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Thomas A. Berry

Virginia Tech has instituted a “bias‐​related incidents” policy, under which students may be referred to a “Bias Response Team.” Under the policy, students can be referred for violating a standard as vague as “words or actions that contradict the spirit of the Principles of Community.” Students can also run afoul of the policy for “unwelcome jokes” or for even being present when jokes are made and failing to report them.

Students are encouraged to report each other while speculating on the “bias” that may have motivated their peers’ opinions. The school has given itself jurisdiction over activities and speech both on and off campus, as well as on students’ social media and other digital platforms.

Speech First sued Virginia Tech on behalf of several current Tech students, arguing that this policy chilled their freedom to express sincere but controversial views and thus violated the First Amendment. Yet a federal district court declined to enjoin the policy, holding that the students did not suffer any First Amendment injury because the bias response teams could not themselves impose formal discipline.

The Fourth Circuit affirmed that holding, and Speech First has now asked the Supreme Court to take the case. Cato has joined the Liberty Justice Center in an amicus brief supporting Speech First’s petition.

In the brief, we recount the history of bias response teams on many campuses across the country and how such teams do in fact chill the free expression and exchange of ideas. Whether or not bias response teams can impose formal discipline, the imbalance of power inherent in their proceedings and the ability of such teams to potentially refer students for formal discipline unquestionably lead students to self‐​censor.

That is the case here: students at Virginia Tech have muffled their own controversial political and social views because they feared the very real consequences of being referred to the bias response teams. Students know that if they are referred, the university will log the allegation in its records, share the “biased” speech with others, call the students in for educational and restorative “interventions,” and possibly refer their case to disciplinary authorities.

Virginia Tech’s policy is strikingly reminiscent of a state law struck down by the Supreme Court in Bantam Books v. Sullivan (1963). In that case, Rhode Island had created a “Commission to Encourage Morality in Youth,” which investigated books deemed potentially obscene or indecent. If the Commission found a book to be “objectionable,” it mailed a notice to the publisher thanking it in advance for quashing the book. Although the Commission had no authority to actually punish a publisher, the Supreme Court held that it nonetheless suppressed speech and violated the First Amendment. As the Court noted, “people do not lightly disregard public officers’ thinly veiled threats.”

When Virginia Tech students find themselves called before a bias response team, they too face thinly‐​veiled pressure to stifle their expression. As Bantam Books explained, that is enough to establish a First Amendment injury. The Supreme Court should take the case, reverse the Fourth Circuit, and vindicate the speech rights of Virginia Tech students.

Walter Olson

Following elections in which former President Donald Trump denounced alternate voting methods as fraud‐​ridden and encouraged Republicans to save their votes for Election Day, both Trump and the Republican Party now generally have shifted gears to encourage GOP campaigns and voters to use the full gamut of alternate balloting methods, from vote by mail through early in‐​person voting to the use of drop boxes. That’s mostly welcome news — but with one bipartisan exception that merits continued scrutiny.

The shift by itself isn’t likely to alter election outcomes much, since the adoption of alternate voting methods probably has only minor effects at most on partisan results. While Democrats are heavier users of in‐​person early voting, for instance, it’s mostly a method used by persons who would have cast votes anyway. What exceptions there may be are not always predictable: it’s been argued, for example, that severe Election Day weather in 2022 in Nevada worked to the disadvantage of Republicans, who were relying on Election Day turnout.

A more systematic benefit is that campaigns can save money and target their resources more effectively if supporters vote early. If a household is already recorded in the state database two weeks before Election Day as having voted, there’s no need to bombard it with last‐​minute mailings and phone calls.

There is also reason to believe that mail and drop box voting appeals to many constituencies among whom Republicans tend to do well, such as retirees and homemaking moms. In fact, until Trump chose to impose a different narrative, Republicans in many states were thought to be more skillful users of mail voting.

Partisan interest aside, there are two ways in which the interest of the nation as a whole is likely to be well served by the GOP’s return to course on this point. First, it abets distrust, polarization, and gamesmanship for one voting method to be seen as somehow “belonging to” one side. If early in‐​person voting is no longer perceived as a Democratic specialty, it will be easier for states to weigh impartially how much of it to schedule (from election administrators’ perspective, there are potential burdens in providing either too little or too much of it). Likewise for other methods.

The second ground for renewed optimism is that allowing voters to sort themselves more evenly between ballot channels will tend to dissipate the “red mirage” phenomenon in which one party jumps off to an early lead based on an early counting of votes that were cast its favored way, only to see that lead diminish and reverse as votes from the other party’s favored channels get counted.

