≡ Menu

Some Links

Mary Anastasia O’Grady writes insightfully about the calamity that is Cuban communism. Two slices:

Take the island’s energy crisis. Regime talking points, repeated ad nauseam by the international media, blame it on Washington sanctions. But major power outages across Cuba have been a recurring nightmare for decades. The worsening situation this year is the death rattle of an electric utility that is never going to be functional without a change in management.

Cuba’s thermoelectric power plants provide some 60% of the country’s installed electricity capacity, according to Jorge Piñon, an energy expert at the University of Texas at Austin. Those plants are powered by Cuban heavy crude, which means their fuel supply isn’t affected by U.S. sanctions policy. Distributed-generation plants around the country provide another 20% of capacity, according to Mr. Piñon. They rely on diesel. But with one-third of those plants inoperable due to poor maintenance and a lack of capital investment, fuel shortages affect only about 13% of generating capacity. They can’t explain the darkness.

It’s true that fuel shipments are down, but that isn’t all about sanctions. Cuba has run out of friends willing and able to underwrite its kleptocracy. Hugo Chávez, who led Venezuela from 1999 until he died in 2013, sent oil to Cuba in exchange for platoons of communist teachers and medical personnel to indoctrinate his nation. The regime in Havana would resell a good part of the oil to other countries and rake in the cash. That practice continued at a reduced pace during Nicolás Maduro’s rule from 2013 through 2025. Now it’s no more.

…..

Get ready for television specials promoting the regime narrative that the country is on the brink of a humanitarian disaster because of U.S. policy. Cue the images of dying babies in broken-down hospitals that can’t keep the lights on. Never mind the more than 800 political prisoners rotting in Cuban dungeons and the goon squads that have plenty of gasoline to patrol the streets.

Expect also to hear that Cuba is pursuing economic “reform.” Don’t buy it. Cuba’s version of change is reminiscent of the Soviet elites who moved in and got rich as the Bolshevik experiment disintegrated. The island needs new rules that provide investors with certainty. That’s not going to happen as long as the Castro family and its inner circle remain in power.

John Puri tells how “a lifelong carbon-taxer,” the late Nobel-laureate economist William Nordhaus, “helped discredit climate policy.” A slice:

Nordhaus may be remembered by the left as a carbon taxer, but his true contribution was bringing rigorous cost-benefit analysis to a policy field that was sorely lacking it. In doing so, he showed that a net-zero policy failed the assessment worse than doing nothing at all, and that tolerating a good deal of global warming would be better in the long run for human welfare than overreacting today.

Kyle Smith remembers with great fondness William Nordhaus’s teaching. Three slices:

Here’s the thing: Nordhaus, who died of brain cancer at 85 on Oct. 30, was one of the most effective and memorable teachers I ever encountered. He wasn’t one of the song-and-dance men who try to charm the students. With his out-of-time horn-rimmed glasses and dry, deadpan attitude, he was like an unusually slender owl. He didn’t care whether we liked him; he cared whether we learned. His course wasn’t entertaining. It was merely life-changing.

…..

This was our introduction to the concept of scarcity, and the related question of value. Nordhaus walked us through supply and demand—why the one curves up (the higher the price you can get, the more you will make) and the other curves down (buyers want things to be cheap). He was the first person I ever heard explain trade-offs, or the phrase “guns or butter.” Pick one or the other. But you have to pick. Difficult choices are everywhere.

…..

Politicians, those masters of telling people they can have something for nothing, distort prices in their own interest but at everyone’s peril, and are the natural enemies of economic thinkers. Nordhaus’s course implicitly showed us how to think about political claims: What are the trade-offs Sen. Fantasyland isn’t mentioning? What is the actual cost? What is the actual benefit? Is “doing something” potentially worse than doing nothing?

Underlying his lectures was an appreciation for how markets create wealth with a never-ending cycle of innovation. This innovation often seems disorienting in the short term but makes us unimaginably better off in the long run. Jobs get destroyed, new and better jobs get created. Inefficiency gets wrung out of the system. In 1900, thanks to Thomas Edison’s light bulb, workers could purchase 10 days of reliable light for only a single 60-hour week of work. This was miraculous at the time. By 2017, Nordhaus noted, that same amount of light could be purchased with a fraction of a second of labor.

Prices do their work. The market adjusts. Resources are allocated, and re-allocated, and re-re-allocated, ever more efficiently—albeit forever dogged by governments interfering with prices and creating their own, often misshapen, incentives.

