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Alex Tabarrok warns of the Trump administration’s “nationalization of American science.” A slice:

OMB, joined by some forty grantmaking agencies—NSF, HHS, DOE, NASA, DOD among them—has proposed a sweeping rewrite of the rules governing all federal grants, the Regulation for Federal Financial Assistance.

American science has long been state funded but not state directed. Since Vannevar Bush, money has flowed through many agencies to independent universities, allocated largely by peer review. The system has flaws—conformity, gerontocracy, waste—but it had one great virtue, the system was decentralized and not under state control. This rule proposes to bring science funding under top-down, state control.

Program goals must now be “aligned with administration policies and priorities” (§ 200.202). Merit review is subordinated to politics: “senior appointees must conduct these reviews,” ensuring “that discretionary awards advance the President’s policy priorities,” while “peer review remains advisory and does not replace agency discretion” (§ 200.205). And every grant becomes terminable at will, whenever it “no longer effectuates program goals, Federal agency priorities, or the national interest *as they exist at the time of the termination*” (§ 200.340, emphasis added). Universities must even ensure their subrecipients don’t “significantly damage the reputation of… the Federal Government” (§ 200.332)—a loyalty clause for scientists.

All this is sold as cutting “burdensome conditions,” a goal I would support, but sadly that is bullshit. The proposed rules add more paperwork and many more layers of bureaucratic review. Payment requests must include written justifications. Every disbursement gets screened through Treasury’s “Do Not Pay” system. Every recipient must run E-Verify. Applicants must disclose any employee who worked at the awarding agency within two years. And on top of the existing review machinery sits a new pre-issuance review committee of “senior appointees” second-guessing the experts. Fixed amount awards—pay for outputs, not inputs—an innovative reward mechanism are *eliminated*, so every award now gets routine cost monitoring and financial reporting.

Political review of every award, peer review demoted, agency review promoted, termination whenever “priorities” change. Chilling. It’s a nightmare of petty low-trust review of the kind that is already drowning science. I must deal with this kind of nonsense all the time. More is not better.

The Editorial Board of the Wall Street Journal identifies one reason for Zohran Mamdani’s electoral success: economically successful people are moving out of Gotham and thus leaving disproportionately more political power with the young and economically ignorant. A slice:

While out-migration has slowed in the last couple of years, high earners and married people continue to leave in large numbers. The data show that 13,662 taxpayers—roughly 1 in 1,000 resident taxpayers—on net left the state in 2024.

“The greatest net loss of taxpayers was among married filers with incomes between $100,000 and $500,000—a net loss of 8,200, or more than half of the total net out-migration, in 2024,” the comptroller’s office says. The highest out-migration rate was for households making $500,000 or more—about one in 100 of whom moved out that year.

The data underscore how the state’s high taxes and cost of living drive out top earners as well as middle and upper middle class families. Other flight propellants include New York City’s poor public schools and disorderly streets. Enrollment in New York City public schools has fallen 117,800 since 2019.

But here’s the political irony, which the comptroller’s office calls “one positive post-pandemic trend”: An influx to the state of single tax filers. These include the young urban progressives who form New York City Mayor Zohran Mamdani’s base and propelled his socialist comrades to victory in Democratic primaries last month.

Progressive policies in New York City and other big cities are driving out the moderate and conservative voters who have historically been an electoral check on bad governance. The New York voters who made George Pataki Governor in 1994 and Rudy Giuliani mayor in 1993 now live elsewhere.

These are the taxpayers who pay the bills for the welfare state and public unions. Good luck funding universal child care and socialist housing with the taxes from graduate students and community organizers.

Lethal ignorance of economics and history is certainly having a day in the United States, as reported by the Washington Post. A slice:

Democrats want to regulate and reform capitalism to curb its excesses and make the results fairer to everyone. The DSA, by contrast, seeks in the long term to replace capitalism, which the group sees as “a system designed by the owning class to exploit the rest of us.” They want workers to “run both the economy and society democratically to meet human needs, not to make profits for a few.”

And as National Review‘s John Puri notes, lethal ignorance of economics and history also now runs rampant among many Republicans. A slice:

One month later, Trump blew his first equity deal out of the water. He eyed an ownership stake in the struggling chip giant Intel, which was bleeding money and jobs despite billions of dollars in federal subsidies under the Biden-era CHIPS Act. Trump noticed that $5.7 billion in grants had previously been awarded to Intel but had not yet been paid. In exchange for releasing the promised funds, the administration asked for 10 percent of the company. Intel was happy to accede, winning the most powerful ally in the world.

Before 2025, economic analyst Scott Lincicome notes, the federal government had not made an indefinite, noncrisis investment in a healthy private company since at least the 1950s. The Trump administration has now taken more than 20 such stakes, targeting a range of industries from minerals and semiconductors to nuclear energy and quantum computing. There is no limiting principle at work; the government is taking equity in any company it can, on any terms, in any amount. It’s a scheme that progressives can fall in love with: Bernie Sanders is now clamoring to take government stakes in artificial intelligence companies.

