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Jeffrey A. Singer

It’s a sad irony that, on December 12, the same day that the Senate Health, Education, Labor, and Pensions (HELP) Committee passed the Modernizing Opioid Treatment Access Act (MOTAA) by a vote of 16–5—the first serious attempt in decades to expand access to treatment for Opioid Use Disorder—the House of Representatives went in the opposite direction, passing the Combat Illicit Xylazine Act (H.R. 4531) 386–37—an utterly unserious attempt to resist the Iron Law of Prohibition.

As I wrote here, the veterinary tranquilizer xylazine, which people who use drugs call tranq, is being added to illicit fentanyl that is smuggled into the country and sold on the black market. It is also mixed with other illegal drugs, such as cocaine and methamphetamine. The sedative properties of the drug greatly enhance the narcotic effects of opioids. That enhancement is why xylazine is the most recent manifestation of the Iron Law of Prohibition: the harder the enforcement, the harder the drugs. Prohibition incentivizes drug cartels to develop more potent drugs and drug combinations that are easier to smuggle in smaller sizes and subdivide into a greater number of units to sell.

Toxicology studies have found xylazine mixed with illicit drugs starting in the early 2000s. In 2012, researchers at the University of Puerto Rico reported it was being mixed with heroin and cocaine. Lately, it has been detected more frequently throughout North America, including Canada.

The Drug Enforcement Administration reported it found xylazine in 23 percent of fentanyl powder and 7 percent of fentanyl pills the agency seized in 2022.

The drug is a muscle relaxant and sedative often used in veterinary anesthesia. It has strong alpha‐​adrenergic properties, which cause constriction of the blood vessels. These vasoconstrictive properties dramatically reduce the blood supply to the soft tissues near the injection site, often causing the tissue to die and infected ulcerations on the users’ limbs. Sometimes, the infections are severe enough to require life‐​saving amputation.

While xylazine users can develop a physical dependency, the drug is more dangerous because the opioid overdose antidote naloxone does not reverse the respiratory depression seen with xylazine overdoses.

Rather than accept reality, the House of Representatives thinks it can combat xylazine by adding it to the DEA’s list of controlled substances. Xylazine is not currently on that list. The Combat Illicit Xylazine Act bypasses the usual process by which cops practice medicine. Ordinarily, the DEA asks the Department of Health and Human Services to undertake an 8‑step process to evaluate the risks and therapeutic potential of a drug before adding it to its list of controlled substances. The results of these studies inform lawmakers on formulating penalties for those who make, sell, or use these drugs non‐​medically.

This time, however, lawmakers decided that politicians know even more than cops about how to practice medicine. They dispensed with the formalities, deciding they knew enough about xylazine without any research to determine where the drug belonged on the list. They decided xylazine belongs on Schedule III: “drugs with a moderate to low potential for physical and psychological dependence.”

Anabolic steroids, testosterone, acetaminophen with codeine, and ketamine are some examples of Schedule III drugs.

The bill imposes criminal penalties of up to 15 years in prison plus fines for people caught possessing, selling, manufacturing, or transporting xylazine outside of the legal prescription drug market.

For some inexplicable reason, lawmakers believe that adding xylazine to the DEA list of controlled substances and threatening prison sentences will deter cartels and drug users. Heroin and marijuana have been listed as Schedule 1—“no currently accepted medical use and high potential for abuse”—for half a century. The only thing it accomplished was to fill our prisons, mostly with non‐​violent and low‐​level drug offenders, while heroin overdoses soared—until the cartels discovered that fentanyl is more potent and easier to smuggle than heroin. Then fentanyl smuggling overtook heroin.

The House passing the Combat Illicit Xylazine Act demonstrates that lawmakers are still not serious about addressing the overdose crisis. Either that, or they are in denial about the real reason why xylazine is being added to fentanyl and other drugs on the black market: prohibition.

If lawmakers want to get serious about reducing overdose deaths, they should make it easier for drug users and organizations that want to save their lives to engage in harm reduction. For example, Congress can repeal or amend 21 U.S.C. Section 856, the so‐​called “crack house” statute, so community organizations can open overdose prevention centers (OPCs), which have been saving lives in 16 countries and 147 locations since the 1980s. The “crack house” statute bans them in this country.

States can repeal laws that make drug testing equipment illegal drug paraphernalia, criminalizing people for helping people who use drugs test to see if they are adulterated with fentanyl, xylazine, or other substances. The same Canadian company that manufactures fentanyl test strips now makes xylazine test strips. Harm reduction organizations can distribute them along with fentanyl test strips to nonmedical users in states where drug paraphernalia laws don’t stand in the way.

The Combat Illicit Xylazine Act is worse than political theater. By denying reality and deferring any meaningful reform, lawmakers are a part of the overdose problem.

Neal McCluskey

This week marks the 75th anniversary of the United Nations’ Universal Declaration of Human Rights. The Declaration’s overall thrust and impact are matters of ongoing debate, and I won’t weigh in on them. But it contains a pronouncement that is very important to the school choice movement:

Parents have a prior right to choose the kind of education that shall be given to their children.

This, as cited on Cato’s School Choice Timeline, is from Article 26 of the Declaration. The article’s first two parts prescribe what education should be and do, and are not major departures from oft‐​stated goals of public schooling. What is a major departure is an emphasis on the right to choose.

The UN Declaration, importantly, precedes the US Supreme Court’s 1954 Brown v. Board of Education decision, which declared decades of segregation in public schooling unconstitutional and set off years of evasion in many southern states. Included in that resistance were voucher plans that provided funding for families to choose private, typically all‐​white, private schools. Many choice opponents point to this to assert that the school choice movement is rooted in evil: segregation.