Voters hated Trump’s tariffs – a proposition for which Jon Miltimore and Laura Williams offer evidence. Two slices:

So Vance is not wrong that the Iran war was unpopular and contributed to the GOP’s defeat. But an abundance of data show the second item on his tweeted list — “focus on the cost of living/inflation” — is the reason, as he said “Our voters showed up. And…many of them voted for Democrats.”

Voters clearly despised the impact of this administration’s tariffs. In a nationwide ABC News poll, about one in three voters said the war in Iran was “crucial” to their vote, while fully half said the same about the cost of living — and government corruption.

Despite Trump’s populist rhetoric around their launch, tariffs were unpopular with voters. Writing at the Cato Institute prior to the election, Alfredo Carrillo Obregon explained that tariffs had become bad politics, as well as bad economics. The bipartisan conventional wisdom in Washington that protectionist policies win electoral votes was turned on its head as voters linked tariffs to affordability.

“Concerns about affordability sit at the top of most voters’ minds these midterms, and thus, high and sweeping tariffs promoted by the White House have understandably become a culprit behind increases in Americans’ cost of living,” Obregon wrote. Polls, and likely the final vote tally, proved him correct.

While Vance framed the disconnect as a messaging failure, voters were right to identify tariffs as a threat to an affordable American life. Last month, economists at the Federal Reserve Bank of New York published a paper finding that tariffs had raised the cost of goods in 67 categories in 2025. The typical American household is paying at least $1,000, and perhaps several times that, more to maintain the same standard of living under the new tariff regime.

Economists have always understood that, contrary to the President’s promises, taxes on imported goods are paid by American consumers, not by foreign governments or overseas manufacturers. Rising prices on imported varieties of a good account for about 64 percent of the tariff’s bite, according to the Fed paper, but another 36 percent comes from higher-priced domestic producers, who are either paying more for the imported inputs to their products, or were able to raise prices when foreign competitors were penalized.

Making goods more expensive, some have argued, is exactly the point of a successful tariff. Americans now pay 75 percent more for aluminum and 64 percent more for steel than the rest of the world. The trade deficit indeed seems to be contracting. And manufacturing jobs are rising again, but only after cratering during the first year of Trumpian tariff theatrics. As our colleague Dave Hebert pointed out recently, the administration is now claiming a job-creation victory for partially filling the hole it dug. Tariffs have done little to nothing to return manufacturing to the US.

…..

But tariffs became broader and harder to avoid, and businesses were relatively transparent about having to pass those costs on to American buyers. Amid an affordability crisis driven by dollar debasement and falling real income, Americans reacted. Fed research showed Americans cut their consumption of tariffed goods proportionally more than the price rose, suggesting a behavioral backlash.

The 2026 election suggests Americans are no longer willing to pay the price of protectionism.

Cullen Hendrix reports that “Santa’s sleigh will be weighed down by tariffs.” (HT Scott Lincicome)

Daniel Hannan reflects on the midterm election results. A slice:

Indeed, it is hard to find any ruling principle behind MAGA beyond the convenience, at any given time, of Trump.

Except one. The President has been a lifelong opponent of free trade. “I am a tariff man,” as he likes to say. Well, all the other tariff men, which is to say everyone in his administration, are now tainted by that association.

They must have known that Trump’s trade policy would fail, for they are not fools. They must have grasped that it would not reshore jobs or raise revenue.

They must have understood that tariffs would fall on American consumers, not foreign governments – which is why no foreign governments are queuing to get their money back following the Supreme Court’s decision that the tariffs were illegal.

Above all, they must have realised that trade deficits, which so obsess Trump, don’t matter. The United States has been running them solidly since 1975, and has outperformed the rest of us.

Basic economics would have told them trade deficits are matched by investment surpluses (or vice versa) and that Trump’s demand for both surpluses and simultaneous increased investment was mathematically impossible.

But, ambitious, obsequious or frightened of the MAGA voting bloc in Republican primaries, they never objected. Instead, they flattered and amplified Trump, like so many eunuchs around a vicious child emperor.

They will surely pay a political price. JD Vance, who had previously been the bookies’ choice to succeed Trump, has seen his stock plummet.

