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The Wall Street Journal Editorial Board decries the unwarranted hysteria over data centers. A slice:

It’s true the AI industry has hurt its own cause by fueling speculative anxiety about mass unemployment. AI developers have also failed to explain how data centers benefit local communities. But the larger failure has been the lack of political leadership in explaining the technological and economic transition now underway and how to address it.

On data centers, there’s a strong case to be made. The U.S. has more than 5,400 data centers, which are the backbone of the internet and power the apps on your smartphone. Data centers enable Zoom meetings, online food deliveries, video streaming, instant retail stock trading and more. If data centers went dark, so would the modern economy.

New large-scale data centers are needed to train and run AI models, and more than chatbots. Businesses large and small use AI to boost productivity, which lets them pay workers more. Steel maker Cleveland-Cliffs recently announced an upgrade to an Ohio plant that will incorporate AI to improve efficiency.

Utilities use AI to prepare for natural disasters and reduce power outages. AI models are helping diagnose cancer at earlier stages and develop cures. Data centers bring high-paying construction jobs, and skilled blue-collar workers are needed to run them.

The Washington Post‘s Editorial Board continues to warn of the ill consequences of the U.S. government’s fiscal incontinence. A slice:

Politicians need to take their obligations to bondholders seriously because they won’t be able to do anything else if they don’t. A hugely indebted government can spend only at the pleasure of its lenders. As interest costs crowd out spending on the essential stuff that government is supposed to do, voters will become increasingly upset as they sense that their taxes aren’t being spent for their benefit.

Debt can be sensible. When private borrowers take on debt, they are mostly doing it to fund an investment. They hope the investment will create a return that exceeds the costs of borrowing. And then when the debt is paid back, a beneficial, productive asset remains.

Some U.S. government borrowing is like that, when funding infrastructure projects or education. But the vast majority of federal borrowing funds short-term consumption, primarily for seniors, over long-term investment.

The government’s “return” on such short-term spending is negligible, and the money it must borrow to fund those expenditures is money that cannot be borrowed by private individuals or businesses to make productive investments.

That hurts economic growth, which hurts job growth, which hurts household incomes, which fuels political demand for more welfare programs to help people who are struggling, which will require even more debt, which borrowers won’t be willing to lend unless interest rates are higher.

GMU Econ alum Romina Boccia and her co-autho Ritvik Thakur tell a scary but true story about Medicare.

Peter Earle explains what shouldn’t – but, alas, what nevertheless does – need explaining: “By suppressing yield signals, bond bureaucrats may summon the very bond vigilantes they hope to suppress.”

Stephanie Slade criticizes “the postliberal right’s frenzy for exaggerating and fabricating transgressions.”

Eric Boehm describes Trump’s trade war with Canada as “costly, absurd, and unfunny.” Two slices:

As the Trump administration escalated its trade war with Canada last week, the White House’s official Twitter account shared a photo of a bald eagle tackling a Canadian goose.

The intended message was not exactly a subtle one.

But the post did illustrate how the administration views America’s economic relationship with Canada, and how President Donald Trump thinks about international trade more broadly: as a win-or-lose struggle in which America must bully its trading partners and fight its allies, lest they keep “ripping us off.”

That logic completely unravels if you think about it for more than a minute. American consumers and businesses are being taken advantage of by Canadians who…are offering to sell us aluminum, oil, and wood while buying our farm goods, machinery, and ethanol? Americans and Canadians trade hundreds of billions of dollars’ worth of goods every year in voluntary, mutually beneficial transactions.

But Trump doesn’t want to think about it for more than a minute. He wants a fight for the sake of a fight, and the details don’t matter.

…..

The mistake there may be in assuming that Trump wants a deal at all. There is little indication that he does.

At one point during recent negotiations, The New York Times reported, American officials said the U.S. “would retain the power to change tariff policy against Canada at any time, irrespective of the agreement.”

What good is a deal that’s subject to be changed at whim? It’s hard to blame Canadian Prime Minister Mark Carney for rejecting that ridiculous proposal.

Even before that, Carney had good reason to be distrustful. After all, the two countries had a deal—the United States–Mexico–Canada Agreement (USMCA), which Trump negotiated and hailed as “the best agreement we’ve ever made” during his first term.

Trump decided to tear up that deal because he wants a fight—even a nonsensical one that will harm American consumers and businesses—more than he wants trade with Canada. (By retaliating against Trump’s foolishness, Canada is compounding the error. As J.D. Tuccille wrote last week, Canada ought to pursue a policy of unilateral free trade, rather than hurting its own people in a showdown with Trump.)

