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Here’s a letter to the Wall Street Journal.

Editor:

Jason Riley eloquently decries President Trump and so many other Republicans (and Democrats) today for falling for the zero-sum mercantilist fallacies that were exploded 250 years ago by Adam Smith (“GOP Doesn’t Know Smith From Adam,” February 18).

The most pernicious of these fallacies serves as the explicit justification for Mr. Trump’s “Liberation Day” tariffs – namely, that a country that runs trade deficits necessarily loses wealth to other countries. This fallacy is also the one that Adam Smith spent most time and ink debunking. His conclusion, brilliantly backed by careful reasoning, is powerful and succinct: “Nothing, however, can be more absurd than this whole doctrine of the balance of trade.”

In a more-rational world, we would worry about our so-called “trade balance” with other countries no more than we worry about our trade balance with other towns, counties, and states – or, indeed, our trade balance with people whose hair or eyes are of different colors than ours. As it is, alas, our freedom of commerce is obstructed by our own leaders who are beguiled by this absurd doctrine.

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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This letter was submitted several days ago to the New York Times but not published there.

Editor:

Oren Cass’s criticism of U.S. financial markets overflows with questionable claims and suggestions (“The Finance Industry Is a Grift. Let’s Start Treating It That Way.” February 7). An example is his blaming the growth in finance and its alleged obsession with “the Excel spreadsheets” for the fact that since the end of the Great Recession “productivity in America’s manufacturing sector — the output generated per hour of labor — has been falling.”

Manufacturing-worker productivity has indeed fallen slightly. But it’s doubtful that this decline was caused by an engorged financial sector, for the simple reason that since the end of the Great Recession the size of the financial sector relative to GDP has also fallen slightly.

This recent shrinkage in the relative size of the financial sector stands in stark contrast to what happened from the end of WWII until the Great Recession. During these years, the financial sector relative to GDP grew steadily and impressively, rising from 3% in 1950 to 4.5% in 1980, then to just over 8% in 2009 before falling to about 7% today. If increased financialization suppresses manufacturing-worker productivity, that productivity from 1950 through 2009 should have fallen, or at least not risen. But in fact, over those same many decades the real hourly output of manufacturing workers also grew steadily and impressively. In 2009 that output was about 40% higher than in 2000, 60% higher than in 1990, 80% higher than in 1980, 100% higher than in 1970, 140% higher than in 1960, and 200% higher than in 1950.*

These facts are difficult to square with the accusation that a growing financial sector suppresses the productivity of manufacturing workers.

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

* Phil Gramm and Donald J. Boudreaux, The Triumph of Economic Freedom (Lanham, MD: Rowman & Littlefield, 2025), page 93.

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Wall Street Journal columnist Jason Riley urges Republicans – indeed, all Americans – to again embrace the wisdom that runs throughout the pages of Adam Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations. A slice:

At least since the Reagan era, the GOP has been the main vehicle for popularizing and advancing economic freedom. And though there are similarities between the Trump and Reagan presidencies—both men cut taxes, reduced regulations and connected with traditionally Democratic voters—philosophical comparisons between the two can quickly become strained.

At Mr. Trump’s direction, the federal government has taken an equity stake in Intel, becoming the tech company’s largest shareholder. It has promoted price controls on pharmaceuticals and credit-card interest rates. It has permitted Nvidia to ship advanced semiconductor chips to other countries, but on the condition that Treasury receives a 25% cut of the revenues. In return for allowing Nippon Steel to acquire U.S. Steel, the government demanded veto power over plant closures and layoffs. And it has used tariffs broadly to bludgeon America’s friends and foes alike into economic submission.

This is industrial policy, the antithesis of free-market economics. None of it is reminiscent of Reagan, and all of it has been abetted by Republicans in Congress who spent years lecturing the Biden and Obama administrations about the pitfalls of government meddling in the private sector. As the Journal editorialized recently, our sad situation today is that “both major political parties lack notable champions for free-market principles.”

On March 9, we’ll mark the 250th anniversary of Adam Smith’s “An Inquiry Into the Nature and Causes of the Wealth of Nations,” published a few months before the Declaration of Independence. The book is considered the foundational text of modern classical economics, and it wouldn’t hurt Republican officials to crack open a copy.

