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… is from page 333 of William Easterly’s brilliant 2025 book, Violent Saviors: The West’s Conquest of the Rest:

Ukraine’s approach to dignity was an attempt at a positive-sum game of liberal values – individual freedom and consent of the governed at home, voluntary international trade, and mutual respect of sovereignty with other nations. The murderous Putin’s approach to dignity was a zero-sum game, bolstering Russia’s national dignity by taking away Ukraine’s. It came after centuries of the West’s own zero-sum game of coercion of people in the Rest in the name of progress.

Sadly, Putin was able to exploit this history to justify his own tyranny at home and abroad, just as Lenin and Hitler had justified their violence by citing Western hypocrisy on liberal values.

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Ge Bai and Elizabeth Plummer make clear that “ObamaCare is a money pit for taxpayers.” A slice:

Congress may yet extend ObamaCare “enhanced” premium subsidies. A new study shows why that would be a reckless act toward taxpayers.

Using health insurers’ mandatory filings, our study, published Friday in JAMA Health Forum, shows that the ObamaCare individual market has become a money pit for taxpayers. In 2024 they paid nearly 80% of the premiums for subsidized plans—compared with only 30% in 2014.

Taxpayers paid more than $114 billion directly to insurers in 2024—one-third more after inflation than in 2023, more than double the amount in 2020 (before the enhanced subsidies), and more than six times as much as in 2014. According to the Congressional Budget Office, this acceleration continued in 2025.

Why? Through regulations, ObamaCare banned affordable insurance options and destroyed independent physician practices, damaging the insurance and provider markets. Consolidation, administrative bloat, high prices and soaring premiums followed. Our study shows the correlation between premium growth and subsidy growth is nearly perfect.

That’s by design. Subsidies are calculated so that the premiums paid by subsidy-eligible enrollees for benchmark plans fall within a set percentage of their income, thereby transferring the financial exposure from rising premiums to taxpayers. In 2021 Congress expanded subsidy eligibility to higher-income households and lowered income caps for others, further burdening taxpayers. In August 2022, it extended these Covid-era subsidies through 2025.

Zero or near-zero premium plans proliferated as the subsidies approached or exceeded the premiums. In 2024, 90% of subsidy-eligible enrollees had access to plans with net premiums of $10 a month or less.

The Editorial Board of the Washington Post is correct: “More American manufacturing won’t mean that many more jobs.” A slice:

It is because the jobs are relatively few in number that they are relatively high in compensation. These newer, successful manufacturing companies in Bridgeport don’t have assembly lines with workers performing repetitive tasks. They have high-skilled workers meeting exacting specifications for a relatively small number of picky customers.

That’s what most American manufacturing firms look like today. Ninety-eight percent of U.S. manufacturing firms employ fewer than 500 people, and 93 percent employ fewer than 100, according to 2022 data.

These workers receive a lot of help from robots. Automation is what helps them be as productive as they are, and more productive workers are paid more. Overall, real value added by U.S. manufacturing is at all-time highs, even though fewer people work in manufacturing than in the past.

Jason Sorens, inspired by the pioneering research of economic historian Robert Higgs, explains that the American economy is suffering drag caused by regime uncertainty. Two slices:

“Regime uncertainty” should be our bywords for understanding the economy of 2025. Trump’s push for “state capitalism,” ranging from tariffs to taking federal stakes in companies to industrial policy to jawboning companies to fire executives to targeted regulatory carveouts, has created a chaotic, pay-to-play environment in which firms find they can get favorable treatment by contributing to Trump’s political success, but the basic rules of the economic game are unpredictable and open to constant negotiation. That unpredictability has in turn deterred private investment and brought on stagflation.

Economist Robert Higgs developed the concept of regime uncertainty to explain why American recovery from the Great Depression was so slow. Investors feared for the security of their contracts and their private property rights as FDR turned explicitly anti-business during the 1936 presidential campaign. As a result, private investment stagnated and the economy tipped back into recession, prolonging the Great Depression. Investor confidence didn’t return until after the war, when it launched an economic boom.

