pause counted towards that cap. In other words, for any student who does not fully repay before they hit the length of repayment cap, payments weren’t paused, they were waived. We won’t know for many years how many students had their payments forgiven rather than postponed, but the current estimates range from $210 billion to $240 billion. There is virtually no chance for this burden on the taxpayer to be reversed. The only good news is that the payment pause ended, with most borrowers restarting payments in October 2023.

Public Service Loan Forgiveness (Existing and extended plan—still active)

The Public Service Loan Forgiveness (PSLF) program was established during the George W. Bush administration. It allowed for public and nonprofit workers to receive forgiveness after ten years of repayment when they used an IDR plan. While I object to PSLF in principle (as a distorting and non‐​transparent subsidy for the government and nonprofit sectors) and due to the windfalls these borrowers receive (an average of over $70,000 per beneficiary) because PSLF legally exists, it should operate as seamlessly as possible. The Biden administration granted many waivers and other changes to increase the number of borrowers who could benefit under PSLF. Some of these changes were good in that they more faithfully implemented the law. But the administration crossed some lines too. In particular, it started counting some types of deferment as payments (borrowers can get deferment when they cannot afford to make payments, which generally allows the borrower to temporarily postpone payments though interest continues to accrue). The whole point of deferment is to temporarily avoid making payments, so for the Biden administration to give borrowers credit for making payments when they were in deferment is logically, morally, and potentially legally wrong (Cato is part of a lawsuit seeking to end this abuse). The administration also waived income requirements, making more people eligible for the program. 

The Biden administration has forgiven “$62.5 billion for 871,000 borrowers since October 2021” under these programs, which works out to just under $72,000 per borrower. By comparison, a formerly homeless student who receives the maximum Pell Grant for four years would get less than $30,000 in Pell Grants. Some of this would have been forgiven even if the administration hadn’t made any changes to the program, but not all of it. In the future, these burdens on the taxpayer can be reduced by rolling back some administrative changes, but eliminating the program would require legislation.

Borrower defense to repayment (Existing and extended plan—still active, though recent changes are paused during a court case)

When a college engages in fraud or severely misleads students, borrowers can have their debt forgiven under borrower defense to repayment. This is reasonable, as victims of fraud should have some recourse. It is also extremely rare because a college would not just need to dupe a student. It would also need to fool a state, an accreditor, and the US Department of Education, as all three are required to sign off on the legitimacy of a college before its students can take out student loans.

However, the federal government can claw back debt forgiven from the responsible college. This makes borrower defense to repayment a powerful tool for progressives in their war on for‐​profit colleges. If a for‐​profit college can be declared to have substantially misled students, it can be ruined financially by the clawbacks. Indeed, new regulations from the Biden administration would make it much easier to conclude a college engaged in misconduct.

Those changes are currently tied up in court, with an injunction preventing the regulations from being implemented (this injunction applies to the next two sections as well). However, the Biden administration has already been able to forgive over $22 billion under borrower defense to repayment, though they’ve promised to forgo clawbacks on much of it (likely in part to avoid giving affected colleges standing to oppose the changes in court). Some of this was done outside the law. For example, $5.8 billion of debt for Corinthian College students was forgiven even if students didn’t submit a borrower defense claim.

Closed School Discharge (Existing and extended plan—still active, though recent changes are paused during a court case)

Borrowers whose school closes while they are still enrolled or shortly after they have withdrawn can have their student loans forgiven. The Biden administration imposed new regulations that loosened the requirements and has used this as an excuse to forgive other loans as well. For example, Biden forgave $1.5 billion in debt for students from ITT Technical Institute, even if they didn’t qualify for a discharge.

Total and Permanent Disability Discharge (Existing and extended plan—still active, though recent changes are paused during a court case)

Borrowers who are unable to work due to a permanent disability can have their loans forgiven. Historically this was very rare. To protect against fraud, the income of borrowers who had their debt forgiven was monitored to ensure they really couldn’t work.

