The Editorial Board of the Wall Street Journal explains that Trump’s tariffs punitive taxes on Americans’ – including American businesses’ – purchases of imports are harming the GOP politically. A slice:
Canada exports about $40 billion in goods to Michigan every year with vehicles and parts making up roughly half of the total. Michigan’s manufacturing supply chains are deeply integrated with Canada, and small businesses especially have borne the tariff brunt since they have less capacity to absorb the costs than larger companies do.
Voters know they are paying more because of the tariffs even if they don’t know exactly how much. Michigan families have paid $27.2 billion in tariff-driven costs since January 2025, according to the business outfit Michigan Smart Trade Alliance. That’s roughly $6,658 per household.
The Anderson Economic Group estimated the auto tariffs on Canada and Mexico alone last year totaled approximately $1,600 for every vehicle assembled in the U.S. That doesn’t include tariffs on steel and aluminum. The border taxes are shrinking the margins of U.S. auto makers, which means smaller profit-sharing bonuses for workers.
General Motors says it expects a tariff cost hit of between $2.5 billion and $3.5 billion this year. That could mean $3,500 less in bonuses for workers. Didn’t Mr. Trump say his tariffs would help manufacturing workers in places like Michigan? Instead, they are hurting Republicans in swing districts and states around the country.
In New York’s 17th House district, Democratic challenger Cait Conley is hammering GOP Rep. Mike Lawler on tariffs, which she says have “jacked up prices on goods for the average household in the Hudson Valley by $4,200.” If Republicans lose control of Congress, Mr. Trump and his ham-handed border taxes will deserve much of the blame.
Also reporting on the GOP’s self-inflicted political damage – damage due to Trump’s tariffs – is Reason‘s Eric Boehm.
Scott Lincicome shares this headline: “Inflation on many everyday items was entirely due to tariffs, NY Fed says.”
My intrepid Mercatus Center colleague, Veronique de Rugy, wonders why so many Democrats and Republicans today embrace price controls – a government intervention with an unbroken record of failure. A slice:
Prices are the manifestations of countless decisions by buyers and sellers, each acting on individual knowledge no one else has. No buyer’s budget and needs, and no seller’s costs and offerings, are identical. Only a free market can account for this and decide whether a price sticks. Creating laws to cap prices doesn’t make scarcity go away. It just shows up as empty shelves instead of a market-determined price.
Consider credit cards. A 10 percent interest rate cap sounds lovely. Many Americans pay twice that. Why not simply tell banks that’s the limit? Because an interest rate isn’t an arbitrary number. It is the price of credit that reflects funding costs, administrative expenses, and, not least, expected default risks.
Congress can cap the rate, but it can’t cap the risk. When the price a lender can charge falls below what the risk costs, lending stops. Lenders turn down applicants, cut credit limits, and close accounts. The borrowers the cap was supposed to protect still need the money. They end up at the payday lender or the pawn shop instead. In other words, interest rate caps hurt the economically vulnerable people they are supposed to help.
The same problem is even more stark with child care. The service is expensive because caring for small children requires a lot of labor and demand is high, especially when governments subsidize it through vouchers and tax credits. Meanwhile, state and local authorities restrict child care supply through staff-to-child ratios, credential mandates, zoning bans on home-based providers, costly building codes, and more. No wonder prices are so high.
Capping those prices won’t help. If providers cannot cover their expenses at the mandated price, some will reduce capacity. Others will close. The parents lucky enough to secure a remaining slot might pay less. Others will find no available care. The government cannot decree the additional workers and facilities necessary to fill the gap it created.
National Review‘s John Puri tells the tale of the U.S. government’s worsening fiscal incontinence. A slice:
Rather, in keeping with America’s broader fiscal story, it’s almost all about spending: “Outlays in fiscal year 2026 were $7.4 trillion, CBO estimates, $386 billion (or 6 percent) more than in fiscal year 2025.”
It’s true, the Trump administration and Republicans in Congress have cut spending in some visible areas. Outlays are down in the Environmental Protection Agency, the Commerce Department, and food stamps. But these categories were small parts of the budget to begin with, and their reductions were swamped by growing entitlements. Spending on Social Security rose by $86 billion, or 5 percent, because of “increases in average benefits and in the number of beneficiaries.” Medicare and Medicaid each grew by 8 percent, or $132 billion combined, because of increased enrollment and higher health-care costs.