It is hard to exaggerate how much damage the “red mirage” did in setting up the conditions for much of the public to be misled about the 2020 presidential election.

Two‐​and‐​a‐​half cheers, then, for the news. I withhold a full third cheer because news reports suggest (albeit sometimes ambiguously) that many Republicans also intend to adopt paid ballot collection (“ballot harvesting”) in states where it is legal, presumably sending out paid operatives to collect ballots by the hundred and drop them off (perhaps after bringing them back to headquarters for a while).

But as I’ve argued, third‐​party ballot collection poses real dangers to voter privacy, security, and freedom from improper pressure, especially when there is no feasible way to keep collectors from seeing how a ballot was marked or even helping the voter mark it. Convenience in voting is decidedly a good thing — but not so good as to be worth a wholesale sacrifice of the secret ballot.

Clark Packard

Between the establishment of the People’s Republic of China in 1949 and the 1970s, China’s economy was centrally planned. It engaged in little commerce and extreme poverty was widespread. Beginning in the late 1970s, China began a series of market‐​oriented reforms. This policy correction paid dividends; it is estimated that 800 million people were lifted out of extreme poverty over time.

In 1992, after Deng Xiaoping’s famous southern tour, China began downsizing the role State‐​Owned Enterprises (SOEs) played in the economy, particularly by subjecting SOEs to more market competition. In 1998 at the 15th Party Congress, Beijing’s SOE reform was turbocharged as many smaller and medium size SOEs were forced to close, privatize, or merge, which “led to a substantial downsizing of the SOE labor force.”

A new National Bureau of Economic Research (NBER) paper by Drs. Hanming Fang, Ming Li, Zenan Wu, and Yapei Zhang finds that the downsizing of SOEs (SOE employment peaked at about 110 million in 1995 but fell to less than 75 million by 2001) “significantly improved the quality of entrepreneurship” in China because “some high‐​skilled SOE employees were reluctantly unleased into entrepreneurship.” The authors found “layoff‐​induced entrepreneurs outperformed other comparable entrepreneurs.”

A 2021 paper from the International Monetary Fund (IMF) estimates that between 1998 and 2005, the share of SOEs in industrial output fell from around 50 percent to about 30 percent, and that this “transition coincided with rapid aggregate productivity growth, which came in part from the growth of the private sector at the expense of less productive SOEs. This was a welcomed development in China and for the global economy more broadly.

In recent years, however, Beijing is turning its back on the very policy reforms that helped propel it to greater economic growth. Maoist socialism is on the rise under the leadership of Xi Jinping and the role of SOEs in the economy has increased. As a result, dynamism in China is waning.

As the IMF recently noted in its Article IV report on China’s economy in 2022, “SOEs are being tasked to make advances in strategically important sectors and technologies affected by growing geoeconomic fragmentation, further burdening them with responsibilities.” But these “strategic” decisions have costs.

Indeed, it is estimated that China’s SOEs are about 20 percent less productive than private firms operating in the same sector and “the decline in business dynamism is particularly pronounced in sectors and regions with large SOE presence.”

In a forthcoming essay for Cato’s new Defending Globalization project, I will highlight a number of short‐ and long‐​term headwinds facing China’s economy, including the increasing role of SOEs. The history of China is not yet written, but policymakers in Beijing should learn from successful policy reforms of the past and begin (re)downsizing the role of SOEs in the economy.

Jeffrey Miron

This article appeared on Substack on September 22, 2023.

The White House recently announced the granting of Temporary Protected Status (TPS) to Venezuelans who arrived in the US before July 31st, a special designation allowing them to stay and work for 18 months.

The announcement comes in large part as a reaction to the tens of thousands of migrants currently overwhelming New York City’s taxpayers, who have been paying $8 million a day to house asylum seekers.

The root of the problem is a provision of a 1996 immigration bill that requires asylum seekers to wait 180 days before receiving work authorization. This provision was likely meant as a deterrent to migration, but that is not happening.

Unfortunately, TPS may not resolve the problem because the current processing time for immigrant work visas is around 10 to 18 months. A real solution, changing the 1996 law, would require congressional legislation at a time when neither party is willing to touch immigration reform. The Biden administration is trying to shorten wait times for visas, but that attempt faces political and practical difficulties.

Given the choice, most asylum seekers would jump at a chance to work and would have no trouble finding jobs. The increased labor pool would be an economic boon to the city. Instead, under current policy, the immigrants that do find work illegally have to participate in an underground market subject to exploitation and abuse.

