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Johan Norberg

Today is Earth Day, an important moment to reflect on our broader responsibilities to the world. How are we really treating the planet and each other?

Very well, thank you.

At least relative to every other period in history and compared to less free societies. I make this case in a new Cato video based on my book The Capitalist Manifesto.

Despite all the horrors of the world, this is the era in history when we have been most successful in increasing human opportunity. In the past 20 years, global extreme poverty was reduced by more than 130,000 people every day and annual child mortality was reduced by more than four million lives. At the same time, we have solved many environmental problems and the richest and freest countries are also reducing their CO2 emission.

Free market capitalism creates growth and innovation because it allows everyone to look for the places where the potential for it might be hiding. And since it relies on the vantage points and creativity of millions instead of a few people at the top, it is our best chance to find ways of adapting to and innovating our way out of unexpected crises, whether it is a pandemic, a war‐​induced shortage or an environmental threat. As I explain in the video, this is why government intervention has such a long and disappointing track record.

So take this day to reflect on the achievements of this remarkable system of limited government and free markets—the best system on earth.

Walter Olson

I’ve got a new piece in the Unpopulist debunking claims that have lately made the rounds that noncitizens vote in large numbers in federal elections even though it is unlawful in every state for them to do so.

I cite audits of the topic undertaken in states like Nevada, Georgia, and North Carolina; an extensive 2017 survey of election administrators asking about problems observed in their jurisdictions; the general failure of both law enforcement and private watchdog groups to turn up more than incidental numbers of such voters; the failure of statistical tests of voting patterns to yield results consistent with widespread noncitizen voting; the outcomes of state screening and database matching; and the incentives at work on both sides (potential lawbreakers, and prosecutors and political actors with the means to document fraud). I write:

The claim that illegal voting is swaying American elections is nothing if not sensational. Those who levy sensational charges should bear the burden of proving them. But they haven’t. It’s just assertion after assertion, with no refutation of the considerable evidence to the contrary.

Over the past four years, through a long succession of court cases, audits, and studies, the props have been kicked out from under #StopTheSteal contention one after another: that voting machine tabulations are being hacked, that hordes of dead or nonexistent persons or ineligible felons vote, and on and on. Now we’re on to a claim of massive noncitizen voting that cleverly dovetails with public anxiety over immigration generally.

It’s worth distinguishing claims of massive current fraud from two separate and less implausible claims that also circulate. One is that immigration patterns may affect electoral politics over the long term in an entirely legal way because some share of immigrants eventually achieve naturalization, and because children born here to immigrants eventually grow up into voters. More on this set of issues from Alex Nowrasteh and co‐​authors here and here.

Another claim is that because the US Constitution mandates that congressional representation be apportioned according to “the whole number of persons in each state,” immigrant‐​heavy districts can enjoy representation disproportionate to their number of citizen residents. But as colleague David Bier has pointed out, under current conditions, in which many arrivals head for Republican states and areas, this appears to make little partisan difference. One estimate of the effect of removing unauthorized immigrants from apportionment, should the Constitution be changed to make that happen, would be to reshuffle a handful of seats between states, with approximately no impact on the balance between red and blue states.

I conclude:

Bogus claims of widespread voter fraud, even when they do not stoke hatred and fear of the foreign‐​born, are grossly irresponsible. They exacerbate polarization and malign honest election administrators. Most of all, they undermine public confidence in our election system. The more people believe elections are rigged, the more they are likely to turn their discontents in a direction other than electoral politics. Some will go the passive route of resignation, withdrawing from civic involvements, making themselves the perfect subjects for strongman rule. Others will turn to militia activity or outright violence.

Either way, the consequences for the American experiment in liberal democratic self‐​rule will be unfortunate.

Read the whole thing here.

Marc Joffe

The drama unfolding in Dolton, Illinois may seem irrelevant to those of us who are not among the 20,621 residents of the village immediately south of Chicago. But the controversy around Dolton’s self‐​styled “super mayor” Tiffany Henyard offers lessons about local government accountability that resonate nationwide.

The problems in Dolton are more likely to occur in states that have an excessive number of governments and poor oversight. But Dolton’s story also illustrates the potential for citizen journalists and engaged residents to push back against corruption and misgovernance.

Voters elected Henyard mayor of Dolton despite media reports that she rented a house to a Section 8 tenant that was uninhabitable due to mold. Since taking office she has been accused of financial improprieties, using the police to harass local businesses, and using her position to retaliate against residents and employees. A majority of voters supported a recall effort against Henyard, but the election was struck down by state courts.

Over the last several months, Henyard has sparred with four of the six town trustees, who recently hired former Chicago Mayor Lori Lightfoot to investigate Henyard’s alleged improprieties. Last week, the FBI delivered multiple subpoenas to Dolton’s village hall indicating the existence of a federal investigation.

Under Henyard’s leadership, Dolton has fallen two years behind in producing audited financial statements and is failing to provide periodic financial updates to trustees. Many vendors have complained about non‐​payment, and a leasing company threatened to repossess some of the town’s police vehicles earlier this year.

This situation developed in an environment of proliferating local governments with limited state oversight. Illinois has more local governments than any other state. The existence of more government entities obliges residents to vote for more elected officials and to monitor their actions. In the case of Dolton, residents pay taxes to the village, as well as a park district, a public library district, a water reclamation district, a forest preserve district, a mosquito abatement district, multiple school districts, a community college district, Thornton Township, and Cook County. That is a lot of local government entities for taxpayers to both fund and track, if they wish to demand accountability.

Tiffany Henyard holds elected office in both the village and township, allowing her to collect two salaries.

