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Scott Lincicome and Alfredo Carrillo Obregon call out the Trump administration for its absurdly exaggerated assertions about how much revenue is being reaped by the tariffs U.S. government’s punitive taxes on Americans’ purchases of imports. A slice:

If we learned (or confirmed) something in 2025, it’s that the president and his cabinet believe in US tariff policy as the solution to every conceivable problem. Hence, 2026 will almost certainly bring more (fantastical) proposals for funding new federal programs and policies through tariff revenue.

Ryan Bourne argues that Mayor Mamdani’s clueless promise of “the warmth of collectivism” was no slip of Hizzoner’s inaugural-day tongue. A slice:

“Collectivism” is not a slip of the tongue or a vague moral appeal to kindness. It is a loaded ideological term with a long, well-documented pedigree and an even longer rap sheet.

By collectivism, political theorists and its own champions have meant a social order in which the claims of the group—often defined and enforced by the state—override individual choice, property rights, and voluntary exchange. Production and distribution are guided not by prices and consent but by political priorities, and individual autonomy is tolerated only insofar as it serves collective ends. That is not a caricature; it is the standard definition of what’s espoused in fascist, socialist, and communist literature.

The word’s lineage matters. Zohran Mamdani is consciously drawing on a tradition that stretches from Karl Marx, who rejected “bourgeois individualism” in favor of collective ownership, through Vladimir Lenin, who implemented it via one-party rule, to Joseph Stalin and Mao Zedong, who enforced it at colossal human cost. Even outside the communist tradition, collectivism was proudly embraced by Benito Mussolini, who defined fascism as the negation of individualism in favor of the state as an ethical whole, and by strongmen such as Idi Amin, who expelled ethnic minorities and appropriated their land in the name of the national good.

The historical record is not ambiguous. Where collectivism has moved from rhetoric to reality, the results have been grim. The Soviet Union’s collectivized agriculture led to chronic shortages and mass famine through both disastrous economic policies and by design to suppress dissent. China’s Great Leap Forward killed tens of millions. Cambodia’s agrarian collectivism under Pol Pot destroyed a quarter of the population, resulting in the “killing fields” and perhaps the most brutal regime in modern history. In each case, politics replaced price signals, error correction was treated as dissent, and individuals weren’t free to exit the collective.

Wall Street Journal columnist William McGurn is correct:

In the understatement of the year, the [New York] Times admitted that the Democratic Socialists’ biggest challenge may have nothing to do with Donald Trump or Zohran Mamdani but with socialism itself: “Some of its policies,” says the paper, “even if pursued, may not work.”

The Editorial Board of the Wall Street Journal rightly defends Sen. Mark Kelly (D-AZ) against Pete Hegseth’s charge that he is guilty of sedition. A slice:

Telling officers not to obey illegal orders is a truism, not a “seditious” statement. As a sitting Senator, Mr. Kelly deserves particular leeway on political speech notwithstanding his continuing military status.

GMU alum Tom Savidge explains that “Medicaid’s structure actually invites waste and fraud.”

Timothy Taylor reports on new research that finds that, in Taylor’s words, “economic inequality does not cause lower subjective ratings of well-being.”

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… is from page 3 of Menzie Chinn’s and Douglas Irwin’s superb 2025 textbook, International Economics [original emphases]:

Or think about your smart phone. Where was it made? The back of an iPhone will tell you that it was designed in California and assembled in China. However, in that process, hundreds of individual parts were sourced from all around the world. The flash memory came from Toshiba in Japan, the application processor was supplied by Samsung in South Korea, the camera module was put together by Infineon in Germany, and the Bluetooth hardware came from Broadcom in the United States. The cost of assembling all of the components sourced from around the globe is a small fraction of the total cost of the phone.

DBx: Indeed so.

And yet Pres. Trump, Commerce secretary Howard Lutnick, and their fellow American protectionists would have you believe that we Americans are being “ripped off” by economic forces that, as these forces direct (and pay!) us to do the high-value-added tasks involved in producing smartphones, assign to lower-productivity, lower-wage workers in poorer countries the menial tasks of snapping all of these component parts together.