In short, we have a textbook situation where a prohibition on labor supply causes shortages, black markets, and losses for both business and labor. That New York City taxpayers have to pay millions to support these immigrants is ironic given that immigrants are normally a net fiscal gain, provided they are allowed to work.

TPS may ease the problem eventually, but more fundamental reform—legalization of more immigration—is a far better approach.

John Mueller

Regardless of how it ends, Russian President Vladimir Putin’s war in Ukraine is likely to go down in history as a massively counterproductive failure, and he may well be remembered as Vladimir the Fool, or, to update an infamous fifteenth century moniker, as Vlad the Self‐​Impaler.

To many commentators, this disastrous trajectory suggests that Putin’s days are numbered. However, there is a serious possibility that Putin will remain in office during any settlement period over the war and that he will still be there afterward.

In fact, history provides numerous examples of politicians, especially in autocracies, who have survived military debacles. And the chance of overthrow, whether by popular rebellion or by elite insider coup, is likely reduced if, as in this case, there doesn’t seem to be a viable alternative waiting in the wings or in the trenches.

The most pertinent parallel with Putin’s misadventure in Ukraine may be the Chechen war of 1994–96 under Boris Yeltsin. When that venture turned into a disaster, Yeltsin desperately worked out an agreement for withdrawal under which Chechnya might eventually have been able to formally secede. These humiliating events played out during Yeltsin’s 1996 reelection campaign, yet he was reelected.

Thus, Putin may well be able to repress any temptation to escalate the war catastrophically, and it is not at all clear that he needs to be given much in the way of face‐​saving concessions to retreat from his debacle and to withdraw from Ukraine.

In fact, if Putin needs an excuse—or talking point—he can simply double down on the major justification he advanced for the war at its outset, one that, however bizarre, seems to have been substantially accepted in Russia. Comparing the situation in Ukraine with the one that led to the German invasion of Russia in 1941, he argued that his attack was designed to prevent NATO from establishing a military presence in Ukraine from which it would eventually invade Russia. That is delusory of course, but it can be fashioned into a victory claim that might well be readily embraced by the war‐​weary and war‐​wary Russians.

For a more extended commentary on this issue, see my essay that originally appeared in Foreign Affairs.

Travis Fisher

A previous post showed that the total cost of the Inflation Reduction Act’s (IRA’s) energy subsidies could reach $3 trillion. Subsidies so large cause a lot of problems—one being that advocates of a robust electricity infrastructure, like me, are now skeptical of using federal policy to expand the transmission system, which is the network of high‐​voltage wires and substations that make up the backbone of the power grid.

Before committing to large‐​scale transmission expansion, Congress should eliminate the open‐​ended generation subsidies in the IRA. Energy producers can’t capture the IRA’s lucrative production tax credits until they connect their new energy projects to the grid, so more transmission without amending the IRA means more subsidies at enormous cost to taxpayers.

The Green Transition Requires Transmission

Experts across the electricity industry argue that we need more transmission—bigger networks and massive transmission development—and we need it immediately. For example, the U.S. Department of Energy under President Biden and academic advocates of “net zero” policies are calling for aggressive expansion of the transmission system. Proponents of aggressive transmission expansion have a catchphrase: “There is no transition without transmission.” That is certainly true in the case of a transition to generation resources like wind and solar energy, which tend to be located far from demand centers.

However, heeding their call without first addressing the potential to spend $3 trillion on electricity generation subsidies is not a conservative or free‐​market approach. Congress should remove the IRA subsidies for mature generation technologies like wind and solar to encourage smart transmission investments that leave electricity customers and federal taxpayers better off. If the IRA subsidies remain in place through a period of rapid transmission expansion, the cost to American taxpayers and electricity customers will escalate.

The required amount of transmission is not small or cheap. Transmission advocates at Americans for a Clean Energy Grid cite the Princeton Net Zero report, which indicates that “high voltage transmission will need to double by 2030, at a cost of $360 billion, and triple by 2050, at a cost of $2.2 trillion, to achieve a zero‐​carbon future by 2050.” Keep in mind this estimated cost of $2.2 trillion is in addition to the $2.5 to $3 trillion in subsidies for generators.

Some investment is necessary to maintain the existing transmission system. However, calls to double or triple the high‐​voltage transmission are a far cry from the $15–20 billion spent annually by utilities on operating and maintaining the grid. Further, transmission spending has already been on a steep upward trend for several years, not just from increased operations and maintenance costs but also from an increase in spending on new projects, as illustrated by data from the U.S. Energy Information Administration below.

