Tweet

The Wall Street Journal‘s Editorial Board excoriates Trump for imposing more tariffs punitive taxes on Americans’ purchases of goods made in Canada. A slice:

There he goes again. President Trump on Monday raged against Canada on the social-media heath, threatening it with 50% tariffs on autos and auto parts. What does he have against U.S. car makers?

Mr. Trump is angry that Canadian Prime Minister Mark Carney over the weekend vowed to retaliate dollar-for-dollar against his latest tariff barrage. “Canada has been ripping off the United States of America for years,” Mr. Trump wrote. “On January First, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%.”

The Jan. 1 date suggests that Mr. Trump probably isn’t serious. No doubt he understands that a 50% tariff would hurt U.S. auto makers more than it would Canada. Ford Motor CEO Jim Farley last year warned that Mr. Trump’s 25% emergency tariffs on Canada and Mexico would “blow a hole” in the U.S. auto industry, and he was right.

Thus the Administration exempted autos and other goods covered by the United States-Mexico-Canada trade agreement from his emergency tariffs. Mr. Trump’s 25% national-security tariffs on autos and parts also include carve-outs for U.S.-made parts and other emollients for U.S. auto makers with cross-border supply chains with Canada and Mexico.

Canada exports about $50.4 billion in vehicles and parts to the U.S. each year, notably to Michigan ($22.1 billion) and Texas ($14.8 billion). Mr. Trump’s 50% tariff would amount to a $25 billion tax on U.S. auto makers, their suppliers and customers—namely, buyers of large pickups assembled in Canada.

John Puri of National Review reports on Trumpians’ detachment from reality regarding tariffs and prices. Two slices:

Over the weekend, many Republican lawmakers found the one issue on which they could break with President Trump: beef taxes.

Trump announced on Friday that he would raise the longstanding quota for beef to enter the country under a reduced tariff rate. Previously, only 697,000 metric tons of beef could be imported from countries other than Mexico and Canada under a modest duty of 4.4 cents per kilogram. The administration is allowing 300,000 more metric tons under this quota for three months — coincidentally through the midterms. Above the quota, beef imports are subject to a 26.4 percent tariff.

If the president were capable of embarrassment, he might be bashful about cutting tariffs to bring down costs for American consumers. (What does hiking tariffs do, then?) Regardless, he is recognizing what I wrote months ago: Beef tariffs exist to increase beef prices.

Republicans from ranching-heavy states also recognize this. Because every price is someone else’s income, cattle producers have greatly benefited from the higher beef prices that are angering grocery shoppers. Members of Congress who represent those ranchers don’t want those prices to fall because of foreign competition.

Senator Deb Fischer (R., Neb.) says she is “extremely disappointed by this decision from the White House. We all want lower grocery prices, but as I’ve said for months, we cannot do it at the expense of American producers.” Translation: She would like beef prices to be low and high simultaneously.

…..

Protectionism is so politically seductive — and so vehemently defended once implemented — because its benefits are highly concentrated and its costs, though they are often far greater, are diffuse. Lower beef prices may benefit every American a little bit, but they would more visibly hurt the small percentage of Americans who raise cattle. Forced to choose between them, politicians will usually serve the squeakiest wheel. That becomes a political problem, however, when a thousand different price-increasing policies add up, making the public inclined to vote on affordability writ large.

Clark Packard reviews the long, sorry record of U.S. tariffs on steel. A slice:

Writing in the fall issue of American Affairs, Rep. Riley Moore (R‑WV) argues that American deindustrialization was a choice—that Washington refused to protect the steel industry and that a West Virginia steel mill and others like it died because of choices made by policymakers. He proposes much higher tariffs, direct federal investment through a new industrial bank modeled on the Development Finance Corporation, the enactment of the Defense Production Act to speed up permitting, and a requirement that the Defense Department buy more specialized domestic steel.