Smith’s “Wealth of Nations,” which spawned an entire school of economics, was written to challenge the prevailing mercantilist system in Britain. The mercantilists advocated on behalf of merchants and favored economic protectionism. They equated a nation’s wealth with the amount of gold and silver it possessed and perceived international trade as zero-sum, meaning one nation’s gain was another’s loss. It was essential for a country to export more than it imported. It’s important to “sell more to strangers yearly than wee consume of theirs in value,” wrote the economist Thomas Mun, a prominent 17th-century mercantilist. And nations must produce domestically “things which now we fetch from strangers to our great impoverishing.” Sound familiar?

Smith set out to refute these ideas. He argued that a nation’s wealth derived not from the amount of gold it possessed but rather from its production and flow of goods and services. Government intervention on behalf of the merchant class led to cronyism, and trade protectionism hurt consumers by limiting their purchase options and increasing prices. Central planning was inefficient. Economic growth resulted when consumers, producers and investors sought their own self-interests through voluntary exchanges.

Whether or not he realizes it, Mr. Trump is animated by a mercantilist conception of the world. But thanks to Smith, today we judge the performance of an economic system based on how efficiently it allocates resources to satisfy consumers, not merchants. Better to focus on creating wealth, not taking existing wealth from others. Republican officials spend a lot of time these days directing epithets like “Marxist” and “socialist” at their political opponents. But where is their criticism of Mr. Trump’s statist tendencies? And what is their competing approach?

Richard Reinsch rightly criticizes J.D. Vance and other “postliberals” for their misunderstanding of markets and their trust in the state. Two slices:

That is one of the reasons economic mobility matters to Americans and their families. As University of Virginia sociologist Brad Wilcox recently observed, “American families have been migrating from blue states like California, New York, and Minnesota by the hundreds of thousands to red states like Idaho, Tennessee, and Texas.” It’s not just that the red states are more socially welcoming to families and people of faith. Wilcox further explains that these states allow families to support themselves financially “more readily than in blue states” because red states have lower taxes, stronger job growth, and more affordable single-family homes.” A successful conservative alternative for American families would seem to be the revival of a supply-side economic and cultural agenda for families, not Hungarian traditionalism.

…..

Like Democrats of old and of today, who always have a victim group that requires more federal programs and more federal spending because of what the country has unjustifiably done to it, Vance is a grievance-based politician. The small-town white male is no longer the salt of the earth; no, he’s a victim. International trade took his job, he fought in the War on Terror for no purpose, and he fell victim to the opioid crisis that corporations imposed on him. Accordingly, the “new right” government must step forward with tariffs, industrial policy, a harsh anti-immigration posture beyond removing illegal aliens, pro–labor union policies, and progressive antitrust measures to provide for these new aggrieved Americans.

The hidden premise of the Vance right is that we are now living in a post–American Dream era. Reaganites have failed, leaving the vast majority of adults who once aspired to stand on their own, living free and independent lives, unable to survive. According to a new caste of American right-wing leadership, taking its cues from European conservative statists, American citizens should lead lives scripted for them, and leaders should abandon policies rooted in growth, work, and citizenship grounded in freedom and virtue.

Vance has been consistently clear, both before and after entering public life, that drastic government action is warranted on behalf of the American people. He has expressed admiration for Lina Khan—President Biden’s director of the Federal Trade Commission, known for her aggressive and progressive antitrust posture—and has supported the Affordable Care Act, and he can be expected to adopt an accommodating stance toward the means-tested entitlement state. His rhetoric of emergency and of a country in extremis reveals an agenda to increase the size of government “for our own purposes,” as he noted in a 2021 interview on the Jack Murphy Live podcast.

The Washington Post‘s Editorial Board decries Sen. Edward Markey’s (D-MA) Luddite efforts to obstruct the use of driverless automobiles. A slice:

The right question is not whether driverless vehicles have ever made a mistake; it’s whether they make fewer such mistakes than human drivers. Thus far the data suggests that self-driving is a substantial improvement, and consumers in the cities where Waymo operates don’t seem deterred.

The greatest risk to moving forward here isn’t technological but political.