Source: https://​www​.eia​.gov/​t​o​d​a​y​i​n​e​n​e​r​g​y​/​d​e​t​a​i​l​.​p​h​p​?​i​d​=​47316

Major Transmission Expansion Will Increase the Burden on Taxpayers

Policymakers need to understand that transmission expansion can have serious costs because it is the missing link between subsidy‐​hungry developers of generation projects and the $3 trillion pot of cash from Congress.

Today, the lack of available transmission is a barrier to new generation technologies eligible for the tax credits in the IRA—for example, generators can only claim the Production Tax Credit (PTC) if they are able to produce energy and deliver it to the grid. Further, the IRA subsidies for electricity production all become PTCs beginning in 2025, so the pressure to expand transmission will only grow in the coming years. But “removing” that barrier by expanding the transmission system would be bad for taxpayers because it would put the PTC on steroids, at taxpayers’ expense. This fits with Ludwig von Mises’ observation that government intervention in markets begets more intervention—in this case, subsidies for generation beget federal intervention in transmission.

The subsidy flood would be substantial. At the end of 2022, the United States had more solar and wind energy projects vying to connect to the grid (1,247 gigawatts) than the total generating capacity of the existing system (1,199 gigawatts). Expanding the transmission system and giving these resources access to the grid will expose taxpayers to trillions in generation subsidies.

Source: https://​emp​.lbl​.gov/​q​ueues

Given this backlog of subsidy‐​eligible projects, the consumer‐ and taxpayer‐​friendly approach to transmission expansion hinges on whether Congress can remove the IRA’s subsidies for electricity generation first. Commissioner James Danly of the Federal Energy Regulatory Commission (FERC) summarized the issue during a House Energy and Commerce Committee hearing in May of this year [at 33:15]:

“There’s been this move afoot in which markets have become something closer to a mechanism by which to harvest these subsidies, rather than what they were intended to do, which is ensure least cost dispatch of available resources and to incentivize new investment. And the largest barrier at the moment to the harvesting of those subsidies is the physical interconnection of what are typically remotely located resources to the markets. You can’t get, for example, the production tax credit if you aren’t connected to a market and you don’t sell. And so there has been this concomitant effort to either mandate or speed the development of transmission… . It would be a shame if we removed and socialized the cost of the development of this transmission because, at the moment at any rate, the cost of interconnecting to the electric system is one of the few disciplining factors remaining in the development of infrastructure… .[emphasis added]”

Commissioner Danly is right to be skeptical of subsidy harvesters. In addition to the existing subsidies for electricity generation, there is also a debate about whether Congress should subsidize transmission itself, as with a federal investment tax credit. But Congress could also inflict harm by simply mandating that utilities build more transmission. One example is the Big Wires Act, which would require a large increase in interregional transmission without first addressing IRA subsidies. With the IRA subsidies in place, such a mandate should be a non‐​starter for anyone concerned about federal spending, impacts on taxpayers, and the overall cost of the electricity system (which consumers always pay, either in retail electricity bills or in taxes).

The Federal Energy Regulatory Commission (FERC) could also get involved in transmission expansion. The agency has explored the question of requiring a minimum level of interregional transmission, and it could move forward with a rulemaking on the issue at any time. In addition to establishing minimum levels of interregional transmission, FERC could also socialize the cost of transmission upgrades by allocating the costs widely in the form of higher prices for all ratepayers.

So‐​called “cost allocation”—which boils down to spending other people’s money—has long been a priority for those who want to rapidly expand the transmission system. If the cost of transmission expansion falls on all ratepayers, Americans could pay trillions in generation subsidies through federal taxes in addition to trillions in transmission expansion costs through higher retail electricity prices.

Congress and FERC should set aside transmission reform efforts until lawmakers address the staggering costs of the IRA’s generation subsidies. Only after reining in the IRA’s energy subsidies should policymakers debate how to expand the transmission system, and the policy goal should be to provide reliable electricity at the lowest total cost to consumers and taxpayers.

Conclusion

Before committing to large‐​scale transmission expansion, Congress should eliminate the open‐​ended generation subsidies in the IRA. There is a legitimate need for transmission expansion when and where it can reduce the total cost of electricity service or increase reliability. However, policymakers in Congress and at FERC should be careful not to run headlong into transmission expansion schemes that only serve the interests of IRA subsidy harvesters and leave U.S. taxpayers with a $3 trillion tab.

Colleen Hroncich

When the kids in Rosa Aristy’s homeschool co‐​op said they wanted to learn coding, the moms all looked at each other and wondered who was going to teach those classes. “The kids were so enthusiastic and wanted to learn more,” she recalls. “And I thought to myself, I’m not going to let these kids down. I was a marketing analyst before I became a mom, so I had done some programming. Not the kind they would want to learn, but I thought I could figure things out and take it from there.”

