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GMU Econ alum Erik Matson is having none of Katie Miller’s ignorant accusation that classical liberalism is woke progressivism.

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.

…..

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).

…..

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.

Jack Nicastro explains that Elizabeth Warren “fails to consider how her tax would harm middle class Americans and slow economic growth.”

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.

Eric Boehm is correct: “From long TSA lines to air traffic control issues to the chaotic war in Iran, it’s all the result of a government that won’t take its powers or responsibilities seriously.” A slice:

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.

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… is from page 267 of Thomas Sowell’s 1999 book, Barbarians Inside the Gates:

Don’t you get sick and tired of being propagandized and warned almost everywhere you turn? Someone said: “They are the missionaries and we are the Hottentots.”

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A follow-up to a friend.

Tim:

Thanks for your reply to my earlier note. You write:

Not all jobs lost are the same. Not all jobs lost to free trade are the same. Not all factories that close are the same. Not all communities in which jobs are lost are the same. And not all free trade agreements are the same. You treat them as if they are and thus dismiss claims that an FTA could raise mortality rates. But jobs long protected in company towns are simply not the same as jobs in say Silicon Valley. It has nothing to do with manufacturing being special and you are perhaps too quick to assume that’s what people are claiming.

I’m not seeing something that you see. I understand that not all jobs (and job losses) are the same. What I don’t understand is what is unique about trade at causing the loss of those jobs that are especially traumatic to lose.

The ultimate cause of job losses in market economies is economic change. Sometimes that change is transmitted by international trade. Sometimes – and most times in a large country such as the U.S. – that change is transmitted by forces having little or nothing to do with trade. What reason is there to single out trade as a source of economic change, or of economic change that causes especially acute harm to workers who lose jobs? I know of none. The fact that trade sometimes has unusually traumatic and heart-rending effects doesn’t make the case. Not only does trade usually not have these effects, sometimes these effects are caused by non-trade sources of economic change, such as labor-saving technology.

It might well be that the economic change fueled by NAFTA caused job losses that led several people to make life choices that put them in early graves. But what of other historical cases? What of manufacturing workers in the 1920s who lost jobs because of electrification? What of manufacturing workers in 1945 who lost jobs because the war ended? What of manufacturing workers in the 1990s who lost jobs because of advances in computer technology? And what about the technology-driven mass destruction of agricultural jobs in the mid-twentieth century – job destruction that was just as large a share of the labor force as was that caused by the “China Shock”? Surely some of those workers committed suicide, turned to drink, or fell into life-draining despair.

It is simply misleading – because mistaken – to single out trade as a source of economic change that causes traumatic job losses.

The right course is to recognize that some unfortunate individual and localized problems are caused by economic change (and, by the way, as well as by efforts to obstruct economic change). And honesty demands that we acknowledge that among the countless sources of economic change is international trade. But to single out trade as if it’s a categorically different, or special, source of economic change makes no more sense than to single out labor-saving technologies invented in Texas, or changes in the preferences of Asian-American consumers, as a special source of economic change.

If voters insist on obstructing trade in order to avoid these traumatic downsides, that would be too bad, but so be it. Voters, however, should then be informed that their aim is too low: To be consistent they should aim to prevent all economic change, no matter its source. Again, it seems to me that to write of trade as if the economic change that it causes is uniquely troublesome is deeply misleading – and dangerous, because it suggests that such economic change should be controlled by political authorities.

Sincerely,
Don

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Here’s a letter to a respected friend – who, by the way, is no protectionist.

Tim:

Thanks for your feedback on my letter to the New York Times; it’s always good to hear from you.

You write that I’m “too glib” in questioning the claim that, as the NYT favorably summarized new research, “American workers in communities that were more exposed to competition from Mexican imports saw a significant shortening of their life spans after the trade deal went into effect in 1994.” You give as a hypothetical example a middle-age factory worker who, having lost his job to Mexican imports, commits suicide or becomes an alcoholic.

I’ll defend myself. I never questioned the finding that, in areas subject to increased foreign competition, mortality rates rose. Nor, of course, did I ever I make light of rising mortality. Instead, I questioned the accuracy of blaming this misfortune on trade.