Robust state oversight of local governments could substitute for citizen involvement but that does not seem to be available in Illinois. As I’ve discussed previously, North Carolina established a powerful Local Government Commission that oversees municipal debt, intervenes in distress situations, and can even dissolve poorly functioning municipalities. Ohio also has very active local oversight through its State Auditor’s office.

Illinois has a mechanism for local government intervention, but it can only be triggered by a vote of the municipality’s governing body, and, for smaller communities like Dolton, a two‐​thirds majority of officials must ask for state involvement.

Unless and until Illinois consolidates local governments and/​or empowers a state agency to monitor and proactively intervene in distressed entities, it will be up to citizens and the media to hold local officials accountable. The collapse of local newspapers in the internet era appears to bode poorly for this remedy, but in Dolton’s case we have seen an encouraging trend.

In addition to frequent coverage from Chicago newspapers and broadcast media, several YouTube creators have been focusing on the situation in Dolton. “Hannibal is Hungry,” a YouTuber “uncovering scams and frauds in the realms of money, media, and society” has devoted multiple live streams to the issue providing commentary, interviews, and coverage of village board meetings. Nate the Lawyer, who focuses on “Comics, Pop Culture, Life, and Law” has also devoted multiple extended videos to events in Dolton, using his legal background to provide informed commentary. Other channels devoting multiple videos to Dolton include Actual Justice Warrior and Pink Book Lessons.

The ability for a single individual to use inexpensive social media platforms to bring attention to local political issues is proving to be a game changer in Dolton. These YouTubers can earn income from advertising on their videos and from interested viewers who can provide support on Patreon and through super chats, real‐​time comments viewers make during a livestream accompanied by donations.

Livestreams of Dolton trustee meetings have shown that several residents are well‐​informed, articulate, and passionate about the village’s financial crisis. Perhaps because they are aware that hundreds or thousands of social media consumers will see their interventions, these active citizens are taking full advantage of opportunities to provide public comment at each meeting.

It remains to be seen whether the Dolton formula can work elsewhere. Henyard is an especially flamboyant and photogenic politician, begging the question of whether YouTubers can generate audience interest for more bland instances of political malpractice. If they can, citizen journalists on YouTube and other platforms may be able to replace local newspapers, providing citizens with a new source of government accountability.

Daniel Raisbeck

In June of 2022, a slight majority of Colombian voters elected Gustavo Petro as president. To say that they ignored numerous warning signs would be an understatement.

Petro began his public life in the late 1970’s as a member of the M‑19, the bloodthirsty urban guerrilla group that—among its many acts of terrorism— stormed the Ministry of Justice in November of 1985, held its magistrates and hundreds of employees as hostages, and ultimately caused the violent death of 111 people.

In 1994, a mere two years after the M‑19’s final official amnesty, which coincided broadly with the introduction of a new constitution in 1991, Petro—then a congressman—invited Hugo Chávez to Bogota, where he hosted him for over a week. At the time, Chávez himself had been recently amnestied, having been sentenced for leading a failed and bloody coup attempt in Caracas in 1992.

Reflecting on his time with Chávez in the Colombian capital, Petro said: “We found an ideological understanding in the fight against corruption and in the Bolivarian discourse.”

Chávez became president of Venezuela in 1999. By 2003, Petro was boasting to a Colombian magazine, which described him as “one of Chávez’s closest advisors on the new model being implemented in Venezuela,” about the country’s change of tack. “We are in a transitional stage,” Petro said, “from a neoliberal model to one that I would call ‘neo‐​populism.’”

Eventually, under Chávez’s price and currency controls, food and basic goods in Venezuela became scarce. So too did Petro’s public statements about the Chavista model. “Neo‐​populism,” it turned out, had been a euphemism for old‐​fashioned socialism. And Petro tried to distance himself from the consequences that he had helped bring about. While running for president in March of 2010, he tweeted:

“We are socialists of the 21st century and Chávez is a 20th century socialist. I don’t expropriate the workers’ property.”

But Petro later deleted said tweet.

When Chávez died in 2013, Petro, who was then the mayor of Bogota, attended his funeral in Caracas. At the time, Petro claimed that Chávez had been “a great Latin American leader.” On Twitter, he posted a photograph of a supermarket shelf full of goods, adding a denial that food was scarce in Venezuela, as it had already been for some time.

During his stay in Caracas, Petro spoke to Telesur, Venezuela’s state‐​run media agency, of his initial encounter with Chávez. According to the Bogota mayoralty’s website, Petro said that, in 1994, he and Chávez had sworn to carry out “a Bolivarian integration” of Latin America. “We pledged to fight for that goal,” he said.

Nonetheless, in the run‐​up to the 2018 presidential election, which Petro lost, he once again tried to downplay his close ties to Chavismo. Petro continually claimed that, since he opposed all future oil exploration in Colombia, his economic policies had nothing to do with Chávez’s model for Venezuela, which was oil‐​dependent. 

Petro’s radical, even apocalyptic, environmentalist rhetoric helped him to win the 2022 election. His not too subtle pivot from traditional statist to climate change alarmist went largely unopposed. Petro’s political rivals, the news media, and center‐​left opinion leaders meekly allowed him to change the axis of political debate.

It fell to a foreign journalist, Mexico’s Jorge Ramos, to provide the only memorable exception. In a 2018 CNN interview, Ramos asked Petro whether he thought that Chávez had been a dictator. After eluding the question for around 40 seconds, Petro said: “I think that international politics is sharply divided by the issue of climate change.” The following exchange ensued:

Ramos: “No, no, no. Was Hugo Chávez a dictator or not, Mr. Petro? […] We can talk afterwards about climate change if you would like.”

Petro: “Hugo Chávez was elected by the people several times.”