The Biden administration expanded eligibility and dropped fraud detection efforts, leading forgiveness under total and permanent disability discharge to spike from negligible amounts to $11.7 billion. The new regulations are currently tied up in court.

Conclusion

In sum, the Biden administration has been the most aggressive in history regarding student loan forgiveness. Despite many setbacks, the administration has canceled a massive amount of debt, with most of the burden on taxpayers still to come from future repayments that will no longer be made. While many of the administration’s attempts to forgive student loans have been stymied, there are still many active plans in play, with more on the horizon.

Marc Joffe

As we mourn the six who perished in the Francis Scott Key Bridge collapse and consider the near‐​term implications for the Port of Baltimore, policymakers must also grapple with the question of how to replace the fallen span. Although President Biden has already taken out the federal government’s heavily overdrawn checkbook, Congress and state officials will also have a say as to whether this check gets written and how large it should be.

One option that could minimize or even eliminate any taxpayer liability is to authorize a private firm to build and operate the new bridge, relying on toll revenues to cover costs and earn a profit.

Perhaps even more important than cost savings is the speed that a properly incentivized and competent private company can bring to the rebuilding task. In the twenty‐​first century, the US public sector seems to have forgotten how to build large transportation infrastructure projects quickly. The most well‐​known example is California High‐​Speed Rail, which will start service at least ten years later than the original plan. But another California case is even more relevant here.

In 1989, pavement on the eastern span of the San Francisco Bay Bridge collapsed during the Loma Prieta earthquake. Although engineers realized that the structure needed to be replaced, it took 24 years and over $6 billion for a replacement span to begin operation.

In New York State, a project to replace the Tappan Zee Bridge between Rockland and Westchester Counties also came in late and over budget, although the delays were nowhere near as bad as those in San Francisco. But like its California counterpart, New York’s new Mario M. Cuomo Bridge suffered from potential safety problems due to the failure of high‐​strength bolts in bridge support structures.

The defective bolts were procured by the private contractor building the Cuomo Bridge, and a whistleblower alleged that it covered up the problem. This is just one example of how private infrastructure construction firms can and do screw up. At the same time, public sector officials can also fail at the task of creating and maintaining infrastructure that meets the highest safety standards.

That fact was on graphic display when it became clear that the Francis Scott Key Bridge lacked adequate dolphins and fenders to protect the piers supporting the structure from a ship impact. The Maryland Transportation Authority (MDTA) could have installed such protections in the aftermath of Tampa’s Sunshine Skyway bridge collapse in 1980 but failed to do so. Engineers differ as to whether a proper protection system would have been enough to stop the Dali from taking down the Key Bridge, and we’ll probably have to wait for the NTSB’s conclusions to know for sure. But clearly the protections on the Key Bridge were far inferior to those surrounding comparable structures.

While no economic arrangement can guarantee total safety, one in which the bridge’s owners face losses from inadequate design is more likely to produce better results. This is why it would be better to not simply rely on a private contractor to rebuild the bridge and turn it over to the MDTA, but to instead require the company to operate the facility, earning back construction costs with toll revenue and shouldering ongoing liability for construction defects and inadequate maintenance.

Private road infrastructure has a long history in the US, as my colleague Chris Edwards has previously discussed. One contemporary example is that of the South Norfolk Jordan Bridge in Southern Virginia. This mile‐​long structure was built for $142 million by FIGG Bridge Engineers in 2012 without public funds and is now privately operated by United Bridge Partners.

One objection to private ownership and operation is that the company owning the bridge will maximize revenue by charging high tolls, adversely impacting low‐​income drivers. But at least in the case of the Key Bridge, the new owner would face competition from two government‐​owned tunnels nearby and routes further away. Setting tolls well above the cost of using alternative routes would result in much lower traffic and less revenue for the bridge’s owner. Also, while tolls would likely be higher than those charged at the tunnels, low‐​income drivers using the tunnel will still benefit from the bridge because it will take away some of the traffic that they would otherwise encounter, reducing delays.