The period studied by the researchers is 1994 through 2008. The St. Louis Fed has data starting in December 2000 on total monthly layoffs and discharges – that is, for 97 of the 180 months covered by the research. During those 97 months, an average of 1.9 million workers in America every month lost or were laid off from jobs they wanted to keep.

How much of this job destruction was caused by NAFTA? The Economic Policy Institute – an outfit hostile to NAFTA – estimates that over the course of NAFTA’s first 20 years, that trade agreement destroyed a total of 700,000 jobs. Even assuming that all of those 700,000 jobs were destroyed in the first 15 years of NAFTA, that’s an average monthly job loss of only 3,900 – or 0.2% of the average total monthly layoffs and discharges during this period. If we add to this number the maximum estimated average monthly job loss caused by the “China Shock” – 15,385 – we find that the average number of jobs destroyed monthly by these two much-criticized and most disparaged sources of increased imports is 19,285 – or 1.0% of total layoffs and discharges.

Most job destruction in the U.S. is caused, not by trade, but by labor-saving technology, changes in consumer preferences, and ordinary, healthy domestic competition. And yet, although this job destruction is massive and has long been on-going, we Americans don’t seem to be killing ourselves in great numbers because of it.

Why would the relatively tiny number of job losses due to trade uniquely increase mortality? I can think of no good reason. The researchers will say that there’s something special about manufacturing jobs, and that manufacturing jobs are disproportionately hit by trade. But the rate of layoffs and discharges in manufacturing was higher during manufacturing’s alleged ‘golden era’ – before America was much-exposed to global markets – than it was during the NAFTA years studied by the researchers.

Did those ‘golden era’ manufacturing-job losses increase mortality? If they did so, trade can’t be blamed, as post-war globalization was still in its infancy. But I’ve encountered no evidence that they did so. Either way, the earlier, higher rate of manufacturing-job loss means that the measured post-NAFTA increase in mortality rates identified by the researchers was likely fueled by factors other than trade – factors such as increased welfare payments that discourage people from moving to other towns to find employment, land-use restrictions that do the same, and more occupational-licensing requirements that close off some employment opportunities.

Because trade is not only not a unique, but not even a major, source of job losses – and because job losses are the proximate cause of the increased mortality identified in the research on NAFTA – and because the rate of manufacturing-job losses pre-NAFTA was higher than since NAFTA took effect – and because there is no evident negative effect on mortality of America’s enormous routine rate of job loss – it seems to me to be mistaken to blame that measured rise in mortality on NAFTA.

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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… is from page 489 of Columbia University law professor Philip Hamburger’s brilliant 2014 book – whose title poses a question to which the book’s text gives the answer “yes” – Is Administrative Law Unlawful?:

Indeed, administrative governance is a sort of power that has long been understood to lack legal obligation. It is difficult to understand how laws made without representation, and adjudications made without independent judges and juries, have the obligation of law; instead, they apparently rest merely on government coercion. They therefore cannot be perpetuated on a theory of consent or acquiescence, and they traditionally would have had the potential to justify revolution. Certainly, when the English Crown justified its power as constitutional, the English and eventually the Americans engaged in revolutions against it.

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This letter was submitted last week to the New York Times, but not published there.

Editor:

Ana Swanson reports on a new paper purporting to find, in Ms. Swanson’s words, “that American workers in communities that were more exposed to competition from Mexican imports saw a significant shortening of their life spans after the trade deal went into effect in 1994” (“‘A Lot of Life Years Lost’: How NAFTA Shortened American Life Spans,” March 13). One of the paper’s co-authors describes this apparent loss of life as “an underappreciated cost of globalization.”

I’m skeptical that freer trade, by causing manufacturing job losses, is to blame for increased mortality. From 1958 through 1980, the average monthly rate at which manufacturing jobs were destroyed was 1.6%, or about 275,000 jobs each month. Yet during NAFTA’s first 15 years – the period studied by the paper – the average monthly rate at which manufacturing jobs were destroyed was lower, at 1.3%, or 206,000 jobs each month.* (NAFTA, by the way – using an estimate from the Economic Policy Institute, an anti-NAFTA outfit – destroyed each month a mere 3,900 jobs.)

Because U.S. life expectancy rose from 69.5 years in 1958 to 73.0 years in 1980 – and because manufacturing’s share of total employment was much higher in those years than it was in the years studied by the paper** – it’s likely that the increased mortality described in the paper was caused by something other than NAFTA specifically, or by globalization generally.

