Reflecting on the Moral Case for Globalization

For President Donald Trump, it is about "Make America Great Again." French politician Marine Le-Pen believes that there is not a "Left or Right", but that the real fight is between "patriots and the globalists." For these nationalistic politicians, there is an intention to malign globalism by maligning the globalist elitists and making those who are opposed to them do not care about their nation's citizens. It is the "us versus them" and zero-sum mentalities that make up the mindset of the more nationalistic and protectionist elements in the Western world's politic. 

This theme and reality came up when I was reading a Cato Institute essay that was published last week: The Moral Case for Globalization. I enjoyed reading the essay because it acted as a reminder of why I am in support of freer trade, borders, and expression of ideas. But first, a definition of what globalization is. As the essay's author, Cato Institute scholar Tom Palmer, explains, "Globalization is the relatively free movement of people, things, money, and ideas across national or political borders." Greater globalization means reducing or removing state-enforced restrictions on these voluntary exchanges. Ultimately, "a consequence of increasing globalization is an increasingly integrated and complex global system of production and exchange." 

The principles of exchange for mutual advantage are vital for liberty. As Palmer points out, "There is evidence that our commonly accepted norms of morality emerge from trade, which established the importance of legitimate expectations and reputations, both of which are necessary fort he emergence of law and morality. Morality itself is a product of exchange, and the more trade, generally the more humane a society is." 

There is also a consequentialist argument the author makes, mainly that reducing barriers to trade, travel, and other forms of exchange across borders "have been spectacularly positive for the world's poor, as wages have increased, jobs have become safer, and the use of children for labor has plummeted. Increasing wealth, in turn, is strongly connected to improving health, and the global spread of improvements in medicines and technologies has improved health outcomes even in regions that have not participated as much in the exchange of goods." Earlier this month, I wrote about how more free trade results in reduced poverty domestically and internationally, so this does not surprise me. 

There are other benefits that Palmer mentions, including greater ability to preserve other cultures and traditions, as well as greater reduction in war democracy and peace become more salient norms. To echo the author's conclusion, "The world is better when barriers to free and voluntary cooperation are reduced. The world is better because of globalization." It is difficult not to come to this conclusion after reviewing the data across multiple topics. 

My 1,000th blog entry was dedicated to why I am libertarian from ethical and consequentialist lenses, which includes the importance of globalization. Allowing more people to be freer, healthier, happier, and more prosperous seems like a noble goal, which is why advocating for removing those barriers that stifle voluntary and mutually beneficial exchange has been a major theme of this blog. For more information on the benefits of globalization, you can view the video from John Stossel released earlier this month debunking globalization myths or you can read the list of selected essays below. 

• The Case for Globalism (American Enterprise Institute)
• Defending Globalization (American Institute for Economic Research)
• Food Globalization Puts Food on Your Plate (Cato Institute)
• Globalization: A Race to the Bottom or the Top? (Cato Institute)
• Globalization Creates a Global Neighborhood, Benefiting All (Cato Institute)
• The Globalization of Ideas Enriches the World (Cato Institute)
• Globalization: A Tinfoil Hat-Free Critique (Foundation for Economic Education)
• In Praise of Capitalist Globalization (Foundation for Economic Education)
• In Defense of Globalization (International Monetary Fund)

Biden Should Keep His Protectionist Nose Out of Nippon Steel's Acquisition of U.S. Steel

In December 2023, U.S. Steel Corporation (U.S. Steel) announced that Nippon Steel was going to acquire U.S. Steel. Nippon Steel (Nippon) is currently the fourth-largest steel producer worldwide and would become the third largest post-acquisition. What should be a simple business transaction in the private sector has been sucked into the politics of an election cycle. 

In March, President Biden expressed his opposition to the acquisition by saying that U.S. Steel is to remain in the United States. A day later, Nippon Steel announced that there would be no plant closures or layoffs in the United States as a result of the acquisition. Of course, that did not stop Biden from visiting the United Steelworkers Union headquarters last week. After Biden vowed that U.S. Steel would remain in the United States, U.S. Steel's stock price dropped. Contrast this to when stocks soared after U.S. Steel announcing the deal in December. Here are some facts about this acquisition that Biden would prefer to ignore:

• U.S. Steel is not what it used to be. President Biden might have some nostalgia about the good ‘ole days, but U.S. Steel has waned in its influence. In its heyday, U.S. Steel produced 40 percent of the world's steel. Now it is the 27th in world output and 2nd in U.S. output with 11.2 million tons of steel last year. At its peak, U.S. Steel employed over 340,000 employees. Now, that employment figure is at 15,000, representing a 96 percent decline from its peak. It is the 652nd largest company in terms of market capitalization, which is less than 1/100th of its size in 1901 as a proportion of the overall economy. Why? It was a combination of mismanagement and government interventions (e.g., import restrictions, subsidies, "Buy American" procurement preferences) that the U.S. government used to prop up U.S. Steel. 
• Japan is a friend and ally. Japan is not a hostile power, certainly not like China. Quite the opposite! Japan and the United States started developing their military relationship with the Treaty of Mutual Cooperation and Security in 1960. The fact that Japan is not the economic competitor that it was in the 1980s would explain why Japanese investors have not been on the radar of the Committee on Foreign Investment in the United States (CFIUS) since the 1980s. Plus, calling Nippon Steel a foreign company is misleading because it has been operating in the United States for 40 years and already has operations across eight U.S. companies employing 4,500 U.S. employees. Blocking this acquisition would risk alienating a key economic and security partner of the United States. 
• The acquisition does not harm U.S. national security. Those making the national security argument assume that putting this steel production into foreign hands would lead to domestic shortages. This is problematic for a number of reasons: 
• One is that the Pentagon only needs 3 percent of domestic steel production. 
• Two, Nippon is not looking to close U.S. production. Nippon is injecting $1.4 billion in capital investments at the U.S.-based plants because Nippon wants to ramp up steel production in the United States. This is in no small part because Nippon wants a presence in the U.S. market and the Trump/Biden steel trade barriers are getting in the way. 
• Three, the Department of Defense does not procure steel from U.S. Steel. Even if Nippon were to move production to Japan (which we established in the previous sub-point they are not going to), it would not impact the U.S. government's ability to procure steel. 
• This acquisition can help with national security. Rather than harming U.S. Steel, Nippon is saving U.S. Steel and actually contributing to the U.S. economy. While U.S. Steel will not be domestically owned, it will still have operations in the U.S. If anything, Nippon's capital and expertise will enhance the U.S. economy by making U.S. Steel's operations more efficient (see below). Together, Japan and the U.S. can better confront China's increased dominance in the global steel market, as well as its general influence in the Asia-Pacific region, with this acquisition. 

• Impact on foreign direct investment (FDI). Foreign investment encourages other companies to invest into the United States, thereby creating more wealth and job opportunities. It is because of Nippon's capital and expertise that most steel industry experts believe that this acquisition will help U.S. steelworkers and the overall manufacturing sector. The synergy with the acquisition will improve steelmaking (see below). If this acquisition is blocked, what sort of message does that send to investors in allied countries in the future? Japan is a leading source of FDI, which helps employ 900,000 U.S. citizens at U.S. subsidiaries of Japanese-owned companies. Disincentivizing foreign direct investment would only be a shot to the metaphorical foot of the U.S. economy. 

Postscript: What should be clear is that Biden is not motivated by sound economics or national security concerns, but rather with his eye on electoral concerns. Even NPR admits that Biden is opposing the acquisition to court the unions and blue-collar workers in swing states. 

Plus, this is part of a perturbing trend of the Biden administration to block several notable mergers and acquisitions, including that of Albertsons and Kroger. One of the main premises of capitalism is that parties voluntarily enter an economic transaction that both find to be mutually beneficial, which is the case here with Nippon and U.S. Steel. Private companies should not need a slew of lawyers to gain approval from the government to engage in voluntary, mutually beneficial business deals. 

The fact that Biden thinks that a nominally Japanese corporation purchasing a nominally American corporation is inappropriate should have zero place in U.S. trade or national security policy. Much like with Biden's student loan "relief" program, Biden is putting good politics over good policy. If Biden wants to be better at economic and national security policy, he needs to go beyond a limited, domestic view and take on a broader view that entails working with allies to strengthen economic and national security ties. 

A Passover Seder Insight On Simultaneously Having Space for Joy and Sadness in Life

As part of my Passover preparation this year, I participated in a Passover-themed yoga session with a local synagogue. Part of the intentionality going into the session was about acknowledging the craziness in the world along with the reasons to celebrate. The rabbi first brought up Jewish weddings. Although it is one of the happiest celebrations in one's life, a Jewish wedding has a sad ritual at the beginning (the recitation of El Malei Rachamim) and ends with a brief, sad ritual: the breaking of the glass to mourn the loss of the Second Temple. Even on such a joyous occasion, there is space for sadness. 

As the rabbi brought up, the Passover seder is no different. Take a look at the blessing over the wine, the Kiddush. The Passover seder begins with a blessing over wine, a happy occasion. As a matter of fact, the Passover Seder is at least happy enough of an occasion to have four cups of wine. Yet there is a moment in which we are to spill some of our wine at Seder to, at least in part, represent a diminishment of joy. This is not the only time this theme comes up in the Passover ritual. 

• Look at the relationship with matzah throughout the Seder. Towards the beginning of the Seder, we break the middle matzah in a ritual known as yachatz. This ritual can have multiple spiritual meanings, whether it is grappling with poverty or dealing with one's brokenness. By the time we reach the Afikomen ritual towards the end, we find those pieces and bring them together, thereby representing a sense of redemption. 
• There is another matzah-related tension in the Seder. On the one hand, we are to hide matzah, which mimics the ancient practice of stashing food out of a scarcity mentality. In spite of that perceived (or actual) scarcity, we are still meant to share with others on Passover. 
• Another example is with the bitter herbs (Maror). Jewish tradition teaches us that consuming bitter herbs on Passover is one of the three mandatory aspects of the Seder so that we can taste the bitterness that the Israelites experienced in Egypt. What is optional is having the charoset, which is a sweet mix. What I brought up a while back regarding the maror and charoset is the bittersweet nature of life. Bitterness is an inevitability in life. Whether or not we bring sweetness into lives in spite of that inevitable bitterness is our freedom and our choice. 
• The Korech (the Hillel sandwich) reminds us that life is neither all good nor all bad. Much like the Hillel sandwich, life is generally a mixture of the bitter, the sweet, and the "tasteless," neutral, "meh" moments.
• The ritual of dipping vegetables in saltwater, known as karpas, also can have mixed meaning. Does it represent the tears of the Israelites? Does it represent the fact that personal growth happens through dark times? Is that rewards come through hard work? How mixed this ritual is depends on how the ritual is interpreted and how we respond to adversity.
• Singing the song Dayenu during the Seder brings up another paradox. This song acts as a springboard to ask us what is enough. Let's say that G-d freed the Israelites had them cross the Sea of Reeds, and then left them in the middle of the desert without manna, is that really enough? We were not in that moment. Part of it is that we sing the song looking back in history. "Hindsight is 20-20," as the saying goes. We need to realize the same in our own lives, as nerve-racking as uncertainty can be. Events often make more sense looking back. In the moment, anxiety about the future can take over, especially wondering if we can make it out of a rut or if we ask ourselves if our best days are behind us. What Dayenu does is encourages us to find the good in life, even during our tribulations or uncertainty about the future.