History supports neither the argument nor the remedy. Protection has virtually never been withheld from the steel industry. It was granted continuously for six decades, and the legacy mills declined anyway.

GMU alum Thomas Savidge is among those who wisely warn of the dangers of the U.S. government’s fiscal incontinence.

Also discussing the U.S. government’s fiscal incontinence are some of the top minds at Reason.

GMU Econ alum Dominic Pino, writing at the Washington Post, makes clear that the government has no business owning the electromagnetic spectrum. A slice:

In the early 1900s, when Congress was figuring out how to regulate broadcasting over a newfangled invention known as radio, it faced a crossroads. It could extend existing ideas about private property to a new domain. Or it could reject that in favor of a quasi-socialist system prone to government efforts to restrict speech and freedom.

ABC can tell you which one it chose.

Under the system set up a century ago, a government agency, initially the Federal Radio Commission and since 1934 the Federal Communications Commission, issues licenses for broadcast frequencies. Who gets these is based not on market forces but rather on what the FCC deems the public interest. Broadcasters don’t actually own their frequencies — licenses must be renewed after a set term — and they can’t transfer them without FCC approval. This system has long since been expanded beyond radio to broadcast TV.

When it created this regulatory regime, Congress was guided by the premise that broadcast frequencies are scarce and many people want to use them. There was a need, the thinking went, for an orderly way to assign frequencies so that multiple users wouldn’t overlap on the same one.

But allocating scarce resources is what markets do. When radio pioneers broadcast programming on a certain frequency, they were transforming a sliver of the electromagnetic spectrum — something owned by no one — into a valuable resource. Remove the hand of intrusive government, and this first-mover claim ought to have conveyed ownership. Left alone, a market for frequencies would have developed naturally, with prices determined by supply and demand.

In this alternate reality there would still be a role for government, which would use its enforcement power to punish interlopers and facilitate the functioning of the market. Broadcast on a frequency owned by someone else? You’re trespassing. Attempt to gobble up a critical mass of frequencies? Welcome to an antitrust lawsuit. But Congress was spooked by the powerful new technology of radio, and the heavy-handed speech-policing system America has today was born.

A 1959 paper by renowned economist Ronald Coase isolated the fallacy at the heart of the FCC regime. Every valuable resource is scarce, Coase noted, but scarcity doesn’t give government a right to control it — at least not in the United States. Coase traced the history of FCC licensing and found that skeptics of government control were ignored as the FCC got rolling; after that regulators couldn’t imagine doing things any other way. Bad economic reasoning got government off on the wrong foot, and then it stepped into cement, which hardened around the mistake.

The Trump administration’s apparent attempt to use the lever of FCC licensing to move the broadcaster’s coverage in the direction it wants, now the subject of a federal lawsuit, lies directly downstream from that.

In the process of issuing and renewing licenses, the FCC has the power to review broadcasters’ content to ensure it is serving “the public interest.” It’s this eye-of-the-beholder requirement that the agency uses to take steps that would be obvious violations of the First Amendment in any other context.

My Mercatus Center colleague Alden Abbott warns of the perils of backdated antitrust.

David Bier tells of one of the newest proposals by the Trump administration to obstruct Americans’ access to the ultimate resource: human ingenuity.

John McWhorter writes wisely about the tragic saga of Jason Arday. Two slices:

But Arday ended up retailing his fictions in modern academia, a world with a burning desire to celebrate blackness and demonstrate its antiracism. No one is on record having chuckled in the corner that hiring Arday at Cambridge University will “give the place a little color,” in the fashion of the old sitcoms. Nonetheless, it’s impossible to avoid the reality that Arday’s color was the crucial factor in his elevation. His scholarly work was insubstantial, a judgment that would be fair even if it hadn’t turned out to be plagiarized to such a degree. Yet he was granted a Ph.D. (the title of his dissertation has a glaring typo) and several honorary degrees, asked to give various keynote addresses, regularly invited on radio and television, and made the equivalent of a full professor at Cambridge University at 37. It’s inconceivable that a white person would be elevated to the pinnacle of the profession—especially a Cambridge professorship—with such a thin record.