Also from the Editorial Board of the Washington Post is this summary of lessons drawn from “Biden’s failed electric-vehicle push.” A slice:

By pulling EV models from their lineups, repurposing EV battery plants and laying off workers in some EV factories, the automakers are taking $50 billion in combined write-downs on their EV investments. The electric-vehicle investment bubble egged on by the Biden administration reflected a classic disconnect between a government’s lofty policy goals and a public that wasn’t convinced. Biden set the fantastical goal that half of all new vehicles sold by 2030 should be EVs. Currently that number is just six percent and dropping.

Former Securities and Exchange Commission commissioner Joseph Grundfest argues, in the pages of the Wall Street Journal, for abolishing the SEC’s “Shareholder Access Rule.” Two slices:

Of the thousands of rules and regulations adopted by the Securities and Exchange Commission, none are as divisive as the Shareholder Access Rule. It empowers investors with even minuscule holdings to force shareholder votes on nonbinding proposals—usually on topics including corporate environmental policies, diversity initiatives, political contributions and board composition.

Investors owning as little as $2,000 of a company’s stock—about 16 billionths of the average market capitalization of an S&P 500 company—can force a vote. Average monthly rent for a New York City apartment is roughly $3,500, 75% more than the rule’s minimum. This holding requirement might be the only thing in America not suffering an affordability crisis.

Only 11% of the proposals that proceeded to a vote in the 2025 proxy season gained majority support from voting stockholders. If a proposal is approved, the corporation’s board typically declines to implement it anyway. The Access Rule thus generates toothless, performative votes.

…..

SEC Chairman Paul Atkins has vowed to rededicate the commission to its statutory mission. Repealing the Access Rule should be part of that agenda. The rule’s supporters would likely appeal that decision to the courts. Because of the Supreme Court’s decision in Loper Bright v. Raimondo (2024), the courts will then interpret the statute for themselves. Given the judiciary’s recent trend toward narrowing the reach of the administrative state, the future there looks dim for the rule.

Corporations can craft their own access rules that are better suited to their specific needs. That would restore shareholder voice under state law, which is where the question properly resides. But corporations should still work to fill the gap that would be left by repealing the rule. Guaranteeing proxy access to stockholders with reasonably sized holdings—much more than $2,000—respects investors, even when their views can be uncomfortable for management to address.

This “private ordering” alternative has decades of support from scholars and individual SEC commissioners. It’s the necessary replacement for years of illegal federal intrusion into shareholder meetings. The Access Rule should never have been adopted, and the legally proper response is to repeal it.

Here’s further evidence that immigrants to America do not ‘steal’ American jobs or otherwise reduce Americans’ employment opportunities: (HT Scott Lincicome)

The large increase and subsequent decline of unauthorized immigrant workers in recent years have raised questions about the impact of these changes on local labor markets across the United States. New analysis linking immigration data with employment data for specific areas suggests that the rapid rise in unauthorized immigrant worker flows increased local employment roughly one-for-one. Extending the analysis to the industry level further suggests that the slowdown of net immigration had a large negative impact on local employment, particularly for construction and manufacturing.

Arnold Kling is a guest on a former classmate’s podcast.

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… is from pages 178-179 of John Chamberlain‘s 1982 autobiography, A Life with the Printed Word:

But what the experience of my own dissident pilgrimage among the “scribblers” who have set the intellectual fashions of the past half century tells me is that the Left has nothing more going for it beyond its willingness to use force or deception in order to stay in power. It can suppress, but it has never managed to revive the spirit of innovation anywhere.

Jack Kemp has had some sharp words about a Republican Party whose symbol is the elephant. The elephant should remember what happens when it identifies itself with big business whose CEOs, managerial rather than entrepreneurial in psychology, compromise with the spirit of socialism in order to “get along.”….

We did not unsettle the Old World merely to reestablish its repressive ways in the New.

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Donald Newell’s letter – shared here in its entirety – in today’s Washington Post is as important and correct as it is succinct:

The national debt is a taxation without representation upon our future children. Put another way: It’s child abuse.