Life is never a walk in the park the entire time. Life often gives us lessons from the School of Hard Knocks. There are moments in which we have to learn how to carry both joy and sorrow at the same time. There are other times where a paradigm shift in perspective can minimize or even eliminate sadness. To be able to do this, we need to find ways to take the edge off the bitterness in life. We need to find ways to be more open to hold space for both sadness and joy. By learning how to embrace life in its totality is how we can truly be free. 

Biden Is At It Again With Some Costly Student Loan "Forgiveness"

"If you at first don't succeed, try, try again." That is the approach of President Biden and his attempts with student loan "relief." It does not matter that the U.S. Supreme Court struck down his student loan forgiveness program last year in Biden v. Nebraska, which the bipartisan Committee for a Responsible Federal Budget (CRFB) estimated would cost $400 billion. That does not stop Biden from giving up on the idea. Last week, the White House announced a new plan to "provide relief to borrowers disproportionately burdened by student debt." This plan entails multiple provisions, including:

• Waiving up to $20,000 of accrued and capitalized student loan interest
• Eliminating student loan debt for those who have had debt for more than 20 years
• Assisting borrowers who experience hardship in paying back loans
• Applying the most favorable repayment options, whether under this latest version or from the previous version (known as SAVE)
• Helping borrowers enrolled who enrolled in low-financial-value programs or institutions

The Penn State Wharton School of Business, which is the premier business school in the country, modeled the cost of Biden's student loan plan. When combining the overlap between the new plan and previous SAVE plan, Biden's student loan plan is going to cost $559 billion!

When Biden first tried student loan "cancellation" with the SAVE Plan, I was critical enough to provide a list of 13 reasons why such a policy does such a disservice. These reasons ranged from the unfairness, cost, and lack of economic stimulus to its regressive nature, the moral hazard, and doing nothing to prevent that the problem from resurfacing. As the CRFB brought up in its response to Biden's latest plan:

You can't solve a very real debt problem by issuing more debt. The President's previous student loan cancellation plan was expensive, inflationary, poorly targeted, and would have boosted rather than reduced tuitions. This plan similarly misses the mark.

Knowing that it is an election, I know this is more than wanting to help out the little guy. It is about fulfilling a 2020 campaign promise, as well placating a certain demographic amongst the Left that is more likely to be critical of Biden's stance on the conflict in the Middle East. Biden's student loan plan is not going to do anything to lower tuition costs. If anything, Biden's plan will create inflationary pressures, both in the higher education market specifically and the macroeconomy generally. If the Biden Administration were to do the responsible thing, it would abandon this plan and work on reforms that would actually reduce college tuition costs. Sadly, it looks likely that good politics will defeat good policy once again.

4-16-2024 Addendum: Apparently, the Wharton School is not the only one to come up with an estimate. The CFRB released its analysis today (4-16-24) and found that it could cost anywhere between $250 billion and $750 billion. 

Trump's 60 Percent Tariff on China Would Not Only Hurt the Economy, But Could Hurt Government Revenue

For my regular readers, it does not come as a surprise that I despise former President Trump's obsession with tariffs. This is not simply a matter of mainstream microeconomic theory. The negative impacts of tariffs were clear before Trump began his tariff tirade. Trump's tariffs during his first term lowered the GDP by 0.21 percent, lowered wages by 0.14 percent, and reduced employment by 166,000 full-time equivalent (FTE). Making the economy worse off with his tariffs was not enough for him. He would like to take tariffs to a new level. 

In February, Trump proposed a 60 percent tariff on Chinese good. Shortly thereafter, I showed how such a tariff would cost the economy anywhere between $200 billion and $495 billion per annum. Remember that the economy is not some amorphous blob. It consists of business and producers, as well as consumers like you and me. On average, it will cost the typical U.S. household upwards of $3,492 if this tariffs gets implemented. If that is not bad enough, it looks like this tariff could adversely affect something else: government revenue. 

An analysis from the bipartisan Committee for a Responsible Federal Budget (CRFB) examines the effects that a 60 percent tariff on China would have on government revenue. This seems counterintuitive at first. After all, if we look at a standard supply-demand graph of the effects of tariffs (see below), increased government revenue is one of the main economic benefits of a tariff. 