Then there was his wildly improbable life story: suffering both a brain tumor and a stroke, yet passing his dissertation defense immediately after recovering from them, despite having lost all memory of what he wrote; suffering from epilepsy, autism, and Asperger’s; not speaking until 11 and not reading until 18; playing championship-level ping-pong despite his many handicaps; being threatened at his Cambridge office by masked, armed men, mysteriously unrecorded by CCTV cameras; discovering that a pig’s head had been sent to his parents; running marathons at world champion-level, including doing so with a leg swollen to twice its size; and so on. Frankly, all of this is so incredible, in the literal sense, that a white scholar making these claims would almost certainly have been instantly dismissed as a fabulist. But Arday was black, and the whites around him considered it more important to be seen elevating him—especially as he was someone claiming past hardships—than viewing his claims as the fables they were.

This was tokenism.

…..

Today’s wokenism is no more justified than yesterday’s tokenism. We must face reality. If there are no truly excellent black candidates for a post, giving it to one more white person may feel frustrating—but it is always better than the dehumanizing patronization of naming a token black person.

Fifty years ago, this was conventional wisdom. It’s one of those cases where we should heed our elders.

Tweet

… is from page 137 of the 1969 Arlington House edition of Ludwig von Mises’s 1944 Yale University Press book, Omnipotent Government: The Rise of the Total State and Total War (available free-of-charge on-line here):

The market is a democracy. Capitalism is the consummation of the self-determination of consumers. Mr. Ford is richer than Mr. X because he succeeded better in serving the consumers.

Tweet

… is from pages 86-87 of the 1989 the Regnery Gateway edition of the 1979 collection – Economic Policy: Thoughts for Today and Tomorrow – of Ludwig von Mises’s Fall 1958 lectures in Buenos Aires [original emphasis]:

The prerequisite for more economic equality in the world is industrialization. And this is possible only through increased capital investment, increased capital accumulation. You may be astonished that I have not mentioned a measure which is considered a prime method to industrialize a country. I mean protectionism. But tariffs and foreign exchange controls are exactly the means to prevent the importation of capital and industrialization into the country. The only way to increase industrialization is to have more capital. Protectionism can only divert investments from one branch of business to another branch.

Protectionism, in itself, does not add anything to the capital of a country. To start a new factory one needs capital. To improve an already existing factory one needs capital, and not a tariff.

Tweet

… is from page 42 of James Ingram’s 1966 book, International Economic Problems [original emphasis]:

Higher tariffs will tend to increase employment in import-competing industries, although this gain will be offset when exports fall – as they must, either because foreigners retaliate by raising their tariffs or simply because their ability to buy our goods declines when we stop buying theirs.

DBx: Trade policy has no long-term effect on the level of employment in a country. But trade policy does have an effect – short-term and long-term – on the kinds of employment opportunities that exist in a country. Free trade directs workers (and other resources) out of industries where they are less efficient and into industries where they are more efficient. Protectionism directs workers (and other resources) out of industries where they are more efficient and into industries where they are less efficient.

And yet protectionists continue to insist that their interventionist schemes will enrich the people of the country.

Tweet

The Editorial Board of the Wall Street Journal draws important lessons from Trump’s tariff ‘policy.’ A slice:

One of the (many) problems with tariffs is that they lead to countless and arbitrary exceptions for political purposes. President Trump’s latest came Friday as he announced plans to lift tariffs on beef imports for 90 days. You may notice that this covers the three months through the November midterm elections.

In a social-media post, Mr. Trump blamed Joe Biden for high beef prices and added: “As we work to rebuild this herd and help our ranchers, for the next 90 days, the United States will allow up to 300,000 metric tons of product for ground beef to be imported with no out of quota tariff.” He pledged that the imports will be sold at 25% below “current market prices,” which was about $6.89 a pound in July, up substantially in the last two years.