The Editorial Board of the Wall Street Journal reports that the Congressional Budget Office “shows again that the U.S. fiscal problem is spending, especially entitlements.” Two slices:

The Trump Administration is boasting about its success in reducing the deficit, and give it credit for curbing what had been ballooning growth in discretionary spending like climate pork. CBO reports a $1.8 trillion deficit in the 2025 fiscal year that ended on Sept. 30, which is $57 billion lower than in the prior year. But hold the apple-polishing.

CBO forecasts that deficits will total $24.4 trillion through 2036, largely because of entitlements on autopilot. Spending will increase to $11.4 trillion in 2036 from $7 trillion, while revenue grows more modestly to $8.3 trillion from $5.2 trillion. Medicaid is expected to grow 47%, Social Security 74% and Medicare 105% over the next decade.

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All told, spending is expected to increase to 24.4% of GDP in 2036 from 23.1% this past fiscal year and the pre-pandemic historical average of 20.1%. The U.S. has never before sustained such high levels of spending in peacetime. Revenue is expected to average 17.7% of GDP over the next decade, roughly the historical norm.

As the U.S. issues more debt, net interest payments are projected to double by 2036, increasing to 4.6% from 3.2% of GDP. This assumes the 10-year Treasury rate remains about 4.3% over the next decade. Some corporations have recently borrowed at lower rates than the U.S. Treasury, which suggests that monetary policy isn’t all that tight and the market appetite for U.S. debt isn’t inexorable.

That’s a warning to Congress, if Members want a legacy worth having.

Pierre Lemieux warns that protectionism justified on grounds of national security too easily turns not only cronyist but also absurd. Two slices:

In a petition (a “Tariff Inclusion Request”) to the federal government, American Pan, the largest manufacturer of industrial and commercial baking pans in the country, argues that national security requires a tariff on competing Chinese pans. Recall that, last year, the same federal government imposed tariffs of 50% (or 25% for a small number of countries) on steel and aluminum. This made derivative products, such as baking pans, more costly to produce in America. The government woke up and allowed manufacturers of derivative products to petition for protectionist tariffs on their products as well.

In its petition, American Pan explains that American tariffs on its inputs have increased their cost by 90% for aluminum and 40% for steel. As a consequence, the company argues, the increased supply of low-cost Chinese pans “is a threat to National Security by threatening the food security of the United States.” How so? If these Chinese imports bankrupt American pan manufacturers and if, in the event of war, the Chinese government imposes an embargo on the United States, there will be no pans with which to cook food.

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The fact that American Pan wants the government to impose a tariff to protect its products against tariffs on its inputs imposed by the same government points to the absurdity of it all. But more than just absurdity is involved. The phenomenon serves the interests of those who would benefit from the growth of Leviathan. It expands rent-seeking opportunities and multiplies obedient government cronies. Americans are getting more accustomed to petitioning for privileges and to being dependent on political authorities.

Here’s the abstract of a new paper by Tamar den Besten and Diego Känzig: (HT Scott Lincicome)

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 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-World War II, a pattern consistent with changes in the monetary policy response and with stronger international retaliation and reciprocity in the modern trade regime.

GMU Econ alum Paul Mueller applauds the demise of ESG-obsessed proxy advisors. A slice:

For those who have been following issues related to environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI), this is a major event. The two major proxy advisory firms, Institutional Shareholder Services (ISS) and Glass, Lewis, & Co. (Glass Lewis), have been criticized for using their recommendations on shareholder voting to push politically motivated ESG/DEI crusades (sometimes unbeknownst to the shareholders they represent). This has made the industry the target of a recent executive order aiming to increase federal oversight in the proxy advisory industry.

Ultimately, though, the proxy advisory industry was born out of regulation. Further government intervention could invite greater cronyism. If the proxy advisory industry wants to win customers back, it needs to focus on fiduciary obligations, not politics. If federal officials want greater transparency and accountability in the proxy advisory market, they should focus on rolling back unnecessary regulations and simplifying any regulations that remain to encourage a competitive proxy market.

Arnold Kling argues that, since 1980, “most of the gain in stock prices has come not from higher earnings but from investors willing to pay more for a given amount of earnings.”

A former police officer asks: “What the hell is ICE doing?”