This endeavor is enabled by a mix of old and new legislative appropriations written with few constraints on their deployment for stretchable ends: bolstering the defense-industrial base, accelerating innovation, etc. Congress clearly did not anticipate the current president’s cleverness.

Trump is reaping the benefits of the industrial policy pushed by his predecessor. The CHIPS Act and Biden’s green-energy law, the Inflation Reduction Act, gave the executive tens of billions of dollars that he could dangle. Last year’s reconciliation bill gave the Defense Department billions more to dole out, and the administration’s recent budget request would supercharge the military’s investment accounts.

Trump related his extralegal investment philosophy in an interview last December: “We should take stakes in companies when people need something. I think we should take stakes in companies. Now, some people would say that doesn’t sound very American. Actually, I think it is very American.” To call this approach transactional may sound trite — every equity deal is a transaction, of course. But conservatives have long insisted that government be the neutral arbiter of the marketplace, not an active participant. And, under law, the executive branch was never meant to trade special favors and taxpayer money for profit.

Eric Boehm reports this sorry but unsurprising fact: “More than $1 of every $10 in SNAP benefits went to people who didn’t qualify in 2025.”

Writing about fears of AI, Victor Menaldo explains that the predicted apocalypse isn’t coming. A slice:

But a job is not a to-do list of separable chores. Firms employ people for bundles of work held together by judgment, coordination, client trust and accountability. When a job’s tasks complement one another, automating the pieces does not reduce the job’s scope. It raises the value of the human work that remains.

When power looms automated much of weaving in the 19th century, they devastated many handloom weavers. But in the mechanized mills, the workers who learned to tend the new looms grew more valuable, not less. They still had to tie the weaver’s knot, swap a spent shuttle in seconds, adjust the warp tension so the threads wouldn’t snap and mind several looms at once. The workers who mastered these skills earned more even as the looms multiplied and cloth grew cheap.

For all its fluency, AI is not an all-knowing mind that does your job for you or better than you. It is a prediction engine that has digested a vast share of human writing.

That gives this machine astonishing reach — and several crippling gaps. It cannot tell you how biased its sources are, cannot show its work in a way you can audit, and can sound just as confident when it invents a citation as when it reports a fact. It is, in this sense, the near opposite of its closest ancestor, statistics, the tool that shows how much to trust a prediction. Statistics implies error bars; AI offers none.

Because AI cannot flag its own margins of error, an organization that deploys it widely can find itself operating in a fog of uncertainty — and that is where the true economic bottleneck emerges. When plausible-sounding output becomes cheap and instant, the premium shifts to the judgment required to tell whether a flawlessly formatted answer to a chatbot query is a breakthrough, a dead end or a hallucination.

Ryan Yonk and Ravi Roy remember Art Denzau.

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… is from page 104 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

You might think that the collapse of communism throughout Eastern Europe would be considered a decisive failure of Marxism, but academic Marxists in America are utterly undaunted. Their paychecks and their tenure are unaffected. Their theories continue to flourish in the classrooms and their journals continue to litter the library shelves.

DBx: And their students continue to seek and gain political power.

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Richard Baldwin documents this reality: (HT Scott Lincicome)

So, the sclerosis story had it backwards. The sclerotic economy keep the factory jobs better than the dynamic economy. The dynamic economy shed factory share faster for the one reason that has nothing to do with sclerosis: its own consumers shifted spending away from manufactures. Europeans did not stop buying manufactures, and they did not stop making them. Their factories lost value added because they spent more of imported inputs.

GMU Econ alum Daniel Smith uncovers the origins of a commonplace economics-textbook example of tradeoffs – the example being guns and butter. Two slices:

Paul Samuelson’s popular textbook Economics (1948) was the first apparent depiction of a guns versus butter graph, making it a permanent staple of introductory courses. Samuelson was introduced to the first production possibilities frontier graph, depicting the tradeoff between two goods, by his Harvard professor Gottfried von Harberler, a student of Friedrich von Wieser and Ludwig von Mises, who had introduced it in his book Theory of International Trade (1936).

Yet the underlying insight, arguably, reaches back much further. In Book IV of Wealth of Nations, Adam Smith meticulously documented the economic costs of Britain’s imperialism. Subduing, protecting, and administering far-flung territories had enormous costs and few benefits. Contrary to the prevailing wisdom of his day, he argued that empire, once all the tradeoffs were considered, diminished the wealth of nations rather than increasing it.

…..

The tradeoff for the Soviet Union was even more devastating, [Adam] Tooze notes. “… the production [of military equipment] came at the expense of enormous sacrifice on the Soviet home front,” he writes, “where hundreds of thousands if not millions of people starved to death for the sake of the war effort.”

It is this bitter experience that led President Eisenhower to observe:

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some 50 miles of concrete highway. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.

Dan Hannan is correct about Trump. Two slices:

America at 250 has never been wealthier or more powerful. It has grown two thirds faster than Western Europe over the past 20 years. Rival ideologies – Chinese authoritarianism, Islamism – are hideously unappealing.