It’s nice that Mr. Trump is giving American consumers this reprieve, at least through the election. He knows he and Republicans are being blamed for higher prices. The break on imported beef is supposed to show he’s doing something about it, even if he is resorting to price controls on imports in the process.

The President said last year he had lifted tariffs on beef imports, and in February he allowed some 80,000 more metric tons of beef from Argentina. Clearly he understands the politics of tariffs and beef prices.

But he still won’t admit that these concessions to political reality are a tacit admission that his tariffs have failed economically and politically. The public is unhappy about higher prices and voters understandably think Mr. Trump’s ballyhooed tariffs are partly to blame.

The tariffs have become a political albatross for the GOP, and they have let Democrats recover from presiding over the Biden inflation that so hurt them in 2024. Democrats in Iowa of all places could pick up the Governorship, a Senate seat and two House seats this year owing to the damage tariffs have done to the farm economy.

Despite his claims that tariffs are a miracle economic cure, Mr. Trump has allowed exceptions for imported consumer electronics, smartphones, coffee, bananas, copper, chemicals, flat-panel TVs, memory chips, fertilizer, and hundreds of other products.

Dailbor Rohac warns of “the Lindsey Graham Act’s dangerous tariff provision.” A slice:

Then there is a provision from the original bill Sen. Graham introduced last year, with the backing of Sen. Richard Blumenthal (D., Conn.). It would authorize the president to impose discretionary duties of up to 100% on goods from countries that rank among the five largest importers of Russian crude oil or natural gas.

Those lists include the usual suspects, namely China, India, Turkey and Brazil. Japan and South Korea, however, also import significant amounts of Russian liquefied natural gas. And despite a dramatic reduction of its dependency on Russian energy, the European Union is Russia’s largest LNG and pipeline gas customer—and the world’s fourth-largest importer of Russian crude. The EU isn’t a country. But it is a single market with a common trade policy, and there is no practical way to impose tariffs on the importers but not on EU countries that have cut energy ties to Russia.

A different administration might wield this new tool prudently and consistently. This one has stretched its interpretation of existing trade statutes. After the Supreme Court struck down the administration’s tariffs under the International Emergency Economic Powers Act, the president leaned on Section 122 of the Trade Act of 1974—a never-before-used balance-of-payments provision, capped at 15%, which lapsed on schedule on July 24.

Since then, the administration has been rebuilding its tariff wall through Section 301 of the 1974 Trade Act. These investigations now affect 60 trading partners accounting for 99.4% of U.S. imports. There are Section 232 “national security” probes into everything from semiconductors to wind turbines. Section 338 of the Tariff Act of 1930 is expected to hit Canadian goods with 50% duties starting Aug.19.

The Graham bill applies only to a small number of jurisdictions, but the legislation’s danger is that it scraps legal triggers, investigations and deadlines that the administration has had to honor under other statutes to sustain its maximalist tariff posture.

The Washington Post‘s Editorial Board reports this: “Trump’s industrial policy meets red state politics.” A slice:

President Donald Trump has touted plans for a massive $4 billion aluminum smelting plant in the small town of Inola, Oklahoma, as a prime example of his administration’s efforts to bring manufacturing back to the United States. Instead, the project is demonstrating a pitfall in populist economics. Promising to restore industrial jobs is popular in the abstract, but the reality on the ground is more complicated, even in a state Trump won by more than 30 points.

Last week, Oklahoma Attorney General Gentner Drummond (R), who is running for governor, asked a federal court to block construction of the 350-acre development. He was tapping into intense anger in Inola, a conservative town outside Tulsa. In June, the town’s council issued a temporary moratorium on the smelter project despite a direct plea from the president to approve it “without delay.”