Here’s the abstract of a new and fascinating paper – published in the Journal of Economic Behavior & Organization – by my GMU Econ colleague Vincent Geloso and co-authors Kelly Hyde and Ilia Murtazashvili:

We explore the institutional foundations of public health by distinguishing among three broad categories of disease: diseases of poverty, which are income-sensitive and decline with improved living standards; diseases of commerce, which are contact-transmissible and spread with mobility and exchange; and diseases of affluence, which are longevity-mediated noncommunicable conditions such as cancer, heart disease, and diabetes that become more prevalent as people live longer. This classification allows us to examine how economic freedom, through its effects on income, mobility, and survival, reshapes the mix of disease rather than health outcomes in aggregate. Using global health data, we find that economically free societies experience large reductions in diseases of poverty, modest changes in diseases of commerce, and a higher relative share of diseases of affluence even as total age-standardized mortality declines. These results reveal that institutional arrangements influence the composition of mortality more than its overall level: economic freedom enhances prosperity and resilience while shifting the burden of disease toward conditions associated with longer lives.

Andy Morriss reviews John Hasnas’s Common Law Liberalism.

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… is from page 203 of Matthew Hennessey’s superb 2022 book, Visible Hand:

[T]he notion that some petty bureaucrat knows your interests better than you do is both empirically false and philosophically unacceptable.

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The dozen or so people who regularly read Cafe Hayek know that I write a lot about trade and trade policy. Indeed, rarely a week passes in which I don’t get a friendly – and sometimes unfriendly – email entreating me to stop writing about trade. I reply that, for as long as I live, I will write about trade as long as protectionists continue to insist on their right to obstruct peaceful trade. As I live, I will stop writing about trade only when protectionists stop demanding protection. I regretfully, but with complete confidence, predict that that day will never come.

Even though my intelligence isn’t especially impressive, I detest having it insulted. Yet nearly every argument for protectionism is an insult to the intelligence of every thinking person. Even more, I despise having my and my fellow human beings’ freedom to act peacefully held in contempt – and nearly every argument for protectionism treats individual liberty with utter contempt.

……………

Because economists have been pondering and writing about trade for a quarter of a millennium – mostly in response to protectionists who, for all of that time, have insisted on making excuses for their schemes – there has been for decades (perhaps even longer) no new argument for protectionism. Economists have heard them all and have rebutted them all, countless times.

And yet I continue to experience occasional genuine surprise at just how elementary are some misunderstandings about trade and protectionism.

On a Facebook thread today, I was conversing with someone who is sympathetic to protectionism. This person, who admits to not being an economist, is polite and civil, and so I don’t mind engaging with him. At one point in the conversation I asked him to “please explain how a policy that intentionally obstructs a people’s access to goods and services – including goods and services that those people use as inputs in their production processes – makes those people richer?”

He responded with this question: “What goods and services have I been obstructed from?”

Reading his response filled me with despair sparked by the realization that the way that many people think about tariffs and trade is – I can find no good word for it – profoundly different from the way that I and most other economists and advocates of free markets think about trade.

How does someone not see that protective tariffs are designed to obstruct the access of people of the home country to tariffed goods and services? How can someone not see that the very essence of protectionism is obstructing fellow citizens’ access to imported goods and services? Here’s my response, of Facebook, to my interlocutor:

You have been obstructed, most obviously, from access to any goods and services the prices of which are raised by the tariffs. Because of these higher prices, you likely purchase fewer of these goods and services over time than you would have purchased absent the tariffs. If you don’t reduce your purchases of these tariffed (and tariff-competing) goods and services, you will necessarily spend a larger share of your income purchasing these goods and services. In turn, you will necessarily have less income to spend on other goods and services, so your access to these other goods and services is obstructed. That’s the whole point of protective tariffs: to obstruct your and your fellow citizens’ access to goods and services sold from abroad.

To not immediately see that tariffs necessarily obstruct the access of citizens of the home country to imported goods and services is akin to not immediately seeing that 10-2 equals some number less than ten. It’s baffling.

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Daniel Hannan makes a powerful case that “the world still needs what America stands for” – and so, too, do Americans. Three slices:

The American Revolution was a rejection of British citizenship, not of British values. Indeed, it was a clamorous assertion of all the things that, in the eyes of the Founders, had made them British in the first place: personal autonomy, representative government, religious liberty, habeas corpus, jury trials, the sanctity of contract, the rule of law, and constraints on executive power.