…..

The evidence suggests that to turn the American economy around, the Trump Administration needs to work through Congress to pass statutory deregulation, end its experiments with industrial policy, government ownership, and tariffs, and shift from a “deal-making” posture of transactional politics to a firm, credible commitment to enforcing a level playing field for private business. Without a believable shift in strategy, this administration risks incurring an economic malaise that could last for another three years.

Here’s the abstract of a new paper by Tamar den Besten and Diego Känzig: (HT Tyler Cowen; emphasis added)

We study the macroeconomic effects of tariff policy using U.S. historical data from 1840–2024. We construct a narrative series of plausibly exogenous tariff changes – based on major legislative actions, multilateral negotiations, and temporary surcharges – and use it as an instrument to identify a structural tariff shock. Tariff increases are consistently contractionary: imports fall sharply, exports decline with a lag, and output and manufacturing activity drop persistently. The shock transmits through both supply and demand channels. Prices rise in the full sample but fall post-WWII, a pattern consistent with changes in the monetary policy response and with stronger international retaliation and reciprocity in the modern trade regime.

Ramesh Ponnuru reveals just how clueless – to put it mildly – is Rep. Ro Khanna (D-CA).

Ramesh Ponnuru also reveals just how clueless – to put it even more mildly – is the racist New York Times “correspondent,” Nikole Hannah-Jones.

Decrying the Trump administration’s hostility to classical liberalism, Ebenezer Obadare warns of the consequences for Africa. Here’s his conclusion:

The administration is wasting an opportunity not only to drive home a point about the inextricability of commerce and freedom, but about the cornerstone principles of liberalism more broadly. At a time when the African continent needs more liberalism, the U.S. sells itself and Africa short by disavowing it, while also blurring the line between the U.S. and its geopolitical competitors, particularly China and Russia.

Liberty and commerce depend on each other to thrive. The world’s leading democracy should not be in the business of separating them.

Arnold Kling offers some advice to today’s college students.

Richard Reinsch asks if there is “conservative life after Trump.”

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… is from page 314 of my late, great colleague Walter Williams’s 2015 book, American Contempt for Liberty, which is a collection of many of Walter’s columns and essays; this quotation specifically is from Walter’s December 29th, 2010, syndicated column, “Free or Fair?“:

The bottom line is that what’s fair or unfair is an elusive concept and the same applies to trade. Last summer, I purchased a 2010 LS 460 Lexus, through a U.S. intermediary, from a Japanese producer for $70,000. Here’s my question to you: Was that a fair or unfair trade? I was free to keep my $70,000 or purchase the car. The Japanese producer was free to keep his Lexus or sell me the car. As it turned out, I gave up my $70,000 and took possession of the car, and the Japanese producer gave up possession of the car and took possession of my money. The exchange occurred because I saw myself as being better off and so did the Japanese producer. I think it was both free and fair trade, and I’d like an American mercantilist to explain to me how it wasn’t.

Mercantilists have absolutely no argument when we recognize that trade is mostly between individuals. Mercantilists pretend that trade occurs between nations such as U.S. trading with England or Japan to appeal to our jingoism. First, does the U.S. trade with Japan and England? In other words, is it members of the U.S. Congress trading with their counterparts in the Japanese Diet or the English Parliament? That’s nonsense. Trade occurs between individuals in one country, through intermediaries, with individuals in another country.

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Here’s a letter to a long-time, friendly patron of Café Hayek.

Pete:

Thanks for sending along Noah Smith’s Christmas-eve post titled “Why Europe should resist the Second China Shock.” Like you, I disagree with much that’s in this post. Especially disappointing is Smith writing this: “That’s what a trade deficit is – the writing of IOUs in exchange for imports.”

He’s deeply mistaken.