Though the plant would create about 1,000 permanent manufacturing jobs, locals reasonably fear that pollution could harm residents and nearby agriculture. Aluminum smelting has real environmental fallout. Others are concerned that the energy-intensive facility would compete for electricity resources and jack up ratepayers’ bills, a familiar point of contention in the fight over data centers.
But unlike data centers, which are being built to satisfy exploding market demand, the aluminum smelter could face economic headwinds. It would be propped up by hundreds of millions of dollars in subsidies and incentives from both the federal government and the state — a classic exercise in industrial policy.

Stefan Bartl pleads: “Don’t let Washington pick the next Apple.”

John Puri warns of the U.S. government’s fiscal incontinence.

Robby Soave ponders opposition to data centers.

Tweet

Here’s a letter to the Wall Street Journal.

Editor:

Your lead on-line headline this morning reads “U.S. Imposes 50% Tariffs on Some Canadian Goods After Last-Ditch Talks Fail” (August 22).

This wording is inaccurate and misleading.

Your headline should instead read “U.S. Imposes 50% Tariffs on Americans’ Purchases of Some Canadian Goods After Last-Ditch Talks Fail.”

Being inanimate, goods pay no tariffs. Tariffs are paid by people. And research shows that the people who pay Trump’s tariffs are overwhelmingly Americans. In a new paper, Gita Gopinath and Brent Neiman find that about 92 percent of the 2025 tariffs were passed through into U.S. import prices, implying that U.S. importers bore roughly 92 percent of the tariff incidence and foreign exporters about 8 percent.”*

Describing U.S. tariffs as being imposed on “goods” hides us Americans from the reality that these levies fall heavily on us.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

* Gita Gopinath and Brent Neiman, “The Incidence of Tariffs: Rates and Reality,” Journal of Economic Perspectives, Vol. 40, Summer 2026, pp. 123-144.

…..

Even more accurate would be a headline that reads: “Trump Imposes 50% Tariffs on Americans’ Purchases of Some Canadian Goods After Last-Ditch Talks Fail.” (The “U.S.” isn’t a sentient, acting creature.) But one battle at a time.

Tweet

… is from page 414 of the 5th edition (2015) of Thomas Sowell’s Basic Economics [original emphasis]:

Government is of course inseparable from politics, especially in a democratic country, so a distinction must be made and constantly kept in mind between what a government can do to make things better than they would be in a free market and what it is in fact likely to do under the influence of political incentives and constraints.

Tweet

Here’s a letter to Semafor. (I add that I nevertheless doubt that Trump understands what he’s saying.)

Editor:

Quoted in “Vance takes his first economic punch in the 2028 primary” (August 21), American Compass’s Oren Cass describes people who don’t share J.D. Vance’s wish that the U.S. dollar lose its role as global reserve currency as members of a “bizarre kind of rump-libertarian right.”

Well now.

Here are six notable people who write or speak favorably of the dollar’s role as global reserve currency. All are prominent, half are center-left, and only one is libertarian.

– Larry Summers (former Secretary of the Treasury under Bill Clinton), testified that “if a country or countries decide to adopt the dollar, the United States can expect to benefit in a number of ways.”

– Jason Furman (Chairman of Obama’s Council of Economic Advisors) said in an interview that the dollar’s reserve-currency status is a “good thing” from which “we get some benefits from that in terms of lower interest rates, cheaper borrowing, and, you know — and some other benefits in terms of ability to, you know, have a higher living standard.”

– Kenneth Rogoff (Harvard professor and former chief economist at the IMF) declared that “the dominance of the dollar – that it’s used in everything, it’s the lingua franca of the global financial system – benefits us a lot of ways.”

– Milton Friedman (Nobel laureate, 1976) asked rhetorically: “Can you think of a better deal than our getting fine textiles, shiny cars, and sophisticated TV sets for a bale of green printed paper? Or for some entries on the books of banks?”

– Kevin Hassett (Director of the National Economic Council under Trump) testifying before Congress in 2013 noted “that we are in a situation where we can print dollars that cost us nothing, really, to make and then give them to people, and they give us BMWs, say, and because they really want to hold the dollars, and that that is an advantageous position for us to be in.”