Back‐​of‐​the‐​envelope calculations suggest that a private operator would indeed have to raise tolls to make rebuilding and operating the bridge profitable. In fiscal year 2023, tolls ranging from just $1.40 for cars using the MDTA’s commuter discount plan to $30 for a six‐​axle truck yielded total revenue of $56.8 million.

If rebuilding the bridge costs $800 million, and that cost is financed over thirty years at an annual interest rate of 5 percent, debt service payments would run $52 million annually, leaving an insufficient cushion to cover operating costs and insurance while earning an adequate return (even in the very unlikely event that traffic on the new bridge quickly returns to 2023 levels).

The state could assist a private owner/​operator by letting it apply any insurance payout to the rebuilding cost and authorizing it to issue private activity bonds whose interest would be income tax exempt.

Policymakers might be tempted to further “buy down” eventual toll rates by subsidizing the owner/​operator with tax revenues, but this is a temptation that should be resisted. Those of us who criticize massive subsidies to urban transit should also oppose subsidies to automobile travel.

Romina Boccia

I am grateful to Dr. William Beach, a Coolidge Foundation Coffin Family Fellow and former Bureau of Labor Statistics Commissioner, for inviting me to present on my fiscal BRAC proposal at America in Debt, a national conference held at the Library of Congress on March 7, 2024. My remarks are below.

A BRAC‐​Like Fiscal Commission Can Solve our Debt Challenge

Our national debt is on track to surpass unprecedented heights, soaring to 166 percent by 2034, according to the Congressional Budget Office’s optimistic projections of debt held by the public. US debt could grow to possibly insurmountable levels should legislators fail to course‐​correct in time. The unchecked growth of federal health care and old‐​age entitlement programs poses by far the biggest fiscal challenge.

According to figures reported in the Financial Report of the United States Government, Medicare and Social Security are jointly responsible for 100 percent of the federal government’s long‐​term unfunded obligations. Left on autopilot, the projected growth in these old‐​age benefit programs threatens to burden younger generations with insurmountable debt, economy‐​crushing tax hikes, and the black‐​swan threat of an unprecedented US fiscal crisis.

We cannot afford to ignore this reality any longer. It’s past time for a new approach.

Over the past 15 years, we have witnessed several attempts at tackling the entitlement‐​driven spending challenge. We have witnessed congressional leadership proposing solutions, and we’ve seen several fiscal commissions come and go, without making meaningful progress on this critical issue. More on that history in a bit.

There is, however, one approach that Congress has not yet tried. And that is modeling a fiscal commission after the successful Base Realignment and Closure Commission, or BRAC.

BRAC was a process to identify obsolete military bases, following the end of the Cold War. It established an independent commission to help Congress overcome the apparently intractable political challenge of making decisions that involve concentrated costs and dispersed benefits. It was clear to all that keeping costly military bases that were no longer needed was contrary to the national interest. And yet, legislators would fight tooth and nail to keep bases open in their jurisdictions. So, they set up BRAC. It succeeded and saved federal taxpayers billions of dollars.

Applying the BRAC concept to resolving America’s fiscal challenge is an innovative approach that holds immense promise in surmounting the political hurdles that have plagued past entitlement reform efforts.

What makes this commission different from those that Congress already tried?

Let me break it down:

First, a BRAC‐​like fiscal commission should consist of independent experts—individuals unencumbered by partisan affiliations. Congress could then point fingers at these experts for making recommendations that are economically necessary but politically unpopular.

Second, the commission’s mission would be to stabilize the debt. How? By ensuring that spending and revenue policies keep debt from exceeding our Gross Domestic Product (GDP). Importantly, the details would be left up to the commission.

Third, empower the commission with Fast‐​Track authority. Instead of expediting the commissions’ plan through Congress and putting politicians on the record with affirmative votes, the BRAC plan would be self‐​executing, unless Congress leveraged expedited procedures to vote it down.