Some part of a country’s trade deficit is debt – namely, the part (and only the part) that’s borrowed from foreigners. An example is U.S. government borrowing from Europeans. This borrowing both raises the U.S. trade deficit and creates debt that Americans must repay to foreigners.

But other parts of a country’s trade deficit aren’t debt. When foreigners use their export earnings to buy American real estate, the U.S. trade deficit rises but there’s no increase in Americans’ indebtedness. Ditto when foreigners hold U.S. dollars, and when foreigners make equity investments in the U.S. If, for example, a Spaniard living in Madrid uses her export earnings to open a restaurant in Cleveland, the U.S. trade deficit is made higher than it would otherwise be without putting any American further into debt.

I know from experience that many people will push back, pointing out that foreigners expect returns on their investments – returns that, when foreigners invest in America, will come from America.

Well, of course foreign investors, like all investors, expect returns. But when no American is contractually bound to pay returns on some foreign investment in America, no Americans are indebted to foreigners as a result of that investment. When, for example, foreigners make successful equity investments in America, those investments create new wealth in America, and it’s from this newly created wealth that foreign equity investors receive their returns. To look, as many protectionists do, on such returns as payments from Americans to foreigners is to fail to recognize that the wealth out of which those returns are paid would not have existed without those investments by foreigners. These returns come not from the pockets and purses of Americans but, instead, from the ingenuity and risk-taking of the foreigners who receive these returns.

It’s distressing that so many non-economists misunderstand so-called “trade deficits.” It’s doubly – indeed, quadruply – distressing to encounter prominent economists who share that same misunderstanding.

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

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Andrew Follett exposes “the left’s hypocrisy problem with energy and affordability.” Two slices:

Democrats seem to have decided that beating the drum on “affordability” is the key to electoral success, and given their recent strong performances in New Jersey, Virginia, and New York City, who could blame them? Indeed, the affordability focus allows them to set aside their remarkably unpopular positions on immigration, crime, and certain social issues in favor of a more marketable focus.

But Republicans should have a straightforward response: Look at Democrats’ energy policies, and their so-called commitment to affordability suddenly becomes empty.

…..

Looking at these findings, it becomes clear that Democrats’ embrace of the affordability issue is massively hypocritical, because the average blue state objectively pays almost 50 percent more per kilowatt hour of power than the average red state. And these numbers get more extreme in more partisan states: a resident of deep-blue California or Massachusetts pays 28 and 26 cents per kilowatt hour of power, double the 14 cents a Floridian pays and nearly triple the 10 cents an Idahoan pays.

A similar argument is true for gasoline prices. A Californian pays an average of $4.30 per gallon, while in red states like Texas, Arkansas, and Tennessee, the average is below $3 a gallon. The ten states with the lowest gasoline prices are all ruby red, largely because many blue states charge a variety of special taxes and fees. Blue California adds 71 cents per gallon in taxes, while red Oklahoma only adds 20 cents, according to the Institute for Energy Research.

Adam Omary makes clear “how a century of progress changed Christmas.”

Also writing about the abundant Christmas brought to you by free markets and trade is Gale Pooley.

The Wall Street Journal reports what shouldn’t be – but, alas, what apparently today to many people nevertheless is – surprising: Trump’s “customs crackdown leads to blocked, destroyed imports.” A slice:

Backpacks from Japan, Milka chocolate biscuits from Europe and other goods shipped to the U.S. aren’t just being blocked from entering the country. Some are smashed to bits.

Tens of thousands of imports have been blocked from entering the U.S. in recent months and stacked in vast warehouses. Many get to their destinations after buyers complete government paperwork. Yet some that can’t clear customs because of missing or incomplete information are returned—or destroyed.

The stranded parcels are casualties of shifting new U.S. tariffs, tougher customs enforcement and other import restrictions that carriers and consumers said are tough to navigate.