Also critical of Trump’s trade war with Canada is Ramesh Ponnuru, calling it “multifaceted stupidity.” Two slices:

The trade war weakens the United States in relation to China. Optimists believe Trump is trying to force Canada to adopt its own stringent tariffs against China. Even if that were the right tool for an international coalition to use to weaken the Chinese government or improve its behavior, simultaneously attacking Canada over everything from its dairy policy to its existence as an independent nation is no way to build that coalition. Canadian Prime Minister Mark Carney’s musings about drawing closer to Beijing may not be wise, but they are predictable.

…..

The trade war is increasingly based on absurd complaints. Canada maintains some protectionist policies that harm American producers (and Canadian consumers), much as the U.S. engages in some protectionism against Canadian businesses. Yet the two nations largely practice free trade with one another. Scott Lincicome of the Cato Institute calculates that 99.85 percent of cross-border trade was duty-free before Trump started his trade war. The president called his first-term deal with Canada and Mexico “the largest, fairest, most balanced, and modern trade agreement ever achieved.”

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… is from page 117 of Robert Bork’s brilliant 1978 book, The Antitrust Paradox:

There is no body of knowledge other than conventional price theory that can serve as a guide to the effects of business behavior upon consumer welfare. To abandon economic theory is to abandon the possibility of a rational antitrust law.

DBx: Yes, but I would go even further than Bork. First, conventional price theory – which I so very much admire and respect – should be supplemented with the Austrian theory of entrepreneurship and market rivalry. Second, when it’s appropriately applied, the resulting price theory reveals that the only rational antitrust law is no antitrust law.

Nevertheless, Bork is correct to insist that if there is to be antirust legislation, the damage that it will do to the economy will be kept to a minimum only if it is guided by sound economic price theory.

…..

Pictured here is the greatest textbook ever written on price theory.

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Bob Higgs remembers his former student, Charlotte Twight. A slice:

Charlotte’s work was marked by careful attention to detail and documentation of evidence. Here her legal training continued to serve her well, even though she was not a practicing lawyer. Her prose was clear and careful. Her conclusions were advanced confidently, as well they should have been in light of the strong arguments and evidence she adduced.

DBx: Charlotte Twight will indeed be missed. I did not know her well; I met her on only two or three occasions. One of these stands out in my memory with special vividness. It was an event – exactly where and when I’ve now forgotten (likely an APEE meeting sometime in the mid or late 1990s) – at which Charlotte enticed Gordon Tullock onto a dance floor. She commenced to dance with a man who likely had never before ever done such a thing. My memory is that Gordon seemed to have appreciated, and perhaps even enjoyed, the experience – and the onlookers, including me, marveled at Charlotte’s charming gambol with Gordon.

Pointing out that “Trump’s tariffs aren’t reducing the trade deficit,” the Washington Post‘s Editorial Board explains that “elevating this pointless statistic to the level of a national emergency never made any sense.” Two slices:

The trade deficit doesn’t matter, but even if it did, tariffs aren’t an effective way to reduce it.

In July, the monthly trade deficit in goods hit its highest level since March 2025, the Commerce Department revealed on Thursday. That was the month before President Donald Trump’s announcement last year of massive tariffs on products from nearly every country in the world.

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Intuition suggests tariffs could bring down the trade deficit. Tariffs are a tax on imported goods, and taxing something more means people will buy less of it. Fewer imports with the same amount of exports would therefore lower the trade deficit.

Absurdly, the Trump administration simultaneously claims that tariffs aren’t taxes and don’t raise prices.

The problem for the Trump team is that imports and exports often move together. In other words, reducing imports also reduces exports, so the difference between them — the trade deficit — hardly changes.

Wall Street Journal columnist Mary Anastasia O’Grady calls Canada “Trump’s Great White Whale.” Two slices:

Mr. Trump has done serious damage to U.S. credibility by picking a senseless fight with a neighbor, ally and important trade partner. For decades Washington has used trade agreements to help American farmers and manufacturers gain access to foreign markets, to develop international supply chains that boost competitiveness, and to enhance consumer choice and affordability. If those agreements can be abrogated unilaterally by the commander in chief, who’s going to trust Uncle Sam?

Mr. Trump didn’t like the 1994 North American Free Trade Agreement. In 2020 he replaced it with his own U.S.-Mexico-Canada Agreement. Now he doesn’t like that. He’s desperate to blow it up but needs someone to blame.

The U.S. president says Canada is the worst country on earth when it comes to negotiating trade. Translation: It’s a little democracy that won’t knuckle under to his second-term tariff hikes. This is hurtful to a frail ego. It can’t go unanswered.

…..