And that is the crucial twist—the linchpin of my BRAC proposal:

Commission recommendations would be self‐​executing. You heard it right. Unless Congress explicitly objects, the commission’s proposals would take effect automatically. This is essential.

Legislators obviously shy away from making decisions that create clear winners and losers due to re‐​election concerns. But with a self‐​executing mechanism, they can advocate passionately for their constituents while simultaneously allowing necessary policy solutions to take effect.

A BRAC‐​like commission paradoxically empowers legislators to be both advocates for their constituents and stewards of the whole nation. They become champions for their communities, blaming politically unpopular outcomes on commission experts.

As such, a BRAC‐​like fiscal commission transcends politics, elevates Congress, and provides a workable path to secure fiscal stability, securing the foundation of a strong and prosperous America.

Why might this commission work where others have failed? Because designing a commission after the successful Base Realignment and Closure commission corrects for shortcomings of previous efforts. The below summarizes the past 14 years of attempts at correcting the US fiscal course and their breakdown.

In 2010, President Obama established the Simpson‐​Bowles commission. Congress and the president felt pressure then to address the debt as stimulus spending had failed at reigniting the American economy but had succeeded in driving up the national debt. Yet the president failed to put executive support behind the commission’s recommendations. Even if the president had been more supportive, it is not clear that the plan could have survived an affirmative vote in the Congress.

In 2011, Paul Ryan served as the chair of the House Budget Committee. He dared to propose bold solutions, including Medicare premium support, to address the biggest debt driver head‐​on. He was a visionary leader, and he was vehemently attacked for it.

The 2011 Budget Control Act, led by then‐​Speaker of the House John Boehner, by arguably backing President Obama into a corner over the debt limit, set up a special bipartisan super‐​committee of legislators and even established automatic cuts to force a solution; yet this effort failed, too.

Leadership on reforming entitlements cannot be confined to one party or one chamber. Not even in the face of automatic spending cuts. That’s one lesson we learned the hard way during that post‐​Great Recession era.

Fast forward to 2020 when Senator Joe Manchin showed remarkable leadership by advocating for a bipartisan, bicameral fiscal commission—established by the TRUST Act—to address Medicare’s and Social Security’s solvency. It garnered significant bipartisan support.

Yet making that commission explicitly about reforming entitlements and relying solely on members of Congress to serve on the commission was unlikely to work.

More recently, together with Senator Mitt Romney, Manchin has championed the Fiscal Stability Act, which is the companion bill to the House‐​championed Fiscal Commission Act. This would establish a bipartisan fiscal commission, guided by experts, to stabilize the debt at no more than 100 percent of the economy over the next fifteen years.

Importantly, it’s about more than reforming entitlements. It’s focused on addressing the broader debt challenge, and this vagueness is a key strength of the approach because it makes it less prone to political attack.

The Fiscal Stability Act is a promising step toward Congress taking another crack at fixing our debt challenge before it’s too late. At the very least, it will reignite a public conversation about the key drivers of America’s fiscal challenge and the programs that are at the core of the issue.

But it’s no BRAC.

A fiscal commission can be most effective in providing Congress with the necessary political cover to reform entitlements, if legislators are removed from commission proceedings and don’t have to take a public vote to enact the commission’s recommendations.

I am now quoting Representative Jon Kyl (R‑AZ) from BRAC discussions in the House of Representatives during the 100th Congress:

“I do not think we are fooling anyone when we say we are all for closing obsolete bases, but then we attach so many preconditions to it that we know we are never going to end up closing the bases. One of these is the difference between automatic closure and the provision that would require Congress to affirmatively act. Who among us believes that we will actually close bases if we have to affirmatively act?”

Representative Jon Kyl hit the nail on the head.

Our best hope lies in members of Congress acknowledging that they abdicated their responsibilities to control the growth in federal government spending a long time ago, when they put entitlements on autopilot. Rather than viewing delegation to an independent BRAC‐​like fiscal commission as further abdication of Congress’ spending powers, it would reclaim that responsibility by putting in place a workable mechanism to get the job done.

