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Wall Street Journal columnist Matthew Hennessey helps to reveal some of the hidden harms done to the U.S. economy by Trump’s tariffs. A slice:

Frédéric Bastiat’s Parable of the Broken Window made the point that destruction can increase GDP by stimulating the need for repair. And GDP has another shortcoming: It can’t account for the buying and selling we don’t engage in because of the disincentive effects of bad policy. When you run out to put a down payment on a new car, it shows up in the GDP numbers. When you decide to squeeze another year or two out of the old jalopy, no entry is recorded.

Mr. Trump is tacking so fast on his tariff negotiations, throwing out new rates and new threats every week—sometimes every day—that no one can say for sure where it will all eventually settle. No company with any exposure to overseas markets can plan under such circumstances. In what dataset can we find an accounting of the domestic investments that aren’t being made because of the uncertainty surrounding Mr. Trump’s mood swings? The companies that aren’t expanding because they can’t be sure if their supply lines will hold? The employees who aren’t being hired because of the trickle-down effects on Main Street of a global trade war?

Bastiat (1801-50) taught us the importance of considering all the economic activity that doesn’t come to pass because of a particular policy. Henry Hazlitt (1894-1993) updated that wisdom for American readers a century later: “The bad economist only sees what immediately strikes the eye; the good economist also looks beyond.”

The MAGA right will say that shaving a few points off GDP is worth it in the long run if it means we can reshore certain key industries or send China a message about our national resolve. Sure, there will be some short-term pain. Sure, some sacrifices will need to be made.

No nation was ever made more secure by limiting its own potential. No society ever thrived by taking the wind out of its own sails. Short-run considerations are of course important, but be wary of those who declare the race over before the first turn.

Amity Shlaes writes insightfully about trade, protectionism, and national security. Four slices:

But the truth is we know little about the next war. And even less about the war that comes after that. That’s why building up a grand defense can’t suffice. Hitler’s panzers rolled right around the Maginot Line, through Belgium.

What we do know is that a strong American economy is its own Golden Dome. The more economically formidable the United States, the less likely others are to assail us. Wars can be waiting games, and stronger economies have the resources to outwait the other side. But what makes an economy strongest?

The answer, so counterintuitive to the collective war brain, is that the strongest economy is less fortress than playground. An economic playground that lures all kinds of innovators, especially individuals and small companies, can yield great benefits for the U.S., whether in immediate conflict or wars far in the future.

Why a playground? Because in peace as in war, the government is a rotten guesser. The business bets that a peacetime government places don’t yield optimal growth — green technology being just one example. Stunning growth comes from the ideas of outsiders, the lesser-knowns. Rather than target certain sectors and try to engineer results, therefore, the government should aim to make overall conditions more inviting.

What’s more, war’s course is often turned by what some call a “technological surprise,” an innovation so unexpected that it flummoxes the enemy. Often enough, the surprise comes from an outside innovator. Back in 2014, when war between Ukraine and Russia broke out, no one expected that Elon Musk and Starlink would be playing such a role in the conflict today.

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To welcome innovators, Harding and Mellon quickly addressed the tax that most constrains new businesses: the capital gains tax. At the time, the tax code treated capital gains the same as income, which meant investors could pay up to 73 percent on, say, profit from the sale of a stock. In 1921, Congress, at the urging of Harding and Mellon, cut the capital gains tax to 12.5 percent.

When Harding passed away in 1923, his successor, Calvin Coolidge, vowed to continue Harding’s pro-innovator campaign. Coolidge and Mellon led lawmakers in driving tax rates down yet further, so that by 1926 the top marginal rate on income stood at 25 percent, low by world standards. Under Coolidge, the regulators at the Federal Trade Commission went quiet. So did the Justice Department, the source of antitrust forays by Theodore Roosevelt, William Howard Taft, and Woodrow Wilson.

The result of the Harding-Mellon-Coolidge restraint was average real growth of greater than 4 percent. That growth brought — attention, Representative Thomas Massie — sufficient revenue to pay down a third of federal debt. Progressives complained that the Roaring Twenties were creating too many millionaires. The public didn’t much care. For wages rose, especially for skilled workers; joblessness stayed low; and consumer goods from autos to washing machines were now priced within the reach of even the working class. Productivity gains meant the standard workweek moved from six days to five. It’s hard to quibble when you’re given a gift called “Saturday.”