This CRFB analysis questions that premise in the case of Trump's 60 percent tariff. Why? In short, because it is such a large tariff. Remember that a tariff is a fancy way of saying "import tax." The larger the tax, the more likely it is to distort the economy in what is known in economics as deadweight loss. In the CRFB's static analysis, it assumes $2.4 trillion of government revenue in a decade. The problem with a static analysis is that is premised on unrealistic assumptions. Once accounting for macroeconomic effects and trade flows, we get a more accurate picture. 

In part, higher tariffs with China means less trade with China, which means less tax revenue. This, of course, depends on if certain goods are replaced with domestic or other foreign substitutes. Even assuming some offset from income and corporate tax revenue, CRFB estimates in its more conventional modeling that the tariff has the potential to lose somewhere around $200 billion to $500 billion of revenue over the next decade. 

While there is a possibility that it could bring the government a net positive in tax revenue, the fact that it could plausibly create a net negative in tax revenue should make even tariff sympathizers pause. For those who care about the impacts of tax policy, this finding is another example out a long list of examples of why we should be more than wary of tariffs. 

Measure 110 Had Its Limits, But Oregon Re-Criminalizing Drug Possession Is a Step Backwards

In 2020, the state of Oregon passed Measure 110. The point of this Measure was to decriminalize all drugs. Instead of jail time, the punishment was a $100 fine or a completed health assessment by a qualified center. It took less than four years for this experiment to end. Late last month, Oregon re-criminalized low-level drug possession due to an increase in opioid deaths and nuisances related to public drug use. My reaction is similar to my reaction last week when Idaho got rid of its syringe services programs: re-criminalizing is not going to do any favors. Below are some preliminary findings about the Oregon experiment to make me wonder about Oregon's recent decision.  

Measure 110 did not increase drug deaths. Brown University Professor Brandon del Pozo found that once adjusted for the rapid increase in fentanyl that came to Oregon later than it did the other states, there was no association between Measure 110 and an increase in fentanyl. These findings are consistent with a study from JAMA Psychiatry (Joshi et al., 2023).

Measure 110 did not encourage drug use. There are some preliminary survey data to suggest that this is the case. An RTI International survey of 467 Oregonian drug users found that only 1.5 percent of respondents started using drugs after Measure 110 began. 

There have been fewer arrests since Measure 110. Since Measure 110, there have been 83 percent fewer possession of controlled substances (PCS) arrests (Russoniello et al., 2023). Fewer arrests mean fewer interactions with the criminal justice system, particularly in terms of prosecution and incarceration. This translates into fewer law enforcement costs. 

Postscript. There are limitations to the findings here, at least in part because it has been less than four years. I made that caveat last year when analyzing the public health impacts of marijuana legalization. Between a fentanyl wave that swept the United States, the COVID pandemic, and a delay in funding for harm reduction programs, I am not surprised. It is also an issue that Oregon did not take it far enough. Similar to what I brought up with last year on Maine's partial prostitution legalization, doing it partway can either cause more problems or keep many problems intact. As Cato Institute scholar Jeffrey Miron brings up, "Legalizing [or, to a lesser extent, decriminalizing] possession, but not production, does not eliminate the underground market, so violence and quality control issues remain." Until these drugs are brought to the legal market, consumers are unsure as to the dose or purity of what they are purchasing. 

There is potential for success of decriminalization. As I pointed out last year, Portugal's twenty-plus years of drug decriminalization has been a success. However, without addressing the decriminalization or even legalization of the production, the success for decriminalization is going to be limited, especially in comparison to legalization. 

In spite of Oregon only partially decriminalizing, it beats the alternative of taking the step backwards that Oregon did. Oregon gave up on serious drug policy reform too soon. All re-criminalization is going to do is divert drug users to jails while doing very little to deter illicit drug usage. Prohibition and criminalization compound the effects of what is a public health issue, not a criminal issue. Why Oregon is going to revert back to prohibition, the very policy that got the Beaver State into this mess in the first place, is indeed a puzzlement. 

Idaho Banning Syringe Services Program Is a Stab in the Back of Idahoans

Last week, the state of Idaho took a step backwards in public health. Idaho's Governor Brad Little signed HB617 into law, which repeals the ability for harm reduction organizations to operate syringe service programs (SSP). Also known as "needle exchange programs," an SSP provides a wide range of services, including "access to and disposal of sterile syringes and injection equipment, vaccination, testing, and linkage to infectious disease care and substance use treatment."

Why did Idahoan lawmakers get ride of their SSPs? They were concerned that SSPs increase drug use and opined that there was not enough evidence to show that SSPs incentivize substance abusers to seek treatment. Here is the problem with that line of thinking. According to the National Association of Counties, SSP participants are twice as likely to reduce the frequency of substance use and three times more likely to stop using substances all together. Even so, advocates never promoted SSPs for that purpose. 

The main purpose of SSPs was to provide drug abusers with a cleaner, safer alternative. This "meet them where they are at" approach is meant to reduce the spread of disease. SSPs have been shown to reduce HIV and Hepatitis C by 50 percent. SSPs have reduced syringe litter (Levine et al., 2019), which means less likelihood of being pricked or injured by a needle. In Idaho, the program collected nearly 600,000 needles, which kept them out of public places. Furthermore, SSPs are not shown to increase crime or illicit drug use. As a matter of fact, SSPs save upwards of $7.58 [in 2014 dollars] for every dollar spent (Nguyen et al., 2014). The cost savings for SSPs is quite high (Ruiz et al., 2019). If you want more information on how beneficial SSPs are, you can read this 2023 meta-analysis from the U.S. Department of Veteran Affairs here.