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Emeritus University of Tennessee economist Harold Black sent the following email to me this morning. I share it here with his kind permission.

Morning Don, Today I read your open letter to the president and this notice from ebay: “Due to US Customs policies, you will need to pay import fees for this order to the shipping carrier prior to delivery.” I thought the president said that the exporter paid the duty so should I refuse delivery because there must have been some mistake in that they want me to pay it?
All the best,
Harold

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Roger Pielke, Jr., reports this great news: “Globally, 2025 has had one of the lowest annual death ratesa from disasters associated with extreme weather events in recorded history.” A slice:

What we can say with some greater confidence is that the death rate from extreme weather events is the lowest ever at less than 0.8 deaths per 1,000,000 people (with population data from the United Nations). Only 2018 and 2015 are close.

To put the death rate into perspective, consider that:

• in 1960 it was >320 per 1,000,000;
• in 1970, >80;
• in 1980, ~3;
• in 1990, ~1.3;

Since 2000, six years have occurred with <1.0 deaths per 1,000,000 people, all since 2014. From 1970 to 2025 the death rate dropped by two orders of magnitude. This is an incredible story of human ingenuity and progress.

To be sure, there is some luck involved as large losses of life are still possible — For instance, 2008 saw almost 150,000 deaths and a death rate of ~21 per 1,000,000. Large casualty events remain a risk that requires our constant attention and preparation.

But make no mistake, 2025 is not unique, but part of a much longer-term trend of reduced vulnerability and improved preparation for extreme events. Underlying this trend lies the successful application of science, technology, and policy in a world that has grown much wealthier and thus far better equipped to protect people when, inevitably, extreme events do occur.

Wall Street Journal columnist Allysia Finley argues that “the scandal of American welfare goes beyond fraud.” Two slices:

Economist John Maynard Keynes suggested that the government pay people to dig holes in the ground and then fill them up. This is an apt metaphor for progressive government these days: It creates social dysfunction, then shovels out money to correct it. Dredge, fill and repeat.

…..

The goal of the welfare-industrial complex isn’t to ameliorate social problems but to extract more money from the government. Social workers employed by a nonprofit—funded by hospitals and health insurers—spent recent weeks searching for undocumented immigrants to sign up for Medicaid before a deadline that would make them ineligible.

A story in the Atlantic this fall described how drug addicts and the mentally ill have been cycling in and out of California hospitals. Every emergency-room visit, typically covered by Medicaid, means more money for hospitals. It’s no coincidence that hospitals are the loudest opponents of Medicaid reforms.

California’s Medicaid spending—which pays for Native American exorcisms, music lessons, cooking classes and many other nonmedical services—has ballooned by nearly 50% over the last two years. “Healthy living starts with a chef in your kitchen. Paid by Medi-Cal,” one company advertises. A state audit last month flagged it as high risk for fraud, waste and abuse. You don’t say.

Say this for a union-backed ballot measure that aims to tax the wealth of billionaires to boost spending on Medicaid: It might awaken wealthy liberals to the welfare racket that masquerades as a public service.

GMU Scalia Law’s Ilya Somin offers sensible thoughts on the “capture of Maduro and Trump’s attack on Venezuela.”

Max Skjönsberg reflects productively on F.W. Maitland’s productive reflections on Adam Smith and trade. A slice:

Smith’s still valid argument for free trade was more skeptical and levelheaded than Bastiat’s theory of harmonious interests. In Maitland’s interpretation, Smith’s main point was that government interference failed to achieve the desired results, partly because of rent-seeking, but also because of the government’s inevitable lack of sufficient information (a view we more often associate with Hayek). Smith’s real service had thus been to show that government meddling with trade had been futile or even hurtful. His followers in the nineteenth century extended this insight to government interference in general. According to Maitland, this position was more solidly grounded in the limited knowledge of political leaders rather than the harmony of interests.