As Winston Churchill was to put it in his History of the English-Speaking Peoples: “The Declaration was in the main a restatement of the principles which had animated the Whig struggle against the later Stuarts and the English Revolution of 1688.”

American visitors to London are sometimes surprised to find prominent statues of six U.S. presidents, including Abraham Lincoln in Parliament Square and George Washington in Trafalgar Square. Yet, even in 1776, the American cause enjoyed widespread support in Great Britain. The most brilliant parliamentarians of the era, Edmund Burke, Charles James Fox, and Pitt the Elder, all favored the patriots. So, as far as we can make out, did a majority of the population — though, with a more limited franchise than in the colonial assemblies, that majority was not replicated in the House of Commons.

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To put it more briefly, the foundational value of the United States is liberty. I feel slightly silly having to write that, as it would recently have gone without saying. But when lots of young American conservatives are disowning the Founders and writing excitedly about Catholic integralism or the jurisprudence of the Nazi lawyer Carl Schmitt, it bears repeating. Listen to the two presidents whose statues have pride of place in London.

“Interwoven as is the love of liberty with every ligament of your hearts, no recommendation of mine is necessary to fortify or confirm the attachment,” said George Washington in his Farewell Address. Abraham Lincoln at Gettysburg defined the nation as having been “conceived in liberty.”

What does liberty mean? It means that the people in power can’t boss others around. It means that politicians are servants and not rulers. It means that private property and free contract are respected, that the coercive force of the state is a last rather than a first resort, and that the people in charge don’t get to make up the rules as they go along. It means, in short, a government of laws and not of men — a phrase attributed to John Adams, although, demonstrating my point about the Founders’ British identity, Adams was quoting the 17th-century English radical James Harrington.

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How secure is that tradition at home? Both parties seem increasingly unwilling to accept results that don’t suit them. There is, again, something creepily un-American about personality cults, about the willingness to contract out your opinions to a father-of-the-nation type, to change your views when he changes his.

The Founders would have had Trump down as a “Caesarist,” meaning a man whose personal ambition outweighed his respect for the republic. They would have been appalled, less by his executive power-grabs or desire for a third term — they knew such men — than by the obsequious way in which others encourage him to exceed his authority. They designed America expressly to prevent arbitrary rule.

Eric Boehm decries the cowardice of most Republicans regarding Trump’s tariffs punitive taxation of Americans’ purchases of imports. Two slices:

Rep. Tom McClintock (R–Calif.) describes himself as a “tariff skeptic.”

In that regard, his judgment seems sound. President Donald Trump’s tariffs are hiking costs for businesses and prices for consumers. They are not delivering the promised boom in manufacturing jobs. Polls show that most Americans dislike them.

Unlike most Americans, however, McClintock was in a position this week to translate that skepticism into action.

Given that chance, McClintock (and the vast majority of his Republican colleagues) chose cowardice and voted to continue Trump’s unilateral executive control over American trade policy.

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Few other Republicans said it as openly as McClintock did, but he’s hardly the only coward in the crowd. The “baseline House Republican position” is tariff skepticism, an unnamed administration official told Politico on Wednesday.

That makes a lot of sense, because you don’t have to be an economist to be a tariff skeptic at this point. Consider the amount of bonkers tariff-related news that happened just this week:

• Trump admitted he placed tariffs on Switzerland—tariffs that are ostensibly a response to a “national emergency”—because he was grumpy about how the country’s “prime minister” spoke to him on a phone call. (Switzerland has no prime minister.)
• Ford said it plans to spend an extra $1 billion this year due to tariffs on imported aluminum, which is pretty essential if you’re in the business of building cars.
• Goodyear announced that it expects to lose $175 million to tariffs this year due to tariffs, and that it would cut 450 jobs to offset some of those costs.
• The Congressional Budget Office reported that American consumers are bearing roughly 95 percent of tariff costs.
• Republican leaders reportedly tried to sway Rep. Don Bacon’s (R–Neb.) vote on a tariff matter by promising tailored tariff relief to businesses in his district.