Much like we could not mask our way out of the pandemic, we cannot criminalize our way out of the opioid crisis. As a 2022 research paper from Cato Institute shows, such drug paraphernalia laws obstruct harm reduction. Criminalizing these programs will make users more likely to use dirty needles (Marotta et al., 2021) and cause a rebound in HIV cases (Zang et al., 2022). Instead of keeping those who use drugs safer, re-criminalization will decrease their likelihood to survive. Idaho's abandonment of a program clearly shown to protect those who use drugs, as well as the community as a whole, is putting its citizens at risk. 

How Free Trade and Trade Liberalization Help Out the Poor Domestically and Globally

Last month, the White House released its annual Economic Report of the President. In the report, there was a chapter on International Trade (Ch. 5, p. 173). One of the interesting admissions in the report is how trade with China has improved the purchasing power, especially of lower-income Americans (p. 203). As a matter of fact, the report calculated that 68 percent of those benefits went to low-income Americans. This finding is echoed in a report from the Federal Reserve Bank of Minneapolis that was released just last week (Horwich, 2024).

The author of the Minneapolis Fed report, Jeff Horwich, says that much of the research of international trade on consumer welfare looks at the effects on a national level. Rarely is it done to see the effects of a certain demographic, such as the poor. Even so, the fact that international trade helps out low-income households both in the United States and globally does not surprise me in the least. Why is this the case? How does international trade help out the poor specifically? 

Improved quality of life with greater imports. As this article from the Houston Chrolinc brings up, it can be cheaper for a country to import goods or services than it can be to produce them. To quote the Australian Department of Foreign Affairs and Trade (DFAT), "trade expands the markets local producers can access, allowing them to produce at a more efficient scale to keep down costs." This ensures a constant flow of more goods, which can improve the quality of life and give options they otherwise would not have. 

Lower prices lead to greater purchasing power. To quote the International Monetary Fund (IMF) from 2001: "Trade liberalization helps the poor in the same way it helps most others, by lowering prices of imports and keeping prices of substitutes for imported goods low, thus increasing people's real incomes...An open trade regime also permits imports of technologies and processes that can help the poor." 

I was first criticizing Trump's obsession with tariffs in March 2016, which was before he was president. I pointed out that tariffs decreased economic welfare. Conversely, countries with fewer trade barriers had less poverty. To quote DFAT, "Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, boosting their competitiveness by reducing their production costs."

Free trade improves innovation and efficiency. The Mercatus Center mentions a good point in its brief on the benefits of free trade: "Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The results are higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities." Those wage increases help out the poor, as well. 

Postscript. As a 2015 report from the World Trade Organization illustrates, free trade creates new job opportunities for the poor, raises the real wages of unskilled labor, lowers prices of goods consumed by the poor (which means greater purchasing power), and improves access to external markets for the goods that the poor consume. All of these phenomenon aggregately improve the quality of life for the poor. 

Freer trade is vital for the poor because, as the World Economic Forum states, "Open trade is particularly beneficial to the poor, because it reduces the cost of what they buy and raises the price of what they sell." Farmers and manufacturers especially can reach a wider market when there is open trade (ibid.). As the World Bank has brought up, free trade has lifted over a billion people of poverty. The Heritage Foundation, amongst many others, has shown how greater economic freedom creates greater economic growth while lowering poverty (see below). This is a truth I detailed when showing how trade liberalization does a much better job than foreign aid at alleviating poverty. 

With the overwhelming evidence in favor of greater international trade, it does beg a question for the upcoming presidential elections. If the relatively lower tariffs from Trump's previous administration made items more expensive and made Americans poorer, what will Trump's proposed universal 10 percent tariff or 60 percent tariff on China will do to the poor both in the United States and abroad? This November's election is between a Republican whose tariffs will make Americans poorer and Bidenomics that has increased inflation in a way that has made life more expensive for the poor. And let's not forget that Biden has maintained many of Trump's tariffs. While it is clear that free trade helps out those in low-income households, it is also clear that we are in an age of protectionism, regardless of who gets elected this November. It is the everyday citizen, especially the poorer ones, that suffer because politicians on both sides of the political aisle ignore the fundamentals about the benefits of free trade.

CBO 2024 Fiscal Outlook Is Grim: Will the U.S. Government Finally Address Rising Federal Debt?

Last week, the Congressional Budget Office (CBO), which is the gold standard of U.S. federal legislative analysis, released its Long-Term Budget Outlook. This outlook projects the nations' fiscal and economic outcome for the next three decades. What fun and joy does the CBO predict for the upcoming thirty years? 

Debt will reach 166 percent of GDP in 2054. As the CBO's graph shows below (p. 10), this amount will be significantly higher than World War II. It will be in 2029 that debt will reach its highest levels and go up from there. 

Entitlement spending is why expenditures continue to outpace revenue. Until the government gets its spending habits under control, there will continue to be a growing deficit. Social Security and Medicare are the two largest culprits of this spending binge. By 2054, these two programs will account for 41.4 percent of federal spending (p. 4).