Maitland was sympathetic to the principle of what he called laissez-faire, as long as it did not rest on any notion of harmonious interests. In this way, he connected his discussion of economic policy with religious politics. “Religion and commerce seem ideas widely removed from each other, but yet in the eye of the statesman they have points in common,” he wrote. First, laws regulating commerce and religion were often futile, as it is too easy to smuggle goods as well as express forbidden opinions. Second, interference on the wrong side can produce the worst effects, by causing starvation or preventing the spread of truth. Third, it is very likely that government interference will be mistaken because of the lack of knowledge. Maitland concluded: “The most convincing pleas for laisser faire, and the most convincing pleas for religious toleration, are those which insist a priori on the great ‘probable error’ of any opinions on matters of religion, and matters of political economy, and those which relate a posteriori the history of the well-intentioned failures of wise and good men.”

Many of these arguments later became key to Hayek’s critique of central planning. Hayek was clear that individuals have diverse and often competing aims, which means that interests frequently clash. For Hayek, diverse interests could be best coordinated via the price system, whereby various actors communicate and reach compromises. The price system, rather than government interference, is the proper mechanism for coordinating competing interests, because of the impossibility of government officials possessing enough information to organize the different parts of the economy effectively. The emphasis on the coordination of clashing interests rather than natural harmony is also arguably a more fruitful way of understanding The Wealth of Nations. Maitland’s reading of Smith thus helps us to disentangle the more realistic elements from the utopian strands of the classical liberal tradition.

Here’s the abstract of a new paper by Viral Acharya and Toomas Laarits (emphasis added): (HT Scott Lincicome)

We explain how the “Tariff War” shock of April 2025 affected the safe-asset status of US Treasuries. Convenience yield erosion for long bonds is consistent with a reduction in the hedging property, reflected in a rising stock-bond covariance. Decomposing the Treasury yield into risk-free rate, credit spread, and convenience yield components reveals that covariance due to the convenience yield component increased for long bonds. The short end of the Treasury curve, however, continued to exhibit the safe-asset hedging property. These effects are consistent with a withdrawal of safe-asset investors from long-term Treasuries and a rotation towards shorter-term Treasuries and gold.

Mitchell Bahnsen is correct: “The threat to the modern media landscape isn’t Netflix or Paramount — it’s regulation that protects incumbents and strangles competition.” A slice:

As free markets come under fire from the political right as well as the left, it has become fashionable in Washington to be suspicious of mergers that could reduce competition, thereby leading to higher prices, fewer options for consumers, and weaker incentives to innovate. In the media sector, it is argued that vertical integration — unified control of content’s production and distribution — risks creating barriers to entry for smaller studios or streaming platforms. This would allow dominant firms to dictate terms to filmmakers, theaters, or talent agencies. Critics also argue that large, oligopolistic media firms would be risk-averse, relying on existing franchises instead of backing new creators. Even if they do innovate, it may be more defensive or incremental relative to the disruptive creativity of newer entrants.

The problem with such criticisms is that, for the most part, they assume that the media market is static and unchanging. That is an assumption that overlooks how quickly the marketplace can change, an odd thing to disregard given how rapidly the rise of streaming services like Netflix disrupted traditional entertainment media. The same dynamism that restructured the entire media landscape over the course of 15 years can also uproot a large corporation’s market share, even after an acquisition that makes it appear “too big to fail.”

The Austrian political economist Joseph Schumpeter famously argued that one of the components of an effectively functioning capitalist system is capitalism as creative destruction, the process by which a new product or service — or even a whole way of business — can disrupt an entire industry based only on what best meets the consumer’s needs. It is a common phenomenon, as markets are reorganized through waves of disruption, old business models collapse, and new industrial configurations emerge. The rise of streaming and the associated decline of legacy television, cable, and moviegoing are the result of technological innovations that consumers preferred over their predecessors.

Mergers are typically the response to such market changes, not the cause of them. Preventing consolidation could freeze industries rather than allowing them to transform, while the strengthened market power or even “temporary monopoly” that mergers create can encourage innovation from challengers, not the reverse. As Schumpeter points out, “In capitalist reality as distinguished from its textbook picture, it is not the large firms that hamper progress. . . . On the contrary, they are the most powerful engine of progress . . . because they are in a position to finance innovation on a large scale and because they have something to lose: the gains from temporary monopoly.”

Mark Perry remembers that “the ‘warmth’ of collectivism in East Germany was so intense that they had to build a wall to contain it.”