What the Declaration establishes first is that belief in a right to choose in education preceded Brown and was asserted internationally. The idea of choice was not suddenly conjured up to defeat American desegregation.

More importantly, the Declaration includes choice because it is a defense against oppressive government, which certainly describes Jim Crow states. It was argued by many Declaration drafters that parents needed their right to choose enshrined lest the state hold too much power, a fear that was top of mind given the weaponization of free, compulsory public schooling in just‐​defeated Nazi Germany. Diverse values and beliefs must be able to coexist on a level playing field.

Of course, as our timeline shows, school choice predated both the Declaration and Brown by centuries. Because people have always had diverse needs and values, and government schooling has never been consistent with that.

Scott Lincicome and Clark Packard

Today the House Select Committee on the Chinese Communist Party issued a lengthy report denouncing various Chinese government economic policies and recommending a wide range of US policy reforms to counter those policies’ alleged threats to US economic and national security.

As Cato scholars have long explained, China raises real economic and geopolitical challenges for the US government—challenges that some of the committee’s recommendations would directly address. However, arguably the most prominent of the committee’s recommendations—to revoke Permanent Normal Trade Relations (PNTR) with China—does not fall into that category. Here are four reasons why revoking PNTR is a bad idea.

Revoking PNTR Would Cause Significant Economic Harm to the United States

Revoking PNTR would impose new US tariffs on a wide range of Chinese goods, most of which raise no economic or security concerns, and would inevitably lead to China’s retaliation against US goods, services, and investment.

These harms are not just conjecture; they are exactly what resulted from the tariffs imposed by the Trump administration and maintained by the Biden administration, which today cover most imports from China at an average rate of about 21 percent. Countless academic studies have found that American companies and consumers, not the Chinese, pay these taxes—which totaled $46.5 billion in 2022—and the higher domestic prices that they cause.

The New York Federal Reserve, for example, estimates that the tariffs increased costs for average American households by about $830 per year, accounting for direct costs and efficiency losses, and this resulted in approximately $1.7 trillion in lost market capitalization for American firms. Moody’s Analytics estimates that the tariffs cost about 300,000 American jobs. Many other studies have found similar harms, including for the US manufacturers that tariffs are supposed to help. As Don Boudreaux and Phil Gramm noted in the Wall Street Journal, “total manufacturing output was 2% lower by the start of the pandemic than it was when [Trump] raised tariffs.”

Beijing, of course, retaliated against the US tariffs, hitting about 60 percent of American products at an average rate of 19.3 percent. To mitigate the political fallout from this predictable response, the Trump administration unilaterally sent billions of taxpayer dollars to US farmers and ranchers who lost market access in China. Those subsidies thankfully ended, but many Chinese tariffs remain and many US exporters still haven’t recovered (and probably never will).

Adding more tariffs would have a similar result: raise prices, inject more economic uncertainty into US trade and economic policy, and further weaken the US economy and American firms’ global competitiveness. Oxford Economics estimates that raising tariffs by revoking PNTR would cause a loss of $1.6 trillion to the US economy and cause a loss of 744,000 jobs over a five‐​year period. If Chinese retaliation is factored in, the study found that it would lead to a loss of $1.9 trillion and more than 800,000 fewer jobs over that same five‐​year horizon. Hamstringing our economy is no way to outcompete China in the 21st century, which should be the lodestar of US international economic policy right now.

This is especially the case given that many of the Chinese products not currently facing US tariffs have no connection to US national security. Instead, many of the newly taxed items would be basic consumer goods like clothing and toys, which means higher prices for American families already struggling from years of abnormally high inflation. Sabine Weyand, the European Union’s Director‐​General for Trade, recently noted in an essay for Internationale Politik Quarterly that 94 percent of EU trade with China is “unproblematic” and that only about six percent is the result of a one‐​sided dependency for EU member nations. A comparable analysis for the United States would almost certainly produce similar results. Holiday season aside, taxing Americans’ toys is not a serious way to counter China.

Tariffs Won’t Change the CCP’s Economic Abuses

The committee’s report acknowledges these potential economic harms and thus suggests additional taxpayer support for affected companies, farmers, and households. Yet there’s little reason to think that additional tariffs will give the United States new “leverage” (in the committee’s words) to convince Beijing to change course and thus potentially justify the tariffs’ additional pain and expense.

The Trump‐​Biden tariffs were ostensibly designed to push China to change its intellectual property and other legitimately concerning economic practices, but they simply didn’t work. After five‐​plus years, China’s abusive practices continue, and the so‐​called “Phase One” agreement signed in early 2020 and meant to address Washington’s concerns about Beijing’s structural economic practices has been discarded. Indeed, that the committee’s report identifies many of the same types of economic policies that US policymakers targeted in 2018 and have long complained about is a testament to the austere limits of a “tariff everything” approach to bilateral relations.

It is inconceivable that more tariffs—and the attendant economic harms to the US—will push Beijing to change its policies this time around.

Revoking PNTR Won’t Stop Chinese Products from Entering the US Market but Will Make It More Difficult to Track Them

Because of the proliferation of global value chains, in which finished goods contain content from many nations, trade data underestimate by a significant amount the extent to which US goods trade remains intertwined with China. In particular, these data assign imports’ and exports’ total gross value to a single country when in reality most manufactured products contain value added from other countries.

Thus, for example, an iPhone stamped “made in China” actually contains raw materials and parts from Japan, South Korea, the United States, and elsewhere, and this complexity is especially high for technology products on which the Select Committee has focused.

Given this issue, research is increasingly confirming that current US tariffs on “Made in China” goods have probably been less effective in restricting Chinese imports into the United States because Chinese content is being rerouted to third countries and embedded there in products legally labeled “Made in [Not‐​China].”