Interest outlays will more than double. The U.S. government already spends more on interest outlays than it does national defense. By 2054, we will be paying 6.4 percent of GDP (or 23.1 percent of government spending) towards interest payments (p. 10). As I have mentioned before, not only do higher interest payments hamper economic growth, but it means that we could spend that money on something other than interest outlays. 

Two silver linings. One is that the Old Age and Survivors Insurance (OASI) Fund with Social Security with Social Security will expire in 2034, which is one year later than previously projected. But still, it is not good (see below). Two, debt-to-GDP ratio projections are at 165 by 2054, which is 17 percentage points lower over a comparable period than when the CBO released last year's report. Nevertheless, as previously alluded to, it is still a perturbingly high amount of debt.

Postscript. All in all, this unsustainable fiscal path is a quagmire waiting to happen and it shows no signs of slowing down. It reminds me why credit rating agency Fitch's downgraded the U.S. credit rating last year. As the bipartisan Committee for a Responsible Federal Budget (CRFB) enumerates, high debt results in threatened economic vitality, increased budget strains, geopolitical challenges, punishing younger generations, and making it more difficult to respond to emergencies and recessions. Addressing the national debt needs to be a priority if the United States wants to continue being a beacon of economic prosperity. If policymakers continue to kick the can down the road, future policymakers will have to make difficult decisions similar to those that Argentinean President Javier Milei is having to make. I think Argentinean culture is by and large great, but fiscal irresponsibility is one feature of Argentina the United States should not emulate.

Declining Fertility Rates: Another Reason to Really Open Up Immigration to the United States

Much like with other developed countries, the United States is experiencing demographic challenges. Aside from an aging population, the United States has a lower fertility rate. This decline in fertility rate can be explained by a number of factors, including more education and career opportunities for women, greater access to contraceptives, less stigma surrounding living child-free, and increased costs of children or other macroeconomic forces. Declining fertility rates are contributing to economic and social pressures as a result of labor shortages. 

Having more children seems like a reasonable solution to the problem. However, as Cato Institute research shows, "once a country's birthrate has fallen below the replacement rate, recent history indicates that it tends to remain there." This leads me to recommend a more salient solution to the demographic issues: more immigration. Historically, the United States by and large allowed for a greater number of immigrants to enter the country. That changed with President Trump when he substantially limited legal immigration to the United States. Unfortunately, President Biden has largely kept those caps comparable to the Trump administration. 

Last week, the premier business school, Penn State University's Wharton School of Business, released a paper entitled "U.S. Demographic Projections: With and Without Immigration." One finding is that the total fertility rate (TFR) is projected to be an average of 1.7 over the next few decades. This is problematic because the TFR is below the replacement rate, which means a decline in population (see below). 

Why would greater immigration be good for the United States to help alleviate the demographic crisis? The data above provides a good hint. Aside from migrants being typically younger than the receiving country, the International Monetary Fund (IMF) provides an explanation: "It [greater immigration] would reduce population decline, keep the size of the labor force from shrinking, improve age dependency ratios, and produce positive fiscal gains." 

What we see from the Wharton School [below] is that we would need to more than triple current immigration to maintain our current worker-to-retiree ratio of about 3:1 by 2070. If we go with status quo, that ratio will fall below 2:1. This ratio decline is important considering that Social Security and Medicare are two major drivers of the U.S. federal budget. France illustrates that Social Security benefits cannot be sustained with a low worker-to-retiree ratio. Japan also ceased its historically limiting immigration policy because it hit demographic reality and shows what happens when an aging policy shuts its doors off to immigration.

The solution from certain anti-immigrant elements is to secure the border and further restrict immigration to this country. I am not going to cover the situation with the U.S.-Mexico border here today. What I will say is this. Allowing for more immigrants will help with demographic woes in the long-run. By extension, immigrants will improve economic outcomes by creating greater dynamism. A paper from the University of Chicago estimated that full immigration liberalization would translate in increasing economic welfare by about threefold (Desmet, 2018).

As I brought up as recently as December, more immigration would create macroeconomic growth, not to mention alleviate the current labor shortage that the United States is experiencing. The United States has historically developed a strong economy and a robust labor force with greater immigration than its peers. If the United States wants to continue to be that shining city on a hill, it will create comprehensive immigration reform that will allow for greater immigration. Not only will this help the U.S. economy, but it will mitigate the effects of a lower total fertility rate. 

Lessons Public Health Officials Should Learn from the COVID Pandemic But Probably Won't

Last week was the four-year anniversary of when the World Health Organization (WHO) declared the COVID-19 outbreak a pandemic. For those who have been reading this blog, you will know that I have been highly critical of the government's response to the pandemic. That is why it was nice to read this report from the Committee to Unleash Prosperity that is entitled "COVID Lessons Learned: A Retrospective After Four Years." The co-authors of this report include Steve Hanke from Johns Hopkins, Casey Mulligan from the University of Chicago, and former Trump advisor/current health policy fellow at Stanford University Scott Atlas. Here is a list of the lessons that they thought to be most important. 