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
571-426-5751 (mobile & text)

* Calculated from data found here.

**

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The latest issue of the Independent Review is devoted to hidden gems in Adam Smith’s Inquiry Into the Nature and Causes of the Wealth of Nations. I was very happy to accept Robert Whaples’s invitation to contribute an essay surveying Smith’s great 1776 work. Here’s a slice from my essay:

The mercantilists’ confusion about the relationship between money and wealth mirrors their confusion about the relationship between production and consumption. Starting with the correct observation that consumption depends on production—and furthered by the also correct observation that producers earn money for what they produce and sell— the mercantilists leaped to the mistaken conclusion that production is an economic activity superior to consumption. After all, consumption, by its nature, consumes goods, resources, and capital, while production produces goods, resources, and capital. Surely we should do as much as possible of the latter and as little as possible of the former. But because people, left to their own devices, are more eager to consume than they are to produce— people, alas, willingly pay to do the former but must be paid to do the latter— intervention by a wise state is necessary to promote production and control consumption.

Although Smith was aware that individuals (and governments) might well consume excessively, he nevertheless understood— as he famously put it, contradicting the mercantilists—that “consumption is the sole end and purpose of all production” (Smith [1776] 1981, 660). For Smith, a person can indeed consume excessively. But such excessiveness occurs only if and when that person’s consumption today reduces his ability to consume tomorrow by an amount that—when tomorrow arrives— the person will regret. Such a person realizes with remorse that his imprudent consumption yesterday diminished the total amount he’s able over time to consume. Ditto when an organization, including government, consumes: That consumption is excessive today only if it reduces its principals’ ability to consume tomorrow by an amount that the principals will regret.

In short, excessive consumption for Smith is consumption that imprudently reduces an economic entity’s ability to consume over a lifetime. Far from being opposed to consumption, Smith sought to maximize it over time.

The mercantilist attitude toward consumption differs categorically from Smith’s attitude. Whereas Smith understood that consumption is the end of economic activity, with production being exclusively a means to promote this end, mercantilists reverse this relationship, treating consumption as a means of promoting production. Smith could barely mask his contempt for this misunderstanding.

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Alan Dlugash is not wrong about Trump’s tariffs punitive taxes, imposed under Section 122 of the Trade Act of 1974, on Americans’ purchases of imports. A slice:

Section 122 of the Trade Act of 1974 lets the President impose a temporary 15 percent import surcharge for up to 150 days only when there is a “fundamental international payments problem,” specifically a large and serious United States balance-of-payments deficit, an imminent dollar crash in foreign markets, or an international payments disequilibrium that needs fixing. That language was written in the early 1970s for the old fixed-exchange-rate world under Bretton Woods. Once those rates floated freely after 1971, the crisis the statute targeted simply vanished. Under those rules, the international balance of payments is simply not a problem and is generally acknowledged as such. Even Trump’s own lawyers admitted months ago in court filings that Section 122 has “no obvious application” to ordinary trade deficits. This is not a close call; it is an intentional stretch of a never-used provision the Supreme Court just forced him to swap in after striking down his earlier IEEPA tariffs.

Tariffs are taxes on American buyers and businesses, they raise costs across the supply chain, and they distort free markets exactly the way I have warned for decades. Justifying hundreds of billions in extra costs on companies and consumers with a rule that has been dead letter for fifty years is not clever policy—it is abuse of power that threatens the separation of powers and the rule of law. Courts are already hearing challenges; they should kill this fast. Congress needs to step up, repeal or rewrite these outdated tools, and stop letting any president—Republican or Democrat—play fast and loose with our economy. Limited government and real free markets demand nothing less.

“Farmers hate the Jones Act.”

Joe Lancaster reports on the FCC’s recent decision to dramatically restrict Americans’ access to routers. A slice:

Since wireless routers transmit over radio frequencies, they must be authorized by the FCC to be sold in the U.S.; adding all new foreign-made routers to the “Covered List” means the FCC will not authorize those devices’ transmitters, effectively banning their sale or use.