Yet, at the same time, the US is starting to behave like a tinpot autocracy. The best way I can describe it is as Third Worldery. The attempt to browbeat the Nobel Peace Prize Committee; the obsession with building big arches; the tariffs; the annexation threats against Canada, Denmark, and Panama; the renaming of public institutions after a living leader; the successful attempt to bully FIFA over a red card. Such things are the hallmark of insecure dictatorships, not of confident democracies.

Opting for strongman government seems to have opened the way to Third Worldery across the board. Once you build your head of state into a Father of the Nation type, once dissent from his latest whims is portrayed as a form of treachery, other things follow.

It is the same pattern everywhere. When Recep Tayyip Erdoğan insists that the rest of us refer to his country in English as “Türkiye”, he invites us to treat Turkey as a post-colonial failed state rather than as the Western democracy it was before his time. I mean, we use English exonyms for serious places. No one demands that we say Deutschland or Nippon or Magyarország. But touchy third worldists demand Côte d’Ivoire, Timor-Leste and Cabo Verde – and, now, Gulf of America, the classic needy country move.

…..

Then again, as Lady Macbeth says, “What’s done cannot be undone”. Those who have downplayed, excused or ignored Trump’s venality will struggle to find grounds on which to oppose equally sleazy stuff from a successor in either party. Standards have been permanently lowered. We will look back wistfully on what was lost.

Giancarlo Sopo reviews the new movie Young Washington. Here’s his conclusion

Young Washington returns a stone founder to flesh and blood, and it does so with skill and real feeling, made without a flicker of irony by people who believe in their subject. We are badly short of films that believe in anything at all, and a nation needs heroes. This is a good one, and word that a sequel is already under way is welcome news. I only wish the film had left a little more of the man inside the marble unexplained.

Available here is the full text of Charley Hooper’s and David Henderson’s recent Wall Street Journal piece urging the Food and Drug Administration to stick to safety.

Welcome to Space Jam!

We are Rebecca, Max, and Aakrith. We are researchers at The Mercatus Center, a research organization dedicated to classical liberal ideas. Rebecca is a philosopher, Max is an economist, and Aakrith is a political scientist. Together, we are the Space Team, and this is our Substack.

We’re here to persuade you that space policy is increasingly important. And that getting space policy right offers humankind astonishing opportunities. In particular, we’re currently thinking hard about innovation, competition, federalism, property rights, and life in space.

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… is from page 253 of the original edition of Walter Lippmann’s sometimes deeply flawed but profoundly insightful and still-important 1937 book, The Good Society [footnote deleted]:

It was here that the founders set themselves apart forever from the naïve theorists of democracy. They saw, in Burke’s phrase, that the constitution of a state is not a “problem of arithmetic.” So they refused to identify the will of the people with the transient plurality of the voters of one constituency…. They thought of “the people” as having many dimensions in space, in time, in weight, in quality. They thought, as Burke did, that a society is “a partnership in all science; a partnership in all art; a partnership in every virtue, and in all perfection,” and “as the ends of such a partnership cannot be obtained in many generations,” a civil society is “a partnership not only between those who are living, but between those who are dead, and those who are to be born.” The American founders sought to represent this many-sided people and they thought of the people’s will as an equilibrium of its many elements.

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Colin Grabow describes and decries the return of mercantilism. Two slices:

America’s maritime industry offers a useful lesson in the limits of economic nationalism. The United States is the world’s second-largest manufacturing country and is renowned for its competitiveness and innovation. Yet in 2024, American shipyards accounted for just 0.04 percent of global commercial shipbuilding. Not 4 percent, or even four-tenths of a percent, but four one-hundredths of a percent. This is not a recent stumble. The past decade’s high-water mark for US commercial shipbuilding, achieved in 2016, was a paltry 0.53 percent of global output.

The malaise extends to domestic shipping as well: Fewer than 100 oceangoing cargo ships serve the transportation needs of the world’s largest economy. These ships are invariably kept in service well past their normal lifespan because the cost of replacement is so punishing.

Such is the legacy of more than a century of aggressive protectionism. The Jones Act, the 1920 law requiring that cargo shipped between American ports travel on vessels that are American-built, American-flagged, American-owned, and American-crewed, is premised on the idea that such restrictions foster a robust merchant fleet and thriving shipyards. The reality, however, is a maritime industry that is expensive, shrinking, and largely irrelevant. A law ostensibly designed to build an industry has instead helped entomb it, all while inflicting high costs on the broader economy. This should not be a surprise.

Indeed, the lesson that mercantilist restrictions impoverish rather than enrich was supposed to be the American Revolution’s central economic inheritance. The Declaration of Independence itself did not settle for mere abstractions in its demand for liberty, instead itemizing specific abuses and taking aim at King George for “cutting off our trade with all parts of the world” and “imposing taxes on us without our consent.”

These were not rhetorical flourishes but responses to a mercantilist system that treated the colonial economy as an instrument of British enrichment rather than a domain of human freedom.