As Scott Lincicome documented a few months ago, this activity is evident when examining US Customs and Border Protection rulings sought by multinational corporations to confirm that their proposed manufacturing processes could “substantially transform” (in legal parlance) Chinese inputs into non‐​Chinese finished goods. In the five years preceding the trade war (2013–2017) there were 152 customs rulings mentioning “substantial transformation” and China. But the five years since the trade war (2018–2022) have seen a whopping 1,039—or nearly a seven‐​fold increase in rulings on substantial transformation involving Chinese inputs.

Anecdotes and economic research show a similar trend. Earlier this year, for example, Bloomberg detailed how Indian manufacturers are in a “Catch‐​22 […] the more they try to ramp up production in competition with China, the more dependent they become on their northern neighbor for components and raw materials.” The Financial Times reported that Vietnam is facing a similar situation. A new study from a team of trade economists, meanwhile, finds that the non‐​China countries exporting more to the United States between 2017 and 2022 were also importing more from China in the same industries. Other studies have since revealed the same things, while also revealing that these new still‐​Chinese supply chains are more costly and opaque than their predecessors—further undermining US economic and security objectives.

The difficulty of truly removing China from the US market should not come as a surprise, given the sheer size of the economy and its globalized manufacturing sector. A recent National Bureau of Economic Research working paper by Drs. Richard Baldwin, Rebecca Freeman, and Angelos Theodorakopoulos finds that when taking into account “the Chinese inputs into all the inputs that American manufacturers buy from other foreign suppliers […] we see that US exposure to China is almost four times larger than it appears to be at face value.” It is worth noting the authors found that Taiwan, Korea, and Japan also have a much larger share of the supply chain than it initially appears.

Revoking PNTR would surely stop some finished Chinese products from entering the United States (at great expense to US consumers), but it would still allow a significant amount of Chinese content to enter the United States through alternative supply chains. That superficial reduction in “China” trade volumes might make for a few good headlines, but it would still leave the economies intertwined in ways that the tariffs were supposed to prevent.

Revoking PNTR for “National Security” Would Open Door to Protectionist Abuse

The committee’s report indicates that new tariffs applied in the wake of PNTR revocation might only apply to “PRC imports in sectors important for national and economic security.” But this possible limitation is cold comfort for anyone aware of the long, bipartisan history of abusing such “security” rationales.

Policymakers should be especially wary of revoking PNTR for a to‐​be‐​defined list of “national security”-related products. As recent bipartisan history shows, doing so would inevitably lead to a flood of new, unsubstantiated, and highly questionable claims that certain products are critical to national security—and thus to new and unjustified protectionism.

The Trump administration, for example, used a tortured definition of “national security”-related trade powers under Section 232 of the Trade Expansion Act of 1962 to restrict imports of commodity steel products with no national security nexus (e.g., rebar or semi‐​finished slab) from longstanding allies like Canada, the United Kingdom, or Japan. The Biden administration, meanwhile, has abused the Defense Production Act (DPA) to target products—such as baby formula, COVID-19 rapid tests, or heat pumps—that similarly have nothing to do with national security.

Other dubious examples abound. The Department of Justice once suggested in federal court that the vaguely‐​worded Section 232 would permit the executive branch to restrict peanut butter imports if the president unilaterally determined as much; the Trump administration investigated European and Asian cars under the same law; and it attempted to use the DPA to convert the film company Eastman Kodak, into a pharmaceutical company. Members of Congress have been even more brazen.

Given this long history, revoking PNTR and applying tariffs to only “security”-related products would inevitably lead to a flood of new, unsubstantiated, and highly questionable claims that certain products are critical to national security—and thus to new and unjustified protectionism. In such a case, the only winners from the resulting process will be Beltway lobbyists and their US clients, certainly not the American people.

Conclusion

As the last year has vividly demonstrated, the once‐​trendy belief that central planning, industrial policy, and protectionism would supercharge China’s economy past that of the United States has been revealed—like Japan before it—to be a naked emperor. China’s economy is today plagued by debt, low productivity, capital misallocation, and declining growth prospects. Misguided CCP crackdowns on private businesses, individuals, and information have spooked foreign investors. And external policies like the Belt & Road Initiative have struggled.

For these and other reasons, foreign direct investment in China turned negative during the third quarter of 2023 as more capital left the country than came in, and investment from G7 countries into China has fallen by half since 2014. Many independent analysts now believe that China’s economy may never be larger than its US counterpart, even with a billion more people. While the reasons for this shift are myriad and complex, it is nevertheless clear that Chinese industrial policy is not the existential threat that many in Washington claimed it was just a few short years ago.

Fortunately, the committee’s report is only recommendations. There are ideas the committee put forward that Congress should embrace (to be discussed in a forthcoming blog post), but revoking PNTR is not one of them. Doing so will weaken the US economy, fail to change Beijing’s legitimately concerning practices, won’t do much to prevent Chinese products from entering the US market, make the customs process more opaque, and will not enhance US national security.

Adam N. Michel

In 2017, Republicans cut and reformed taxes for individuals and businesses. The vast majority of the changes for individuals expire at the end of 2025, which will increase taxes in 2026 by about $400 billion a year. There is broad bipartisan support to extend about three‐​quarters of the tax cuts.

In addition to cutting individual and corporate tax rates, the 2017 reforms simplified taxpaying for millions of Americans, streamlined family tax benefits, and overhauled the international tax system, among many other reforms. Due in large part to the changes in business taxes, the law boosted economic growth, investment, and wages.

Before the end of 2025, lawmakers will need to address the pending tax increases and wrestle with their budgetary impact. Congress also has a number of other fiscal policy deadlines in 2025 and 2026, which include the reinstatement of the debt limit and possible sequestration (EPIC has a nice summary of upcoming fiscal policy deadlines here).