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That last surprise technology won our Navy the Battle of Midway. The Japanese might have beat us on radar, but Japan’s authorities and economy, both all fortress, showed scant interest in the Japanese professor who did the best work on antennae for long-wave airborne searches, Hidetsugu Yagi. The Japanese military woke up only when they captured a British searchlight-control apparatus in Singapore and discovered its antenna was a “Yagi.”

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Still, the takeaways are clear. Subsidies for old weapons, the Golden Dome, and other carefully crafted programs will perhaps prove useful in the next war. What may matter more are the corporate tax cuts of President Trump’s 2017 law. Sustaining lower tax rates, as the new tax law does, will also help. A deep cut in the capital-gains tax rate could do yet more — politically impossible as such a proposal may sound. So would stronger intellectual property laws and less regulation. For the technological surprise of the next conflict, or the conflict after that, will likely come from someone we don’t yet know.

Speaking of national security, Brandan Buck reviews Andrew Preston’s new book on its history in America. Three slices:

The idea of “national security” is so ubiquitous that it is hard to imagine an American political culture without it. But as the Cambridge historian Andrew Preston shows in Total Defense: The New Deal and the Invention of National Security, the concept and its universal usage have not always been with us. They have a history firmly rooted in New Deal liberalism, its anxieties about economic insecurity at home, and its fears of illiberal forces abroad.

Despite the framing suggested by the subtitle, this well-argued and often provocative book stretches from the 19th century through the early Cold War. Preston’s purpose, he writes, is “to find the source of the idea, now axiomatic, that the security of the United States often had little to do with the immediate safety of the continental United States itself.” He argues that the modern ideology of national security, one where security is unmoored from strict dictates of Americans’ physical safety from immediate danger, was primarily an elite project. That elite pushed, cajoled, and scared a nation that once prided itself on having the luxury of distance into seeing its interests as global. America, the new thinking held, belongs at the center of a “horizonless world.”

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But under President Franklin Delano Roosevelt, a new national security ethos buried free security for good. Preston argues that the Roosevelt administration used World War I as a “model of efficient, centralized planning in a crisis environment”; the country’s leaders adopted an atmosphere of wartime rhetoric that cast the Depression as a threat worthy of aggressive action. Preston argues that the New Dealers’ domestic logic—the idea of using planning to mitigate risk—provided the ideological lattice upon which the idea of national security was grafted. With the coming of total war in Europe, a crisis exacerbated by technological change, Roosevelt and his advisers asserted that the era of free security, like the supposed era of unconstrained capitalism, was now history.

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Preston’s book joins a growing body of scholarship that shifts the genesis of the national security state and its related foreign policy from the early Cold War to the FDR administration. Such scholarship has often argued that the formation of the national security state was not merely reactive but lay within the New Deal, its assumptions about modernity, and its implications for liberalism. While earlier works such as James T. Sparrow’s Warfare State focus on the domestic economy and Ira Katznelson’s Fear Itself on domestic politics, Preston centers his book on how an elite progressive idea of national security became a bipartisan and ubiquitous social norm that spanned the challenges of fascism, communism, and beyond.

Ramesh Ponnuru decries Trump’s tariffs. A slice:

Tariffs obviously raise some prices. That’s how they’re supposed to work. Protectionists seek to change patterns of consumption and production by altering prices. Tariffs make imported steel more expensive, so U.S. consumers (including companies that use steel) buy more domestically produced steel. U.S. steelmakers can then increase their prices, too, drawing more investment

But raising some prices need not mean raising the overall price level. Maybe consumers will spend more on products with steel in them and less on everything else, with prices going down in other sectors. Or maybe a monetary contraction will pull prices down. That’s what happened in the early years of the Great Depression, when a spike in tariffs happened alongside deflation..

Washington Post columnist Megan McArdle (who long ago blogged as “Jane Galt”) is rightly critical of Trump’s firing of the commissioner of the Bureau of Labor Statistics. A slice:

The Bureau of Labor Statistics, a unit of the Labor Department, revised its estimates for May and June payrolls sharply downward, by more than 250,000 jobs, and estimated that the economy added only 73,000 jobs in July, well below analysts’ expectations. Virtually all these new jobs came from health care and social services. The numbers contain no sign of the manufacturing boom that President Donald Trump has promised.

This is not the sort of jobs report any president wants to see; it’s the kind that portends falling approval ratings and party losses at the next election. So Trump took immediate, decisive action: He hopped on Truth Social and announced that he would fire Erika McEntarfer, the commissioner of the Bureau of Labor Statistics.

This move was so boneheaded, William Beach, who served as bureau commissioner during the first Trump administration, called it “totally groundless” and “a dangerous precedent” that “undermines the statistical mission of the Bureau.”