1. Leaders should calm public fears, not stoke them. This is good advice even when it is not a pandemic. If we exaggerate fears without considering the costs, we get the catastrophic impacts that fear-obsessed decisions wreak, as we will see in subsequent points. 
2. Lockdowns do not work to substantially reduce deaths or stop viral circulation. This was established epidemiological knowledge and was part of pandemic guidance provided prior to the pandemic. Leaders and decision-makers across the world ignored the advice and gave into panic. Unsurprisingly, lockdowns did little to reduce COVID deaths. If anything, lockdowns increased excess deaths.  
3. Lockdowns and social isolation had negative consequences that far outweighed benefits. Sadly, I called this one in May 2020, as well as pointing out in April 2020 how the lockdowns would adversely affect the economy. Lockdowns ended up causing or exacerbating multiple negative consequences, including deteriorating mental health, increased child and domestic violence, greater food insecurity, widened economic inequality, social polarization, unhealthy lifestyle choices, and erosion of liberal democracy. 
4. Government should not pay people more not to work. Here is another one I called in early 2020.  The more the government pays to stay at home, the less likely they will want to work. As I wrote in 2023, that ended up being the case, much like it was during the Great Recession. 
5. Shutting down schools was a major policy mistake with tragic effects on children, especially the poor. I expressed my issues with school closures in July 2020. It turns out that school closures ended up doing considerable harm to children. Even the Left-leaning New York Times got around to admitting as much this week. 
6. Masks were of little or no value and possibly harmful. I was mildly for a temporary face mask mandate at the beginning of the pandemic, even in spite of conflicting information. That is because there was at least mechanistic plausibility that they could work, which is better than the lockdowns (See Point #2) or school closures (See Point #5). But my support waned to the point of being against the mandates. Then I was against using face masks to fight COVID because it became clear that face masks were ineffective in slowing the spread of COVID.  
7. Government should not suppress dissent or police the boundaries of science. Attempts to shut down discussions under the guise of "fighting information" not only led to the erosion of scientific inquiry, but also democratic norms. 
8. The real hospital story was underutilization. As the authors bring up, the real issue was that hospitals were underused because hospitals were doing as little as possible to treat non-COVID disease. Postponing preventative disease in 2020 has created problems to this day. A whole slew of preventible diseases went undiagnosed, which has resulted in a backlog that still affects our public health systems.
9. Protect the most vulnerable. It was clear as early as March 2020 that COVID had a profound differential in risk between the elderly and the immunocompromised versus everyone else. We should have had differential protection for the vulnerable while allowing everyone else make their own choices based on their own risk tolerance so we can avoid the societal disruptions and havoc that the blanket mandates caused. 
10. Warp Speed: Deregulate but don't mandate. There were considerable regulations that existed prior to the pandemic that made our response to COVID worse. That is why it was nice to see the government cut red tape to make the vaccines happen. As the authors bring up, "the original vaccine was well-matched to then-circulating variants, and there was a sharp drop-off in hospitalizations and deaths." In spite of the earlier vaccines' success, the government had no business mandating vaccines, especially since the vaccines did nothing statistically significant to stop COVID transmission. 

As you can tell from this list, public health mandates in response to the pandemic were one fiasco after another. Former NIH Director Francis Collins eventually issued a mea culpa in which he realized he was too close-minded when it came to COVID restrictions. Fauci recently admitted that social distancing at six feet was bunk and that vaccine mandates increased vaccine hesitancy. Even so, I have not seen anything to suggest that public officials have asked the tough questions to the point of making significant change. I think in part, ego will play a role because it is difficult for a politician to admit they contributed to one of the worst peacetime public policy decisions in human history. Another factor is that it is election year and there are many other topics to focus on now that the pandemic it is in the rearview mirror. As much as I wish they would learn from past mistakes, I would not be surprised if a similar level of stupidity took over during the next pandemic. 

England Bans Puberty Blockers for Kids: Will the U.S. Political Left Ever Question Youth Gender-Affirming Care?

Gender-affirming care is deemed by proponents as a vital medical procedure for those seeking to deal with gender dysphoria, which is the mental distress of one's gender identity not matching with biological sex. Partaking in hormone replacement therapy, taking puberty blockers, or having gender-reassignment surgery to better align some of one's secondary sexual characteristics with their gender identity helps them deal with the anguish that comes with gender dysphoria. If you read from such sources as the Human Rights Campaign, ACLU, or American Medical Association, not allowing for such treatment is literally a matter of life or death. 

Contrast that with what happened on the other side of the Atlantic in the United Kingdom. Britain's National Health Service (NHS) banned the use of puberty blockers to treat children dealing with gender dysphoria. This follows a June 2023 NHS report that stated "there is not enough evidence to support [puberty blockers'] safety or clinical effectiveness as a routinely available treatment." This lines up with what is currently on NHS' website as of last week:

Puberty blockers (gonadotrophin-releasing hormone analogues) are not available to children and young people for gender incongruence or gender dysphoria because there is not enough evidence of safety or clinical evidence...Long-term cross-sex hormone treatment may cause temporary or even permanent fertility. 

This should not be surprising. These puberty blockers are the same drugs used to castrate sex offenders, which has some nasty side effects, including decreased bone density, deteriorating mental health, and lowered IQ. This all leads to what I illustrated last year: the evidence base is too weak to justify youth gender-affirming care. 