It would be a mistake, however, to view the Founders as simply reacting to the observed harm of British policy. They had an intellectual framework for understanding why that policy was wrong. In March 1776, just months before the Declaration, Adam Smith published The Wealth of Nations, perhaps the most thorough demolition of mercantilist theory ever written. The Founders read it. Thomas Jefferson called it “the best book extant” in political economy, and James Madison included it on a list of essential books for Congress.

Why they assigned the book such importance is easy to grasp: Smith gave philosophical coherence to what colonists had experienced as practical oppression.

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Enthusiasm for industrial policy and strategic tariffs has spread across both parties. Trump is not the disease but its most candid expression. The mercantilist instinct, the belief that governments can allocate economic activity more wisely than the people conducting it, has never been fully extinguished. It persists in the Jones Act, heavy tariffs meant to benefit particular industries such as steel and autos, and “deals” with other countries that aim to reduce imports in a benighted obsession with balanced trade.

That instinct is now making a bid for the center of American economic policy.

Mercantilist restrictions did not fail because governments executed them poorly. They failed because the premise was wrong. Two hundred and fifty years after the Revolution, that premise has returned—dressed in new language and justified by new anxieties, but recognizable in its essentials. The Founders knew what it looked like. And they wrote a declaration that led to a new nation, in no small measure because of it. The question now is whether we remember why.

Matt Yglesias tweets: (HT Scott Lincicome)

Postliberals will really be like “you believe in GDP growth? that pales in comparison to my strategy, robust communities with real human flourishing” and then not create robust communities but everyone gets poorer thanks to bad economic policy.

The Editorial Board of the Washington Post reports on what every sensible economist back in 2010 warned would happen as a result of Obamacare: One consequences of this abominable legislation is high and rising health-care costs for Americans. A slice:

If it wasn’t obvious before that the famous bill passed to make health care more affordable has done anything but, it should be now: Individual plans on the Affordable Care Act exchanges are projected to spike by about 14 percent in 2027, according to recent insurer filings.

The ACA imposed a wide array of mandates on health insurance. Those mandates are expensive. To make up for the increase in costs, the ACA distributes subsidies so consumers don’t feel the impact of the increase.
Many of these subsidies are “advance” subsidies that go directly from the federal government to insurers based on the customer’s income. That means insurers can raise premiums without customers having to pay more.

As of 2025, 93 percent of enrollees in the exchanges received subsidies, up from 86 percent in 2021. If nearly everyone on the exchanges needs subsidies, that’s a clear sign that the product being sold is not affordable.

George Will writes about the seeming itch of each major U.S. political party to ensure that the other wins elections. A slice:

[Graham Platner’s] reputation is in tatters. So should be the reputations of all those national figures who tried to put him in the Senate from Maine. The Platner debacle is just a smidgen of the Everest of evidence for two propositions:

The Democratic Party no longer has a knack for its business, which supposedly is politics. In America, this means cobbling together majority coalitions from a politically and culturally diverse continental nation. The second proposition is that the nation cannot have just one healthy party. When one welcomes contamination by the extremism and stupidity on its side of the spectrum, the other, relishing the collapse of standards, does likewise.

Platner’s campaign was born of the cynicism that permeates the Democrats’ devotion to identity politics. Never mind that Platner is a lout whose work résumé is thinner than his record of sponging off his parents. Rather than assess him as — Heaven forfend! — an individual, Democrats anointed him the embodiment of a category: the working class. He could be their favorite thing, a victim. He could make vivid their simpleminded binary of “oppressors” and “oppressed.” Oblivious of their insult to America’s working class, Democrats wonder why what once was their base has abandoned them.

Republicans, however, should shed any post-Platner delusions of moral superiority. Ten years ago, they turned the louche star of the “Access Hollywood” tape, and the payer of hush money to his porn star paramour, into a president. Conjured from the populism of celebrity worship, he today is frighteningly out of his depth, dumbstruck that his son-in-law, in tandem a New York real estate crony, cannot pacify Iran and end the war against Ukraine.

America’s still-multiplying embarrassments are rank weeds fertilized by the manure of populism. And by populism’s inherent, aggressive disdain for the importance of character in politics. Populism is almost everything rejected by America’s unsentimental Founders, who, a few days ago, the nation briefly, and often uncomprehendingly, celebrated.

The clear-eyed Founders, steeped in sobering histories of short-lived republics, constructed a sophisticated constitutional architecture that blends democracy and distrust. They built a bulwark against populism because they believed this: Majorities must rule in the end, but their opinions must be mediated — and cooled — by being filtered through institutions. Those institutions must be occupied by people possessing “republican virtue,” an attribute not evenly distributed among “the people.”

What animated the Founding was the antonym of American populism. Populism celebrates popular passions incited by, and channeled swiftly into action by, an unconstrained executive.

Matthew Hennessey offers a clear-eyed look at modern American politics. Here’s his conclusion:

Next time you’re tempted to get romantic about politics, remember: It’s all showbiz.