Even Heather Mac Donald argues that “Trump’s science reform veers off course.” A slice:

Other battles are more worthy of attention. Congressional Republicans should provide the White House with an unambiguous charter for its reform efforts. Congress should strip all identity-politics language from NSF budgetary authorizations by rejecting the notion that researchers must justify their work on nonscientific grounds. Lawmakers should also extricate the NSF from teacher training and education research. Congress and the administration could treat scientists like adults again by cutting red tape and restoring discretion to project managers and researchers.

The White House has started a long overdue overhaul of science and academia, unleashing end-of-times prophesying from those intertwined establishments. But federal science funding shouldn’t go to social or economic goals, “equity” or any other ideology. Rather, its aim should be to unleash human genius in its confrontation with natural mystery.

John Goodman explains that “the belief that people can choose their own paths, politically and economically, is pretty new.”

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… is from page 69 of Norbert Michel’s excellent 2025 book, Crushing Capitalism: How Populist Policies are Threatening the American Dream [footnotes deleted]:

Bringing more people into an economy increases human ingenuity, thus increasing opportunities for improving specialization and division of labor. It can lead to improvements in productivity as people with complementary skills work together. Increased immigration can also boost a country’s exports as migrant networks generate lower transaction costs and help transfer product-specific knowledge, both of which increase productivity. Just as important, increased immigration can bring noneconomic benefits to a country, such as enriching the existing culture, cuisine, and knowledge of other places and people.

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Wall Street Journal columnist Allysia Finley reflects on Trump’s firing of the commissioner of the Bureau of Labor Statistics. A slice:

Mr. Trump sniffs a deep-state conspiracy. “Today’s Jobs Numbers were RIGGED in order to make the Republicans, and ME, look bad,” the president huffed on Truth Social. Where’s the evidence? There is none.

The BLS commissioner has traditionally been a nonpartisan post, and the Senate confirmed Ms. McEntarfer 86-8 last year. Yet Mr. Trump asserted, again without evidence, that Ms. McEntarfer “faked the Jobs Numbers before the Election to try and boost Kamala’s chances of Victory” and revised down the numbers after the election by 818,000. Also false.

The truth is that the jobs numbers have become more volatile in recent years because of declining business survey response rates. It’s similar to the problem political pollsters face getting representative samples. And Mr. Trump’s trade and immigration policies may be making monthly data less reliable.

It helps to understand how the BLS produces its monthly jobs report. The bureau surveys some 631,000 workplaces by a variety of media, including phone, web and even fax. Many businesses don’t respond every month, but the BLS continues to collect data and revise its findings over the next two months.

The survey’s overall response rate has declined to 43% from 60% before the pandemic, and small businesses are less likely than bigger ones to respond, especially in the first month. The jobs estimate can also be off in either direction by 136,000 in any given month because of statistical chance. Such variations tend to even out over several months.

Also writing wisely on Trump’s firing of the head of the BLS is National Review‘s Dominic Pino. A slice:

The original estimate for the number of jobs in the month of June was 159,724,000. Then, after the revision with better data, it was 159,466,000. That’s a 0.161 percent correction, based on higher-quality information that didn’t exist at the time of the original estimate.

So, no, the BLS is not incompetent, and it does not have an easy job at all. The reasons for revisions are incredibly boring and technical and have nothing to do with politics or ideology. Or at least they didn’t, until the president fired the BLS commissioner because he didn’t like the jobs numbers. Now, the incentives have changed, and there is a reason to cook the books out of self-preservation.

Economist Lars Christensen describes Trump’s firing of the BLS commissioner as “one of the most insane things I’ve witnessed in my entire career.”

And here are Tyler Cowen’s thoughts sparked by the sacking of the BLS commissioner.

Andrew Duehren of the New York Times reports on the additional customs revenues that Trump’s tariffs are bringing in – mostly by bringing those sums out of the pockets of Americans. A slice:

Placing new taxes on imported products, however, is expected to raise the cost of everyday goods. Lower-income Americans spend more of their earnings on those more expensive goods, meaning the tariffs amount to a larger tax increase for them compared to richer Americans.

Tariffs have begun to bleed into consumer prices, with many companies saying they will have to start raising prices as a result of added costs. And analysts expect the tariffs to weigh on the performance of the economy overall, which in turn could reduce the amount of traditional income tax revenue the government collects every year.

“Social justice ideology is rigid and uncompromising.”

