What would Republicans have said if the Biden crowd acquired government stakes in companies with ties to its friends and family? Well, that’s more or less what the Trump team is doing to little political objection. State capitalism and political cronyism are in fashion these days, despite a history of failure.
The Commerce Department recently announced a $1.3 billion loan and $277 million in direct funding for USA Rare Earth, in return for an equity stake and warrants that are worth about 10% of the company. USA Rare Earth is developing a Texas mine that contains 15 of the 17 rare-earth elements and a magnet manufacturing plant in Oklahoma.
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The Administration has also taken stakes in other mineral companies, including MP Materials, Lithium Americas, Trilogy Metals and Vulcan Elements. Donald Trump Jr.’s 1789 Capital venture fund invested in Vulcan months before the Administration announced its funding and equity stake. Sus, as the young people say.
Trump officials don’t care about such apparent conflicts. But Republicans in Congress could put limits on state socialism in appropriations bills. Think of how a future Democratic President would imitate the Trump investment model—how about the government buying shares in electric-vehicle startups?
A better idea to counter China’s rare-earth dominance is to coordinate development of mines and processing facilities with allies, as the White House has sought to do with Australia. The Administration could also guarantee government purchases of rare earths and fast-track permitting, as Mr. Trump’s Operation Warp Speed did for Covid vaccines.
It’s a mistake to think that the only way to beat China is to emulate its statist model.
President Donald Trump argued in a Saturday Wall Street Journal op-ed that his myriad tariffs have boosted America’s economy without causing the harms that many economists predicted. “We have proven, decisively, that, properly applied, tariffs do not hurt growth—they promote growth and greatness, just as I said all along,” Trump claimed.
That conclusion rests on misleading claims, inaccurate data, and logical fallacies.
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“According to a recent study by the Harvard Business School,” Trump wrote, foreign producers and middlemen “are paying at least 80% of tariff costs.”
In fact, the paper he cited concludes that “tariffs led to both rapid and gradual retail price increases.” The study found that “prices began rising within days of the March announcements and continued to increase steadily over subsequent months,” and also that “imported goods rose roughly twice as much as domestic goods relative to pre-tariff trends.”
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In this case, the sectors of the economy that are supposed to be benefiting from Trump’s tariffs—manufacturing and other forms of industrial production—aren’t even realizing those benefits, because higher prices on raw materials make it more difficult to manufacture things. For example: American businesses are now paying much higher prices for aluminum than manufacturers elsewhere in the world. That’s a good way to discourage manufacturing, not to promote it.
In response to the headline “Steel Tariffs Not Hurting U.S. Manufacturing, Nucor Chief Says,” Alexandra F. Baldwin tweets: (HT Scott Lincicome)
“Removal of electric electric fencing has been great for sheep” – Wolf
In late September, as a government shutdown loomed, the SEC initiated a watershed change to allow what are known as “exchange-traded fund share classes” to be grafted onto traditional mutual fund structures. That story was overshadowed by government gridlock, but as the SEC grants the largest wave yet of ETF-share-class relief, the benefits of this change merit fresh attention.
Mutual funds and ETFs, which offer similar value propositions, will be familiar to many savers and investors. Both are efficient vehicles that allow everyday investors to build wealth through investing in public company equities, bonds and, more recently, digital assets. The primary difference is that ETF shares trade on stock exchanges throughout the day, while mutual fund transactions happen once a day, at market close.
ETFs and mutual funds also differ significantly in their structure, especially when it comes to tax liability. Many mutual fund investors are all too familiar with the unpleasant year-end tax surprise that can result from a fund selling securities to meet redemptions from some exiting investors and passing on the resulting capital gains — and the associated tax liability — to the fund, and thus to all shareholders, even those who did not redeem their shares.
Unlike mutual fund shareholders, ETF investors do not usually bear the tax burden of other investors’ redemptions. When ETF investors exit their positions, they sell to others in the general stock market, which generally does not trigger a tax bill for other investors.
Now, by allowing fund sponsors to offer these products, the SEC is enabling more sponsors to combine these two approaches with appropriate protections. That will allow more mutual fund investors to access the favorable tax efficiency of ETFs.
While it’s too early to say with certainty how this will unfold, it is not unreasonable to anticipate a decidedly significant capital gains tax reduction. The Investment Company Institute (ICI) has estimated that nearly $175 billion of capital gains distributions were allocated from mutual funds held in taxable accounts in 2024, so it’s clear that this change has the potential to deliver tremendous tax savings to investors.
Jared Dillian ponders Trump’s recent express wish to “drive housing prices up.” Here’s his conclusion:
In the U.S., we build about 1.4 million new homes a year—not enough to keep up with population growth, and this is after a decade of underbuilding in the wake of the financial crisis. The solution to the housing crisis is more supply, not less. Trump’s views on the housing market are, for lack of a better word, insane.
This letter in today’s Wall Street Journal by GMU Econ alum Dave Hebert is great:
In his Jan. 30 op-ed “The World’s Worst Budget Process,” former Rep. Van Taylorcorrectly identifies the Congressional Budget and Impoundment Control Act of 1974 as a problem in the federal budget process. But that was a Band-Aid solution to the real problem: the Second Liberty Bond Act of 1917, which created the first debt ceiling of $15 billion. The Big Beautiful Bill Act raised this to $41 trillion, over 2,700 times higher than it was in 1917.
Prior to the 1917 law, Congress could still incur debts but it had to do so with project-specific authorization. Major purchases, like the Panama Canal and the Louisiana Purchase, were financed this way, with Congress defending the decision to incur debt and demonstrating a plan to repay it. This resembled a loan application, while today’s deficit spending evokes credit card bills. Importantly, because debts were tied to specific projects, voters could hold elected officials accountable for their fiscal decisions.
President Trump (and Nancy Pelosi) are right that we need to end the debt ceiling once and for all. But we should return to our pre-1917 roots and require Congress to apply for project-specific loans instead of giving themselves a credit card.
We compare trends in absolute poverty before (1939–1963) and after (1963–2023) the War on Poverty was declared. Our primary methodological contribution is to create a post-tax post-transfer income measure using the 1940, 1950 and 1960 Decennial Censuses through imputations of taxes and transfers as well as certain forms of market income including perquisites (Collins and Wanamaker 2022), consistent with the full income measures developed by Burkhauser et al. (2024) for subsequent years. From 1939–1963, poverty fell by 29 percentage points, with even larger declines for Black people and all children. While absolute poverty continued to fall following the War on Poverty’s declaration, the pace was no faster, even when evaluating the trends relative to a consistent initial poverty rate. Furthermore, the pre-1964 decline in poverty among working age adults and children was achieved almost completely through increases in market income, during which time only 2–3 percent of working age adults were dependent on the government for at least half of their income, compared to dependency rates of 7–15 percent from 1972–2023. In contrast to progress on absolute poverty, reductions in relative poverty were more modest from 1939–1963 and even less so since then.