Rosa knew the kids would need a very solid math curriculum if they were going to get into robotics and coding. “I decided to start out with a math club, so then I’d get a rhythm and create a community,” she said. “Then these kids would be equipped to dive deep into robotics and coding and whatnot.”

She arranged for professors from Texas A&M to facilitate some sessions and she facilitated the others. One thing led to the other, and soon Rosa made connections that allowed her to start planning a robotics program. She was spending a lot of money on supplies and hated paying taxes on it when it was for educational purposes, so she decided to start a non‐​profit called Bridges to Science.

“Two months after we launched, Covid came and everything changed,” she recalls. “We started doing virtual, primarily the math circle. We continued that because the students really wanted to, and it gave them a sense of continuity in the midst of it all. Then we also started doing virtual coding clubs. We believe in providing a whole ecosystem for the students. By that I mean it’s not just me and the parents who are there chaperoning.

“We invite professionals—software engineers from different tech companies, faculty members, retired engineers, you name it. Every year in the math circle, we have a theme. Last year it was finance and economics. We did the stock market game, and we invited a lot of financial professionals who gave our students a peek into how they use math to buy stocks, create portfolios, etc.”

Last year, Rosa launched a Youth Ambassador program, where the upper high school students start training the younger students. Bridges to Science also has what they call family creative learning gatherings, which Rosa says are like mini science festivals. The youth ambassadors facilitate the different activities at the gatherings.

According to Rosa, the gatherings got the attention of a sponsor who suggested they host a larger event. “So we did,” she says. “We just launched the Houston Science Festival on September 9, and it was an amazing success. We exceeded expectations in attendance. We welcomed over 15 exhibitors, including the Houston Museum of Natural Science, Texas A&M, Rice University, cyber​.org, and Girls Who Code. We had music to kick off Hispanic heritage month. It was lots of fun. What was very gratifying is that over two‐​thirds of attendees were people who are considered low income. Many pulled me to the side and told me ‘if you hadn’t done this, we wouldn’t have ever seen any of these.’”

Rosa also focuses on Hispanic outreach. “There aren’t that many Hispanics homeschooling, and we believe there can be more of them,” she notes. “That was another great thing about the festival. Families came to us and said, ‘Oh my goodness, I didn’t know there were so many of us because usually every group has just handful of Hispanics.’ So we want to work with them and help them realize there are others.”

Bridges to Science is now shifting towards becoming an organization that supports the yearly science festival since it’s so much work. In between, the focus will be working with different communities in the Houston area so that families have access to resources that might not be accessible to them now. “If they attend a coding workshop or go to the Houston Museum of Natural Science to explore chemistry or the life sciences, the children begin to see which areas catch their fancy. Once you give them all these appetizers then they might want to dive deep into one of them,” Rosa explains. “The way we see our organization is we are a bridge—on one end of the bridge we have the communities that have little access and on the other we have the organizations, primarily universities, and we connect the two.”

David Boaz

It’s hard not to despair at the state of public policy discussion these days. Every day’s newspaper contains another bad idea from politicians, pundits, and wonks from across the political spectrum, from rent control to corporate subsidies to trillion‐​dollar handouts to costly regulations to red vs. blue cultural war games. It could keep an entire institute busy analyzing, criticizing, and warning about looming policy errors. As bad as the current climate is, though, I was reminded this week that we’ve lived through worse policy enthusiasms.

In his recent book Freedom’s Furies: How Isabel Paterson, Rose Wilder Lane, and Ayn Rand Found Liberty in an Age of Darkness, Timothy Sandefur describes the intellectual climate that those “founding mothers of libertarianism” faced in the Hoover‐​Roosevelt Depression years:

Between 1917 and 1919, agencies such as the War Industries Board and [Herbert] Hoover’s U.S. Food Administration appeared to vindicate Progressive beliefs in government planning. A decade later, many—including Hoover himself—pointed to that precedent, arguing that the Depression was analogous to a world war and should be dealt with in the same way.

That was the basis for the idea that General Electric’s president Gerard Swope proposed in September 1931. He recommended that the federal government create a system of industrial cartels under which all compa­nies of more than 50 employees would be assigned to a trade association vested with authority to dictate the types and amounts of goods and ser­vices businesses could provide, and how much they could charge. This would prevent “destructive” competition, by giving companies the power to prohibit their competitors from reducing prices or introducing new or improved products, which would “stabilize” the economy and ensure full employment. “Industry is not primarily for profit but rather for ser­vice,” Swope declared. “One cannot loudly call for more stability in busi­ness and get it on a purely voluntary basis.” Although hardly the only such proposal—it mimicked the corporatism already being implemented in Italy and Germany—the Swope Plan gained the most attention and would later form the blueprint for the National Industrial Recovery Act. But at the time, Hoover labeled it “fascism” and rejected it as “merely a remaking of Mussolini’s ‘corporate state.’”