“It was impossible for all of us to turn on a dime,” said Joseph Costigan, chief executive of IBC Customs Brokerage, which helps process imports and calculates duties and fees for products.

Matthew Gallo was waiting for an automotive part from the U.K. for his vintage Jaguar when he got an email from his carrier saying the $1,600 air-conditioner condenser had been destroyed.

United Parcel Service was shipping the condenser. Gallo said he and his supplier provided UPS the information it requested for the part to clear customs, including its size, brand and model number. They also provided a description of its composition, use and true value. UPS later said U.S. Customs and Border Protection wanted even more information such as the country of origin of the condenser’s steel and aluminum, which Gallo and the supplier said they didn’t know they had to provide.

[DBx: But, hey, not to worry! This destruction of goods that Americans want to have and are willing to pay for is carried out by the unwoke!]

Jeff Jacoby justly praises George Washington’s daring Christmas night, 1776, crossing of the Delaware River. A slice:

From a strategic point of view, the Battle of Trenton was a minor affair. But Washington’s unexpected victory, followed by another at Princeton a week later, revived American morale and marked a psychological turning point in the fight for independence.

The story of the Delaware crossing has become legend, rooted in the peril of that Christmas night and the surprise of the morning that followed. But its significance goes beyond the drama of the event itself. It helps explain why the Revolution survived — and what the struggle still tells us about leadership, resolve, and the ideals on which the country was founded.

One enduring lesson of the Delaware crossing is about leadership at the edge of failure. By Washington’s own admission, the cause looked lost. “I think the game is pretty near up,” he wrote to his brother a few days earlier. Retreat would have been understandable — even advisable. Instead, the American commander chose to go into action.

Too often great leadership is conflated with a vigor born of confidence or optimism, but Washington had neither. What he did possess was the clarity to see that inaction would be fatal and that when circumstances are dire enough, risk can be the least dangerous option. For Washington, David Hackett Fischer wrote in his acclaimed account, “a vital part of leadership was the ability to persist in what one believed to be the right way.” The Christmas crossing was a calculated refusal to accept defeat simply because defeat appeared likely.

The second lesson is no less important. Washington crossed the Delaware with boats, muskets, and cannon — but also with some of the most galvanizing words in American history. On Dec. 23, Washington’s men gathered to listen to a reading of Thomas Paine’s just-published essay, “The American Crisis,” which began: “These are the times that try men’s souls.”

Kevin Gentry talks with GMU Econ alum – and university administrator extraordinaire – Scott Beaulier.

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… is from page 8 of Johan Norberg’s wonderful 2025 book, Peak Human: What We Can Learn from the Rise and Fall of Golden Ages:

Some cultures are better than others because they provide institutions for positive-sum games instead of zero-sum, and their eras create liberties and opportunities rather than oppression and destruction.

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GMU Econ alum David Hebert does his own excellent version of ‘If protectionism were correct, Santa Claus would be an economic terrorist.’ Two slices:

Worse still, is Santa’s practice of dumping gifts on the American economy. “Dumping,” according to US law, is when a foreign producer sells goods in America below the cost of production. Previous administrations have solved this in the past through the use of antidumping duties, sometimes exceeding 200 percent of the product’s value.

But Santa does not merely sell below cost. He gives his goods away for free. This is dumping at a price of zero, which is completely indefensible under US law. Even China, often referred to as the worst trade offender in the world, has the decency to charge us something for their harmful production.

Using standard methodology to calculate the appropriate response is simple: take the value of the good, divide it by the price the importer is selling, and multiply it by 100 to arrive at the appropriate percentage penalty to apply. Since Santa charges us nothing, the appropriate response is therefore an infinite tariff rate applied to any and all goods imported from the North Pole.

…..

But if we really stop and think about it, foreign producers have a degree of “Santa” in them. While they do not sell us their wares at zero price, they still charge lower prices than our domestic counterparts can match. This means more access to goods and services that allow us to live healthily and wealthily, however we choose to define those terms. Unlike Santa, foreign producers sell their “gifts” to everyone regardless of age or religious affiliation and they do so year round.