Ramos: “Do you think that Chávez was a dictator?”

Petro: “I think that there was no doubt about his elections according to the information I have.”

Ramos: “But you have not answered me whether Chávez was a dictator or not. [Ramos proceeds to quote Petro’s 2013 tweet praising Chávez as a great leader] A great Latin American leader? He had political prisoners, caused many deaths, censored and controlled all news media. Is that a great political leader?”

Petro: “I think that Chávez died and, since his death, a part of Venezuela admires him and another part does not admire him.”

Ramos: “But you, Mr. Petro […] Many Colombians fear that you will do the same.”

Petro: “I cannot do the same for two fundamental reasons. First, because what I propose for Colombia is to separate the economy from oil and coal….”

Ramos: “But you have not wanted to answer me. It is very simple. For you, was Chávez a dictator or not?”

Petro: “I think that he was elected by the people.”

Petro eventually admitted—with an evident lack of conviction in his body language—that the Venezuelan regime had become authoritarian, but only under Chávez’s successor, Nicolás Maduro, and that Cuba’s statist economy harmed democracy. But Ramos’s pushback had exposed his rhetorical tactic: to claim that Venezuela’s economic and humanitarian collapse was not due to Chávez’s socialist policies, which Petro had celebrated and promoted, but rather to the primacy of the country’s oil industry.

Hence, Petro claimed that his center‐​right opponents, who did not intend to shut down oil exploration and production in the country, were the true proponents of Chavismo in Colombia. Not Petro himself, the one Colombian politician who had helped to bolster Chávez’s power in Venezuela.

Petro got away with his sophistry. Also with his claim that, despite earlier statements about the supposed need to change the constitution, he did not plan to summon a constitutional assembly if elected, as Chávez had done in Venezuela in 1999. Thus, leading politicians and opinion leaders of the center‐​left allowed themselves to be convinced that Petro was a democrat and, as such, represented no menace to Colombia’s republican institutions. In other words, Petro was no Chávez. Nor was Colombia, South America’s longest‐​running democratic republic, as institutionally weak as Venezuela had been when Chávez took over.

A pillar of this theory was the formidable opposition that Petro could face from Congress, where Petro’s party did not hold a majority. But this overlooked the longstanding Colombian tradition of a pro‐​government Congress, whose members are always susceptible to the patronage of a powerful presidency.

Indeed, as Petro was preparing for his inauguration, he formed a coalition not only with the center‐​left Green Party. It also came to include the Liberal Party, a member of the Socialist International since the 1990’s, the nominally center‐​right Party of National Unity, and even the Conservative Party. The formidable opposition theory collapsed even before Petro was sworn into office.

By November of 2022, Petro’s coalition had already approved a tax law that raised rates on formal sector employees and businesses, reinstated a national wealth tax, introduced a sugar tax (which falls most heavily upon the poorest in society), and forbade mining companies from deducting royalty payments from their income taxes. Petro’s “tax reform” really meant hefty tax increases (although this was already the norm in Colombia well before Petro came to power).

More recently Petro has garnered support from the Liberal Party and from Conservative senators for his sabotage of the private pension system. Petro aims to end workers’ ability to choose between the private and public pension alternatives for their mandatory retirement savings; the private system consists of individual retirement accounts, whereas the public version is an unsustainable, pay‐​as‐​you‐​go system that is subsidized through the national budget. Workers in the formal sector are currently free to choose between both models. Petro seeks to force all workers into the state‐​run system, leaving private funds as a voluntary alternative for those earning over three times the minimum wage. 

Liberal and Conservative politicians are supporting Petro’s statist pension scheme despite their parties’ official exit from the government. Petro’s original, “National Agreement” government only lasted until the first half of of 2023, when it dawned on the political class that Petro truly intended—as he had said all along— to uproot private sector involvement in the healthcare sector.

Last March, Congress refused to approve Petro’s bid to expand state control of the healthcare system at the expense of private health insurance companies. Petro’s government responded by taking control of the administration of one of the largest private insurance companies, which manages the health funds of 5.7 million members. Petro also announced that it was time to summon an extralegal constitutional assembly since Congress could not “rise to the challenge” of implementing his agenda in full.

When it came to healthcare, the opposition finally became formidable. And Petro moved to make it futile. Analysts had failed to consider that, when push came to shove, Petro did not intend to respect constitutional protocols.

While the current constitution allows the creation of a new constitutional assembly, it requires both chambers of Congress to vote in favor by a majority, followed by the approval of the Constitutional Court and a majority of voters in a plebiscite, after which an election to choose the assembly members must take place. But Petro says that none of these requirements are necessary to change the constitution.

Petro argues that the “constituted” power that emerged in 1991 has been corrupted, while the “constituent” power is “the people,” which he claims to represent. “The constituent power is not summoned,” he said in an interview. “It is the people, which summons itself to decide the country’s fundamental questions. That is the constituent power.”

Petro has hinted that “the people” will express their support for a new constitution through a series of cabildos or town hall meetings that the government will summon across the country.

He thus claims that he can bypass Congress, the courts, and the need for a legal plebiscite to usher in a new constitution. Its pillars, Petro says, should include “the struggle against climate change” and “the decarbonization of the economy.” This implies a constitutional mandate for Petro’s ongoing war against Colombia’s hydrocarbon industry. Petro’s constitution also would include “a monetary policy that prioritizes employment and production.” That is, a takeover of the nominally independent central bank.

Petro’s attempt to create a new, statist constitution is reminiscent of Hugo Chávez’s own methods, replicated by Latin America’s “21st Century Socialists” Rafael Correa in Ecuador and Evo Morales in Bolivia. Like Petro, who implies that Colombia’s 1991 constitution is obsolete, Chávez affirmed that the Venezuelan constitution was “moribund” when he was sworn in as president.