Many similar schemes were offered by prominent intellectuals, includ­ing historian Charles Beard, who proposed “A Five‐​Year Plan for America” on the Soviet model, and New Republic editor George Soule, whose 1932 book A Planned Society proposed political control over the entire economy. These writers, said one of Soule’s colleagues, “were impatient for the com­ing of the Revolution; they talked of it, dreamed of it.” And they were not alone. That same year, novelist Theodore Dreiser published Tragic America, which he had originally planned to call A New Deal for America. It advo­cated the overthrow of capitalism and the replacement of the Constitution with a government that would control industry in the style of the Soviet Union, where he thought communism was “functioning admirably.”…

Dreiser probably changed his title because A New Deal had already been taken by economist Stuart Chase, whose book of that name also appeared in 1932. Chase—who considered it “a pity” that “the road” to socialist revolution in America was “temporarily closed”—looked forward to the day when the government would seize all industry and “solv[e] at a single stroke unemployment and inadequate standards of living.” It would do this, he said, by compelling all individuals to “work for the community.” The government should forbid high interest rates, stock market speculation, the manufacturing of “useless” products, the creation of new clothing styles, businesses “rushing blindly to compete,” and other “ways of making money”—and it should do so “by firing squad if necessary.” The 44‐​year‐​old Chase was inspired by the “new religion” of “Red Revolution,” which he found “dramatic, idealistic, and, in the long run, constructive.” “Why,” he asked, “should the Russians have all the fun of remaking a world?”

A system of industrial cartels under which all compa­nies of more than 50 employees would be assigned to a trade association vested with authority to dictate the types and amounts of goods and ser­vices businesses could provide, and how much they could charge. A Five‐​Year Plan. Political control over the entire economy. Replacement of the Constitution with a government that would control industry in the style of the Soviet Union. Seize all industry. Compel all individuals to “work for the community.”

As bad as our policy dialogue is in 2023, we don’t hear mainstream commentators calling for five‐​year plans and top‐​down control of the entire economy. It seems that libertarian and free‐​market ideas, along with our experience of overweening government in the United States and especially in other countries, have had some influence.

At the time, though, these ideas were not just wishful thinking by ivory tower academics. Consider some commentary from March 1933, when Franklin D. Roosevelt was inaugurated as president.

In his inaugural address Roosevelt declared, “We must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline.… I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.” And if Congress didn’t promptly pass his agenda, “I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.…The people of the United States … have asked for discipline and direction under leadership.” And as Sandefur reports, plenty of people who ought to have seen themselves as guardians of constitutional liberty fell in line:

Fearful Americans cannot have been reassured by the February editorial in Barron’s that advocated “a mild species of dictatorship,” or by Walter Lippmann’s advice to the new president that same month—“You have no alternative but to assume dictatorial powers”—or by the New York Times reporter who proclaimed in May that Americans had given Roosevelt “the authority of a dictator” as “a free gift, a sort of unanimous power of attorney.… America today literally asks for orders.” Publisher William Randolph Hearst—who admired Mussolini and Hitler so much that he gave them columns in his newspapers—financed a propaganda film called Gabriel over the White House, which premiered days after the inauguration and depicted the new president being guided by heaven to declare martial law, unilaterally cure the Depression, execute criminals, and end all war. Even the Nazi Party celebrated Roosevelt’s commitment to all‐​encompassing power with a story in its newspaper lauding what it called “Roosevelt’s Dictatorial Recovery Measures.”

In some ways the real counterattack on this collectivist, centralist mindset began a decade later with the publication in 1943 of Paterson’s The God of the Machine, Lane’s The Discovery of Freedom, Rand’s The Fountainhead, and in 1944 of F. A. Hayek’s The Road to Serfdom. But as our current challenges illustrate, this intellectual battle is far from over.

Gabriella Beaumont-Smith

Today, I published a piece in Real Clear Policy highlighting Mattel’s Barbie supply chain and why manufacturing products in multiple countries is positive. Here’s a summary:

The toymaker behind Barbie’s iconic brand, Mattel, is one of the largest in the world and it exemplifies today’s global supply chains. Despite being known for her Malibu Dreamhouse, Barbie and her accessories come from all over the world—and for good reason. Different countries—much like different stores—offer different advantages. Barbie is small, requires intricate production, and has steady demand, while her Dreamhouse is big and heavy, and not purchased as frequently. These different factors mean that one is suitable to produce in one place and other parts somewhere else. However, the fact that the doll and her house aren’t made in America does not mean that Americans don’t add value to Mattel’s production process. In fact, quite the opposite is true. Read the full story here.