– Donald Trump (President of the United States) said in July 2025 that “the reserve currency is so important. You know, if we lost that, that would be like losing a world war.”

This list could easily be extended.

Mr. Cass should do his homework before offering commentary.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

Tweet

Phil Magness and Sara Albrecht wonder why the Trump administration refuses to reveal just how it came to devise the formula – ‘formula’ – by which it calculated its “Liberation Day” tariffs punitive taxes on Americans’ purchases of imports. Three slices:

When the Office of the U.S. Trade Representative unveiled its now-infamous “Liberation Day” tariff formula in April 2025, economists quickly noticed that something was not right.

At first glance, the formula looked impressive. It had Greek symbols, academic citations, and all the trappings of serious economic analysis. But once economists began examining it, the sophistication quickly fell away. Key terms, they noticed, effectively cancel one another out, leaving little more than a calculation driven by bilateral trade deficits.

For one of us, an economist, that raised a simple question: How did this formula come to be? So he filed a Freedom of Information Act request seeking the records behind it. Then came more than a year of delays, missed deadlines, and back-and-forth with the U.S. Trade Representative.

When the agency finally responded, it said it had found 31 pages of responsive records. It would release none of them — not one email, calculation or even redacted paragraph. Rather, the office insisted that every page is protected because the records include communications between the agency and the White House Council of Economic Advisers about the reciprocal tariff calculations.

Whether those privileges ultimately apply is a question for the courts. But they do not answer the larger question. From an economist’s perspective, the response raises an obvious question: If the economic case for these tariffs was so strong, why is the government so determined to hide its work? And why wouldn’t the Council of Economic Advisers, a body of academic experts, put its name on a document that it reportedly helped to prepare?

…..

If professional economists inside the council warned that the formula made little sense, the public deserves to know. If they endorsed it, the public deserves to know that, too. What should not happen is for the entire record to disappear behind a blanket claim of executive privilege.

The administration’s handling of one of its own academic sources only deepens the mystery. One of the main academic sources cited in support of the formula was a then-obscure working paper by economists Pau Pujolas and Jack Rossbach. Just days later, a link to the same paper appeared again in a speech by then-chairman Stephen Miran, defending the “Liberation Day” tariffs.

But one of the paper’s authors later said the administration had misused their research to support the opposite of what the paper actually found. As Pujolas explained, “there’s a huge gap between my study and what they’re doing.”

…..

Reasonable people disagree about tariffs, trade deficits, and industrial policy. But the executive branch owes the public an honest explanation for policies that affect hundreds of billions of dollars in commerce.

When the government asks courts to defer to its judgment, businesses to trust its reasoning, and the public to accept sweeping economic policies, it should be willing to show its work. What is this administration afraid we will see?

Scott Lincicome writes that manufacturing in the U.S. is thriving despite tariffs. Two slices:

The U.S. manufacturing sector’s recent growth is real but has been exaggerated in recent surveys. More importantly, the hard data we now have show that the nation’s industrial upswing is being driven by non-tariff forces—ones that have more than offset a clear tariff headwind. In fact, American factories would likely be doing even better without the tariffs, an inconvenient reality that brand new research confirms. Let’s dig in.

The first problem with the protectionists’ spin is wonky but important: Much of the recent tariff triumphalism rests on PMI surveys that are useful for gauging short-term industry sentiment and forecasting future trends but can misrepresent what’s happening nationwide and over the long term. As economist Dave Hebert just detailed, the PMI records the share of purchasing managers in various U.S. manufacturing industries who report an increase, decrease, or no change in their orders, employment, prices, and other categories of business activity. The index documents only the direction of the change, not its magnitude. Thus, Hebert explains, a big company like Ford could lay off 1,000 workers while two other small automotive firms each hire five, and the index would read 66.7, signaling a robust “expansion” even though actual employment fell by 990.