Jeffrey Miron and Pedro Aldighieri

The Biden administration plans to announce a new cap on rent increases for certain affordable housing units subsidized by the federal government. The move, which will limit yearly rent increases to 10 percent for low‐​income housing tax credit properties, has been hailed by tenant advocates but criticized by others in the housing industry.

As we argue in a chapter on rent control for the forthcoming War on Prices, such policies are misguided and ultimately counterproductive. While well‐​intentioned, rent control fails to achieve its primary goal of improving housing affordability for the poor and disadvantaged. In fact, it often generates unintended consequences that exacerbate the very problems it seeks to solve.

Economic theory predicts that binding rent controls will discourage upkeep and improvements on rent‐​controlled units, resulting in lower property values. Landlords, unable to charge market rents, convert rental units to condos and sell them, reducing the quantity of rent‐​controlled housing and creating rental housing shortages. Tenants in rent‐​controlled units become less mobile to avoid losing access to below‐​market rents.

Empirical evidence largely confirms these predictions. Studies have shown that rent control leads to a reduced supply of rental housing, as seen in San Francisco and Cambridge, Massachusetts. It also results in the misallocation of housing, with tenants sticking to apartments that don’t reflect their needs. Rent‐​controlled units often have worse maintenance and more quality issues compared to market‐​rate units.

Crucially, rent control often fails to benefit the intended recipients—poor and minority households. In San Francisco, rent control accelerated gentrification as landlords converted rental units to upscale condos. In St. Paul, the benefits of rent control accrued primarily to white, more affluent tenants, with little wealth transfer from landlords to disadvantaged renters.

The most sustainable and effective way to promote affordable rents is to enable new construction by deregulating zoning, land use, and building requirements. Such policies make development cheaper and supply more responsive to prices, keeping rents in check. If low‐​income households still struggle with affordability, targeted approaches like housing vouchers are a leaner, more cost‐​effective alternative to rent control.

While the Biden administration’s proposed rent cap may seem like a quick fix, it ignores the fundamental issues plaguing the housing market. Price controls prevent the market from efficiently allocating scarce resources and discourage the investments needed to expand affordable housing. The unintended consequences likely outweigh any short‐​term benefits.

Policymakers should heed the lessons from economic theory and real‐​world evidence. Rent control, even in its more moderate forms, is a flawed tool that creates more problems than it solves. Instead of resorting to price controls, the focus should be on removing barriers to new housing development and providing targeted assistance to those who need it most. Only then can we address the nation’s affordable housing crisis.

Readers can find more about rent controls in our chapter for Ryan Bourne’s The War on Prices, published by the Cato Institute and available for pre‐​order now. The book is poised to become an essential read for anyone interested in the intersection of economics and public policy. Other chapters include discussions of “greedflation,” the Biden administration’s war on “junk fees,” the alleged “pink tax” on products marketed to women, and much more.

This article appeared on Substack on March 29, 2024.

Chris Edwards

Politicians often say one thing but do another. President Biden rails against tax breaks for big corporations, and the White House boosts that Biden “has fought to build a fairer tax system that … asks big corporations and the wealthy to pay their fair share; and requires all Americans to play by the same rules.”

But Biden has signed into law three bills with vast subsidies and narrow tax breaks for big corporations. These were not across‐​the‐​board tax cuts that simplified the tax code, but rather a mess of complex loopholes with special rules for favored industries.

How large are Biden’s special‐​interest corporate breaks? The US Treasury issues annual estimates of “tax expenditures” or loopholes showing the size of each tax break. This official tally of tax expenditures is biased but can provide a rough measure of the change in narrow breaks over time. Let’s compare the corporate breaks under Presidents Biden and Trump.