So what we should really be after here is consistency: either condemn Santa as the job-destroying, IP-stealing, border-flouting menace he is — or thank foreign producers for enriching our lives with their gifts of specialization. You cannot have it both ways.

The Editorial Board of the Wall Street Journal – reporting on the Trump-tariff-induced decline in demand for American-made whiskey – concludes that “this is harm inflicted on American workers by their own government.”

With this letter in today’s Wall Street Journal, two GMU Econ alums bust the myth that events have proven economists wrong about tariffs:

Economists never claimed that tariffs immediately or inevitably cause inflation (“Why Everyone Got Trump’s Tariffs Wrong,” Page One, Dec. 16). We’ve long acknowledged that their effect on prices is complicated.

The first reason for that is the substitution effect: When tariffs raise the relative price of imports, consumers often shift their spending toward other goods. Some import prices may even fall, particularly if demand dries up. The net effect, then, is ambiguous.

The second factor is the income effect. Higher import costs give consumers less bang for their buck. If iPhone prices double because of tariffs, for instance, consumers enjoy less real income. Tighter budgets mean consumers have less to spend on other goods.

Moral of the story: If you’re looking solely at the inflation rate to see the effects of tariffs, you likely won’t find it. In a vacuum, the levies cause a one-time jump in an economy’s price level but not a continuous rise in its growth rate. What happens after that depends on how policymakers respond. In any case, tariffs’ most predictable and immediate effects are sputtering growth and declining consumer welfare.

Ask yourself: Doesn’t that resonate with your experience over the past nine months?

Scott Burns
Southeastern Louisiana University
Baton Rouge, La.

Caleb S. Fuller
Grove City College
Grove City, Pa.

The Editorial Board of the Washington Post writes eloquently on this:

It only took the European Union two years to start walking back its plan to ban all new gas and diesel automobiles by 2035. It’s an important reminder that government mandates are destined to disappoint in the fight against climate change.

Autumn Billings reports that the Trump administration obviously believes that the American people would oppose its immigration crackdown if the American people had a clearer understanding of what those crackdowns involve.

George Will bids adieu to 2025. A slice:

In the Republicans’ hotly contested Toadyism Sweepstakes, a House member proposed legislation to mandate carving Donald Trump’s visage on Mount Rushmore. Channeling the etiquette of the Golfer-in-Chief, American spectators at the Ryder Cup shouted vulgarities at the European players. Cannot protectionism fend off the NBA’s overbearing foreigners? In the season that ended in June, the five top players, as identified by two sophisticated metrics, had passports from Canada, Serbia, Greece, France and Slovenia.

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… is from page 401 of The Thomas Sowell Reader (2011):

Egalitarians create the most dangerous inequality of all – inequality of power. Allowing politicians to determine what all other human beings will be allowed to earn is one of the most reckless gambles imaginable.

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Here’s a slightly modified version of a letter that I sent eleven days ago to the Washington Post – a letter not published there.

Editor:

Nearly all that you write about the effect of U.S. tariffs on China is correct and crucial (“Are U.S. tariffs on China working? Look at the evidence.” December 15). But you err when you describe China’s trade surplus as “evidence of its industrial overcapacity.” China might well have industrial overcapacity, but a country’s trade surplus isn’t necessarily evidence of such. A trade surplus could instead reflect the relative attractiveness to a country’s citizens of investing abroad rather than in their own country. The resulting net outflow of capital (which is the mirror image of a trade surplus) reflects, not necessarily industrial overcapacity but, rather, much better investment opportunities abroad.

It’s worth noting that if China does indeed have industrial overcapacity, that’s a problem for China but a boon to the rest of the world. We get a greater abundance of goods for our consumption and inputs for use in our own production facilities – all subsidized by the Chinese people.

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