But even Chávez’s opponents admitted that, in 1999, his constitutional convention “began as a democratic process that in its origins did not involve the rupture of the previous political regime.” Petro, on the other hand, is attempting a full rupture with the established order. He aims to bypass all existing checks and balances to his power.

Petro’s plan is more akin to Nicolás Maduro’s spurious constitutional assembly of 2017, which nullified the power of the National Assembly, where the opposition held a majority since its victory in the election of December, 2015. In that sense, the commentators who still claim that Petro is no Chávez are correct, albeit for none of the reasons they put forth (such as the strength of Colombian institutions).

Rather, Petro’s contempt for the rule of law is arguably greater than that of Chávez during the initial stages of his rule. Then again, whereas Chávez sought to conceal his true intentions during his campaign for the presidency in 1998, Petro campaigned while offering Chavista recipes openly. There were, for instance, his threat to expropriate specific companies, his ambiguity on his intention to change the constitution, and his defense of Marxist doctrine, such as the labor theory of value.

In 2022, a small majority of Colombian voters acted against their better judgment and allowed Petro to hold power. A large majority is now firmly opposed to his government. The question is whether the republic itself will withstand Petro’s imminent constitutional onslaught.

Ian Vásquez

For more than 30 years, I and a number of my Cato colleagues have been travelling to Argentina, where we have participated in countless meetings, media appearances, and public events organized by local think tanks or Cato itself. We have been close observers of what may be the most politically erratic country in the most politically erratic region of the world, and we’ve been active participants in its public policy debates and in Argentina’s classical‐​liberal movement. Prominent Argentine thinkers such as Alberto Benegas Lynch, Jr., whom President Javier Milei cites as his intellectual mentor, and Martin Krause, are long‐​time Cato adjunct scholars. (See this essay by Daniel Raisbeck on the history of Argentina’s classical liberal tradition—the longest and richest in Latin America—and how it has influenced the current political moment.)

Javier Milei’s rise to the presidency on a mandate to implement a classical‐​liberal paradigm shift and revive the tradition that made Argentina one of the richest countries in the world a century ago offers us a significant opportunity to promote the ideas of liberty. That’s why we are pleased to cosponsor a major conference in Buenos Aires on June 11–12 with Argentine think tank Libertad y Progreso: “The Rebirth of Liberty in Argentina and Beyond.”

President Milei and leading liberals from around the world will come together to discuss specific policy reforms to limit power and expand individual liberty. Speakers will also discuss the record of classical liberalism and its grand narrative of unprecedented progress across the whole range of human well‐​being indicators.

Argentina is a cautionary tale for the United States and other rich countries because of its fall in the 20th century from prosperity to poverty as it abandoned liberalism. Elsewhere, we have discussed the political sea change that Milei’s rise promises (see here, here, here, here, and here, for example). But at a time when so many countries around the world are moving away from liberal democracy or strengthening authoritarianism, the importance and relevance of Argentina’s reform efforts extend beyond that country and even Latin America.

We hope you can join us in Buenos Aires for what we think will be a timely and stimulating event. For more on the conference and how to register, see here.

Colleen Hroncich

Catholic schools are known for many things—quality academics, character formation, a family‐ friendly atmosphere, teaching self‐​discipline, and more. They aren’t necessarily known for innovative instructional approaches. But Holy Family Catholic School in Jacksonville, FL, could help change that.

In many ways, Holy Family is a pretty traditional school. Children are in regular grade levels based on their age, they are in classrooms with normal desks and teachers who are instructing them, and classes change at regular intervals. But within that traditional framework, the school has adopted a program called D.E.N.S., Differentiation, Enrichment, and Needed Support, to meet the individual academic needs of students. The D.E.N.S. program aims to maximize student potential by helping them grow and thrive academically, which will build confidence and pave the way for future success.

I was fortunate to tour Holy Family in February, so I got to see firsthand how the D.E.N.S. program operates. Lauren May, Director of Outreach at Florida’s Step Up for Students, was my tour guide. She said the school is full, with 25 kids in a class, so pulling kids for individual and small group work lets them provide that personalized help.

For D.E.N.S., she explained, “they look at test scores and they get teacher feedback, and they pull kids based on whether they’re above or below grade level. Then they work with them on specific subject areas or goals.” She told me about one student she knows who was in the 30th percentile at the beginning of the year and by December was in the 90th percentile.

Jennifer Webster is one of the learning support staff members who runs the D.E.N.S. program. She explained that the program uses a push in/​pull out system. For children who are struggling a little bit, learning support “pushes in” to the classroom and works with small groups to help them on specific topics. Children who are struggling more are “pulled out” to work with them individually or in small groups separate from the large group lessons. The support is most intense in grades K‑3, with the goal being to get the children on track so they won’t need as much help in later grades.

It’s not only struggling students who receive individual attention at Holy Family. There’s also an enrichment program to help challenge students who are above grade level. In grades two through five, Jennifer and her colleague Amy Galloway pull students out once a week to do activities that go beyond the classroom curriculum. In middle school, the teachers incorporate enrichment activities in their classes.

Florida has one of the most robust school choice landscapes in the country, with every child eligible for an education savings account that can be used for private school tuition and a variety of educational expenses. Most students at Holy Family receive a scholarship, which helps the school afford to offer the D.E.N.S program. As these programs continue to expand, more schools may follow Holy Family’s lead in offering such individualized support for students.