Dan Greenberg rightly rejects Andy Craig’s myopic case for packing the U.S. Supreme Court. Two slices:

Ultimately, Craig’s insistence that the Court has rendered itself illegitimate rests on an idiosyncratic reading of a few of the Court’s decisions. I think judicial integrity and “the Court’s own professed methodology” allow for a far wider range of results—partly because it is unsophisticated to reduce the Court’s own professed methodology to a slogan. Anyone is entitled to disagree with the Court’s decisions, but political disagreements aren’t evidence of a lack of integrity—they are just a fact of life. In short, Craig’s arguments about the Court’s illegitimacy fail.

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Craig’s broader argument—that the Court is illegitimate because it is insufficiently independent—is also undercut by the Court’s decision on tariffs. Craig tries to explain that problem away by describing the tariff decision as consistent with “longstanding Republican policy preferences.” That conflates the typical voter’s partisan identification (relatively static over time) with the typical voter’s policy preferences (relatively plastic): it misunderstands, e.g., the strange new respect Republicans exhibited for tariffs that coincided with Trump’s rise. And of course Craig’s insistence that the Court is insufficiently independent will require increasingly elaborate counter-explanations when the Court’s repeated refusals to allow the president to deploy National Guard troops in states with governors who do not want them there—and the Court’s repeated refusals to allow the president to deport detainees—are considered. In short, Craig’s denunciation of “what this Court does when its side’s power is directly at stake” is hard to reconcile with the real world’s record.

Of course, there will be Democratic politicians who will find the charge that the Court has become compromised persuasive, and there will be Democratic voters who will find it persuasive as well. (People often find propositions persuasive when those propositions are useful.) But Craig’s case that the Court has been compromised will likely be unpersuasive to a neutral observer who is familiar with the whole of the Court’s record. Once partisanship is removed from the scales, Craig’s case for the Court’s legitimacy crisis is thin on evidence.

Daniel Freeman patiently reveals the ravages of rent control. Here’s his conclusion:

None of the above points is particularly controversial among economists – which is a rare thing. If you want to get a good overview of the huge amount of empirical evidence that has formed this consensus, I recommend Konstantin Kholodalin’s paper analysis of almost every study conducted around the world on the impact of rent control. Or if you’re short of time, the IEA briefing, Rent Control: Does it Work?.

Stephen Kotkin writes about the remarkable Benjamin Franklin.

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… is from Alexander Hamilton’s Report on the Subject of Manufacturers, which was submitted to the U.S. House of Representatives on December 5th, 1791:

To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients, by which the wealth of a nation may be promoted. Even things in themselves not positively advantageous, sometimes become so, by their tendency to provoke exertion. Every new scene, which is opened to the busy nature of man to rouse and exert itself, is the addition of a new energy to the general stock of effort.

DBx: Hamilton here identifies yet another good reason for economic freedom: Such freedom maximizes the possibilities for – and encourages – the use of human imagination and creativity at figuring out how to improve one’s (and one’s family’s) life by improving the lives of one’s fellow human beings. Creating new products or new and better ways of supplying existing products is excellent exercise for the human mind.

And if trade is free, the scope for applying this entrepreneurial creativity is larger than if trade isn’t free.

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The Progressive Policy Institute’s Ed Gresser testifies against the Trump administration’s proposed Section 301 “Forced Labor” tariffs. A slice from PPI’s announcement of the testimony:

Just as the Trump administration’s IEEPA tariffs last year rested on a bad-faith claim of ‘international emergency,’ its 301 proposal this year uses an important human rights as a pretext for breaching the Constitutional separation of powers and raising costs for Americans. This proposal does not meet the standards of Section 301 required to implement tariffs, as it neither offers evidence of actual trade in forced-labor goods nor demonstrates any ‘burden’ on U.S. commerce.

The Editorial Board of the Wall Street Journal isn’t favorably impressed by the consequences of Trump’s tariffs punitive taxes on Americans’ purchases of imports. A slice:

But the President is right that his tariffs are at work—in destroying U.S. jobs and raising prices. The U.S. has lost some 75,000 manufacturing jobs since January 2025, including 25,900 in motor vehicle and parts production. Manufacturing jobs have been declining since early 2023, so not all of these job losses stem from Mr. Trump’s border taxes. Some auto job losses are probably an overhang from the electric-vehicle fiasco.

Still, there’s no question his tariffs are raising costs for U.S. manufacturers. At the same time, foreign retaliation has hurt America’s farmers and depressed purchases of agriculture equipment. A slowdown in trade has also dented demand for semi-trucks.

Mr. Trump’s Section 232 national security tariffs on autos and parts have cost $35.2 billion through April of this year, and his steel and aluminum tariffs another $17.5 billion, according to U.S. government data. Mr. Trump and his advisers claim that foreigners pay his border taxes, but the evidence shows that U.S. companies, workers and consumers are picking up most of the tab.

The Anderson Economic Group estimates that auto tariffs on Canada and Mexico alone added about $1,600 to the cost of each car made in the U.S. last year. While auto makers absorbed some of the Trump tariff costs, they also passed on a large share to customers.