National Review‘s David Bahnsen shares his wise reflections on the GOP’s electoral drubbing. A slice:

The debate over the Iran war’s role in this Republican debacle would be comical if it were not so maddening. With virtually no one operating in good faith or making a serious argument, a whole cabal of people have claimed, all statistical evidence and voter polling to the contrary, that the sole reason for states like Texas, Kansas, and Mississippi flipping is the Iran war. Inversely, no one who disputes that monocausal theory of the case denies that the Iran war is unpopular, and that its unpopularity was a contributor to the decline of approval for President Trump and to the results Republicans suffered all over the country Tuesday night. That voters detest the state of prices, and that they believe (with obvious basis in fact) that tariffs are connected to this, is not disputable by credible people. That the bizarre handling of the Iran war led to a Strait of Hormuz debacle, and to significant problems for fuel prices and a downstream impact from diesel prices, is also obvious. Reasonable people can disagree as to how much of the Iran war contribution was related to opposition to de-nuclearizing Iran versus the way in which it all went (e.g., a failed MOU negotiated by the vice president, repeated claims of victory that were obviously untrue, and a sustained period of time with no clear resolution). But all advocates of a multi-causal explanation of the midterms recognize the significant role Iran played.

While those who predicted the economic pressures tariffs would create (yours truly included) and others who are more focused on Iran (some due to strong anti-Israel obsessions) socially post to their heart’s content about those two issues, it seems to me that the framework of Burkean conservatism is under assault in this new right, populist, Trumpian, Vanceguard moment, and the election results reflect this internal right-wing implosion. My contention is that a lack of focus on the free and virtuous society cost the GOP dearly in 2026 and will cost the GOP dearly until that framework is recovered.

Advocates of a free society have never called for central planning as a tool for economic growth. The anti-constitutional, discretionary, imperialistic, arbitrary wielding of tariffs has been a sight to behold, but not nearly as much of a sight as watching people try to defend it. From “Canada is ripping us off” claims to “this will restore manufacturing jobs” to “we must protect our national security interests” to “tariffs are making us rich” — the statist dogma embedded in all of this was trumped only by the intellectual incoherence. Tariffs have been put on, then taken off, and applied so randomly and inconsistently, it has caused the few honest pro-tariff people out there to admit this has been an unmitigated disaster even for so-called economic nationalists.

But the heavy hand of counterproductive and imperialistic tariffs has hardly been the only policy priority undermining a free society. The first two years of this Trump administration created 40 times the quantity of something President Obama did just one time — the taking of an ownership interest in a private U.S. company. If you had told me that in 2026 the United States government would have 41 companies on its balance sheet, I would have told you that neither the Republicans nor Democrats won in 2024, but rather that the CCP did. Generational critique of state-owned enterprises has been muted in exchange for indefensible government equity positions, making a mockery of cogent defense for optimal capital allocation and repudiation of cronyism.

Add to the mix an economic agenda that has pushed deficits to record levels (unashamedly), suggested paying married women taxpayer money for being home with their kids, promoted the idea of blocking private ownership of private property, advocated for price controls in credit cards, and made demands of private businesses repeatedly around their own priorities of investment and resource allocation, and what we have seen is a rhetorical opposition to the DSA movement of the left that is accompanied by DSA-light policies on the right. This is political malpractice, in that it has never worked in history to offer a weak and limp echo to the worst policies of progressivism, but it is also an ideological heresy for conservatives. Those who say voters were only motivated by prices in this election are wrong and miss the point that some of the administration’s policies heavily exacerbated high prices, but they also underestimate the role that a potent opposition to left-wing policies represents. The strongest talking point the GOP had this election was that the Democrats seem to be increasingly radicalized. They spent two years taking that opposition off the table by an unending game of footsie with these populist embraces of government interventions in the economy.

{ 0 comments }

Quotation of the Day…

… is from pages 262-263 of Samuel Gregg’s excellent new book, The Civilization of Commerce:

For, “to give” requires some degree of other-regarding, minimally expressed through an awareness of and even sympathy for someone else’s needs and wants. That necessitates a willingness to put yourself in another person’s place, even if briefly and temporarily. In The Theory of Moral Sentiments, Smith devotes many pages to describing how this occurs. “To take,” by contrast, demands no substantive reflection on another person’s ambitions or needs, let alone the conditions under which other people find themselves.

DBx: Yes.

The taxman, like the thief, need know nothing about the persons whose property is taken other than the fact that those persons possess property that can, with force, be taken. The merchant, in contrast, can profit only by knowing what his or her customers want.

{ 0 comments }

Bonus Quotation of the Day…

… is from page 116 of Stephanie Slade’s excellent 2026 book, Fusionism: Liberty, Virtue, and the Future of the American Right [original emphasis]:

Soon enough, the [Berlin] wall would indeed come down. That is often thought of as the first domino to fall in Eastern Europe, but in fact, it occurred a few months after Poland held its first semi-free parliamentary elections in June 1989. Solidarity claimed 99 percent of the open seats, and Lech Walęsa went on to become president of a democratic Poland.