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… is from page 152 of Thomas Sowell’s Compassion Versus Guilt, a 1987 collection of some of his popular essays; specifically, it’s from Sowell’s June 14th, 1985, column titled “Chances versus Guarantees”:

People who bought homes in a quiet little town often become resentful when other people begin moving in, expanding and changing the community. They pass laws depriving other people of the right to buy and sell property freely. The excuse for depriving other people of their rights is that the people who were there first came to enjoy an atmosphere and lifestyle that will no longer be the same if they can’t keep others out.

What the original people paid for when they moved in was a chance for a particular way of life – not a guarantee. If they wanted a guarantee, they would have had to buy up the surrounding property as well. Instead, they go into court to get a guarantee free of charge.

American laws call for equal treatment and property rights. Yet people who happen to have been in town first are treated as more equal than others. Judges wave aside both the equal-treatment principle and property rights, in order to transform the chances that were originally bought into permanent guarantees. From an economic point of view, it’s the same as if judges declared that everyone who bought a raffle ticket [for a chance to win a car] is entitled to a car.

DBx: Profound and important.

Notice that the same principle applies to jobs. When protectionists plead for high tariffs to protect the existing jobs of particular workers, they plead for transforming workers’ ‘purchase’ of a chance not to lose those jobs into a guarantee – a guarantee paid for by fellow citizens in the form of higher prices for goods and services, as well as lost economic opportunities. The workers for whom protectionism is demanded could, after all, greatly increase their chances of keeping their current jobs by paying to do so – specifically, by taking wage cuts or by working harder with no corresponding increase in pay. But, obviously, these workers don’t themselves value the additional job security and non-wage benefits of their existing jobs highly enough to pay for these benefits themselves. These workers, however, are more than happy to have other people pay for these benefits. Protectionism is a means of compelling other people – mostly, fellow citizens – to pay for these benefits.

The core case for protectionism offered by Oren Cass, for example, is pretty much as described above. Ironically, Cass accuses free traders of being narrowly obsessed with money while, in contrast (he says) he and the workers whom he champions have higher, nobler, non-economic goals. But in fact the goals that he and the workers whom he champions have are neither non-economic nor ‘higher.’ The goals they have are not only very much economic (‘keep my job without having to take a pay cut’), they also are greedy in the accurate sense of this term (‘I want other people to pay for the benefits I enjoy but am unwilling myself to pay for; I want to force other people to subsidized my standard of living.’)

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Mr. Donald J. Trump
President, Executive Branch
United States Government
1600 Pennsylvania Ave., NW
Washington, DC 20500

Mr. Trump:

On New Year’s Eve your office released a “Fact Sheet” stating that you “imposed reciprocal tariffs to take back America’s economic sovereignty, address nonreciprocal trade relationships that threaten our economic and national security, and to remedy the consequences of nonreciprocal trade.”

Two things.

First, by its nature, all trade is reciprocal. Each party gives something to the other party and receives in exchange something that each party values more highly. Therefore, your punitive taxes – a.k.a. tariffs – on Americans’ purchases of imports are aimed at correcting a problem that doesn’t exist.

Your only possible retort that would retain as much as a tenuous connection to logic would be to insist that foreigners regularly dupe us Americans into buying things that we don’t want to buy – that is, to insist that we Americans are incurably stupid at conducting our own economic affairs, while foreigners are so astonishingly clever that they routinely swindle us out of our own money. Do you, sir, really believe that your fellow Americans are generally the intellectual inferiors of foreigners?

Second, by obstructing each of your fellow Americans’ voluntary, peaceful trades with foreigners you diminish the economic sovereignty of each and every one of us. What (il)logic leads you to conclude that by obstructing – with your taxes on our purchases of imports – the economic sovereignty of 340 million Americans, you thereby “take back America’s economic sovereignty”?

Your tariffs do for us Americans the opposite of what you assert: they diminish our economic sovereignty and, in this sorry bargain, also make us poorer than we’d otherwise be.