A March report by Cox Automotive found that tariffs drove a 10.4% increase in the average suggested retail price of a new car. Sticker prices rose by an estimated $5,000 to $8,900 for imported vehicles and about $1,600 to $2,000 for U.S.-made cars. Auto dealers—most of which are small businesses—absorbed about 4.5% of the manufacturer’s price increase.

Dealers have shed 6,100 jobs since Mr. Trump became President. Cause and effect? Manufacturers have also added fees to avoid raising base prices. Cox says GM and Ford charge “destination fees” of $2,795 for full-size trucks and SUVs. GM has increased such fees by 40% (about $800) on its Chevrolet Silverado. Call it the Trump tax.

Auto makers have also reduced imports, and in some cases discontinued sales, of entry-level models because the tariff costs render them unaffordable. One result is that younger and middle-class Americans are struggling to afford new cars, especially on the heels of the Biden inflation.

Many are driving clunkers for longer—and paying more for repairs if they break down—or buying used cars. New vehicle sales have averaged 15.9 million in the first half of this year, down from the 17 to 18 million in the five years before the pandemic. When people buy fewer cars, auto makers don’t need as many workers.

Scott Atlas is on to something by noting that the ease of life in late 20th-century and early 21s century America for young people gave many of them a distorted view of economic reality. A slice:

My generation—the baby boomers—made a catastrophic mistake. We watched our parents sacrifice, we struggled to move up, and we vowed our children would have it easier. When that time came, we gave them trophies for showing up. We meant well. But in freeing them of the need to struggle, we deprived them of something essential. We raised a generation insulated from failure, from consequence, from the experience of working for something, failing and trying again.

The result is visible in major American cities, where young voters are electing socialist candidates who spew hatred of those who achieve greatness. These movements aren’t about creating opportunity. They’re about grievance, redistribution and the conviction that your own failures are the result of someone else’s success. It is a politics of envy dressed up as justice.

The hallmark of today’s young generation is the selfie. A photo of yourself, taken and posted for the approval of others. That says everything. And when the world doesn’t deliver the validation young people have been told they deserve simply for existing, the explanation is always the same: The system is rigged, the deck is stacked, someone else has too much.

Economically ignorant and arrogant progressives in Europe detest air-conditioning; at least some economically ignorant and arrogant progressives in the U.S. wish to coercively mandate air-conditioning. A slice from a Washington Post editorial:

The rising cost of housing is squeezing Americans’ take-home pay, and a major cause of the problem is overregulation. For an example, look at Spokane, Washington, whose city council will vote next week on whether to give renters a “right to cooling.”

The measure, dreamed up by faculty and law students with the Gonzaga Institute for Climate, Water, and the Environment, would require landlords to provide “adequate cooling” in “each bedroom” of every rental unit. If they fail to do so, a tenant could install his own cooling equipment of up to $500 at the landlord’s expense.

Air conditioning is a world-changing invention, and state law already allows tenants to install an AC unit without permission. But the new mandate could mean expensive upgrades to thousands of units in the city. The regulatory burden would be paid for by higher rents.

Nonprofit organizations that provide low-income rentals are most at risk. Leaders from affordable housing groups warned against the plan at a city council meeting last month. Sarah Lickfold, whose organization provides transitional living for women with kids, laid out the tradeoff: “We cannot keep adding to the requirements of affordable housing providers and expect to meet our community’s housing needs.”

Corey DeAngelis identifies some of the hypocrites who oppose oppose school choice yet who send their own children to private schools. A slice:

Randi Weingarten and Becky Pringle, presidents of the American Federation of Teachers and the National Education Association, respectively, sent a letter last month to Democratic governors urging them not to opt into President Donald Trump’s new federal tax creditboosting school choice.

Weingarten and Pringle’s message was unequivocal: Keep the money inside the traditional public school system and shut down a path that would let families direct their resources elsewhere.

At the same time, Sen. Mark Kelly (D-Arizona) is leading an effort to repeal that program. But over half of the lawmakers backing Kelly’s bill, the Keep Public Funds in Public Schools Act, have had the privilege of opting out of public schools: They either attended private school growing up or sent their children to private schools.

That includes at least 19 out of the 34 total sponsors and co-sponsors of the bill. The figure reveals a pattern of lawmakers who benefited from educational options they now want to keep out of reach for many families across the country.

Tweeting about J.D. Vance and the many MAGAnites who oppose measuring GDP, Scott Lincicome observes this:

Not just Vance, btw. Almost all the GDP Truthers – left and right – attack it bc they love anti-growth policies.

Tyler Cowen talks with Nobel-laureate economic historian Joel Mokyr.

My intrepid Mercatus Center colleague, Veronique de Rugy, ponders Ambrogio Lorenzetti’s Allegory of Good and Bad Government. A slice:

Nearly 700 years old, the series of fresco paintings includes a depiction of a bustling city that illustrates the effects of good government, as well as representations of the decay that results from arbitrary and unjust rulers. The visual treatise on political economy holds important lessons for us today.

Lorenzetti’s city isn’t thriving because its government is energetic or ambitious. It’s thriving because a wise government knows its place.