The following table provides a summary of current policy, the tax changes that will take effect automatically in 2026, and an abbreviated recommendation for how to address the changes. The table does not include the 2017 corporate income tax cut from 35 percent to 21 percent because the change was permanent. Changes that have already taken effect, such as research spending amortization and stricter limits on interest deductibility, are also excluded. If not addressed before 2025, these will also be important considerations for any tax package.

As Congress tackles tax reforms in 2025, it should balance broader budgetary constraints, additional tax simplification, and economic growth. Many of the provisions below interact with each other, and the reforms proposed will have implications for other parts of the tax code that should also be addressed. The table is intended to be a cheat sheet for the automatic tax changes at the end of 2025.

You can download a PDF version of the table here.

Scott Lincicome

Today we’ve published two new essays for Cato’s Defending Globalization project:

The “China Shock” Demystified: Its Origins, Effects, and Lessons for Today, by Scott Lincicome and Arjun Anand, explains that trade with China likely eliminated some US manufacturing jobs, but economists intensely debate the size of these losses—and few believe the China Shock justifies protectionism today.

Global Capital Flows and the Balanced Trade Myth, by Norbert Michel, discusses the US trade deficit and recent proposals to shrink it by taxing capital flows, and argues that such a policy is highly flawed on theoretical, empirical, and practical grounds.

This is the project’s last release for this year. We’ll be kicking off 2024 by hosting Dr. Ngozi Okonjo‐​Iweala, director‐​general of the World Trade Organization, at the Cato Institute on Friday, January 12, at 11 AM (EST). You can view more details and register to attend at this link. Seats are limited, so make sure you RSVP soon.

Make sure to check out the 22 other essays that have been published, as well as other multimedia features, on the main Defending Globalization project page.

Colin Grabow

In a new paper, economists Ryan Kellogg and Richard L. Sweeney examine what might happen if oil and petroleum products could be transported from the Gulf Coast to the East Coast without Jones Act shipping restrictions. Their answer: many more barrels of these energy supplies would be moved between the two coasts, resulting in efficiency gains and lowered prices. The economists estimate that East Coast consumers would experience benefits to the tune of $896 million per year while overall consumer surplus would rise by $769 million annually.

And these estimates, Kellogg and Sweeney add, are conservative.

As I noted last week, the Jones Act’s requirement that only US‐​built and US‐​flagged vessels transport goods within the United States introduces significant distortions in the domestic energy market. Such shipping is so costly that it is often more attractive to purchase oil from distant countries—where the Jones Act does not apply—than elsewhere in the United States.

Instead of transporting Gulf Coast crude to East Coast refineries, it’s often sent as far as China and South Korea on less expensive internationally flagged ships. The East Coast, in turn, mostly meets its crude needs from countries such as Nigeria and Saudi Arabia.

The same dynamic also applies to refined products such as motor gasoline. Instead of purchasing domestic supplies, the East Coast imports fuel from Europe and elsewhere while the Gulf Coast exports much of its output to Latin America.

Such inefficiencies mean higher costs. To estimate these costs, Kellogg and Sweeney examined oil and petroleum product price differences between the Gulf Coast and East Coast during 2018 and 2019. They then calculated likely domestic shipping prices in the Jones Act’s absence. Where the price difference exceeded the new shipping price without the Jones Act, they assumed the energy supplies would then be moved from the Gulf Coast to the East Coast.

The estimated result: fuel shipments would have grown from 253 million barrels per year to 371 million barrels—a nearly 47 percent increase. Such an increase would have been of sufficient magnitude to almost entirely replace East Coast imports of jet fuel and ultra‐​low sulfur diesel and completely replace imports of motor gasoline in the East Coast’s Lower Atlantic region. Significant amounts of light crude oil imports would have been displaced as well.

The efficiency gains by sourcing domestically instead of distant countries would translate into lower fuel prices ranging from 36 to 82 cents per barrel—depending on what is being moved—and consumer savings in the hundreds of millions of dollars.

Significantly, the authors note that their study likely underestimates the long‐​run effects of no longer applying the Jones Act to the movement of oil and petroleum products. They point out, for example, that investments in mid‐​Atlantic refineries could become more attractive as the facilities gain access to more competitively priced supplies of oil. It’s also worth highlighting that the study does not examine the Jones Act’s impact on the East Coast’s consumption of certain fuels such as reformulated motor gasoline, liquefied natural gas, and propane.

Furthermore, the study does not cover other parts of the United States whose energy costs are inflated by the Jones Act, such as the West Coast, Puerto Rico, Hawaii, and Alaska. Once these are accounted for there is strong reason to believe the Jones Act imposes costs to consumers that surpass $1 billion annually for energy supplies alone.

Colleen Hroncich

It looks like last month’s New York Times editorial on learning loss struck some nerves. Over the weekend, the paper ran a handful of letters in response, including my own. What stood out to me the most about the editorial was the call to double down on things that clearly haven’t been working.

Like many pieces about how students are struggling these days, the editors called for more money. But they first acknowledged Congress has sent public schools an additional $190 billion dollars since the pandemic. This aid came on top of the hundreds of billions already spent each year by public schools. In 2019–20, before most COVID-19 aid was distributed, public schools spent $870 billion, or $17,000 per pupil.

Even before the pandemic, public school performance was lackluster at best. But we’re supposed to believe that giving even more money to the same people in the same system will fix things now? It defies logic.

The funding issue isn’t even the biggest head‐​scratcher. The editorial says, “Researchers have long known that American students grow more alienated from school the longer they attend — and that they often fall off the school engagement cliff, at which point they no longer care.” But later it argues that “measures to increase the time that students spend in school— such as after‐​school programs and summer school — will be required to help the students who have fallen furthest behind.” Once again, the “solution” is more of the same, despite acknowledging it might exacerbate the problem.