The Treasury projects tax expenditures for 10 years, so I choose six years of overlap between the Trump and Biden figures, fiscal years 2024 to 2029. The chart shows the annual average total corporate tax expenditures as measured today, and as measured four years ago in the last year of Trump’s tenure. Since then, Biden has signed into law many new and expanded breaks, particularly in the Inflation Reduction Act with its massive subsidies for energy companies.

President Biden has increased annual average corporate tax expenditures 92 percent from $109 billion to $209 billion. Thus Biden has almost doubled narrow corporate breaks, despite all his rhetoric about fairness, fair shares, and people playing by the same rules.

The chart includes both tax cuts and tax provisions that provide outlays to companies. Tax‐​code outlays have increased from $0.3 billion a year projected under Trump to $29 billion a year under Biden. These are the red boxes at the top of the two bars.

Biden administration policies on corporate taxes are the opposite of fairness. He has signed into law complex and anti‐​growth increases in corporate taxes, and his current budget proposes to raise the overall corporate tax rate. Yet at the same time, Biden has signed into law an explosion of corporate welfare, including narrow tax breaks and spending subsidies in the tax code.

Rather than pursuing low and equal tax rates for all businesses, Biden’s misguided approach is to impose punitive treatment on most businesses while handing out subsidies for the select few.

Data Notes

US Treasury projections of tax expenditures under Trump (FY2021) and Biden (FY2025) are available here. Summing the expenditures does not account for interactions between the provisions, so these totals are only a rough gauge of the overall size of the breaks.

The Treasury does not split the outlay part of tax expenditures between corporate and noncorporate, so I’ve estimated the corporate outlays using the tax cut shares of each provision.

US Treasury estimates of tax expenditures are biased in numerous ways, as I discuss here.

Adam Michel discusses Biden’s energy tax subsidies here.

Jeffrey A. Singer

In a March 22 opinion column in the New York Times entitled “The DEA Needs to Stay Out of Medicine,” Vanderbilt University Medical Center associate professor of anesthesiology and pain management Shravani Durbhakula, MD, documents powerfully how patients suffering from severe pain—many of them terminal cancer patients—have become collateral casualties in the government’s war on drugs.

Decrying the Drug Enforcement Administration’s progressive tightening of opioid manufacturing quotas, Dr. Durbhakula writes:

In theory, fewer opioids sold means fewer inappropriate scripts filled, which should curb the diversion of prescription opioids for illicit purposes and decrease overdose deaths — right?

I can tell you from the front lines that that’s not quite right. Prescription opioids once drove the opioid crisis. But in recent years opioid prescriptions have significantly fallen, while overdose deaths have been at a record high. America’s new wave of fatalities is largely a result of the illicit market, specifically illicit fentanyl. And as production cuts contribute to the reduction of the already strained supply of legal, regulated prescription opioids, drug shortages stand to affect the more than 50 million people suffering from chronic pain in more ways than at the pharmacy counter.

Dr. Durbhakula provides stories of patients having to travel long distances to see their doctors in person due to DEA requirements about opioid prescriptions. However, despite their efforts, they find that many of the pharmacies do not have the opioids they require because of quotas. She writes:

Health care professionals and pharmacies in this country are chained by the Drug Enforcement Administration. Our patients’ stress is the result not of an orchestrated set of practice guidelines or a comprehensive clinical policy but rather of one government agency’s crude, broad‐​stroke technique to mitigate a public health crisis through manufacturing limits — the gradual and repeated rationing of how much opioids can be produced by legitimate entities.

In the essay, Dr.Durbhakula does not question or challenge the false narrative that the overdose crisis originated with doctors “overprescribing” opioids to their pain patients.

Unfortunately, Dr. Durbhakula’s proposed policy recommendations would do little to advance patient and physician autonomy. She would merely transfer control over doctors treating pain from the cops to federal health bureaucracies and let those agencies set opioid production quotas. For instance, she claims, “It’s incumbent on us [doctors] to hand the reins of authority over to public health institutions better suited to the task.”

No. The “reins of authority” belong in the hands of patients and doctors.