Jeff Jacoby sensibly wonders why, if Canada greatly improved its air-traffic-control system years ago, the United States can’t do the same. Two slices:

There is no mystery about what ails air traffic control in this country: It is run by the government, which is ill-suited to the task. Worse yet, the agency that’s in charge of providing air traffic control, the Federal Aviation Administration, is also the agency that regulates it — an inherent conflict of interest. As journalist John Tierney put it in a recent essay for City Journal: “The FAA is supposed to be a watchdog, but we’ve put it in charge of watching itself.”

That’s only part of the problem. Because the FAA is an arm of the government, its operations, including air traffic control, are inevitably politicized. Since the agency has to be reauthorized annually, its funding is tied not to market forces but to the priorities of politicians, lobbyists, and interest groups. That chronic budgetary uncertainty has often forced the FAA to defer system upgrades and limit hiring — which is why the system is beset by outdated hardware and perpetually understaffed towers.

Happily, there is a straightforward solution: Get the federal government out of the air traffic control business.

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Our neighbor to the north long ago made the leap to nongovernmental air traffic control. In 1996, Canada created Nav Canada, a not-for-profit corporation that is fully funded by users of the system — that is, airlines and other aircraft operators — and thus doesn’t cost taxpayers a cent. The results have been almost uniformly positive. Nav Canada funds its own modernization and operates on a solid financial footing. The company has hundreds of millions of dollars in reserve — a stark contrast to the FAA’s perennial shortfalls.

Canada boasts state-of-the-art satellite navigation systems. Almost 10 years ago, The Wall Street Journal’s aviation columnist, Scott McCartney, marveled  at how flying south from Canada to the United States was “like time travel for pilots … you leave a modern air-traffic control system run by a company and enter one run by the government struggling to catch up.”

In Canadian ATC towers, there are no strips of paper to shuffle. Instead, controllers update information about each flight on touch screens and pass the information to one another electronically. “Requests for altitude changes are automatically checked for conflicts before they even pop up on controllers’ screens,” McCartney wrote. “Computers look 20 minutes ahead for any planes potentially getting too close to each other. Flights are monitored by a system more accurate than radar, allowing them to be safely spaced closer together to add capacity and reduce delays.”

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… is from page 279 of the late David Boaz’s excellent 2015 volume, The Libertarian Mind:

One of the earliest insights of modern economics was that mercantilism, under which the state would supervise and plan the economy, favoring and supporting particular businesses and industries, was actually harmful to prosperity. In the past two centuries the most successful economies have generally avoided mercantilism, industrial policy, and protectionism, while poor and authoritarian countries have relied heavily on subsidies, protectionism, planning, cronyism, and “picking winners.”

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Here’s a letter to the Wall Street Journal.

Editor:

David Hebert correctly concludes that “the simple truth is that taxes, whether on imported goods or corporate profits, raise prices and retard economic growth. If we want a prosperous America, we need to lower barriers to trade rather than erect new ones” (Letters, August 4).

It’s dismaying that many conservatives today fawn over hikes in taxes on imports with the same blind reverence with which progressives have long fawned over hikes in taxes on income and capital-gains – specifically, as levies that, allegedly, not only do nothing to discourage desirable economic activities, but, instead, miraculously fuel the economy, feed the poor, fill government coffers, and promote equality, fairness, fraternity, and the American way as nothing else can.

If these conservatives ever break out of their trance, they’ll be mortified to realize just how alike their defenses of tariffs are to progressives’ defenses of other taxes.

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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… is from page 195 of Matthew Hennessey’s splendid 2022 book, Visible Hand:

Classical liberalism, as understood by Adam Smith and the American Founders, is an umbrella term. It describes a political philosophy characterized by an emphasis on liberty, limited government, and individual rights. Classical liberalism elevates the rights of people above the rights of the collective. In doing so, it liberates human potential and enables the representative democracy under which we live. In the 19th and 20th centuries the expansion of classical liberalism paved the way for an outpouring of technological innovation and economic dynamism that changed the world, freeing millions from slavery – figurative and literal – and sparking a mind-blowing rise in living standards and life expectancy.

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Let’s hope that Washington Post columnist Jason Willick is correct in writing that Trump’s tariffs are in legal trouble. Three slices:

Eight of the 11 judges on the Federal Circuit panel were appointed by Democrats, including the two quoted above, so its eventual ruling won’t necessarily predict how the conservative-leaning Supreme Court will see the issue when the losing side appeals. But if the courts do eventually ratify the Trump administration’s position, it wouldn’t be an exaggeration to say that a key premise of the Constitution will have been inverted.