The reality is that one size does not fit all where education is concerned. That’s why a government‐​mandated, top‐​down approach can’t fix the problems we see in education. Instead of just funding a school system, we need school choice programs where education dollars follow students to the learning environments that meet their individual needs.

Interestingly, this solution—funding students instead of just a system—will address many of the issues raised by the other responses to the Times’ editorial. One letter said students need “active, engaged, meaningful and socially interactive classrooms.” With school choice, teachers can create the classrooms of their dreams and parents can choose them for their children.

Other letters talked about tutoring programs and extra‐​curricular activities. An education savings account (ESA) that allows parents or guardians to direct education funding to a variety of educational options would enable families to take advantage of tutoring if that’s what their child needs. Some may even help fund certain extra‐​curricular activities.

One teacher responded to the editorial by chastising the paper for pushing larger classes with excellent teachers, while another said teachers need higher pay and students need more engaging curriculum. With school choice, teachers across the country are opening microschools and tutoring centers, and parents are flocking to them. I’ve talked to many teachers who are making more money in their new microschool, but they say the improved environment is an even bigger benefit.

Finally, one of the responses mentioned special education. Many school choice programs start out targeted just to students with special needs because they have the clearest need for individualized educational support. I’ve also talked to parents and teachers who have seen children move beyond their original diagnoses by finding the right learning environments.

As the saying goes, insanity is doing the same thing over and over and expecting a different outcome. Pouring more money into the system and making children spend more time there isn’t what’s needed. It is individual children who are struggling, so they need individual—not system-focused—help.

The good news is that policymakers are increasingly recognizing this. In 2023, seven states enacted new school choice programs and ten expanded existing programs. Before the pandemic, there were no states with universal choice and now there are ten. Happily, thirteen states have ESAs that allow parents to use funds on expenses beyond just private school tuition, which means they can customize their children’s educational experiences.

School choice isn’t a panacea for all our educational woes. But it’s a necessary first step. Equipping parents to get their children into a learning environment that works for them can help put them on a path to a brighter future. We’ve spent a lot of time and money on the system‐​focused approach. Let’s try focusing on the kids now.

Travis Fisher and Jennifer J. Schulp

Proposals to mandate transparency and accountability in corporate environmental practices are becoming law. So far, the most aggressive actions have come from the European Union (EU) and the state of California—both have ordered large companies (public and private) to begin disclosing all greenhouse gas (GHG) emissions. The EU’s program is already in effect, with reports due in 2025. The California law requires companies to report Scope 1 and 2 emissions in 2026 and Scope 3 emissions in 2027.

The US federal government is poised to take similar steps.

The Securities and Exchange Commission (SEC) proposed a rule on the “Enhancement and Standardization of Climate‐​Related Disclosures for Investors” in March 2022, requiring disclosure of Scope 1 and 2 emissions by all public companies and Scope 3 emissions by many of those companies. (The final rule remains pending.) A related measure under federal acquisition regulations would require comprehensive GHG reporting for major federal contractors.

Disclosure of Scope 3 emissions encompasses all indirect emissions in a company’s value chain. “All” is the operative word. Emissions come in three categories—Scope 1, 2, and 3. Mandating a comprehensive accounting scheme for Scope 3 emissions (the catch‐​all category for all emissions a company doesn’t directly control) would balloon compliance costs, pry into Americans’ privacy, and grant expansive authority to the federal government.

What Are Scope 1, 2, and 3 GHG Emissions?

Scope 1 emissions come from anything directly owned or controlled by the company in question. For example, the GHG emissions from a boiler at a factory would be included in the factory owner’s Scope 1 emissions. Scope 1 emissions tend to be easy to count.

The Environmental Protection Agency (EPA) describes Scope 2 emissions as the “indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling.” Like Scope 1, Scope 2 emissions are not difficult to estimate. If a company knows its overall electricity consumption and the average GHG intensity of the electricity on the grid, it can estimate Scope 2 emissions. (Note: marginal or time‐​of‐​day GHG intensity can add a wrinkle for some companies.)

Scope 3 is everything else. EPA guidance says Scope 3 emissions “are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain.” These emissions can be upstream and downstream. Scope 3 emissions for an automobile manufacturer, for example, would include the GHG emissions associated with all raw materials purchased to manufacture a vehicle (upstream) as well as all emissions associated with the use of the vehicle over its lifetime (downstream).

According to the new reporting law in California, titled the “Climate Corporate Data Accountability Act,” Scope 3 emissions “may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.” EPA states that Scope 3 emissions “often represent the majority of an organization’s total” emissions. Hence, while Scope 3 emissions are probably large, they are very difficult to quantify (and, especially in the case of future downstream emissions, impossible to know with certainty).

The Cost of Mandatory Scope 3 Disclosure Would Make a Bureaucrat Blush

Counting and reporting all Scope 3 emissions would be an onerous and costly process. As Jennifer wrote regarding the SEC’s proposal last year:

The SEC estimates that its new rules would raise the annual cost of compliance from $3.8 billion to $10.2 billion. And the SEC’s estimates of $420,000 to $530,000 in annual expenses, including the services of climate modelers and emissions accountants, places a substantial burden on companies, particularly smaller ones.

And that’s likely an underestimation, with some estimating the SEC’s proposal to quadruple the cost of a company’s primary securities filings.

The EU- and California‐​type Scope 3 mandates apply directly to large companies, but there are countless small companies upstream and downstream of reporting companies that would be indirectly impacted. Specifically, mandating Scope 3 reporting would, of course, increase compliance costs at large companies, but it would also raise accounting and reporting costs for all the mom‐​and‐​pop businesses in the company’s “value chain.” The type of impact is the same regardless of whether the regulation’s target is a publicly traded company or a company of a certain size.