Dr. Durbhakula suggests that “instead of defining medical aptness, the DEA should pass the baton to our nation’s public health agencies” and proposes that the Centers for Disease Control and Prevention and the Food and Drug Administration “collaborate” to “place controls on individual prescribing and respond to inappropriate prescribing.” She elides the fact that these public health agencies will “respond” to doctors or patients who don’t comply with their regulations by calling the cops.

To be sure, Dr. Durbhakula has good intentions. But replacing actual cops—the DEA—with federal health agencies that can order those cops to arrest non‐​compliant doctors and patients is like rearranging the deck chairs on the Titanic. True, her proposed new pain management overlords would have greater medical expertise, but they would still reign over doctors and patients and assault their autonomy. And, as we learned during the COVID-19 pandemic, they will not be immune to political pressures and groupthink.

While her policy prescriptions may be flawed, Dr. Durbhakula deserves praise for having the courage to point out that the war on drugs is also a war on pain patients. Alas, courageous doctors are in short supply these days. Most doctors keep their heads down and follow the cops’ instructions.

After I read her essay, I wrote the following (unpublished) letter to the editor of the New York Times:

Dear Editor—

Kudos to Dr. Durhakula for speaking out against the Drug Enforcement Administration’s intruding on doctors’ pain treatment (“The DEA Needs to Stay Out of Medicine,” March 22, 2024). As my colleague and I explained in our 2022 Cato Institute white paper, “Cops Practicing Medicine,” for more than 100 years, law enforcement has been increasingly surveilling and regulating pain management.

The DEA maintains a schedule of substances it controls, and it categorizes them based on what the agency determines to be their safety and addictive potential. The DEA even presumes to know how many and what kind of controlled substances—from stimulants like Adderall to narcotics like oxycodone—the entire US population will need in future years, setting quotas on how many each pharmaceutical manufacturer may annually produce.

The DEA restricts pain management based on the flawed assumption that what they consider to be “overtreatment” caused the overdose crisis. However, as my colleagues and I showed, there is no correlation between the opioid prescription rate and the rate of non‐​medical opioid use or opioid addiction. And, of course, as fear of DEA reprisal has caused the prescription rate to drop precipitously in the last dozen years, overdose deaths have soared as the black market provided non‐​medical users of “diverted” prescription pain pills first with more dangerous heroin and later with fentanyl.

Researchers at the University of Pittsburgh School of Public Health found that overdose fatalities have been rising exponentially since at least the late 1970s, with different drugs predominating during various periods. Complex sociocultural, psychosocial, and socioeconomic forces are at the root of the overdose crisis, requiring serious investigation. Yet policymakers have chosen the lazy answer by blaming the overdose crisis on doctors treating pain.

When cops practice medicine, overdoses increase, drug cartels get richer, and patients suffer.

Sincerely,

Jeffrey A. Singer, MD, FACS

Senior Fellow, Cato Institute

When cops practice medicine, overdoses increase, drug cartels get richer, and patients suffer.

Jennifer Huddleston

The debate over youth online safety laws and their impact on speech has often focused on adult users’ rights. However, as I discuss in a recent policy brief, existing precedents suggest that when it comes to expressive activity, young people have rights that can be violated by the government—at least in a school context. Outside of school, these decisions should be left to parents.

Kids Have Been Online, and Are Online For a Variety of Reasons

Most of the debates around young people online today focus on harmful activities; however, today’s teenagers are using the internet in a variety of beneficial ways. In focusing only on the potential harm, we neglect the positive opportunities for expression the internet can provide and fail to ask young people themselves why they are choosing to have online interactions. As I highlight in the paper, young people have used the internet to start businesses, engage in political activism, and find support when they may feel isolated in their communities offline. This has been particularly important for young people in vulnerable or marginalized groups who might not otherwise be able to express themselves.