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There appear to be three reasons so many smart people are nonetheless discounting the magnitude of the legal threat to Trump’s tariffs. The first is the perception that the Supreme Court favors executive power, and it’s true that Trump’s executive-power claims have been on a winning streak at the high court in recent weeks. But there is a profound difference between presidential power over the executive branch — the so-called unitary executive theory — and presidential power to reach into the other branches.

This court wants to protect core presidential powers, such as the power to remove subordinates, from interference. By the same token, it should want to carefully guard core congressional powers, such as the power to regulate commerce, from usurpation by the executive.

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Republicans might want to be careful about carving out a zone of excessive deference to presidents who claim “foreign affairs” power to compel behavior by people and entities in the United States. Could a Democratic president impose Green New Deal policies and cite international climate diplomacy to win a pass from judges? What if the president claimed public health regulation was integral to national security and foreign affairs, since viruses cross borders?

Eric Boehm asks: If Trump’s tariffs are really meant to be a tool used in response to a genuine emergency, why is the administration delaying enforcement until October? A slice:

On Thursday morning, attorneys representing the administration stood before a panel of federal judges in Washington, D.C., to defend the President Donald Trump’s use of emergency economic powers to levy tariffs.

By Thursday evening, however, a new executive order seemed to undermine the legal basis for those tariffs. With the enforcement of some tariffs postponed until early October, it’s becoming ever more difficult to believe that the president is responding to “an unusual and extraordinary threat.”

Philip Klein, in an understatement, calls Trump’s firing of the Bureau of Labor Statistics’s commissioner Erika McEntarfer “reckless.”

Wall Street Journal columnist Peggy Noonan calls on the Trump administration to stop ICE’s workplace raids. A slice:

There have been reports all over of Immigration and Customs Enforcement raids in workplaces—restaurants, construction sites, farms. In a June ICE raid at an Omaha, Neb., meatpacking plant, more than 100 employees suspected of using false IDs were taken away. The owner of the plant told the New York Times that some of them had been with him for decades—they were “salt-of-the-earth, incredible people who helped build this company.”

The administration believes its toughness delivers a message—don’t come here illegally—and of course it would. But there are other ways to deliver it. Donald Trump’s presence alone has delivered it, and the border is pretty much closed. In these raids the administration is making a grave moral and political mistake.

The American people want criminals, thugs and abusers in the country illegally thrown out, full stop. But workers who are living constructive lives, who are contributing, who help keep America up and operating each day? No.

You can’t help but grow smarter and wiser by reading – and believing – Arnold Kling.

Now here’s a development that no one could reasonably have foreseen!

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Here’s a letter to the Wall Street Journal.

Editor:

You’re correct that the U.S. economy is now showing signs of the inevitable damage done by Mr. Trump’s tariffs (“The Trump Economy Stumbles,” August 2). Yet some of your wording carelessly grants too much credit to the administration’s case for protectionism.

You write that “much of the world will now pay 15%, if Mr. Trump sticks to his deals.” Not so. Because – as the evidence shows – pre-tariff import prices aren’t falling, what you mean is that Americans will now pay 15% for imports from much of the world.

It’s therefore inaccurate also to say, as you do, that failure of other countries to retaliate with tariffs of their own means that “that these countries seem willing to absorb the 15% tariff.” These countries are indeed willing to absorb the shrinkage of their U.S. markets rather than risk the further shrinkage that a trade war would cause. But because the president’s tariffs are paid by Americans, the people who are ‘absorbing’ the bulk of the tariffs aren’t foreigners but, rather, American firms and households who are paying the higher prices.

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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… is from page 5 of Roderick Floud’s, Nobel-laureate Robert Fogel’s, Bernard Harris’s, and Sok Chul Hong’s fascinating 2011 book, The Changing Body: Health, Nutrition, and Human Development in the Western World since 1700:

[T]here is no doubt that from 1700 to 2000, over the course of some 12-15 human generations, all the features of this schema have been transformed in ways never seen before in human history. In the process, humankind has gained equally unprecedented control over its environment – even if it has sometimes misused that control – through the invention and application of new forms of technology. One sign of that control is that, in most if not quite all parts of the world, the size, shape, and longevity of the human body have changed more substantially, and much more rapidly, during the past three centuries than over many previous millennia. There were, of course, evolutionary changes to our bodies during those past millennia, but the change that has occurred in recent times is of a different character. It has come about, within a timescale which is minutely short by the standards of Darwinian evolution, through the application of technology, in particular to food production and distribution and to the development of means of combatting disease.