{ 0 comments }

Some Links

Mark Penn and Andrew Stein make clear that the electoral trouncing of the GOP was not chiefly the result of the war in Iran. A slice:

According to the Harvard CAPS/Harris poll, 58% of voters were unhappy with the economy when they showed Democrats the door in 2024, compared with 64% late last month. They were happier with the economy when Donald Trump was elected, but that faded month after month, showing the biggest decline when tariffs were issued and then when Democratic campaign ads were in full swing. Among voters supporting Democrats, 86% said they were unhappy with the economy. Ahead of the midterms, only 5% of voters ranked foreign policy as the most important issue facing the country. To the extent that the war was a factor, it was in large part because of the spike in gasoline and diesel prices.

Megan McArdle points out that many of the Democrats elected last week to Congress will have to deal with the fiscal reckoning that awaits Social Security and other ‘entitlements.’ Two slices:

In the last quarter of 2032, the Social Security trust fund dedicated to retirees is scheduled to run out of money. (There is another trust fund for disability insurance, which is better funded but comparatively small.) At that point, by law, benefits are supposed to be cut to match outflows to inflows, which would mean an across-the-board cut of over 20 percent. Six months later, the Medicare hospital insurance program will deplete its trust fund and is scheduled for an 11 percent cut in reimbursements.

…..

Because we’ve waited so long, all of the options are now bad. Perhaps you have heard that there is an easy fix: just eliminate the cap on payroll taxes, which applies only to the first $184,500 of income. Actually, this fix is neither easy nor complete. A 12.4 percent tax hike on every dollar earned above $184,500 would be one of the largest tax hikes since World War II, aimed squarely at the affluent professional base. Yet it would generate surpluses for only a few years and cover about half the program’s long-term shortfall. If we assume that the employer portion of payroll taxes ultimately comes out of wages — and we should — it would also raise the marginal tax rate on higher earners to 50 percent or more in high-tax blue states, leaving little fiscal space for new spending or for fixing Medicare.

The other options are just as politically unappetizing: raising the retirement ages and trimming back benefits for higher-income seniors. Some combination of these things has to happen. Any combination will make a lot of people mad. If Congress tries to punt — passing temporary fixes with borrowed money — America will never get its fiscal act together, resulting in higher interest rates to keep financing our massive deficits. There’s a real risk of a major economic crisis.

Anyone elected to the Senate this year will be responsible for those painful choices. So will any House member who manages to stick around for a couple of terms. And the next president will be the focal point of any blowback.

Clark Packard hopes Democrats have the courage to do what’s right regarding Trump’s tariffs punitive taxes on Americans’ purchases of imports. A slice:

A Democratic Congress can pass bills to eliminate virtually all Trump tariffs and reform tariff powers, requiring Republicans to vote on them. Likewise, Democrats can attach limits to must-pass spending bills, use their oversight powers to examine how the Trump tariffs were assembled and why they were imposed, and write laws that a future president can sign. The public is already on board: in a Cato survey this spring, 70 percent of voters said presidents should be required to get explicit congressional approval before imposing tariffs, including 56 percent of Republicans. On Election Day, about 7 in 10 voters told the AP Voter Poll that Congress isn’t doing enough to check this deeply unpopular president.

Allysia Finley identifies what’s rotten in the state of MAGA. A slice:

Last week’s Republican bloodbath has the ingredients of a Shakespearean tragedy. A leader brought down by overweening pride. Schemers and sycophants who goad him into taking actions against his interests. Innocents who become collateral damage.

Like King Lear, President Trump is a fool for flattery. He demands ostentatious displays of loyalty that are often insincere. “Which of you shall we say doth love us most?” Lear asks his daughters. JD Vance doth say. So too profess Stephen Miller, Howard Lutnick and Bill Pulte.

Mr. Trump rewards brown-nosers who seek to bolster their own power and banishes those he perceives as disloyal. Take North Carolina Sen. Thom Tillis, who became persona non grata after he criticized the president’s tariffs and blanket pardons of Jan. 6 rioters. The president’s refusal to abide criticism insulated him from sage advice that might have prevented his descent in public approval and the GOP’s election wreckage.

“I am a man more sinned against than sinning,” the aggrieved Lear rages on the heath after being cast out by his sycophantic daughters. After the election, Mr. Trump delivered a Truth Social soliloquy: “FoxNews bears responsibility for these losses by constantly and consistently putting on the Dumocrat opposition, and worse.”

He faulted GOP candidates who tried to distance themselves from his unpopular tariff and immigration policies. “Some of the candidates that I endorsed fought me,” Mr. Trump said. MAGA voters “didn’t like that they fought me,” though exit polls showed that it was non-MAGA Republicans and independents who turned against Republicans.