Concerns about kids’ use of the internet are not new. In the 1990s and early 2000s, internet safety advocates were raising concerns about kids online, but the nature of the debate has shifted somewhat since. The debate about child online safety, however, can often refer to several different concerns parents might have. Some child online safety debates focus on the physical safety of children or protection from sexual exploitation. Others are more concerned about exposure to certain types of content or the amount of time spent online. These concerns have vastly different solutions.

Developing a Legal Basis for Young People’s Expressive Rights

Historically, the leading case around young people’s rights is Tinker v. Des Moines. This case famously established that students and teachers do not abandon their rights at the schoolhouse gates. So, if young people do not abandon their rights to expression when they enter a government‐​funded school, why should the government then be able to restrict their ability to express themselves on a private platform, in a private residence, and force them to abandon their rights at the user login page? More recent cases indicate that such proposals may raise constitutional concerns and that it is parents, not the state, that are able to determine what, if any, limitations there are to such rights.

The courts have not yet spoken directly on young people’s rights in this online context, but other cases involving the free expression rights of young people and past internet safety laws indicate that there is likely a high level of scrutiny for such restrictions. For example, in Mahanoy v. B.L, a case involving a young person’s profanity‐​laden Snapchat post, the court found that any discipline for such expression in a context outside of the classroom belongs to parents, not the school. In prior challenges to youth online safety laws, including Reno v. ACLU and Ashcroft v. ACLU over two decades ago, the court found that the market response in providing parental controls would indicate that the state had not met its burden for the impact of their proposed laws on the speech of adult users.

Despite all of the past statements on the topic, there remains a missing piece of legal puzzle: what are the contours of young people’s expression rights online? Or, more generally, what are their rights outside of the school context? Current iterations of youth online safety laws are facing legal challenges in Ohio and California, opening up opportunities for courts to provide clarification on the speech rights of minors, including a clear definition of the distinction between government mandate and parental choice.

Conclusion

The internet has been a valuable tool in expanding opportunities for expression, including for young users. As youth online safety laws face judicial challenges, the courts should consider not only their impact on the speech rights of adults, but also on young users’ own speech rights. States may have a legitimate interest in children’s safety, but young people also have expression rights that must be considered, and the state must illustrate it has met appropriate legal burdens before restricting their access to a vital speech outlet.

Scott Lincicome

Among the research I commended in the 2024 Economic Report of the President (ERP) last week was a solid section on free trade’s “pro‐​poor bias,” i.e., that eliminating US government barriers to cross‐​border commerce disproportionately benefited Americans with lower incomes. This week, the Federal Reserve Bank of Minneapolis highlights a brand new paper showing much the same thing (emphasis mine):

In a Minneapolis Fed staff report, Monetary Advisor Michael Waugh models how lower trade costs play out for richer and poorer households (Staff Report 653, “Heterogeneous Agent Trade”). Waugh finds starkly different effects, with poor households (defined by their level of consumer spending) gaining much more as freer trade lowers prices.

The reason is not that poorer households buy a larger proportion of imported goods. Rather, it is their higher marginal utility of consumption: Falling prices provide more value to households with tighter budgets, as evidenced by their sensitivity to prices. Low‐​income households react more strongly as trade drives down the prices of imports and competing domestic goods. These households increase their consumption more as their buying power increases, and they are quicker to substitute new products in pursuit of savings.

Waugh finds that all US households benefit from a 10 percent reduction in US trade costs. But the poorest fifth of households experience a welfare gain more than 4.5 times larger than the richest.

Given the ample academic research cited in the ERP, these new findings, while welcome, are unsurprising. However, they do raise the following question related to the 2024 US presidential campaign: If an across‐​the‐​board 10 percent reduction in US trade costs generates outsized gains for America’s poor, what does an across‐​the‐​board 10 percent increase in those same costs—say, via the universal tariff proposed by Donald Trump—do?

For more on the benefits of free trade and the costs of protectionism, be sure to check out Cato’s ongoing Defending Globalization project or this 2022 Cato paper from me and Alfredo Carrillo Obregon.