At first glance, the airline and auto industries seem much different. Airlines are frequently in and out of bankruptcy court, while the large automakers have avoided that fate since the recession of 2007-09 thanks to massive and recurring government intervention. But both are domestic industries operating in a global world, kept afloat by a regulatory scaffolding that gives priority to producer stability over consumer welfare and industry efficiency.
While we rightly celebrate the 1978 Airline Deregulation Act, airports and foreign competitors that could serve U.S. routes weren’t deregulated. Public airport monopolies and duopolies allow airlines to raise fares. With foreign carriers prohibited from flying domestic U.S. routes, domestic fares have been kept artificially high even while load factors approached 85% just before the Iran war. As a result, when a domestic shock hits, the system lacks the diversified global networks and capital depth needed to absorb the blow.
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From the 1964 “Chicken Tax” to the 100% tariffs on Chinese electric vehicles in 2025, Washington has walled off the American consumer. These barriers have allowed domestic makers to abandon the low-cost econobox segment entirely, focusing instead on $80,000 SUVs. Because they are shielded from the $15,000-a-car global competitors that are modernizing fleets in Europe and Asia, automakers have become addicted to a narrow, affluent demographic.
In both industries, the government’s protectionist solution has become poisonous. By shielding companies from the efficiency frontier of global competition, we have created industries that are too small to be truly global yet too large to be allowed to fail locally.
Resolving this crisis of financial brittleness requires a shift from a national-champion model to a global-industry model.
Worried about the politics of affordability heading into the midterms, President Donald Trump has already exempted other food staples and home goods. In February, he allowed more beef imports from Argentina. He would have taken this additional step earlier if not for lobbying by ranchers, who want to keep beef prices as high as possible.
My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Jessica Melugin about antitrust.
Short of praising the Met Gala, it’s hard to think of a more controversial thing you could do online than defend big business. The left has long crusaded against corporate America, but increasingly the populist right does too, turned off by toxic business practices like DEI and ESG.
But what happens when the contempt for business goes too far? What happens when it destroys a low-cost airline, hurting American workers and consumers?
This is the situation confronting those who cheered on the Biden administration’s antitrust revolution. Under the oversight of Jonathan Kanter at the Department of Justice’s Antitrust Division and Lina Khan at the Federal Trade Commission, the government largely abandoned the consumer welfare standard, which holds that the feds should interfere with mergers or business contracts only if the consumer stands to be directly harmed.
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The consumer welfare standard is, of course, meant to place the consumer front and center in antitrust policy. But it also functions as a restraint on regulators, creating clear and limited criteria for when government may intervene in markets. It understands that left to their own devices, regulators will act arbitrarily and create unintended consequences they can’t foresee at the outset.
This is exactly what the Biden team wrought with Spirit Airlines. Now, all eyes turn to Donald Trump. Trump has never fully thrown in with the anti-bigs, but some in his administration, including his Antitrust Division interim head Omeed Assefi and FTC Chairman Andrew Ferguson, risk paying an unhealthy amount of homage to Khan and the rest of the Biden antitrust enforcers by keeping alive antitrust suits with little obvious connection to the consumer welfare standard.
Current enforcers should treat Spirit Airlines not as a mere talking point against the Biden administration but also as a cautionary tale. The left claims to fight the bigs, but their meddling too often hurts those they try to help. The right has its own brand of populism, but it must avoid the left’s mistakes if it’s going to be effective.
For Hume, we should assume knavery in our political reasoning because collective action—the core of political life—distorts judgment and encourages knavish behavior toward those outside our social groups. Political life, in other words, brings out the knavery in us. In democratic politics, ordinary people of apparently decent character come together and end up authorizing coercive acts of injustice and, in some cases, outright moral atrocities.
Desmond Lachman warns of the U.S. government’s fiscal incontinence.
Arnold Kling brings his usual wisdom to this discussion of Zionism vs. anti-Zionism. A slice:
Once again, the Zionist project is caught in the middle of external conflicts. In this case, it is the conflict between Third Worldism and the Western tradition.
Third Worldism unites the left and Islamists. The Islamists are a bigger part of the alliance in Britain than in the United States. They have a shared hostility to markets, to American power, and to white people. (On straight vs. queer, the left and the Islamists would seem to disagree, but they apparently have set aside their differences.)
Whatever accidents of history that allowed the state of Israel to get to where it is today, I think that it would be terrible to see the country sacrificed on the altar of Third Worldism. That ideology strikes me as evil and backward. I believe that most Americans reject it. But it would not surprise me to see the Democrats adopt it in 2028.
When the state actively enters the commercial field, there is everywhere an accompanying increase of economic nationalism, no matter whether it is on the basis of socialism as in Soviet Russia or on the basis of capitalism as in Western and Central Europe.
[I]t can’t be stressed too much that capitalism is as much a cultural as an economic system. A new way of establishing political order emerged. People reversed how they looked at the past and the future. They reconceived human nature. At a very personal level, men and women began making plans for themselves that would once have appeared ludicrous in their ambitious reach.
Imports are the benefit of trade, and exports are its cost. Imports directly increase consumers’ utility by making higher utility combinations of goods available than under autarky. Exports, however, do not directly benefit anyone inside the country; they are goods that are produced but given up to other countries. However, the revenue earned from the exports is what pays for the imports that enable consumption to be higher. In other words, the gains from trade arise from imports, and exports are the cost of acquiring imports.
When a government directs resources toward some industries, however, it effectively takes them away from others. Economic theory and practical experience teach us that individual entrepreneurs and firms are better equipped to make these choices.