It’s left to the American business community to explain to Mr. Trump the harm he’s doing and that his obsession with the trade deficit with Canada, caused by energy imports, is misplaced. If that message gets across, there’s hope. Until then, Mr. Carney might want to thank Mr. Trump for the political assist.

“Canada trade war a fig leaf for Trump’s absurd trade policy.” (HT Scott Lincicome)

The Editorial Board of the Wall Street Journal rightly criticizes Trump’s newly announced ‘deal’ for the U.S. to grab oil from Venezuela. A slice:

Official details of the agreement are scarce, but the facts reported by the Journal over the weekend aren’t cause for enthusiasm. The U.S. will take a 35% stake in a private company run by Alejandro Betancourt, a Venezuelan businessman close to Ms. [Delcy] Rodríguez. The Betancourt firm, North American Blue Energy Partners, will be able to develop those 65 billion in reserves, and the U.S. will have preferential rights to 20% of what the firm produces at the cost of production.

The U.S. investor here will be the Pentagon, of all agencies, which will structure the investment through penny warrants that will gain the equity stake without taxpayer cash. The legal authority for this is far from clear, since the Defense Department is investing in a foreign entity. Can the Pentagon Office of Strategic Capital take such equity stakes?

Why is the Pentagon even playing in global oil markets when it has enough to do buying new weapons in short supply and reforming its broken procurement process? The global oil market is under stress from the Iran war, but by and large it does a good job of matching supply and demand.

Venezuela produces only about 1.1 million barrels of oil a day now, and deep wells in Guyana and new investment in Argentine shale (including by U.S. entrepreneur Harold Hamm) are coming in the Americas. Venezuelan production will take years to ramp up.

Who will finance this oil production and which companies will invest to extract it? Mr. Trump has been pleading with U.S. oil firms to invest on their own in Venezuela since he snatched President Nicolás Maduro in January. But most say the government hasn’t provided the right legal or contractual protections. Chevron is a long-time player in the country.

The politics of all this are even more complicated, to put it mildly. The U.S. government is essentially getting in bed with a foreign dictator and her favored capitalist. Any foreign firm that invests will have all three as de facto partners, but Mr. Trump will be out of office in 2029 and the heavy-handed U.S. role might not play well over time in Caracas.

Phil Magness talks with Jeremiah Johnson about, among other things, J.D. Vance’s clueless attack on economics.

When will Californians tire of their officious, harmful government?

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… is from page 3 of Thomas Sowell’s 2012 monograph, “Trickle Down” Theory and “Tax Cuts for the Rich” (original emphasis):

What actually followed the cuts in tax rates in the 1920s were rising output, rising employment to produce that output, rising incomes as a result and rising tax revenues for the government because of the rising incomes, even though the tax rates had been lowered. Another consequence was that people in higher income brackets not only paid a larger total amount of taxes, but a higher percentage of all taxes, after what have been called “tax cuts for the rich.” There were somewhat similar results in later years after high tax rates were cut during the John F. Kennedy, Ronald Reagan and George W. Bush administrations. After the 1920s tax cuts, it was not simply that investors’ incomes rose but that this was now taxable income, since the lower tax rates made it profitable for investors to get higher returns by investing outside of tax shelters.

The facts are unmistakably plain, for those who bother to check the facts. The federal income tax rate on the highest incomes in 1920 was 73 percent. By 1928, the highest income tax rate had been reduced to 25 percent. Between those two years, the total amount of income tax revenue collected increased, and the proportion of all income taxes collected from people earning a million dollars or more per year also increased, from less than 5 percent in 1920 to 15.9 percent in 1928.

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Here’s a response to a different commenter at my Facebook page.

Mr. Martin:

In response to my Facebook post critical of Trump’s protectionism, you write that Trump’s policies create great harm for Canada but are a mere “inconvenience” for us Americans.

Why should we be pleased with, or even indifferent to, any hardships that our government inflicts on Canadians? Even from a selfish perspective, what do we gain from their suffering? Indeed, economics tells us that we lose from their economic suffering. (Would you prefer that your neighbors be productive and wealthy, or unproductive and poor?)

You’ll point out – as you do in your comment – that Trump’s policies have induced several companies to move their investments from Canada to the U.S. And you obviously presume that these investments are good for Americans. But you’re mistaken.

Investments made in the U.S. rather than abroad only because U.S. protectionism prompted these investments in the U.S. harms most Americans in at least two ways.

First, we Americans will pay for the outputs of these U.S.-based facilities prices that are higher than we would have paid for the same outputs had these investments remained in Canada, for Canada is where the market revealed these outputs can be produced at lowest cost.