Ryan Bourne

As I outlined in “Five Fiscal Truths,” the United States faces an alarming fiscal outlook characterized by historically high budget deficits, high accumulated debt levels, and the prospect of further debt escalation driven by an aging population and elevated interest rates. But some people look at the same budget numbers and yet remain relaxed about the country’s fiscal situation.

So here are three economic arguments I present in my new policy analysis for why policymakers should reduce deficits now, even if a fiscal crisis doesn’t appear imminent.

1. As Insurance against an Acute Fiscal Crisis in the Future

If the United States ever did face a fiscal crisis in the future, it would bring financial and economic chaos. Historically, fiscal crises come slowly and then suddenly; they represent sudden changes in investors’ perceptions about their prospects of being repaid. This could be triggered by an unexpected event—such as a war, another pandemic, or a major recession—substantially worsening the debt outlook. Or it could simply reflect changing sentiment about the country’s existing trajectory.

If investors were to lose confidence in the federal government’s ability to repay its debts, they would demand sharply higher interest rates. A sharp surge in bond yields would feed directly into a higher deficit, with extra borrowing then driving up yields further in a so‐​called fiscal doom loop. Eroding investor confidence, heightened macroeconomic uncertainty, and a growing sense that the government might eventually lean on the Federal Reserve to print new money to fund the government (risking higher inflation) would result in steep declines in the dollar as money flees from dollar‐​denominated assets.

Higher interest rates would squeeze private‐​sector investment and would cause financial turmoil by wreaking unexpected havoc with asset values. The federal government would find it very difficult to finance its core obligations, and the only way to avoid leaning on the Fed to print money would entail rapidly closing deficits with deep austerity cuts to government spending, large tax increases, or both.

A fiscal crisis thus inevitably ends with some combination of a default, sharp and painful austerity, or high inflation. True, the country could always meet its nominal debt obligations in its own currency by printing money (though relying on the Fed to acquiesce would undermine central bank independence). Yet the result would be a sudden burst of damaging inflation and shot credibility in bond markets. These risks might be small, but they are real.

Despite the unsustainable nature of the federal finances on current policies, markets clearly haven’t concluded that the US government is insolvent yet. Inflation expectations don’t show signs that people expect the Federal Reserve to fund the government anytime soon either. However, fiscal crises are unpredictable. Ratings agencies have woken up to the United States’ budget outlook and the lack of political interest in mitigating the flow of debt.

Furthermore, modeling from Penn Wharton suggests that the United States has two decades to stabilize the national debt relative to gross domestic product (GDP), after which no combination of tax hikes or spending cuts would prevent an explicit default or an implicit one (with debt monetization).

Deficit reduction today can thus be somewhat of an insurance against the tail risk of a genuine fiscal crisis occurring, with all the disruption that would bring.

2. As Insurance against Bad Policy Stemming from a Fiscal Crisis, Real or Perceived

Undertaking deficit reduction now, rather than waiting for a crisis, is also prudent because policymaking during panics can itself be economically destructive. If we were to experience an acute fiscal crisis, politicians might reach for measures like wealth expropriation to ease the inevitable cocktail of defaults, rapid deficit reduction, and higher inflation. That erosion of property rights would undermine people’s willingness to save and invest in the United States.

Even if a full‐​blown fiscal crisis doesn’t occur, we regularly see that sudden panics lead to policies being adopted that can do long‐​term harm. We saw this in the Great Depression (with extensive industrial policy and price and entry regulations); in the Great Recession (which exacerbated the demand for government bailouts during downturns); and with the reaction to the COVID-19 pandemic (where all sorts of unevidenced social restrictions were imposed).

On tax and spending policy, too, waiting until there’s a perceived emergency can lead to bad decisions. In Europe, governments resorted to tax‐​rise heavy deficit reduction programs in the 2010s, which evidence from the late Alberto Alesina showed were more harmful to output and debt levels than equivalent spending cuts would have been. In other countries, spending on genuine public goods investment was cut, while inefficient government programs and distortive welfare systems were largely protected. Policy changes that cut investment spending and raise taxes can undermine longer‐​term growth.

It makes sense when certain unforeseen emergencies occur to allow debt to rise and then smooth the path of deficit reduction over a long period. This helps stabilize marginal tax rates and protect incentives to work and invest. However, maintaining the capacity to do this relies on being confident that such shocks won’t themselves induce a fiscal crisis. That requires running balanced budgets or smaller deficits during stable periods. With unemployment at historic lows and total spending growth in the economy still above its pre‐​pandemic trend, now is a good time to deliver deficit reduction over a number of years. Doing so can help avoid more abrupt changes in taxes or spending during crises.

3. Because High Debt Is Associated with Slower Economic Growth

Even if you think I’m overly worried about the risks or costs of a fiscal crisis, empirical studies consistently demonstrate a negative correlation between high government debt levels and economic growth. Economist Jack Salmon has shown that a large existing body of research suggests that a debt‐​to‐​GDP ratio of around 80 percent seems to be a threshold beyond which government debt can be a big drag on growth. The United States has already surpassed this threshold.

To be clear: crossing some arbitrary threshold doesn’t automatically lead to disaster. This type of threshold analysis also got a bad rap after the work of economists Kenneth Rogoff and Carmen Reinhart presenting a similar result was found to contain a coding error that exaggerated the negative relationship between debt and growth. Yet even those who critiqued that work admitted their own analysis still showed that the mean GDP growth rate tends to be a percentage point lower for countries with debt‐​to‐​GDP ratios above 90 percent compared to those with debt‐​to‐​GDP ratios in the 60–90 percent range.

That may sound inconsequential, but an economy growing at, say, 2.5 percent per year will double in size every 30 years, whereas one growing at 1.5 percent per year will take about five decades to double.