By their very nature, Scope 3 emissions disclosures are incredibly burdensome. Wearing a utilitarian hat for a moment, the marginal benefit of a regulation should exceed its marginal cost. And each regulator has responsibility for a different type of benefit—securities regulators are focused on investors’ needs, whereas environmental regulators have a different mandate. At some level of GHG emissions disclosure, though, the cost of obtaining an additional unit of transparency surely exceeds the benefit.

In the securities context, are climate‐​risk disclosures really worth making securities disclosures four times more costly? On the environmental side, how much more useful is additional GHG disclosure when the EPA estimates that 85–90% of GHG emissions are already covered by existing reporting? In other words, even if the juice is worth the squeeze when it comes to Scope 1 and 2 emissions for many companies, Scope 3 could be a different type of fruit altogether.

However, any discussion of Scope 3 mandates should go beyond the most visible costs and include the “unseen” costs of heavy‐​handed disclosure rules. Economists call these opportunity costs, and they are just as important as the costs that are easy to see. First, obsessing over GHGs would create a distracted federal government and a less effective private sector. Under a mandatory Scope 3 emissions regime, it is very likely that too many resources would go to the GHG accounting effort while too few would go to things people care about more than GHGs.

Second, even within a typical “ESG” framework, GHGs are not the only environmental issue investors and consumers may care about. Other concerns in a company’s value chain, such as toxic pollutants, water usage, and effects on biodiversity, are also important. In fact, polling data on consumers’ willingness to pay to address climate change tends to reveal modest amounts. The Associated Press reported, “To combat climate change, 57 percent of Americans are willing to pay a $1 monthly fee; 23 percent are willing to pay a monthly fee of $40.” These low figures could help explain why voluntary reporting schemes are not satisfactory to regulators—left to their own devices, people aren’t willing to spend much to address climate change.

Privacy and Other Rights Issues Abound

The government, at its best, is a force for preserving individual liberty and economic freedom. Voluntary initiatives, consumer choices, and market forces can drive positive change without the need for government mandates that may infringe upon personal and economic freedoms.

The collection of data related to a company’s supply chain and business relationships may necessitate the sharing of sensitive and proprietary information. Not only may some of that be required to be turned over to the government as a part of the reporting process, or for the government to audit the company’s reports, but the company itself may have to undertake intrusive inquiries to make the report in the first place. This is where Scope 3 accounting gets creepy.

For example:

To calculate the emissions from their employees’ commutes, companies may need to collect personal information from employees about the methods by which they commute, how often, and maybe even the time of day.
To calculate emissions produced from their supply chain, companies will be required to gather information from their suppliers about their emissions. Calculating or verifying those figures may require suppliers to provide confidential or proprietary information about their business practices.
To calculate emissions from the usage of a company’s products, companies will have to collect data on what their customers do with the product, including how they dispose of it. Some of this data collection may be intrusive (and the need to collect more comprehensive data than data collected for market research may increase the intrusion).

All of this is at odds with the rights of individuals and businesses to protect their privacy and trade secrets without unwarranted government interference. But privacy isn’t the only right in play.

Where the government compels a company to make disclosures, the First Amendment extends to protect from “not only expressions of value, opinion, or endorsement, but equally to statements of fact the speaker would rather avoid.” Disclosures about emissions are politically charged (and, at least in the case of the SEC, extend far beyond the type of investor‐​relevant information that the agency is empowered to require). By forcing companies to condemn themselves, mandated emissions disclosures promote one side in a policy debate and violate the First Amendment’s requirement of viewpoint neutrality.

Allow Scope 3 Disclosure to Proceed Voluntarily

Forcing companies to account for Scope 3 emissions would inflate compliance costs, invade people’s privacy, and expand the bounds of an overzealous government. And if the SEC requires the disclosure of GHG emissions, there’s little to stop it from mandating the disclosure of any other information.

Scope 3 emissions disclosures, in particular, place the burden and responsibility for emissions on those who are not clearly responsible. Holding a company to account for the use of its products seems to make little sense. Should a blue jean manufacturer really be held responsible for the carbon emissions based on its customers’ entirely voluntary decisions about how often to wash those jeans, at what temperature and time of day, etc.?

Rather than relying on government mandates, businesses should have the freedom to respond to market demand for sustainability and transparency, which can drive innovation and responsible practices. If there is a strong demand for accurate climate disclosures, nothing is stopping private companies or third parties from supplying them. Indeed, 96 percent of the companies in the S&P 500 provided some form of sustainability reporting in 2022.

Policymakers should let markets work. The American people—investors and consumers alike—should be free to drive the disclosure of all types of environmental information by the companies they invest in or support with their purchases. Government mandates distort this process and open the door to further intrusion into our lives by busybody officials.

Alex Nowrasteh

The immigration system of the United States favors family reunification even in the so‐​called employment‐​based (EB) green card categories. Under current interpretations of US immigration law, family members of immigrant workers must use EB green cards. The American system isn’t unusual as Japan, Spain, and Ireland are the only OECD countries with more immigrants who enter on visa categories as workers than immigrants who enter on visas for family members.

Still, the difference is more significant in the United States than in other countries. Instead of a separate green card category for the spouses and children of workers, those family members get a green card that would otherwise have gone to a skilled worker. This should change without reducing family‐​based immigration.

In 2022, 55 percent of EB green cards went to the family members of workers (Figure 1). The workers themselves received the other 45 percent. Those percentages are similar to 2020 and 2021. Some of those family members who received EB green cards are workers, and many of them are highly skilled since skilled people tend to marry each other, so this isn’t a neat de facto division.