Let’s dwell on that last item for just a moment. Faced with a possible Republican revolt over tariffs, the White House was reportedly trying to cut deals to reduce tariffs for certain parts of the country while maintaining them broadly.

First and foremost, that’s an admission that tariffs are being paid by American businesses and consumers (otherwise, there would be no relief to be offered).

Wall Street Journal columnist Allysia Finley asks: “Why is the Trump administration continuing the Biden push for ‘inclusive’ credit scores?” Two slices:

A wrong-headed political drive in Washington to make housing more affordable fueled the 2000s housing bubble, which burst into the 2008-09 financial crisis. Now we’re seeing history rhyme as federal housing regulators create perverse incentives that are sure to lead to inflated credit scores that will let riskier borrowers take out lower-interest mortgages.

…..

At least the Biden FHFA required lenders to submit to Fannie and Freddie both a FICO and VantageScore for all loans. Mr. [FHFA Director Bill] Pulte, however, announced last summer to much fanfare that lenders would be allowed to choose which score to use when underwriting mortgages. The end of this story writes itself.

Lenders will always choose the higher score so they can make more mortgages to risky borrowers—and at lower rates. Fannie and Freddie charge higher fees to insure mortgages for borrowers with lower credit scores. That means Fannie and Freddie will guarantee riskier mortgages and charge less for doing so.

Chesapeake Risk Advisors’ Clifford Rossi estimates that severe-delinquency rates could increase by 18%. The consulting firm Milliman predicts default rates will rise by some 30%. The American Enterprise Institute’s Ed Pinto, Tobias Peter and Sissi Li estimate guarantee fees will fall by 10% to 13%, putting taxpayers at greater risk.

Reality isn’t optional even for charismatic, slogan-slinging east-coast socialists who win landslide elections. A slice:

Zohran Mamdani was happy to promise lower rent for New Yorkers on the campaign trail. But now that he’s the guy stuck with the bill, the mayor is having second thoughts.

The socialist seems to be walking back a campaign promise to expand the city’s billion-dollar rental voucher program. The City Fighting Homelessness and Eviction Prevention Supplement was launched in 2018 to help keep low-income New Yorkers out of shelters by subsidizing permanent housing. The program’s cost ballooned from $25 million in 2019 to more than $1 billion in 2025, making it one of the nation’s largest rental assistance programs.

Ditto for west-coast collectivists, as reported by Shawn Regan. A slice:

Los Angeles has a history of progressive housing policies that sound good in theory but prove counterproductive in practice. Measure ULA, the city’s so-called “mansion tax,” is the latest example, and it’s one of the most unreasonable.

Approved by voters in 2022, Measure ULA imposes steep taxes on real-estate sales worth over $5 million. The revenue is meant to fund affordable housing and tenant assistance. Advocates’ pitch for the measure was straightforward: tax luxury-property sales and use the proceeds to tackle homelessness and affordability. Supporters estimated that the measure could generate nearly $1 billion annually for housing programs.

Four years later, Los Angeles officials are beginning to acknowledge that the policy has not worked as intended. Last month, City Councilmember Nithya Raman—who supported Measure ULA when it was on the ballot—introduced a motion calling for changes to the tax, warning that it had produced “unintended consequences.” Measure ULA, she argued, “stalls housing production” and “ultimately undermines the very goals voters asked us to achieve.”

Raman is right. Measure ULA has both raised less revenue than promised and discouraged the kinds of property transactions that make new housing possible, including new multifamily units. In trying to tax its way to affordability, L.A. has worsened its housing shortage.

In response to people who today point with much fear – but with little knowledge of history – to lots of recent immigration to the U.S. from Latin America, Jeremy Horpedahl tweets: (HT Scott Lincicome)

15% of the population of Ireland entered the US between 1851 and 1860

9% of the population of Norway entered the US in the 1880s

6% of the population of Italy entered the US from about 1900-1910

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… is from page 533 of F.A. Hayek’s brilliant Postscript – “Why I Am Not A Conservative” – to the Definitive Edition (Ronald Hamowy, ed., 2011) of Hayek’s 1960 volume, The Constitution of Liberty:

Follies and abuses are no better for having long been established principles of policy.