There are clear theoretical mechanisms through which very high debt may cause this slower growth. Extensive government borrowing, by competing with the private sector for funds, can push up interest rates and crowd out private investment. Debt can fund wasteful and destructive economic activity or government transfers that harm work incentives, undermining the potential productive capacity of the economy. If government debt gets very high, it also raises the prospect of much higher taxes or debt monetization and high inflation, each of which has a range of harmful costs on economic efficiency.

Even aside from the simple budget math I outlined in “Five Fiscal Truths,” deficit reduction would thus help mitigate three risks: of a harmful fiscal crisis, of bad policymaking during a perceived fiscal emergency, and of high debts weighing on economic growth.

David Inserra

Last month, Instagram users took notice of two features that change how much political content users see on Instagram. However, the rollout wasn’t exactly smooth, with users of various political stripes accusing Meta of trying to suppress content. But rather than attack this change, users and policymakers should recognize it as a significant move to give users greater control over their news feeds and opportunity for a more user‐​first social media experience.

First, let’s understand what changed on Instagram. Within the user controls for Instagram,

users are now able to click a button to either limit or not limit “political content” regarding “governments, elections, or social topics.” The current default option is to limit political content.

users are able to determine how fact‐​checked content is treated. They can choose to heavily reduce how much they see such content, somewhat reduce it, or not reduce it at all, with the default being to somewhat reduce fact‐​checked content.

The discovery of these new features, however, was met with accusations by various parties that Meta was hiding this change to suppress certain viewpoints. But Meta has been announcing these changes for some time now, so these aren’t exactly secret changes. 

A better question might be what gets classified as political and social content. While some types of content are very clearly political, others largely depend on one’s viewpoint. Is it political to merely express horror over the October 7 attack on Israeli civilians? Or to express sadness over the casualties in Gaza? Is support for certain types of energy like solar power or nuclear power a political issue? Are various diversity initiatives covered? What about content supporting or rejecting environmental, social, and governance investing strategies? It would be nice to know more about what is and isn’t considered a political issue.

But perhaps even better than mere transparency, Meta could give users more specific control over various types of content. Some users may want to see even more political content than Instagram’s filters currently allow—others may want to see even less. Some may want to see a lot of specific types of political or social content but not content about other issues. There is a lot of room here to further empower users.

For example, Bluesky—a social media company that became open to the public this year—would allow users to quickly and easily subscribe to different independent moderation services. These services would allow users to truly customize what their social media experiences are, ranging from how potentially hateful content is handled to less serious decisions like whether to block pictures of spiders.

Alternatively, platforms like Reddit give different subcommunities, known as subreddits, the ability to add different rules to fit those communities. Reddit also lets users upvote or downvote comments by other users, which the independent moderators of subreddits can use to limit posts by users whose comments are regularly downvoted.

The other tool users can make use of on Instagram determines how fact‐​checked content is treated. Through its fact‐​checkers, Meta has long suppressed content that it had deemed to be misinformation. The problem, of course, is the ancient question: Who watchers the watchers? The fact‐​checkers have significant authority to declare content false, partly false, or missing context and get content suppressed. But nearly every piece of content is missing some context—after all, good writing requires that only the most essential context is provided. What facts count as the most important context differs from person to person or organization to organization. And how various facts are interpreted or assessed is subject to all sorts of potential bias.

This is not to say that there are no truths or facts—just that much of our discussions around major social issues are not as black‐​and‐​white as many fact‐​checkers would assert. Add to this the fact that it is difficult to meaningfully appeal a fact-checker’s decision, and it is easy to see how some users might be frustrated with such a system. 

Of course, this is Meta’s system, and other platforms provide different fact‐​checking systems. X has invested in Community Notes, which empowers users of X to write notes that add additional context to a post. When enough people from a variety of perspectives believe that a given note is helpful, it can be shown to all users. This crowdsourcing model relies not on the views of a fact‐​checker but instead focuses on only providing widely agreed‐​upon facts.

The reality is that users can have substantively different views on what is political, what is misinformation, and how much of any such content they want to see on certain apps. Allowing users to choose may be a new way to help alleviate the moderator’s dilemma where moderators will tend to err on the side of caution for many types of speech. For example, while I strongly believe that content moderation policies should favor more expression, I recognize that there are other people who vigorously disagree and prefer a feed with more limited views.

Because of this, these new tools that give more control to users may be the easiest way out of the moderation paradox. Some users can choose to heavily suppress fact‐​checked content in their feeds, while others can choose to see more. I can choose to use my Instagram for foodie, travel, gaming, and family content and keep politics on X, Facebook, or LinkedIn. And by giving users even more options for control, users and advertisers across the political spectrum and around the world can truly customize their experience based on what they are comfortable with, rather than a one‐​size‐​fits‐​all approach.

Platforms could even allow civil society organizations to create various one‐​click moderation filters. Want to see social media that is minimally moderated in favor of expression? Use a filter by a free speech group. Want your social media experience to completely avoid certain sensitive topics that trigger or disturb you? Use a filter by an online safety organization. Of course, these would all be optional. If you like the current experience offered by Instagram or any other platform, you can keep it. And none of this requires government mandates or regulations that infringe on freedom of expression.

While a lot of ink has been spilled over whether the changes to Instagram are suppressing one group or another, these changes provide a glimpse of what is possible if social media companies provide users with transparent controls over what they see online.

Ryan Bourne

In a new Policy Analysis out today, I make the case for a substantial spending cut‐​led federal deficit reduction effort. Tomorrow I will outline three economic reasons why deficit reduction is desirable. But today, I just want to take stock of the federal government’s budget realities by outlining five fiscal truths.

