Although the competition is stiff, Scott Lincicome identifies “the world’s dumbest tariff.” Two slices:
For American consumers, higher aluminum costs flow into the retail prices of food, beverages, foil, appliances, and more. For US manufacturers, the steep premium means higher costs and reduced competitiveness. Aluminum is a critical input for both advanced manufacturing – automotive, aerospace, defense, etc. – and less capital-intensive industries like food production. Today, American firms pay much more for the metal than do their overseas competitors.
Economists have found that Trump’s first-term aluminum tariffs hurt manufacturing on net. The harms today are surely greater, given the tariffs’ higher rates and broader scope – and dwindling domestic inventories that could cushion the blow. The complicated “derivatives” regime, which requires US companies to report imports’ precise metals content, has added more costs – a regulatory burden that even Trump officials acknowledge.
American supply chains are also more fragile. In one absurd example, Ford Motor Co. reported last month that a fire at its main US supplier would force it to pay $1 billion more to import aluminum in the meantime. (And that was before Iran.) Manufacturers without Ford’s resources and clout have been hit even harder, unable to get needed supplies and pausing expansion plans in response.
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Overall, aluminum protectionism has been a confounding own-goal. Tariffs haven’t just raised prices and harmed American manufacturers; they’ve actively pushed a top producer and close ally out of our market, with shrinking domestic sources unable to fill the gap. Given the metal’s role in the US defense industrial base, aluminum-related risks are likely higher today than they were before “national security” tariffs were ever enacted.
New investments, meanwhile, require years of sky-high prices before coming online and will take resources from better uses when they do. The US Chamber of Commerce estimates that replacing imports with domestic aluminum would require electricity generation equivalent to that of Nevada – finite power unavailable for semiconductors, data centers, and every other “strategic” industry Washington says we need. With clean, abundant, and secure supplies right across the border, choosing this path is nonsensical.
High-earning – that is, mostly highly productive – Americans continue to vote with their feet for lower-tax states. Two slices:
As Democrats across the country seek to raise income taxes, the IRS on Friday released new data on state income migration that is a reality check on their ambitions. Even after the pandemic, high-tax states continue to lose tens of billions of dollars in taxable income to low-tax states.
The latest IRS data includes the adjusted gross income (AGI) of tax filers who moved between and within states between 2022 and 2023. Not surprisingly, overall migration ebbed from record highs in 2020 and 2021 during the Covid lockdowns. A mortgage lock-in effect and rising interest rates also resulted in fewer people moving.
Yet states with the highest taxes continue to lose the most income to other states. California lost on net $11.9 billion, mostly to Texas, Nevada and Arizona. Other big losers include New York ($9.9 billion), Illinois ($6 billion), Massachusetts ($4 billion), New Jersey ($2.6 billion), Maryland ($1.8 billion) and Minnesota ($1.5 billion).
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People move for reasons besides taxes, but taxes influence the economic climate and opportunity. Government unions that rule high-tax states also work to undermine the quality of public education and other services, while ballooning welfare states squeeze spending on public safety.
When partisan gerrymanders and public-union machines entrench one-party Democratic governance, people who can’t affect political change at the ballot box vote with their feet. And they are taking their wallets and mutual funds with them.
Hank Adler reports on the flight from California of that state’s wealthy taxpayers. A slice:
California has long depended on a small number of ultrawealthy taxpayers to fund a large share of its government. According to the Legislative Analyst’s Office, the top 1% of taxpayers generate roughly 40% of the state’s personal income-tax revenue.
The flight of even a handful of California’s highest-earning taxpayers from the state has immediate and significant consequences for Sacramento’s finances. Although California doesn’t currently tax wealth directly, it heavily taxes the income generated by wealth—particularly capital gains. When billionaires change their state of residence, California largely forfeits the ability to tax those gains in the future. Former residents who are company founders won’t pay California income taxes when they sell shares in their companies after they leave the state.
My intrepid Mercatus Center colleague, Veronique de Rugy, asks: “How will Congress fund a $300 billion war with Iran?” Here’s her conclusion:
In the end, the $300 billion question isn’t really about Iran. It’s about whether Congress will admit that nothing the federal government does is free, and that the bill always comes due. The only choice is who pays for it and when.
It doesn’t have to be this way—and a country with a more serious government would have fixed it long ago.
America’s entire air-traffic control system relies on technology that is woefully out of date (which probably makes it more difficult to recruit workers) compared to systems used in other countries. It remains that way because it is funded and managed by the federal government, rather than by the people who must rely on it to work: airlines, airports, and private pilots.
Those entities would have an incentive to make sure the air traffic control system is top-notch and fully staffed. As Reason Foundation cofounder Bob Poole noted in November, roughly 100 countries receive their air traffic control services from user-funded utilities. “If any of their governments were to have a shutdown like ours, air traffic control would continue to operate normally,” Poole wrote.
The federal government could fix this problem with air traffic control anytime it wants. This is not a partisan issue. It does, however, require some semblance of seriousness from our policymakers—so it is unlikely to happen, and another accident is inevitable.
Jeffrey Miron continues to share research evidence of the folly of minimum-wage legislation.
Robert Trivers is remembered by his student Robert Lynch. A slice:
The first [paperr], published while he was still a graduate student at Harvard, confronted one of the deepest problems in evolutionary theory: how can natural selection favor cooperation between non-relatives? In The Evolution of Reciprocal Altruism Trivers proposed that cooperation could evolve when the same individuals interacted repeatedly, making it advantageous to help those who were likely to help in return while avoiding cheaters who took benefits without reciprocating — i.e.“you scratch my back, I’ll scratch yours.” The paper offered an elegant solution to the problem of how natural selection can “police the system” and has had enormous implications for human psychology, including our sense of justice, with parallels in other mammals such as capuchins and dogs. The next year in 1972, Trivers published his most cited paper, Parental Investment and Sexual Selection. Here he offered a unified explanation for something that had puzzled biologists since Darwin. Writing perhaps the most famous sentence in all of evolutionary biology—“What governs the operation of sexual selection is the relative parental investment of the sexes in their offspring”—Trivers threw down the gauntlet and revealed a deceptively simple principle that reorganized the field. From that insight flowed one of the most powerful and falsifiable ideas in modern science: the sex that invests more in offspring will tend to be choosier about mates, while the sex that invests less will compete more intensely for access to them.