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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George Will describes the Trump administration’s recent actions in Venezuela as “monster-hunting, untainted by a whiff of legality.” A slice:

As Bishop Joseph Butler (1692-1752) said, “Everything is what it is, and not another thing.” Narcotics trafficking is a serious crime. It is not a terrorist activity. Neither is the self-“poisoning” of Americans who ingest drugs.

So, the administration must improvise post facto rationalizations for the forcible regime change in Venezuela, rationalizations harmonious with the president’s recent pardoning of Juan Orlando Hernández, the former Honduran president convicted in a U.S. court of shipping here more than 400 tons of cocaine. “The Honduran regime,” McCarthy writes in National Review, “figures prominently in the indictment of Maduro brought by the first Trump administration.” Maduro’s lawyers will have fun with this.

And perhaps with this: When Theodore Roosevelt asked Attorney General Philander Knox to concoct a legal justification for the unsavory U.S. measures that enabled construction of the Panama Canal, Knox replied, “Oh, Mr. President, do not let so great an achievement suffer from any taint of legality.”

Also writing about Trump’s seizing of Maduro is Washington Post columnist Megan McArdle. A slice:

It’s hard to imagine a worse leader for Venezuela than Nicolás Maduro, who combined corruption, economic mismanagement and brutal repression in one repulsive package. That doesn’t mean America was right to invade the country and arrest him, which strikes me as both unconstitutional and unwise. And while it’s hard to imagine a worse leader than Maduro, that doesn’t mean there isn’t one out there, waiting in the wings.

The Cato Institute’s Ian Vásquez, Justin Logan, Brandan Buck, Marcos Falcone, Katherine Thompson, Clark Neily, and Jeffrey Singer ponder Trump’s seizure of Maduro.

Reason‘s Eric Boehm explains what shouldn’t – but, alas, what nevertheless today does – need explaining, namely, Trump should have gotten Congressional authorization if he wanted to strike Venezuela and capture Maduro.” A slice:

The U.S. Constitution gives Congress the sole authority to approve military strikes against foreign countries. Federal laws, like the War Powers Resolution, allow for unilateral executive action only in response to an imminent threat against Americans or U.S. troops. That separation of powers is fundamental to American democracy—not an optional arrangement for presidents to discard when it is politically or logistically inconvenient.

At a press conference on Saturday morning, President Donald Trump termed the attack an “extraordinary military operation,” which he claimed was unlike anything seen since World War II. Therefore, there should be no debate about what this was: a military strike, one that utterly lacked congressional authorization.

Trump also clarified that the U.S. would “run the country until such time as we can do a safe, proper, and judicious transition” to a new leader. “We are going to stay until such time as a proper transition can take place,” he added.

Again, that leaves little room for debate. This was a regime change operation, and one that creates an ongoing responsibility for the American military.

Vice President J.D. Vance tried a different line of argument earlier on Saturday, when he claimed on X that Trump did not need congressional authorization for the attack on Venezuela because “Maduro has multiple indictments in the United States for narcoterrorism. You don’t get to avoid justice for drug trafficking in the United States because you live in a palace in Caracas.”

That argument, however, shreds the concept of separation of powers. The executive branch makes indictments. If it is also allowed to use the existence of those indictments to authorize military strikes in foreign nations, then there is no need for Congress to be involved at all.

Carlos Martinez assesses 67 years of communism in Cuba. A slice:

Even Cuban economists largely agree that the island’s problems stem not from the U.S. embargo but from the regime’s own policies. In addition, recent research by João Pedro Bastos, Jamie Bologna Pavlik, and Vincent Geloso found that the embargo explains only 3–10% of Cuba’s economic decline. The real culprits are nationalizations, the destruction of private property and markets, and their replacement with centralized economic planning. By 1989, even before Soviet support collapsed, these policies had already made Cuba approximately 55% poorer than it would have been otherwise.

“Why haven’t Trump’s tariffs had a bigger impact?” (HT Scott Lincicome) Three slices:

President Trump raised the taxes that the United States charges on imports last year to levels not seen in a century.

Prices of goods have increased as a result, and businesses that depend on imported products and supplies have struggled, with some closing their doors. Still, the effects have not been felt as strongly as some experts predicted after early April when Mr. Trump announced double-digit tariffs on imports from countries worldwide.