1. The United States Today Has a Historically High Budget Deficit

The recorded federal deficit from 2023, at $1.7 trillion (or 6.3 percent of GDP), was 23 percent higher than in 2022, but even that was pushed artificially downward by the CBO recording the Supreme Court’s cancellation of Biden’s student loan forgiveness plan as a one‐​off spending cut. The underlying figure was around $2 trillion, or 7.4 percent of GDP. This is easily the largest deficit recorded outside of wars or acute emergencies since the Great Depression of the 1930s.

Figure 1 shows the Congressional Budget Office’s (CBO) budget deficit projections for the next ten years. It estimates, on current policy, that annual deficits will grow to $2.6 trillion per year by 2034. This likely understates the scale of red ink. It assumes that large portions of the Tax Cuts and Jobs Act will be allowed to simply expire, that no other large spending programs will be introduced after the next presidential election, and that no unexpected shocks or recessions will hit in the interim. The feds are simply borrowing vast amounts, especially given today’s sanguine macroeconomic conditions.

FIGURE 1

2. High Deficits Add to a High Existing Debt Burden

As Figure 2 shows, back in 2007, federal debt was projected to fall to around 20 percent of GDP by 2017. It turned out to be almost four times that, at over 76 percent, mainly due to the financial crisis and then a tardy economic recovery.

Since then, federal debt held by the public has jumped again because of pandemic borrowing and ongoing large structural deficits. By 2022, debt hit 96 percent of GDP—the highest level since the aftermath of World War II. This time there is no prospect of a sharp demilitarization that would slash spending nor a political commitment to balanced budgets, as was seen after 1945. In fact, debt is projected to hit its highest‐​ever level, 106 percent of GDP, by 2028. High borrowing is thus adding to an already historically high level of debt.

FIGURE 2

3. On Unchanged Policies, Debt Is Set to Explode Further

Long‐​term debt is projected to sharply rise further relative to GDP over the coming decades, primarily due to Social Security and Medicare promises interacting with an aging population. The CBO’s forecasts, based on unchanged policies and fairly optimistic assumptions about interest rates and economic growth, suggest a surge in debt to an unprecedented 166 percent of GDP by 2054 (see Figure 3).

Analysts widely agree that continuing current policies without significant adjustments in tax revenues or spending cuts is unsustainable. Indeed, those who try to model the US economy’s growth prospects are usually forced to just assume that politicians will deliver substantive deficit reduction in the medium term to avoid this scenario, or else their models simply crash.

FIGURE 3

4. Borrowing Has Become More Expensive with Higher Interest Rates

Government borrowing has become much more expensive as interest rates have risen. In April 2020, the 10‐​year Treasury yield was just 0.7 percent. Now it is 4.6 percent, after not rising above 3.1 percent in the ten years before 2022 (Figure 4). This trend of higher yields is consistent across various Treasury maturity durations—and these interest rates have risen relative to expected inflation. This increase in real borrowing costs is inconvenient, given how much the federal government intends to borrow.

FIGURE 4

Higher yields have two major effects on federal finances. First, they obviously make it more expensive for the federal government to issue new debt. Second, higher yields make existing debt more expensive, because as Treasuries mature, the debt must be refinanced if it has not been paid off. The Committee for a Responsible Federal Budget has calculated that more than half of the $26.2 trillion outstanding debt held by the public at the end of 2023 was due to be refinanced within the next three years. “Cheap” borrowing undertaken in the 2010s risks becoming increasingly expensive if interest rates remain higher.

5. The Debt Outlook Is Highly Sensitive to Rising Interest Rates

While it’s unclear whether interest rates will remain elevated or fall back again over the coming years, we know the longer‐​term debt outlook is highly sensitive to their level. A 2023 CBO tool revealed that 10‐​year Treasury yields at 4.3 percent (rather than their expected 3.8 percent) would add $1.5 trillion to federal borrowing over the next decade (Figure 5).

Moreover, calculations from budget wonk Brian Riedl suggest that if long‐​term interest rates were to gradually increase by just 1 percentage point higher than previously expected by 2053, net interest costs could skyrocket to 10.4 percent of GDP, significantly higher than the otherwise‐​projected 6.7 percent.

FIGURE 5

Economists can and do disagree on the urgency of federal budget deficit reduction. But we should all agree on these fiscal truths, which themselves give strong grounds for concern. I expound on these facts, the broader economic justification for deficit reduction, and present a menu of policy remedies available in the full analysis here.

Romina Boccia and Ivane Nachkebia

[T]he European nations’ larger welfare states are the product of the transformative effect of the Second World War […] Total war suspended constraints on the expansions of entitlements beyond a needy minority: it hobbled private financing of health insurance and retirement, excused the broad‐​based tax increases necessary to fill the gap with public funds, and weakened the political capacity of those losing out to resist.—Chris Pope, “War and European Welfare Exceptionalism”

The United States is often considered an anomaly when it comes to social welfare provision among industrialized nation‐​states, with critical observers suggesting that US benefit provision is unusually low in size and scope (see Figure 1). As Chris Pope, a senior fellow with the Manhattan Institute, argues in his recent paper, “War and European Welfare Exceptionalism,” published by The Independent Review, it is the expansive nature of European welfare states that begs for an explanation.

According to Pope, the modern European welfare state is a byproduct of the disruptive nature of the Second World War and features policies that originated in Nazi Germany.

Drawing inspiration from Robert Higgs’s Crisis and Leviathan, which traces the growth in the size of the US government to expansive policies that emerged during crises, particularly the two world wars, Pope argues that “the Second World War imposed an even more dramatic upheaval on Western Europe, and the continent’s supersize welfare states remain as a legacy of the even greater disruption that they suffered.” What follows is a summary of Pope’s article, which I had the pleasure of reviewing during drafting.