A common theme in Shakespeare is the danger of nursing grievances and grudges. Hamlet becomes consumed by a self-destructive need to avenge his father’s murder at the hands of his uncle Claudius. Though Hamlet ultimately succeeds, he, his beloved Ophelia and most of their families die as a result.

The president has let revenge consume his presidency, as he has waged retribution against John Bolton, James Comey, Letitia James and others. Such vendettas became political distractions and exhausted the patience of Americans.

“Hamlet” also offers a lesson in the insidious nature of political corruption. “Something is rotten in the state of Denmark,” the palace guard Marcellus observes. Voters took the same view of the Trump administration and the Republican party.

Over the past two years, voters have been confronted with a steady dribble of stories about the Trump family’s crypto schemes. This fall brought reports that a Russian oligarch helped bankroll Donald Trump Jr.’s Bahamas wedding and that former Ambassador Kimberly Guilfoyle sought $100,000 from a GOP donor to pay off a credit-card debt.

Grifters in the Trump administration call to mind the buffoonish Sir John Falstaff in “Henry IV, Part 1” who engages in disreputable activities and enriches himself by exploiting his friendship with the young Prince Hal. “What is honour? A word. What is in that word ‘honour’? What is that ‘honour’? Air,” Falstaff muses.

Mr. Trump and his coterie may view honor as immaterial, but corruption ranked at the top of voters’ concerns in polls. Yes, Americans are unhappy about high gasoline prices from the war in Iran and persistent inflation. But the killer was that while they struggled to pay bills, Mr. Trump and his hangers-on looked to be enriching themselves. In exit polls 62% of voters said that the president put his personal interests over the interests of the country.

Arnold Kling predicts that a “coalition of the militants” will ensure that Democrats continue to rule from the far left.

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with GMU alums Dave Hebert and Tom Savidge about the blue wave and the future of economic policy in the U.S.

Scott Lincicome tweets: “AI & data centers drove recent US manufacturing job growth.”

{ 0 comments }

Quotation of the Day…

… is from Ronald Reagan’s August 13, 1986, statement issued on the 25th anniversary of the raising of the Berlin Wall:

Those who built and maintain the Berlin Wall pretend it is permanent. It cannot be. One day it – and all those like it – will come down. As long as the wall stands, it can never be porous enough for free men and women in the West, and freedom-loving men and women in the East, to tolerate it. Freedom, not repression, is the way of the future.

DBx: The Berlin Wall, of course, did indeed come down – was razed – 37 years ago today, on November 9th, 1989, three years after Reagan predicted its fall.

Reagan’s optimism is worthy of applause. But I fear that it’s excessive. History – including much of it since that glorious day 37 years ago – reveals that humanity is heavily populated with individuals who itch to order their fellow human beings about, as well as with people who are eager, or at least willing, to be ordered about. Still, let us celebrate the collapse of 20th-century communism.

{ 0 comments }

Markets or Politicians?

Here’s a letter to the Wall Street Journal.

Your November 6th page features an interesting inconsistency. Jim Secreto writes that “private capital alone hasn’t secured our supply chains because markets have underpriced the risk for too long” (“Trump, the New Congress and the Solyndra Probe”). To remedy this alleged market failure, he – although acknowledging the dangers of political interference in markets – would have politicians override market assessments of risk and direct capital toward industries that they deem to be strategically important

In contrast, Jeff Yass explains that “it is arrogant to believe you know more than the market, and you’d be a fool to listen to a pundit who says he does” (“There’s No Such Thing as a Stock-Market Bubble”)

I’m with Mr. Yass. The fact that markets don’t eliminate particular risks is no evidence that they underprice those risks. And economic theory and history give us ample reason to doubt that politicians and bureaucrats can match – let alone surpass – the success of markets at assessing risks and allocating capital. The case for markets isn’t that they are always right. They aren’t. Instead, the case for markets is that they are more likely to be right than are politicians and bureaucrats.

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

{ 0 comments }

Some Links

Douglas Holtz-Eakin tells why Trump’s tariffs were (to put it mildly) a mistake. Two slices:

Of the many losers in this year’s midterm election, one stands out: President Trump’s populist economic platform. Many Republicans have always known that Trumponomics is a false promise. On Election Day, America showed that it agrees. The best course forward — for Republicans or any other politicians seeking a record of economic success — is a return to traditional limited-government values.

Trumponomics is a Frankenstein’s monster that mashes together progressive, conservative and origin-unknown economic and fiscal policies. The good elements are effective but few: pro-growth tax policy and a rollback of the regulatory overreach of past administrations. The bad list is lengthy: protectionist tariffs, government stakes in private industry, price-setting, payoffs to favored constituencies and the abdication of responsible fiscal stewardship.