Another thing to note is that Congress capped the EB green card category at 140,000 per year, but the federal government issued 270,284 in 2022. The government was able to issue more EB green cards because immigration law allows unused green cards in other categories to be used for immigrants who have applied for EBs. Unused family‐​based green cards from 2021 were reallocated to adjust the statuses of EB green card applicants already in the United States on other visas. This process will reallocate almost 60,000 additional green cards from the family‐​based to the EB green card categories in 2023.

EB green cards are in five categories separated by the type of worker or investor and their family members. EB‑1 green cards are for workers of extraordinary ability, outstanding professors and researchers, and some multinational firm managers and executives. EB‑2 green cards are for professional workers with advanced degrees and those with exceptional ability in the sciences, arts, or business. EB‑3 green cards are for skilled worker, professionals, or other workers. EB‑4 is for religious workers, certain broadcasters, some foreign employees of the U.S. government, and others. EB‑5 is for a narrow class of investors. All EB categories also include their family members by convention, not according to statute or regulation.

Family‐​based immigration is important for social, economic, and ethical reasons. To ensure that family‐​based immigration is not hindered by the numerical cap of EB green cards, Congress should either exempt family members from the cap or create a new category for them. This will prevent the reduction of workers by the same number of family members. By doing so, an additional 147,017 immigrant workers could have earned a green card in 2022, which would have resulted in a 120 percent increase without adjusting the cap number for that green card category.

Eighty‐​two percent of those who received an EB green card in 2022, or 221,373, were already legally living in the United States (Figure 2). That’s down from 2021, when 92 percent were adjustments of status: those who are already legally present and have received their green cards can adjust their immigration status from another type of visa, like an H‑1B or an F visa, to an EB green card.

Exempting those adjustments of status from the EB green card cap would boost the number of highly skilled workers who could have entered from abroad by a factor of 4.5, from a mere 48,905 up to the statutory cap. Figure 3 gives more detail.

Exempting adjustment of status from the EB green card cap would increase the number of green cards for the EB‑1 and EB‑2 categories the most (Figure 4). In 2022, 89 percent of immigrants who received an EB‑1 and 95 percent of those who received an EB‑2 were adjustments of status. Exempting adjustments of status from the cap would have increased the number in these two categories by 151,219. Workers on the EB‑1 and the EB‑2 are the most skilled, so increasing the numbers available would have the biggest positive economic effect while increasing the number of green cards in other categories through the trickle‐​down.

Going forward, exempting adjustments of status from the EB green card cap would also deplete the 1.8 million green card backlog imposed by the per‐​country caps. The backlog would fall at the speed of administrative processing unhindered by arbitrary annual caps. Such a reform would especially benefit Indian workers on the H‑1B visa by shortening their wait times without increasing the wait time for immigrants from other countries.

Exempting adjustments of status, rather than tinkering with the numerical cap or getting rid of the per‐​country caps, is the best policy for two reasons. First, the green card system would be more open and flexible. Second, it would avoid the debate over which arbitrary number should be the new EB green card cap. Congress should eliminate the per‐​country cap, but exempting adjustments of status would achieve the same goal of reducing wait times for Indian immigrants without increasing them for others.

Here are some other exemption options for increasing the number of EB green cards issued annually without raising the overall numerical cap:

Workers should be exempted from the EB green card cap if they have a higher level of education, like a graduate degree or a PhD.
Workers should be exempted from the cap if they have a graduate degree or a PhD in particular fields, such as science, technology, engineering, mathematics, or medicine. The House version of the America COMPETES Act did this in 2022.
Some workers who adjust their status should be exempted from the numerical cap in the way the H‑1B visa exempts 20,000 graduates of American universities from that visa’s numerical cap. Exempting all workers who earned their degrees at US universities is a good start.
Workers who have wage offers in the top 10 percent of wages in their occupation, or in the top 5 percent of wages nationally, should be exempted from the cap. These workers are extremely productive, there’s no sense in making them wait longer.
Workers who work in occupations with unusually low unemployment, say below half the national average, should be exempted from the cap.
Immigrants who adjust their status in the EB‑1 and EB‑2 categories should be exempted from the numerical cap.
Workers should be exempted if they show five or more years of legal employment in the United States prior to obtaining their green card.
Workers should be exempted from the cap if they have waited for five years and are otherwise eligible for a green card.
Anybody who has legally resided in the United States for a decade or more should be exempted from the cap. This would benefit many workers who started as students and then became temporary students, as well as the legal dreamers who grew up as dependents of temporary workers but who lost their status at age 21.
Workers should be exempted based on the occupation they intend to enter. This is a problem because it requires the government to choose which occupations are deserving, but the benefits will outweigh the costs so long as it leads to a general increase in the number of skilled immigrant workers without decreasing them elsewhere.
Workers should be exempted from the cap if they work in a non‐​profit research institution or a university, similar to how they are exempted from the H‑1B visa cap.
Workers should be exempted for other national security or geopolitical reasons if they are from countries that the US government believes are a national security threat to the United States. For instance, exempting skilled workers from China, Russia, or Iran would reduce the number of skilled workers who could work in their defense industries. 
The United States should also exempt all EB green cards issued to Canadians and Mexicans because of the deep economic, social, and political ties between those countries.
Workers should be exempted from the cap if they receive Schedule A exemption to the labor certification because they work in shortage occupations, which are currently just registered nurses and physical therapists as well as those with exceptional ability in science or the arts. The Department of Labor is currently considering changing that to include other occupations.
Workers who meet the EB‑2 National Interest Waiver threshold should be exempted from the cap. These are for individuals whom the government believes are working on a project of national importance.

Colleen Hroncich

“I was a homeschool mom, you know, just trying to make community for my kids.” This sums up what motivated Yalonda Chandler to start what eventually became Black Homeschoolers of Birmingham. Yalonda has what she calls two sets of kids: an older son and daughter who are 22 and 23, and a younger son and daughter who are 11 and 13. Both sets are eighteen months apart, so she says, “I was crazy twice.”