Before the Second World War, European welfare programs were targeted to low‐​income families. Old‐​age pensions and state‐​provided health care were means‐​tested, as wealthier citizens were expected to provide for their own needs. In Great Britain, national health insurance covered low‐​income individuals, with free municipal hospitals designated to exclusively serve the working class. Prewar Germany’s welfare system, established by Otto von Bismarck, was more extensive than Britain’s and operated on a compulsory, earnings‐​related model funded by payroll taxes. Still, participation was limited to industrial workers. In both Britain and Germany, as well as in other European nations, individuals with higher incomes relied on private insurance.

The war provided European governments with the opportunity to expand the role of government in benefit provision across the social classes and raise taxes with minimal resistance. As Pope points out, “the suspension of democratic politics (with all its contestation and controversy) permitted the revolutionization of the welfare state, with lasting effect.”

With more resources and broadened responsibilities, governments switched from targeted to universalized entitlements, expanding social programs to include not just the poor but also the wealthier citizens. This expansion of welfare programs led to subsequent crowding out of market‐​based alternatives.

In Britain, wartime expenses justified massive tax hikes, raising the top marginal income tax rate from 65 percent in 1936 to 97.5 percent by 1941 and tripling the income tax base to include lower‐​income individuals. Initially driven by wartime needs, the broader tax base was maintained after the war ended. Additionally, the war disrupted private markets and the funding structure of the health care system, prompting the government to extend national health insurance coverage to wealthier individuals. Furthermore, from 1938, nonprofit hospitals were repurposed for wartime needs, leading to their heavy reliance on central government funds.

Importantly, William Beveridge, an academic tasked with recommending reforms to British entitlement programs, published a report in 1942 advocating for eliminating means tests from state pensions and switching from a targeted approach to universal flat‐​rate benefits.

Similar developments, influenced by the policies of National Socialist (Nazi) Germany, took place elsewhere in Europe. As Pope argues,

“The Nazis […] saw comprehensive social benefits and principles of national solidarity as distinguishing National Socialism from the practice of liberal capitalist nations of targeting assistance at the poor.”

That is why the Nazis sought to replace the Bismarckian model of earnings‐​related, targeted pensions with a system of universal flat‐​rate benefits. In a 1939 speech, Hitler claimed that Britain opposed his regime due to their aversion to “[T]he Germany which sets a dangerous example to them … the Germany of social welfare, of social equality, of the elimination of class differences—this is what they hate!” However, despite Hitler’s claims, the Beveridge report developed in Britain outlined a system similar in many respects, differing primarily in its funding strategy—where the Nazis favored income taxes, Beveridge opted for uniform premiums.

While the Nazis failed to fully implement their national‐​socialist programs in Germany because of their defeat, Nazi policies contributed to the transformation of entitlement programs in occupied countries. Austria adopted new entitlement policies, such as unemployment benefits and broad child allowances post‐​Anschluss. France, where the collaborationist government, like the Nazis, considered the limitation of benefits to the poor as a liberal concept, expanded health care benefits and universalized child allowances.

Similarly, under the 1941 Nazi decree, the occupied Netherlands saw its top marginal tax rate increase from 4.8 percent to 65 percent, fueling significant growth in the Dutch entitlement programs.

The wartime transformation of European welfare programs provided an ideal foundation for the mostly left‐​leaning postwar governments to maintain or even enhance expanded entitlement programs.

Recognizing the opportunity, the postwar Labour government in Britain passed the 1946 National Health Service Act (NHS), which nationalized municipal and non‐​profit hospitals, establishing free health care for all British citizens. As Pope puts it, “The political hard work required to socialize health care […] was all done by the war.” In addition, inspired by the Beveridge report, the government eliminated income caps for entitlement eligibility and established flat‐​rate old‐​age, unemployment, and sickness benefits.

In Austria, the benefit structure established by the Nazis has remained after the war.

Following the liberation from the Nazi occupation, the French provisional government eliminated eligibility caps entirely and established a universal entitlement program known as “sécurité sociale.”

The 1941 Nazi decree, which made state health care insurance compulsory for the working and the middle class in the Netherlands, remained in force until 2006, continuing to shape the Dutch health care system to this day.

The Nazi attempts to overhaul the Belgian welfare system, similar to their efforts in the Netherlands, faced resistance and were ultimately abandoned. Nevertheless, in 1944, the provisional Belgian government, exploiting the tumultuous circumstances, expanded entitlement programs without consulting other parties and direct stakeholders.

Table 1 below summarizes the impact of the Second World War on welfare programs across Europe.

These examples illustrate how the Second World War shaped modern European welfare systems. As a result, modern European governments generally spend more on welfare programs than the US (see Figure 1 above). This also means that the modern European welfare state is involved in more aspects of individuals’ lives, replacing private alternatives and levying higher taxes that leave its people with fewer resources to design their own lives.

Pope’s article serves as a timely warning for the US where the unchecked growth of the major entitlement programs combines with calls for entitlement expansions, following a massive expansion in social spending during the COVID-19 pandemic. As Cato’s Adam Michel has demonstrated, large European welfare states require high taxation across the income spectrum “[with] countries that have larger governments than the U.S. [using] high taxes on low‐​income and middle‐​class workers to foot the bill.”

Had it not been for the extraordinary devastation brought on by the war, the modern European welfare state might look very different today. The US would be wise not to go down a similar path.

Read “War and European Welfare Exceptionalism,” by Chris Pope., published in The Independent Review, v. 28, n. 3 (Winter 2023/24) here.