Take tariffs. Imposing protectionist taxes on imports has had prominent supporters on the left, with generations of leaders from that side — John Dingell, Richard Gephardt, Bernie Sanders — who have built economic platforms including them. For the past quarter century or so, right-leaning populist commentators have pushed for aggressive use of tariffs, too. The idea of sweeping tariffs seems popular. The reality is not.

Mr. Trump began saddling the country with relatively limited new tariffs in his first term, and the Biden administration mostly continued them. On “Liberation Day” in 2025, Mr. Trump blitzed Americans with new tariffs on a scale and scope not seen for a century. Traditional conservatives understood what this really meant: large tax increases that hit low-income families hardest and damaged small businesses and entrepreneurs. The public response was also unsurprising: With costs going up, the tariffs became deeply unpopular.

Politically, this episode flipped the script. Democrats developed an anti-tariff fervor, spending nearly $60 million on ads attacking Republicans who supported the tariffs. The upshot? Tariffs are a political loser.

The administration can’t even argue that its tariffs have brought jobs and manufacturing back to America. Look at steel tariffs, initially imposed in Mr. Trump’s first term, retained by President Joe Biden and raised again by Mr. Trump in his second term. If Trump-style populist economics were right, the country should have had a surge in new steel mills and in employment in the industry. Yet after nearly a decade, the needle has barely moved on either. The nation has seen a large increase in steel prices, though, and that has driven up the costs of things such as housing and canned food.

Apparently still under the impression that government intervention can help the economy — or at least himself, politically — Mr. Trump has tried to appeal to key voter blocs with insalubrious handouts. The president has offered $5,000 checks, Medicare “rebates,” Obamacare “refunds,” diesel subsidies and aid to farmers to offset their losses stemming from tariffs. These failed to improve Republicans’ midterm chances — or enhance economic growth. The money would have been better spent if it had remained in the private economy rather than taxed and redistributed according to the president’s whim. Or the Treasury could have retained it and kept the deficit a little lower.

The lack of interest in fixing America’s increasingly dangerous budget situation is another irresponsible element of Trumponomics, which holds that huge, expensive entitlement programs such as Medicare and Social Security should remain untouched. The federal deficit in the 2026 fiscal year was about $2 trillion, or around 6 percent of gross domestic product. (By contrast, deficits averaged only 2.1 percent of G.D.P. from 1960 to 2000.) Publicly held federal debt now equals G.D.P. and is projected to rise uncontrollably in the future. Borrowing costs, faith in the government’s solvency and the security of the dollar are all on the line, and Mr. Trump has no plausible plan to deal with the problem.

…..

To be fair, the president’s agenda is not all bad. The Trump administration’s efforts to control the regulatory state have worked. It permits federal agencies a limited budget of regulatory costs that they may impose on businesses, and it enforces this restraint. In the past, Republicans spoke about the need to control red tape but often failed to act. Mr. Trump demanded action and got it. Future administrations should copy this regulatory budget policy, limiting the economically costly overgrowth of the state.

Similarly, the 2017 Tax Cut and Jobs Act delivered long-overdue business tax reforms, cutting taxes on corporations to a rate that enables us to compete internationally, rewards retention of intellectual property in the United States and promotes business research, development and investment. The G.O.P.’s 2025 reconciliation law fine-tuned business taxation and made the investment incentives permanent, so businesses now have the certainty they need.

There is a pattern here: Trumponomics worked when it removed government from economic decisions; when it put government rather than individuals and businesses in charge, it failed. The most damaging notion in populist thinking is that government is the source of material prosperity — that the state knows better than business about what investments are valuable or than families about how to achieve work-life balance.

A return to a traditional platform of contained, efficient government with a well-targeted social safety net and a responsible budget will best serve the country’s economic needs. Now that Americans can see that populist economics have failed, leaders who embrace this platform might win some elections, too.

Cato Institute economist Ryan Bourne makes clear that “tariffs, [budget] deficits and an energy shock have handed the Republicans the same verdict on inflation that voters gave Biden two years ago.” Two slices:

The truth, however, is that discontent with Trump on inflation was growing pre-Iran. President Trump’s net approval on inflation in the Economist/YouGov poll slid steadily throughout 2025, even as real average hourly earnings were improving. By February 2026, before any strikes, Trump’s net approval on inflation had fallen to –28, a level not dissimilar to that Joe Biden suffered in the dying days of his presidency.

…..

Enormous ongoing budget deficits are putting upward pressure on interest rates. Demanding the Federal Reserve cut rates could’ve de-anchored inflation expectations somewhat, while Trump’s recent ode to inflating away the national debt sent the same signal. Deportations, and the fear of them, disrupted agriculture and construction.