Plus, here’s a fun tariff reclassification case that didn’t make the op‐​ed:

Today, there are no tariffs on Barbie imports. However, this was not always the case. In the 1990s, Toy Biz Inc. brought an action to have certain action figures reclassified as “Toys representing animals or other non‐​human creatures” because the tariffs on these figures were 6.8% compared to 12% for “Dolls representing only human beings.” The tariff schedule no longer disaggregates dolls this way and the preferential tariff rate is zero. Dolls were temporarily subject to Section 301 tariffs imposed on China in 2018, but the list dolls were included on has since been suspended.

It’s a great free trade story on all fronts for Barbie!

Romina Boccia

Here’s an unpopular opinion: Social Security benefits are growing too fast. And this excessive benefit growth is one of the key reasons the program is unsustainable.

We’ve all heard that entitlement programs are suffering under the weight of a demographic shift. The American population is aging and living longer, as fertility has declined. Fewer new workers as the share of the senior population increases means fewer taxpayers available to cover the cost of old‐​age benefits.

This is true. And it’s also true that we could solve a lot of the entitlement spending problem, without cutting a single penny from current benefits, by slowing the growth in benefits.

In the case of Social Security, benefits are growing much faster than inflation. This is by design. And the difference is sizeable.

Prior to 1972, it took an Act of Congress to adjust Social Security benefits as they weren’t indexed to any economic measure. This meant that during periods of inflation the purchasing power of benefits would decline until Congress passed a benefit increase. Amendments in 1972 adopted the consumer price index for automatically adjusting current benefits for inflation. By 1977, Congress adopted further amendments, this time determining that initial benefits would be indexed to wage growth.

To this day, workers’ initial benefit levels are indexed to wage growth and ongoing benefits adjust with price growth.

The chart below shows the growth in workers’ initial benefit amounts over a period of 25 years, adjusted for inflation (for comparison) and wage growth (which tends to grow faster than inflation).

Here’s an example to illustrate this point: When Chris (an average American wage earner) decided to claim Social Security in 2020, she began receiving $18,231 per year. Pat on the other hand, with a very similar earnings history as Chris, claimed benefits 25 years earlier, in 1995, and she receives $14,545 in 2020—Pat’s initial benefit of $8,638, adjusted for 25 years of inflation.

Why are Pat and Chris, who earned the same and contributed the same payroll taxes to Social Security over their lifetimes, receiving wildly different benefits in 2020?

That’s the power of wage indexing. When Chris applied for benefits in 2020, she didn’t receive the same benefit as Pat, adjusted for inflation. Instead, Chris benefited from a $3,686 bump‐​up to reflect the increase in the standard of living, after inflation, that occurred between 1995 and 2020.

Some might argue that this is a good thing. Perhaps one of the goals of Social Security should be to raise the standard of living in retirement for average‐​wage workers by giving them a boost based on wage gains that occurred since they started working. After all, an important principle embedded in Social Security’s design is to redistribute some income from higher‐​earning workers to those lower on the income scale.

However, higher‐​earning workers also benefit from this excess benefit adjustment. Here’s another example featuring Jordan and Riley, high‐​income workers retiring 25 years apart. Jordan applied for benefits in 2020 and now collects $37,000 in annual income from the program. Riley, with the same earnings history and tax contributions collects $8,000 less, because she applied in 1995 and her benefits stayed the same, except for increasing with inflation. That doesn’t seem particularly fair but this is how the program works.

How benefit indexing works: When a Social Security‐​eligible worker’s benefits are first calculated, this worker’s past wages are indexed to bring them to the same level as today’s earnings. This is called wage indexing and is based on the growth in average wages in the economy. When the Social Security Administration (SSA) first indexes a worker’s lifetime covered earnings, it does so using the SSA’s Average Wage Index (AWI). The AWI includes all wages that are subject to federal income tax, including wages in excess of the taxable Social Security maximum payroll tax threshold.

Wage indexing gives retirees a benefit amount that reflects the increase in the standard of living over their working careers—even if they didn’t earn commensurate wages. It’s like giving workers retroactive credit for improvements in the economy, including for wage improvements among the highest income earners.