Net interest costs also continued spiraling upward. As debt accumulated and interest rates jumped, servicing expenditures automatically rose by $115 billion last year, or 11 percent — the greatest increase of any single category.
We are reaching the point where interest on the debt exceeds economic growth, ensuring that the debt will keep rising even if we somehow balanced the underlying budget. Which we won’t. The entitlement programs driving the deficit — Social Security, Medicare, and Medicaid — run on autopilot, expanding each year based on predetermined formulas. They are projected to grow much larger over the next ten years. Congress has zero appetite to reform these programs and make them fiscally sound.
Jeff Yass explains why “pouring money into the Ivy League won’t solve its problems.” A slice:
No matter how much money donors throw at the problem, classroom instruction at elite institutions keeps getting worse. In a 2024 survey at Harvard, 45% of students said they were reluctant to share views on controversial topics in class. Sixty percent of grades at Harvard College were A’s in the 2024-25 academic year, up from 24% in 2005-06. That doesn’t sound like an environment of rigorous debate and scholarship.
Under pressure from powerful critics, elite universities have begun to make changes such as adopting statements of institutional neutrality, capping grade inflation, promising to protect open inquiry and establishing civics centers. These changes are cosmetic.
Undergraduate education comprises three elements: students, teachers and classes. If admissions policies, faculty and curriculum don’t improve, administrators haven’t changed anything. They’ve maintained the status quo while trying to deceive the public and get critics off their backs.
For all the Trump administration’s efforts to use federal funding as leverage, elite universities are too wealthy to feel significant pressure from withheld government subsidies. Harvard last reported its endowment at $59.9 billion. In fiscal 2025 the return on the endowment was 11.9%, and the university paid almost no taxes. Administrations at these schools whine about funding cuts because they feel entitled to taxpayer money, but they aren’t hurting.
For the same reason, private donors can’t make much of a difference at these schools. Donations to Ivy League schools get you invitations to cocktail parties and, for the big shots, your name on a building where activist professors who hate you teach classes in which you are the villain.
Paul McDonnold reviews Tobias Straumann’s book Out of Hitler’s Shadow: Debt, Guilt and the German Economic Miracle. A slice:
In June of 1948, Ludwig Erhard, a German who had never joined the Nazis, was director of economics for the United States’ and UK’s occupation zones. A classically liberal economist with a PhD from the University of Frankfurt, he had helped the zones transition to the new Deutsche Mark currency.
At the time, stores were still barren and black markets allocated many goods and services. Without authority or approval from the occupying military leaders, Erhard moved to eliminate extensive consumer price and wage controls.
“As a result,” Straumann writes, “barter trade disappeared literally overnight, and the shops were full again.” The policy move was so successful, it was politically impossible to reverse.
An economy exists to make trade-offs, and a market economy makes the terms of those trade-offs plain with price tags representing the relative costs of producing different things. To have politicians arbitrarily change the price tags, so that prices no longer represent the real costs, is to defeat the whole purpose.
It is true that almost any kind of manufacturing can, at a price, be done almost anywhere. It is not true that every or any kind of manufacturing can be done as efficiently in one place as in another, i.e. that location is irrelevant to it. Nor is the economic advantage of particular locations for particular industries destroyed by the existence of international boundaries. Within any national area, prudent business men take pains to erect their factories at the point of greatest convenience, having regard to differences in sources of raw materials, location of markets, supply of labor power, and so forth. Such differences do not disappear because the possible sites between which the choice has to be made have a political frontier between them. The development of international trade under conditions of freedom is in itself the proof of gain by national specialisation; if there were no gain, there would be no trade.
One advantage of commercial society is that the value of such knowledge is constantly put to the test. It is not enough to simply have a new idea. It is equally necessary to subject the idea to the endless feedback provided by the market. Without these ongoing reactions, the capacity of knowledge to change reality becomes more limited. Markets help us to know what is inefficient and understand what requires adaptation. They also reveal gaps in knowledge, tell us which forms of existing knowledge are becoming less economically relevant or commercially unviable, and provide us with information about possible ways forward.