Second, these tariff-induced investments in the U.S. aren’t free. They use land, resources, and workers in the U.S. that would otherwise be used to produce not only other outputs, but other outputs that these resources can produce at a comparative advantage. But because of Trump’s protectionism, these other investment and employment opportunities in the U.S. are squelched, and these other outputs aren’t produced in the U.S. Put differently, these tariff-induced investments pull resources and labor in the U.S. out of more-productive and into less-productive channels. The fact that a similar inefficiency of resource use is caused also in Canada does nothing to diminish the economic harm suffered by Americans.

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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Here’s a note to a commenter at my Facebook page.

Ms. Rachel Mills

Ms. Mills:

To my Facebook post ridiculing Trump’s latest punitive taxes – a.k.a. tariffs – on Americans’ purchases of goods from Canada, you offer this comment: “Our starting point in this is not free trade to trade war and protectionism. The starting point was already tariffs and protectionism and shenanigans. The end point might be free-er trade though.” You close by writing that “Trump is playing a game,” by which I take you to mean that Trump is strategically using U.S. tariffs to lower tariffs globally.

For several reasons, I believe you to be mistaken.

First, from Adam Smith and Frédéric Bastiat centuries ago to Phil Gramm and Doug Irwin today, all informed advocates of free trade have repeatedly explained that the best trade policy for the home country is free trade regardless of the policies of other countries. While free traders recognize that the ideal world is one in which complete free trade is universal, they also recognize that, as a practical matter, such a world has never existed and will never exist, and so the best that each government can do is to leave its own citizens free to trade even when other governments abuse their citizens with protectionist restrictions.

The claim that free trade at home requires free trade abroad is made only by protectionists; it has never been made by informed free traders.

Second, while trade wasn’t completely free when Trump took office in 2017, it was darn close. I had ChatGPT construct the graph below, from data assembled by Julia Estefania-Flores, Davide Furceri, Swarnali Hannan, Jonathan Ostry, and Andrew Rose, showing changes over time in global trade restrictiveness.* As you can see, when Trump unilaterally began jacking up U.S. tariffs in 2018, world trade was largely free by historical standards and still becoming more free (if at a slower pace than before the early 1990s).

Third, Trump’s own decades-long pronouncements about trade make abundantly clear that he neither likes nor understands trade. After all, he scribbled in the notes of a speech “TRADE IS BAD,” and proudly calling himself “Tariff Man,” he has consistently asserted that so-called U.S. “trade deficits” with individual countries are evidence that these countries are ‘raiding’ the U.S. to steal our wealth. Despite the fact that bilateral trade deficits are utterly without economic significance, these phenomena nevertheless serve as the ridiculous justifications for Trump’s “Liberation Day” tariffs.

Trump’s comprehension of trade is akin to a flat-earther’s comprehension of astronomy. No one with such a preposterously poor understanding of trade should be presumed to be playing a long game aimed at making trade more free.

In short, there is no excusing Trump’s protectionist folly.

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

* A Measurement of Aggregate Trade Restrictions and Their Economic Effects (World Bank, 2022).

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Andrew Biggs explains that the U.S. Social Security program is welfare for the rich. A slice:

Federal spending on retirement benefits is running riot. Social Security swallows nearly a quarter of the federal budget and is less than a decade away from insolvency. The government loses hundreds of billions per year on tax breaks for retirement savings.

And who gets most of this money? It isn’t the most vulnerable seniors. It’s the richest.

The wealthiest fifth of households receives 38 percent of taxpayer dollars spent on Social Security and retirement tax preferences, more than the bottom 60 percent. But Congress can solve the problem by capping federal retirement benefits at middle-class levels. The change would eliminate most of Social Security’s funding gap, reduce federal deficits and improve economic growth — all without threatening low- and middle-income seniors.

Though it is intended to be a safety-net program, Social Security drives the bulk of this inequality. The highest-earning quintile of Americans born in the 1960s will receive $33,000 in annual Social Security benefits, compared with just $13,000 for the lowest. Affluent Americans also collect more checks in their lifetimes. On average, a wealthy 62-year-old can expect to live to be roughly 88, while the poorest Americans the same age live only to around 80. Since top earners collect more and live longer, they take 33 percent of total Social Security benefits, leaving a mere 8 percent for the lowest-earning quintile.

My intrepid Mercatus Center colleague, Veronique de Rugy, talks with Roger Bate about his new book on sports betting, The House Always Wins.

GMU Econ alum Bryan Cutsinger reports that inflation remains troubling high.

My GMU Econ colleague Bryan Caplan ponders the ‘externalities’ of airports and of immigrants.