A new working paper from economists at Harvard and the University of Chicago helps explain why. It shows that the tariff rate importers have paid is significantly lower than the tariff figures that Mr. Trump announced. The reasons include exemptions for certain countries and industries, rates that were lowered for some goods by the time they arrived in the U.S. and evasion of the rules by some companies.

By analyzing the government’s tariff revenue and the value of imports, the economists concluded that the actual U.S. tariff rate was 14.1 percent at the end of September.

…..

This phenomenon does not mean that tariffs don’t burden U.S. companies and consumers. The researchers demonstrated that Americans were bearing the cost of Mr. Trump’s tariffs, in contrast to what he and his advisers have claimed.

….

U.S. consumers and manufacturers are also paying higher costs. A working paper published in November by economists at Harvard Business School and elsewhere found that tariffs had pushed up the price of imported goods by roughly twice as much as domestic ones.

Ms. Gopinath and Mr. Neiman also traced the effect of tariffs on U.S. manufacturers, which often depend on foreign parts and metals. They found that companies making heavy-duty trucks, construction vehicles, cars and car parts, agricultural implements, and oil and gas machinery were among the most affected by higher tariffs.

“The logic was if foreign firms wished to sell to the mightiest consumer market in the world, they would have to pay a price,” Ms. Gopinath said. “In reality, the price has been borne by U.S. firms, and not by foreign firms.”

Writing at Civitas Outlook, Jon Miltimore reminds us of warnings by Hayek and Orwell that the more the state takes charge of people’s lives, the more it corrupts our access to, and grasp of, truth. Two slices:

The COVID-19 pandemic was a vast economic experiment. The federal government issued a wide array of public health “recommendations” that soon became dogmas. To question the efficacy of masks or social distancing — a policy we learned in 2024 had no basis in science — was to risk being censored or accused of spreading “misinformation.” Scientific debate gave way to official decree, and many who questioned “the plan” or resisted it lost their jobs or were booted from platforms.

None of this would have surprised Hayek, who warned that the plans constructed by central planners must be “sacrosanct and exempt from criticism.”

“If the people are to support the common effort without hesitation, they must be convinced that not only the end aimed at but also the means chosen are the right ones,” he wrote. “Public criticism or even expressions of doubts must be suppressed because they tend to weaken public support.”

Hayek’s chapter is not primarily about censorship. Instead, he argues that the rise of state power will systematically undermine the concept of truth itself and the human pursuit of it.

…..

The economist Daniel Klein recently called “The End of Truth” the most important chapter in Hayek’s most important work. I couldn’t agree more. The chapter serves as a reminder that the human mind is not something to be controlled but something to be unleashed. If we forget this simple lesson, we risk surrendering the very capacity for independent thought that sustains civilization.

“The tragedy of collectivist thought,” he noted, “is that, while it starts out to make reason supreme, it ends by destroying reason because it misconceives the process on which the growth of reason depends.”

In March, 250 years after the publication of Adam Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations, a new oratorio – to be performed by the New York Philharmonic – will celebrate this magnificent work. (HT Tyler Cowen)

Gustavo Dudamel — the Oscar L. Tang & H.M. Agnes Hsu-Tang Music & Artistic Director Designate — conducts the World Premiere of the wealth of nations, a highly anticipated commission from the Pulitzer Prize–winning composer David Lang. Inspired by economist Adam Smith’s 1776 magnum opus, Lang dramatizes this foundational work about economics as inspired by Handel’s treatment of Biblical texts in Messiah. “I want this work to be enjoyable and thought-provoking,” says Lang, “encouraging audiences to consider what we truly value.”

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… is from page 189 of Johan Norberg’s wonderful 2025 book, Peak Human: What We Can Learn from the Rise and Fall of Golden Ages:

Tea was a drink for royals and nobles until Song [dynasty] farmers transformed tea cultivation from wild plants to controlled farming. It was not nature or tradition, but trade and productivity, that turned rice and tea into staples of the Chinese household.

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… is the closing line of this excellent letter by Steven Williams in the December 28th, 2025, edition of the Financial Times:

Industrial strength comes from innovation and coherent policy, not protectionist nostalgia.