The people creating its wealth aren’t politicians. They’re merchants opening shops, artisans practicing their crafts, builders raising new homes, farmers bringing goods to market, families walking safely through the streets, and a couple getting married. Prosperity comes from their voluntary cooperation. The government appears as the guardian of the rules that make prosperity possible: justice, security, predictable laws, and limits on arbitrary power.

That distinction is everything. America did not become the richest nation in history because Washington, D.C., was exceptionally good at directing the economy. It thrived because its institutions largely prevented Washington from interfering. The rule of law and constitutional limits have allowed millions of individuals to make sound decisions that no central authority could possibly coordinate.

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… is from page 59 of the late Gordon Wood’s marvelous 1991 book, The Radicalism of the American Revolution:

In such a small-scale society [as colonial North America], privacy as we know it did not exist, and our sharp modern distinction between private and public was as yet scarcely visible. Living quarters were crowded, and people who were not formally related – servants, hired laborers, nurses, and other lodgers – were often jammed together with family members in the same room or even in the same bed.

DBx: And by the world standards of the day, residents of Britain’s North American colonies were among the richest people then alive. Ponder this reality when you next hear some Democratic Socialist or collectivist pundit or professor announce, from the comfort of their cubby or study – having slept the previous night with no unwelcome strangers – that “capitalism has failed.”

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George Will continues to argue eloquently against all government restrictions on contributions to political campaigns and on the spending of such contributions. Two slices:

Any adequate history of human shortsightedness, which would pretty much encompass all of human history, would mention America’s half-century dalliance with “campaign finance reform.” The Supreme Court recently issued another decision distancing itself, but not nearly enough, from its original 1976 sin of not invalidating limits on coordinated expenditures by parties when it invalidated expenditure limits on candidates.

Academia has been egregious in diminishing the First Amendment, but this began in Congress. All campaign finance laws are written by incumbent legislators, and, unsurprisingly, serve their interests. Ostensibly responding to Watergate, but primarily codifying its members’ interests, Congress imposed limits on the quantity, content and timing of political (campaign) speech, the First Amendment’s core concern. Limits on campaign contributions and spending magnify the importance of incumbents’ many communications advantages.

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Campaign regulations and their rationales about “appearance” breed the sort of cynicism they are supposed to combat. Consider the following:

The largest political spending that today could raise quid pro quo “appearance” probably is by teachers unions, whose support goes almost entirely to Democrats. But do we want corruption sniffers trying to establish where politics ends and corruption begins? Does a recipient’s opposition to school-choice programs cause a union’s contributions, or do the contributions flow to the recipient because he or she opposes school-choice programs? Supporting a party or candidate because one supports particular policies is called politics.

Quid pro quo corruption has long been illegal. Restricting speech in order to deter such corruption also should be illegal. It is, under the First Amendment (“Congress shall make no law …”) properly construed.

Actually, any doctrine that permits limits on contributions and spending for political advocacy is inconsistent with the constitutional proscription of laws abridging freedom of speech. The court could have spared the country much trouble if in 1976 it had responded to Congress’s speech-rationing regime with a three-word opinion: “You’re kidding, right?”

Who says that capitalism impoverishes workers? A slice from a Wall Street Journal report:

Cashier Tony Barzar unloaded his lunch in the breakroom, clocked in and headed for the checkout, just as he has for much of the past four decades.

That day, like most days, the 60-year-old Barzar was assigned to the self-checkout area, a cluster of six registers. At 9:02 a.m., the first shoppers were ready to ring themselves up.

“Right here, ma’am!” Barzar said, gesturing for a customer in line to move to an open register. “How ya doing today, sir? Find everything alright?” he said to another as he circled the registers with a scanning gun.

Long-tenured workers like Barzar are Costco’s secret weapon. They are reliable and experienced, able to speed shoppers through a checkout line and serve as mentors to newer workers, passing down the company’s unique culture, Costco executives say.

Barzar’s pay and benefits reflect his value to the company. He earns $32.90 an hour, and the holdings in his 401(k) have boosted his retirement savings to over $1 million, he said. His Costco-sponsored healthcare has a regular visit co-pay of $15, and a specialty visit co-pay of $25, well below the national average. In 2009, Barzar’s family bought a three-bedroom, two-bath house with a pool, and they have been able to travel to Europe twice over the past decade.

As a younger person, “I didn’t think me and my family would reach where we sit now,” he said. “I could retire, but what would I do? Costco has been good to me.”

Costco has long paid more than most U.S. retailers to help keep turnover low, a strategy the company’s founders believed would reduce costs associated with training new hires and lead to better customer service. Turnover after one year of employment at Costco is around 7%, a fraction of industry averages.

Research generally supports the idea that happy employees stay longer and lead to happier customers. In one 2023 study, consulting firm McKinsey looked at online reviews of over 100 retailers by both customers and employees. Retailers with the top 25% highest employee-satisfaction scores were more than twice as likely to fall in the top 25% of customer-satisfaction scores, said the firm.