Christian Britschgi draws lessons from opposition to data centers, and opposition to Flock cameras. Two slices:

It might be tempting to lump these two backlashes into a generalized revolt against technology.

But polling on AI and tech companies generally shows only a modest cooling of the public’s attitude toward them. Nothing like the sharp collapse in public support we’ve seen for Flock and data centers specifically.

When people are asked why they oppose data centers, environmental concerns are top of the list, not an opposition to technology.

Instead, what we’re seeing appears to be popular revolts against two things Americans like to get panicked about: Big Brother and Big Development.

People naturally object to the government spying on them. They’re also primed to oppose new construction, regardless of what’s being built.

In a country witnessing a massive boom in data center construction and a comprehensive nationwide rollout of ALPRs, a bottom-up, popular revolt was perhaps inevitable.

And to be clear, these are popular, bottom-up revolts.

…..

If the revolt against Flock and data centers demonstrates the power of populism to move politicians on an issue, it also highlights the limits of populism for protecting liberty.

There’s a world of difference between the government tracking citizens in public and landowners developing their private property. An angry populace isn’t making those distinctions.

ALPR technology poses serious privacy concerns. Its many misuses and abuses are scandalous. The public’s turn against it is provoking a belated conversation about the benefits, costs, and constitutionality of the 120,000 Flock cameras already in the field.

It’s far harder to see anything positive in the sudden revolt against data centers.

These facilities’ critics are not stopping at demanding more mitigation of their relatively few externalities. Nor are they simply calling for an end to unfair subsidies or tax credits some data center projects receive.

Instead, people’s misplaced concerns about data centers’ overhyped environmental impacts are leading states and localities to impose some of the tightest land use restrictions on one of the more innocuous forms of development imaginable.

About the newly announced U.S. government stake in a Venezuelan oil company, Scott Lincicome tweets:

So, after taking 31 US government equity stakes in private companies over the last year, Trump just announced a MAJORITY-STATE-OWNED oil company?

This isn’t even “creeping” socialism anymore.

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… is about protectionism and is from chapter 1 of William Graham Sumner’s 1885 book, Protectionism: the -ism Which Teaches that Waste Makes Wealth [bracketed comment original to Sumner]:

Obviously the doctrine includes two assumptions. The first is, that if we are left to ourselves, each to choose, under liberty, his line of industrial effort, and to use his labor and capital, under the circumstances of the country, as best he can, we shall fail of our highest prosperity. Second, that, if Congress will only tax us [properly] we can be led up to higher prosperity.

DBx: Yes. Distrusting free markets, all protectionists – left, center, and right – put their faith in politicians and government officials who possess the authority to suppress and override the voluntary choices of individuals spending and investing their own money, time, and effort. The presumption – supported only by blind faith – is that politicians and government officials know enough to improve upon market outcomes, and can be trusted to use this power in the public interest.

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Here’s a letter to National Review.

Editor:

Jim Geraghty makes several excellent points in his critical assessment of Trump’s protectionist assault on Canada – which, of course, is also an assault on Americans’ economic freedom and standard of living (“The Canadian Menace,” August 28). But one further point, missed by Mr. Geraghty, warrants mention. It’s one that exposes a fundamental contradiction in Trump’s protectionism.

Mr. Geraghty quotes the White House’s complaint that “Canada also administers these [automobile-import] quotas in a way that compels U.S. auto companies to invest in production in Canada instead of the United States.”

Given Mr. Trump’s decades-long obsession with reducing U.S. trade deficits, the White House should regard this Canadian policy not, as it does, as a reason to punish Canadians with tariffs, but instead as a blessing – as Canadian cooperation with the president at reducing U.S. trade deficits.

When we Americans increase our investments abroad, our long-running capital-account surplus – which is the excess of foreign investment in the U.S. over U.S. investment abroad – shrinks. By the rules of international commercial accounting, a shrinking U.S. capital-account surplus is necessarily accompanied by a shrinking U.S. current-account deficit. Because trade deficits are by far the largest component of U.S. current-account deficits, a shrinkage of U.S. current-account deficits puts downward pressure on U.S. trade deficits.

More simply, when we Americans invest more of our savings abroad, we have fewer savings to spend on imports. Other things equal, the U.S. trade deficit shrinks.

The bottom line is that, according to the White House’s own professed objective, Canada is helping America: By encouraging us to invest more of our savings abroad, it puts downward pressure on the very trade deficit that Mr. Trump claims to be determined to reduce. Yet he responds by slapping Canada with higher tariffs. A clearer example of the internal contradiction in Trump’s protectionist policy is difficult to imagine.

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