…..

Despite these problems, real-world data do show an uptick in the U.S. manufacturing sector, especially in 2026. According to the Federal Reserve’s industrial production index, domestic manufacturing output has been on a decent run since Trump took office, outside of that multimonth dip in the second half of last year.

That’s good news for the sector, but there’s little reason to think it’s owed to Trump’s tariffs. More likely, the growth is happening despite them.

For starters, three powerful factors coincided with the 2025-26 tariffs and are the most likely drivers of U.S. factory output. On the supply side, the One Big Beautiful Bill Act restored and made permanent provisions that allow U.S. businesses to immediately deduct spending on equipment, machinery, and research and development (R&D), and the law temporarily allowed U.S. manufacturers to do the same for spending on structures, effective January 2026. As the Tax Foundation explains at the link above, research shows that cutting the after-tax cost of these business inputs boosts investment and growth, and they estimate that the OBBBA’s permanent expensing provisions will boost long-run GDP by a significant amount (0.7 percent). As I and others have explained for years now, these neutral, free-market reforms are particularly beneficial for large, capital-intensive manufacturers, and their timing aligns with the current U.S. manufacturing acceleration. (The temporary expensing provisions might induce a sugar high but won’t affect long-run growth; they should instead be made permanent.) The White House, for what it’s worth, seems to agree: Its official press release credits business tax cuts, not tariffs, for the current manufacturing “boom.”

Miles Saltiel explains why markets are essential to growth.

National Review‘s Charles Cooke, as usual, is correct – here, specifically, about those whom he accurately describes as “leftist zealots”: “Whether government-run grocery stores or ill-conceived wealth taxes, their doomed pet projects have become articles of faith.” A slice:

In California, Representative Ro Khanna is determined to tax the state’s billionaires, the consequences be damned. In New York City, Mayor Zohran Mamdani is fixated upon the establishment of government-run grocery stores, even as the absurdity of his plan becomes clearer by the week. Both men are impervious to reason. Objections are dismissed, criticisms are deliquesced, contemplation is a skill not yet learned.

Informed that a series of government-run grocery stores would be a burden to the taxpayer, Mamdani merely pounded the Exchequer. Told that this policy might have a deleterious effect on the city’s existing outlets, an aide glibly proposed a subsidy. That subsidy, in turn, will have consequences, and, when those consequences are adumbrated, yet another mitigation will undoubtedly be contrived on the fly. Rube Goldberg, please call your office.

Ro Khanna’s penchant for instantaneous patchwork is more alarming still. Upon hearing that his coveted wealth tax does not intersect with reality, Khanna spontaneously invented an invasive new program: “Allow illiquid founders to pledge shares with a loan from the government to pay tax,” he wrote on X. “The loan period is long but not infinite (e.g. 10 years). The loan is non-resource: at the end of the period, the loan is either paid back in cash, or the government assumes the shares.” That, as it happens, is a preposterous idea. But the instinct is more instructive than the detail. Khanna has his agenda, and he is trying to bend the world around it. Welcome back, Mr. Caligula, we trust you will enjoy your stay.

Also writing about the absurdity of Ro Khanna’s destructive (and immoral) scheme to tax the paper wealth of billionaires is my intrepid Mercatus Center colleague, Veronique de Rugy. A slice:

There is a delicious irony to all of this. Wealth-tax advocates complain about wealthy people borrowing against appreciated stock rather than selling the stock and realizing the gains that trigger capital gains taxes. Yet when their wealth tax creates a liquidity problem, their solution is for billionaires to borrow against appreciated stock, only now from Uncle Sam.

Cuban identified an even deeper problem: The new company doesn’t have to fail for this arrangement to become perverse. A founder could spend the next 10 years building an enormously successful company, creating thousands of jobs, and paying millions in taxes, while continuing to reinvest rather than cash out. After a decade, his shares might be worth far more than when the loan was made—and he still might not have $100 million in cash to repay the wealth-tax loan.