The Washington Post‘s Editorial Board explains what shouldn’t – but, alas, what today nevertheless does – need explaining: “The government should not gamble taxpayer dollars on politically timed industrial projects.” Two slices:

In addition to tariff protection, which raises prices for everyone who buys anything made with steel, Mesabi Metallics is set to receive $1.3 billion in public support for the project. Iowa had to change its laws to allow for such generous corporate welfare. A handful of Republican lawmakers in Des Moines initially opposed the giveaway, out of concern for taxpayers, but most fell in line.

…..

Politicians in Washington don’t know what’s best for Lee County. Protectionism and corporate welfare always undermine the free market. If they can’t even deliver votes, they really serve no purpose.

Lance Izumi decries the anti-educational consequences of the false portrayal of equal outcomes in schools. A slice:

Equity in education has come to mean something very different from equal opportunity. Rather than giving every student the same opportunity to succeed based on merit and hard work, equity increasingly focuses on producing equal outcomes, even when doing so means changing grading, discipline, curriculum, and academic expectations.

Consider equity-based grading, which can include giving students partial credit for work they never submit, eliminating penalties for late assignments, allowing repeated test retakes, and eliminating D’s and F’s from the grading scale. Teachers themselves have raised serious concerns about those practices. A 2025 Fordham Institute study found that 81 percent of teachers considered giving partial credit for assignments never turned in harmful, while only 8 percent considered the practice helpful. Students also understand how these practices undermine their education.

Arnold Kling rightly sticks to his libertarian principles regarding data centers.

My former Mercatus Center colleague Josh Pauzé reports on this troubling development: “White House Warns Conservative Groups It Is ‘Monitoring’ What They Say Amid Discontent Over Midterm Results.”

My Mercatus Center colleague Rebecca Lowe reviews Rainer Zitelmann’s new book on space exploration.

{ 0 comments }

Quotation of the Day…

… is from pages 127-128 of Thomas Sowell’s 2023 book, Social Justice Fallacies:

Intellectual elites may imagine that they have all the consequential knowledge required to create the social justice world they seek, despite considerable evidence to the contrary. But, even if they were somehow able to handle the knowledge problem, there still remains the problem of having enough power to do all that would need to be done. That is not just a problem for intellectual elites. It is an even bigger problem – and danger – for the people who might give them that power.

DBx: Yes.

Almost no one would allow his or her neighbors – even though these are people who are personally known and considered to be friends – confiscate large chunks of his or her wealth and liberties. Yet very many people think nothing of allowing strangers who excel at winning elections confiscate large chunks of their wealth and liberties. Very many people really do believe that being invested with government power, especially if that investiture is done democratically, transforms ordinary humans into superhumans.

Strange belief, that. For humanity’s sake, hopefully one day this superstition will be dispensed with in the same manner as we’ve dispensed with superstitious beliefs in witches, ghosts, and phrenology.

{ 0 comments }

Thomas Sowell and William Buckley

I assumed that I had already shared here at Cafe Hayek this recording of a 1983 appearance of Thomas Sowell on William Buckley’s Firing Line (with an appearance also by Robert Lekachman). My assumption is mistaken. I now remedy this oversight.

{ 0 comments }

Here’s a letter to National Review.

Editor:

Dan McLaughlin is correct that the U.S. economy is generally performing worse so far during Trump’s second term than performed during the comparable period of his first term (“Trump Lost the Voters’ Trust on the Economy Before the War,” November 6).

Consider these comparisons of economic performance from January 2025 through September 2026 with the performance during the corresponding period of Trump’s first term, January 2017 through September 2018.

Inflation, measured by the personal consumption expenditures price index, was 5.45% under Trump 2.0, compared with 2.98% under Trump 1.0.

The unemployment rate rose from 4.0% to 4.2% under Trump 2.0, while falling from 4.7% to 3.7% under Trump 1.0.

Total nonfarm employment grew by only 0.54% under Trump 2.0, compared with 2.56% under Trump 1.0.

Manufacturing employment fell by 0.09% under Trump 2.0, compared with a 3.05% rise under Trump 1.0.

Real average hourly earnings of production and nonsupervisory workers rose by only 0.50% under Trump 2.0, compared with 1.73% under Trump 1.0.

Real median weekly earnings fell by 0.80% under Trump 2.0, compared with an increase of 0.57% under Trump 1.0.

Industrial production rose by 3.88% under Trump 2.0, compared with 5.41% under Trump 1.0.