To illustrate: When Chris retired in 2020, her 1995 wages would have been counted as if they’d been earned in 2020, instead of the actual wages she earned in 1995. (Social Security uses the average wage index for two years prior to retirement. Thus, a person retiring in 2020 would see their wages through 2018 indexed to the 2018 average wage index; the two years immediately before retirement. This indexing increases past earnings to account for inflation as well as increases in average wage growth.)

After Chris’s initial monthly benefit was determined, it will be price indexed to preserve her benefit’s purchasing power against inflation – that’s the annual COLA (cost‐​of‐​living adjustment) that Social Security beneficiaries get when overall prices in the economy are going up.

The below chart shows how continuing initial benefit calculations using this model will increase Social Security benefits in the future. A maximum‐​benefit‐​eligible beneficiary retiring at age 70 in 2045 would receive an annual benefit of $114,306—more than $23,000 higher, after adjusting for inflation, than a similarly‐​situated worker retiring in 2020.

How much would this policy change save? According to the Social Security Trustees, switching to a benefit formula that adjusts workers’ initial benefits for inflation, rather than the growth in average wages, would close 80 percent of the program’s 75‐​year funding gap and lead to a surplus in the 75th year, if such a policy began in 2029.

Limiting the formula change to the highest 70 percent of earners (this is often called progressive price indexing) would close Social Security’s 75‐​year funding gap by 45 percent and achieve near‐​solvency in the 75th year, balancing out revenues and spending at 95 percent, assuming this change took place beginning in 2029. Figure 3 compares Social Security’s projected funding gap under current policy, progressive price indexing, and regular price indexing.

Changing the initial benefit formula to account for inflation instead of wage gains is one of the most significant changes that Congress could undertake. Adopting price indexing for initial benefits would preserve current benefits and protect beneficiaries from inflation, while reducing excess benefit cost growth.

How would this change affect the purchasing power of seniors? When President Roosevelt signed Social Security into law, he referred to it as “a law which will give some measure of protection to the average citizen and to his family…against poverty‐​ridden old age.” From a modest income support program, targeted toward individuals who lived beyond the age of life expectancy, Social Security now redistributes more than $1 trillion annually from working Americans toward those in retirement, despite the much greater wealth owned by retirees.

The median net worth of working Americans aged 35–44 was $91,300 in 2019, based on the Fed’s Survey of Consumer Finances. Meanwhile median net worth among those 65 and older was nearly three times that, at $266,400 for those in the 65 to 74 age bracket, and $254,800 for those 74 years and older.

As John Cogan, author of The High Cost of Good Intentions (2017), has argued in this Mont Pelerin Society report from 2020:

“modest Social Security changes to limit the growth in the inflation‐​adjusted value of initial monthly benefits and to raise the retirement age will maintain benefit levels that are fully consistent with the original objectives of the Social Security wage‐​indexing policy of helping senior citizens avoid a precipitous drop in their standard of living upon retiring and of helping senior citizen standards of living to keep pace with those of the working age population.”

When comparing the growth in the inflation‐​adjusted median income of households headed by persons age 65 or older (senior; considering all income, including from Social Security and other sources such as pensions and retirement account withdrawals) and the growth in the median income of households headed by persons under age 65 (non‐​senior) since 1980, shortly after Social Security adopted wage indexing, Cogan finds that:

“in the years since wage‐​indexing was established, incomes of senior households who are largely the group collecting Social Security, has not just kept pace with that of non‐​senior households, who are largely the group paying taxes to finance these benefits, it has a grown about four times faster. The more rapid income growth among senior households compared to the income of the typical working household has been an across the‐​board phenomenon [emphasis added].”

Cogan argues that if seniors’ initial Social Security benefits had been indexed to inflation, instead of wages, senior household income would have still grown twice as fast as non‐​senior household income, over the 40‐​year period since 1980. This is because most of the increase in senior household income is due to higher earnings from work and increases in retirement income, rather than increases in Social Security benefits.

It’s not only unnecessary and unfair to burden a declining share of workers with higher taxes to pay out benefits to a growing share of retirees, but such a policy is particularly offensive when those on the receiving end of an income transfer are better off than those providing the transfer. Shifting to price indexing for calculating initial benefits, at the very least when calculating benefits for higher income earners, is a sensible policy change. It would help avoid indiscriminate benefit cuts when Social Security’s trust fund borrowing authority runs dry (benefits would be automatically cut by 23 percent in 2033) and avert economically harmful tax increases to finance unsustainable benefit growth.

There’s a way to reduce Social Security’s financial and economic burden and eliminate its unfunded obligations over the long‐​term, and it requires no benefit cuts, but merely reductions in the growth of benefits. Now we just need to find the political will.