The reason is that success and liquidity are not the same thing. In Khanna’s government-loan scenario, the government could sell the shares used as collateral not because the company failed but because the founder kept his wealth tied up in the venture. Under this system, the incentive is to cash out instead of growing the business, hiring more people, and creating more corporate tax revenue over the long term.

[Mark] Cuban’s response was profane but insightful: “This is the biggest fuck you in the history of entrepreneurship.” While Khanna points to founders so rich that this situation might not be much of a problem now, they made their business decisions and took lots of financial risks when they weren’t threatened by a wealth tax.

Before Republicans get too indignant, they should look in the mirror. The Trump administration helped destroy the norm against government ownership of American businesses by taking a nearly 10 percent stake in Intel and pieces of many other companies, including Trilogy Metals and USA Rare Earth.

No less insightful about the economic folly of Ro Khanna’s scheme to soak the rich is the Editorial Board of the Wall Street Journal. A slice:

But there’s nothing modest about the measure—championed by the SEIU-United Healthcare Workers West—to confiscate wealth from California’s top job creators.

The tax will punish private startup founders whose assets mostly consist of illiquid shares in their companies. They may lack cash and liquid assets to pay the tax bill. What are they supposed to do? The initiative would let them spread the payment over five years, though at a hefty interest charge.

They would also be allowed to defer payment until they are able to monetize their startup stake. As the Tax Foundation explains, the state would then become “a co-investor in the assets.” If they appreciate over time, “California can tax the additional accumulated wealth even if the taxpayer has long since left the state.” Neither option is appealing.

Last weekend on social media Mr. Khanna floated another idea. “Allow illiquid founders to pledge shares with a loan from the government to pay tax,” he wrote. “The loan period is long but not infinite (e.g. 10 years)” and “at the end of the period, the loan is either paid back in cash, or the government assumes the shares.”

“The government would make out if the company succeeds in terms of collection but founders would not be personally liable if the company somehow failed,” he wrote. The latter isn’t true, as others quickly corrected. Hedge fund manager Bill Ackman wrote that a founder could still owe tax if he takes out a loan against his shares from the state and if the company fails.

Mr. Khanna later acknowledged as much. “If the shares go to zero the founder can still face capital gains tax on the deemed sale (basis is often near zero),” he said. “That’s a real issue.” Yes, it is.

A more obvious problem: The state would be lending money to billionaires to pay itself. As Mark Cuban mused, if the state doesn’t receive any incremental revenue, “what’s the point of that?” Also, what happens if a founder can’t pay back the loan in 10 years? The government could then seize the shares.

“I’m sure the investors in those companies will be thrilled about their new partners,” Mr. Cuban wryly noted. His point is that the prospect of government taking partial ownership and control of a startup would chill venture investment.

Palmer Luckey, who co-founded the defense tech startup Anduril Industries, shrewdly noted founders would have a 10-year “speedrun” to pay back their loans—or else surrender their shares to the government—which could warp a business’s incentive to create long-term value for investors. “The behavioral incentives are so obviously horrible,” he wrote.

GMU Econ alum Dave Hebert makes clear this reality: “We can’t tax our way out of the entitlement hole.”

I seldom agree with Donald Trump, but on this matter he’s correct (as reported by the Editorial Board of the Washington Post): The the data-center industry needs “a little public relations help.” A slice from the Post‘s editorial:

That even Loudoun County residents are starting to complain about the bargain they’ve struck speaks to Trump’s point about a PR problem. Opposition to data centers also reflects broader anxieties, and it would help if AI leaders stopped talking nonsense about how their inventions will imminently replace workers — nonsense that appeals to a certain kind of investor but terrifies the public.

Progress on artificial intelligence won’t make humans obsolete, but it can make them wealthier and more productive. Data centers need a better plan for negotiating with local governments, but the frothy debate about the economics of AI also needs a reality check.