Real gross private domestic investment increased by 4.71% under Trump 2.0, compared with 10.04% under Trump 1.0.

The real stock of foreign direct investment in the U.S. increased by only 1.72% under Trump 2.0, compared with 7.28% under Trump 1.0.

Real exports of goods and services rose by 2.08% under Trump 2.0, compared with 2.85% under Trump 1.0.

Real GDP increased by 4.06% under Trump 2.0, compared with 4.53% under Trump 1.0.

Federal debt held by the public, measured as a percentage of GDP, rose under Trump 2.0 (through the second quarter of 2026) from 96.4% to 97.4%, compared with a slight decline over the corresponding period of Trump 1.0, from 75.6% to 75.2%.

Of course, the economy under Trump 2.0 didn’t perform worse in every respect. Industrial capacity, for example, rose by 2.16% under Trump 2.0 but fell by 0.79% under Trump 1.0. And real per-capita GDP grew at nearly identical rates under the two administrations: 3.57% under Trump 2.0 and 3.58% under Trump 1.0.

Nevertheless, by many relevant measures, the American economy performed worse – and often much worse – over the first half of Trump 2.0 than it performed over the first half of Trump 1.0. It’s little wonder that voters today are less impressed with Trump’s economic stewardship than they were at the corresponding point in his first term.

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

Notes: (1) Comparisons use mostly monthly data, but the foreign-direct-investment figures, and federal debt figures, are based on quarterly observations. (2) Inflation figures measure cumulative increases in the price level, not annualized inflation rates. (3) Nominal figures above are adjusted for inflation using the personal-consumption-expenditure index. (4) Data for Q3 2026 federal debt as a percentage of GDP will not be released until later this month.

UPDATE:

In response to my earlier letter to National Review, a friend wrote to suggest that a better starting point for each of the two Trump administrations is three months after each inauguration day. The idea is to ensure that data from the new administration isn’t corrupted by hold-over data from the previous administration. Here’s a revised letter that takes account of this reasonable suggestion.

Don

……………

Editor, National Review

Editor:

Dan McLaughlin is correct that the U.S. economy has generally performed worse during Trump’s second term than during the comparable period of his first term (“Trump Lost the Voters’ Trust on the Economy Before the War,” November 6).

To allow each administration three months to get underway, consider these comparisons of economic performance from April 2025 through September 2026 with the performance during the corresponding period of Trump’s first term, April 2017 through September 2018.

Inflation, measured by the personal consumption expenditures price index, was 4.83% under Trump 2.0, compared with 2.70% under Trump 1.0.

The unemployment rate was 4.2% in September 2026, compared with 3.7% in September 2018.

Total nonfarm employment grew by only 0.41% under Trump 2.0, compared with 2.18% under Trump 1.0.

Manufacturing employment was unchanged under Trump 2.0, compared with growth of 2.77% under Trump 1.0.

Real average hourly earnings of production and nonsupervisory workers rose by only 0.03% under Trump 2.0, compared with 1.45% under Trump 1.0.

Real median weekly earnings fell by 1.60% under Trump 2.0, compared with no change under Trump 1.0.

Industrial production rose by 2.79% under Trump 2.0, compared with 4.08% under Trump 1.0.

Real gross private domestic investment increased by 8.07% under Trump 2.0, compared with 8.33% under Trump 1.0.

The inflation-adjusted stock of foreign direct investment in the U.S. increased by 1.15% under Trump 2.0, compared with 5.08% under Trump 1.0.

Real GDP increased by 2.0 by 3.04% under Trump 2.0, compared with 3.94% under Trump 1.0.

Real per-capita GDP rose by 2.7% under Trump 2.0 compared to a rise of 3.2% under Trump 1.0.

And federal debt held by the public as a percentage of GDP rose from 94.6% in the second quarter of 2025 to 97.4% in the second quarter of 2026, compared with an increase from approximately 73.9% to 75.2% over the corresponding quarters of Trump 1.0.

Of course, the economy under Trump 2.0 didn’t perform worse in every respect. Industrial capacity, for example, rose by 1.79% under Trump 2.0 but fell by 0.73% under Trump 1.0. Real exports of goods and services grew by 4.28% under Trump 2.0, compared with 3.12% under Trump 1.0.

Nevertheless, by most of these measures, the American economy performed better – sometimes much better – during the comparable period of Trump’s first term than during his second.

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

Notes: Monthly comparisons run from April through September of the following year. Quarterly comparisons generally run from the second quarter through the third quarter of the following year. The FDI and federal-debt comparisons end in the second quarter of 2026. Real hourly earnings and FDI are adjusted using the PCE price index.

{ 0 comments }