Yalonda first started homeschooling when her oldest son was entering sixth grade. She was a middle school classroom teacher at the time and could tell her son wasn’t academically or socially ready for sixth grade. “His light bulb didn’t really come on until mid‐​year,” she says. Since she was home with a newborn and toddler, she decided to try something different that year and keep him home.

For math, she got a workbook and used Khan Academy videos to teach the various concepts. But as an English teacher, she was able to get really creative to get him engaged. She says he was a reluctant reader, but that was when the Percy Jackson movie first came out. She told him they could watch the movie first but then he had to read the book. She created a whole curriculum around Percy Jackson—tied in math, mythology, and all sorts of things because he was so interested in it.

“That lasted us for a year,” she recalls. “And then I brought my daughter home in the second year of homeschooling. I knew just enough then to make us miserable, because I thought, ‘oh, I’ve got two now, so maybe I need to switch things up and do something different.’ I tried to replicate my classroom and that just didn’t work. I made us miserable for about six months or so, and then the kids were like ‘Mom, this isn’t working.’ And I said, ‘I was waiting for you to say it because it wasn’t working for me either.’ And then we just kind of switched gears again.”

Yalonda says they homeschooled until her older daughter was in eleventh and her older son was in tenth grade. They had moved to Alabama from Virginia and were struggling to find a new homeschool community. In Alabama, you have to homeschool through a church or private cover school or with a tutor. Yalonda tried joining a church school, but it was 40 minutes away and got to be too much. Midway through the year, they switched to the local public school. Yalonda says her kids “stuck out like a sore thumb” because they were more knowledgeable and respectful than the other kids and more comfortable talking to adults and participating in class.

During this time, Yalonda says she started a business that was starting to take off so she enrolled her younger kids in school. “I felt that tug of wanting to homeschool, but I was so into the business and was really enjoying it, to be honest with you. My youngest son had a wonderful kindergarten experience. He is considered twice exceptional—he is on the spectrum and identified as gifted as well. So when we first started kindergarten, we had conversations with the principal about what we were hoping his education would look like,” she says.

The school made some concessions to keep him from being bored. But in first grade, everything went downhill. His teacher was about to retire after thirty years. Not only did she not offer Yalonda’s son enrichment, but she was actually mean to him. After several problems, things got so bad that Yalonda pulled him and her daughter who was in second grade from the school and started homeschooling them.

They made it through the first year on their own, but Yalonda knew they needed more. “I was just like I’ve got these extroverted kids and they’re going to drive me crazy together home by themselves. They’re such different personalities from my older two, who are kind of laid back. They needed friends, but they were OK with being home that first year that we moved. So I needed my kids to have friends where we can get out of the house and meet other homeschoolers.”

Yalonda knew there were other homeschoolers around, so she posted on a local Facebook group trying to organize a meetup. Coordinating schedules was tricky, so she just said that she would be at the park at a certain time with cupcakes. Seven families showed up and had a great time. She created a messenger thread and labeled it “Birmingham area homeschool moms” to keep track of it. Within a couple of months, they had 50 or 60 people on the thread because moms started inviting their friends who were homeschooling or thinking about homeschooling. In 2019, Yalonda created a Facebook group, which she says “spread like wildfire.”

After COVID-19 disrupted education, Yalonda’s group began to focus more on specifically serving black and brown families and thus became “Black Homeschoolers of Birmingham.” According to their website, “Our focus and purpose has now evolved to be a “landing pad” that centers the educational development of Black and Brown homeschoolers.”

In 2021, Yalonda decided to host an informational summit that almost no one attended. “At that point, we really didn’t know what we were doing,” she admits. “At the end of 2021, there was a reporter who was doing a story on homeschooling. I reached out to her and said I’d love to chat about it, and she asked if I had any friends. And I was like, I’ve got this whole group of moms who would love to talk to you about it. The story was picked up nationally by NPR.” The group exploded after that and even got connected with VELA Education Fund just in time for them to apply for a grant, which they received.

They decided to try another Homeschool Summit. Yalonda says everything that could go wrong did go wrong—including the Wi‐​Fi and air conditioning both going out. In Alabama. In August. But people were raving about the event. “We were in this hot church and people were fanning themselves. And nobody left,” she recalls. “Everyone was talking about how great it was. And I thought, were we not in the same room together? But something amazing was happening. We went from like 60 members to almost 200 in two months.”

That was around the same time that many parents were deciding whether to send their kids back to schools after the pandemic. “Black families did not return to the classroom the way that they were expected to,” says Yalonda. “Every day the phone was just ringing nonstop with families who were asking ‘What do we do? Where do we go? What is this homeschooling? I want to try it, but I don’t know how to do it.’’ Yalonda started a consulting business where she provides homeschool coaching and a church cover school called Legacy Builders Academy.

Black Homeschoolers of Birmingham doesn’t offer homeschool classes or academic support, but those are available through Legacy Builders Academy, which is becoming a microschool. BHOB has “a standard set calendar and we do a field trip once a month,” says Yalonda. “We have a teen volunteer event every month and a teen hang out every month. Our biggest attendance events are our park days. Depending on what’s going on in our community, we also have community‐​sponsored events.”

Yalonda’s advice to other moms is to build the community that they want. “It doesn’t have to be something super formal,” she says. “I don’t like saying ‘just,’ but I was ‘just’ a homeschool mom. I never envisioned being executive director of a nonprofit and owning a microschool. I just wanted community for my kids. So if you don’t have it in your community, don’t be afraid to build what you need. I always tell my kids that Black Homeschoolers of Birmingham was created for them. I don’t do it for everyone else. I started with the mission of getting them community, and it’s just a plus that everyone else is benefitting.”