Here’s the abstract of an important new paper by my Mercatus Center colleague Jack Salmon:

This paper examines the differential effects of tax-based versus spending-based fiscal consolidations on debt sustainability and economic growth using narrative consolidation data for 17 advanced economies from 1978 to 2016. The Adler et al. (2024) dataset, published as International Monetary Fund (IMF) Working Paper 24/210, provides a comprehensive revision of the Alesina et al. (2015, 2019) narrative data, extending coverage to 17 countries including the Netherlands and updating shock magnitudes throughout the sample period. Macroeconomic outcome variables are drawn from World Bank, Organisation of Economic Co-operation and Development (OECD), and IMF primary sources. The narrative shock sample is bounded in 2016 to ensure the three-year debt outcome window remains pre-pandemic; local projections use shocks through 2014 to guarantee all five horizons avoid COVID contamination.

Employing country and year fixed-effects panel regressions with clustered standard errors, local projections methods, and linear probability models, this paper reveals that spending-based consolidations are associated with higher probabilities of debt reduction and more favorable growth outcomes than tax-based consolidations. A one-percentage-point tax-based consolidation reduces GDP growth contemporaneously by 0.59 percentage points, versus 0.29 percentage points for spending-based consolidations. Local projections reveal that tax-based consolidations impose increasingly negative effects over time (reaching −2.94 percentage points cumulatively five years after the event), while spending-based consolidations generate a trajectory that turns positive after two years and reaches +1.81 percentage points after five years. Tax-based consolidations reduce the probability of substantial debt reduction by 9.5 percentage points and of debt stabilization (debt-to-GDP ratio does not increase over three years) by 12.4 percentage points. Spending-based consolidations significantly raise the probability of substantial debt reduction by 11.1 percentage points. These results are robust to heterogeneity by initial debt level.

The Editorial Board of the Washington Post criticizes Trump for using subsidies for the purpose of “compensating farmers partly for the damage from his own policies.” A slice:

While farmers have struggled to deal with Trump’s trade and Iran policies, the subsidies go beyond cushioning farms in a rough period. Net farm income is still above the 20-year average. If Congress manages to pass the extra $11 billion, government payment to farms would be at a record high. The handouts come on top of existing government supports such as crop insurance.

Scott Lincicome tweets:

New rule: Every wonky argument “rethinking free trade” – and defending Trump 2.0 trade policy – due to alleged “national security” concerns must conclude with–

“So, that’s why we tariffed bananas and Canadian aluminum”

“Warren’s plan to ‘fix’ Social Security would be largest tax increase in over 40 years” – so explains Reason‘s Eric Boehm.

Greg Lukianoff explains that “the government’s flagrant violations of the First Amendment threaten the heart of the American experiment.” Two slices:

The administration has aggressively pursued everyday Americans for expressing their grievances with the government. These flagrant violations of the First Amendment should frighten Americans of every political stripe, because they threaten the very heart of the American experiment: the freedom to criticize our representatives vociferously and petition our government for change.

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Then there is social worker Colleen Fagan. In January, Fagan was at an apartment complex in Portland, Maine, observing federal immigration enforcement operations. The agents did not like being watched. They scanned her face with a smartphone and took down her license plate number. When Fagan asked why they were doing this, a masked agent answered: “Cause we have a nice little database. And now you’re considered a domestic terrorist.”

Yet everything these Americans did is protected by the First Amendment. The Constitution protects the people’s right to criticize the government, whether by writing an email or posting to social media or observing police in action. As the Supreme Court wrote in 1987 in City of Houston v. Hill: “The freedom of individuals verbally to oppose or challenge police action without thereby risking arrest is one of the principal characteristics by which we distinguish a free nation from a police state.”

The purpose of the government’s intimidation tactics is clear: not only to terrorize the immediate critic into silence but also to send a message to others. In other words, to build the foundation of a police state.

The Editorial Board of the Wall Street Journal agrees that “the Smithsonian lost America’s plot.” Two slices:

One of the better causes of the second Trump Administration is its effort to purge the progressive political takeover of America’s national cultural institutions. A case in point is the new White House report on the bad historical turn taken by the Smithsonian Institution’s National Museum of American History.

The press is attacking the report as an attempt to censor independent museum curation, but that’s not how we read it. The 162-page “Saving America’s Story,” produced by the White House Domestic Policy Council, lays out in persuasive detail how the museum offers a largely critical view of American history that “no longer treats the American story as a shared national inheritance to be taught or celebrated.”

Instead, the museum offers the message, captured in one exhibit, that when they founded the U.S., “early leaders envisioned a country that promised opportunity and freedom—but only for some.”

The report isn’t a cheerleading document seeking to hide America’s warts. What it seeks is a history of the U.S. that doesn’t resemble the 1619 Project in its partisan bias.

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The Smithsonian American Art Museum and Smithsonian Learning Lab created a poster that says, “Whiteness as a concept is foundational to the history of the United States, actively shaping this country’s social, cultural, political and economic structures.” Whiteness? This is today’s leftwing identity politics imposed on the past.