The announcement specifies that this only applies to new consumer-grade devices and “does not prohibit the import, sale, or use of any existing device models the FCC previously authorized.” It also notes that manufacturers who apply for exemptions on new models can be “granted ‘Conditional Approval’ after finding that such device or devices do not pose such unacceptable risks.”

Perhaps unsurprisingly, the ban will likely make it more difficult for Americans to get wireless routers.

The problem is that banning all foreign-made routers means banning practically all routers. Most manufacturers, including the three largest, make their products overseas.

My intrepid Mercatus Center colleague, Veronique de Rugy, continues her noble battle against that cancer of cronyism, the U.S. Export-Import Bank. A slice:

I want to point to a submission for the record by Bryan Riley of the National Taxpayers Union that deserves attention because virtually everything in it has been documented, warned about, and ignored for years.

Riley’s testimony is concise. He makes three points. First, Ex–Im’s mission creep is real: In 2022, the bank bypassed Congress and expanded from export-financing into subsidizing domestic manufacturing through its “Make More in America” initiative — a program with no direct export requirement and no congressional authorization. Second, the bank hides the true cost of its lending from taxpayers by using Federal Credit Reform Act accounting instead of fair-value accounting. Under FCRA, Ex–Im’s projected $16 billion loan book looks like a $600 million moneymaker for the government. Under fair-value, which is the method that accounts for market risk the way a private lender would, it is an estimated $200 million subsidy, or cost. Third, Congress has called for negotiations to eliminate predatory export subsidies since the Carter administration. Decades later, those negotiations have produced nothing.

The mission-creep problem did not begin with “Make More in America.” It is the defining feature of an institution that has spent nine decades attaching itself to whatever policy priority dominates the headlines. In 2019, it was competing with China. Congress gave Ex–Im a seven-year reauthorization and a brand-new strategic mandate: the China and Transformational Exports Program, with a $27 billion target; 20 percent of the bank’s total lending authority.

The Washington Post‘s Editorial Board is correct: “Limitations on build-to-rent homes would reduce supply, which is why many progressives oppose them.” A slice:

Sen. Elizabeth Warren (D-Massachusetts) inserted a provision that would require any build-to-rent homes to be sold within seven years of construction. This is a way many families can afford somewhere to live who otherwise couldn’t afford a down payment, but the seven-year cap means the builders won’t necessarily have enough time to recoup their investments, which will discourage them from starting construction in the first place.

Pro-housing groups from across the country and the political spectrum have warned that it would restrict supply. Even if build-to-rent homes do still get built, the families living in them who couldn’t afford to buy would effectively be evicted by an arbitrary deadline from the federal government.

Sen. Brian Schatz (D-Hawaii) said the measure demonizes people who want to build rental housing. He initially assumed the build-to-rent provision was such bad policy that it must have been “a drafting error,” only for Warren to clarify that it was actually “quite deliberate.”

Jerusalem Demsas is also critical of Elizabeth Warren’s ignorant obstinance on this housing matter: (HT Scott Lincicome)

Warren seems like a uniquely bad actor in the housing policymaking space.

A hostility towards negotiation and a reluctance to accept that there could be any sort of thing as good faith disagreement.

Good on [Brian] Schatz for standing strong here.

John Stossel, as usual, is right:

Politicians say they can “make the economy work better.”

I once believed they could.

But years of reporting taught me that politicians’ attempts to “fix” the economy usually make things worse.

The Editorial Board of the Wall Street Journal explains that “the verdict against Meta and YouTube is a victory for the plaintiffs bar, not for children or society.” A slice:

Trial lawyers will now use the L.A. verdict in advertisements to recruit more plaintiffs. They may even use the social-media platforms to advertise. Unemployed? Depressed? Spend your Friday nights scrolling? You could make big money by holding billionaires responsible for your problems.

Trial lawyers and juries may figure that Big Tech companies can afford to pay, but extorting companies is certain to have downstream consequences. Meta and Google are spending hundreds of billions of dollars on artificial intelligence this year, which could have positive social impacts such as accelerating treatments for cancer.

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… is from page 20 of the late Brian Doherty’s great 2007 book, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement:

For all its occasionally zany radicalism, libertarianism is not a utopian ideology. More than any other set of political ideas, it recognizes and is based on the limits that economic reality and human nature place on attempts to use the state to accomplish grand goals.