There are European countries that have implemented these medical procedures before it became trendy in the United States, including England, Sweden, Finland, and France. They have conducted systematic reviews only to find the evidence for these practices is lacking. Rather than make it readily available like candy, the approach in these countries is to limit these procedures as a last resort and to do so in a clinical setting. These countries otherwise use psychotherapy to help children navigate gender dysphoria, which does not even consider that about four out of five adolescents who have gender dysphoria naturally overcome it by the time they are adults without these medical procedures.  

Medical treatments are supposed to be backed by a growing body of well-researched evidence. Rigorous scientific consideration should be considered when discuss the physical and mental well-being of a child. The scientific process should not take a back seat simply because it does not line up with one's political beliefs or whims. I am glad to see NHS correctly acknowledge that the costs and uncertainties outweigh benefits and political wishes of those on the Far Left. 

Yet in the United States, much of the political Left treats this practice as sacrosanct. As much as the Left likes accusing the Right of being anti-science, there are those on the Left have clung onto anti-science beliefs, whether it has been genetically modified foods are bad for your health, face masks and lockdowns helped stop COVID, or any body size is healthy. It is a similar adherence to faith that you see when there is climate change fear-mongering: not an iota of healthy skepticism. For these individuals, they believe without question that they are helping children. There is the misconception that to be against gender-affirming care is to either be a bigot or want trans children dead without considering the possibility that these medical procedures, much like any other medical procedure, are not without any drawbacks or side effects. The naysayers are accused of starting a culture war, even though it is the proponents who fired the first shot. 

Gender-affirming care is experimental because there are no long-term studies showing its efficacy. It is also irreversible in that such procedures as mastectomies and penectomies cannot be undone. On top of it all, we are already seeing side effects with puberty blockers. Given the nature of such medical procedures, the burden of proof is on proponents to show that the benefits exceed the costs, not on naysayers to show it does not. To reiterate, I am a proponent of the Swedish approach, which is limiting these procedures and doing so in a clinical setting to develop more evidence. Any clinician pushing an experimental procedure without having the evidence to back it up is downright irresponsible. I hope that more people in the United States will start scrutinizing this medical procedure as we should scrutinize other things that could cause us considerable harm.

New Swedish Study Is Yet Another Study Showing How Lockdowns Inflicted Collateral Damage

I wrote on how COVID vaccine mandates likely created greater vaccine hesitancy with other vaccines earlier this week, so I figured I would continued with the theme of the COVID pandemic for this week. Since the beginning of the pandemic, proponents of lockdowns (who I have dubbed Lockdown Lovers) maligned Sweden for not imposing a lockdown. For the Lockdown Lovers, they thought Sweden was playing Russian Roulette with Swedish lives. Whether Sweden's approach was the correct one is a question I have asked since June 2020 and asked again in August 2021. In August 2022, I wrote that Sweden fared quite well both from a public health and economic standpoint. A recent study from Economic Affairs shows more positive affirmation that the Lockdown Lovers were wrong (Andersson and Jonung, 2024). Here are the key findings from this study:

• "Countries with more stringent lockdown measures did not experience a lower death rate, as might be expected a priori." This was a similar outcome in the U.S. context, mainly that states that implemented greater lockdowns did not see improved health outcomes. Sweden also fared relatively well in terms of COVID death rate and excess mortality rate. 
• "Compared with an average annual pre-pandemic growth rate of 2.6 percent cent, the Swedish economy lost approximately one year of growth. Countries with a higher lockdown rate lost between one and three years of economic growth...It was nevertheless possible to maintain a positive growth rate by avoiding the more severe lockdown measures applied in other countries." 
• "The more restrictions, the deeper was the downturn in the economy, and consequently, the larger was the budget deficit." The large price tag of lockdowns should not surprise us. When you shut down large swathes of the economy, there is less economic output. 
• "The social costs are many, such as increased mental illness through isolation in homes; increased violence mainly directed against women and children; and postponed and cancelled surgeries." I expressed a number of these concerns about mental and physical health in May 2020, and sadly, they came to fruition. 
• "School closures and the transition to online teaching impaired pupils' learning and could result in poorer opportunities later in life." 
• "The political costs deserve a separate analysis. The restrictions seem to have inspired growing polarization, conspiracy thinking, and protests and demonstrations in many countries. The lockdowns may thus have undermined liberal democracy and economic freedom. Freedom of the press was curtailed...In authoritarian countries, restrictions were used as a pretext for increased repression." 

Because of a low lockdown rate and intensity along with fiscal moderation, Sweden fared well during the pandemic. As the researchers conclude, "the lockdowns "had negligible positive health effects despite the evidence available at the time pointing towards the limited benefits of such broad measures." And they are right. The lockdowns were implemented in spite of no evidence in support of them. 

The lockdowns ended up having negligible positive outcomes, especially when compared to the gargantuan costs. Not only did lockdowns fail in saving the number of lives the Lockdown Lovers were hoping for, but there were economic, social, and political costs that we are still reeling from to this day. As vindicating as "I told you so" feels, what I would much rather have is the politicians and decision-makers held accountable and answer some important questions about how we let such an anti-science policy come into existence so we do not have this hell on earth thrusted upon humanity the next time there is a pandemic. 

Study Suggests That COVID Vaccine Mandates Created Greater Skepticism About Non-COVID Vaccines

I remember back in the days of the pandemic when I was excited about there being COVID vaccines. It meant that we could, at least in theory, put the pandemic behind us and find at least a semblance of a pre-pandemic normal. Yes, I was hesitant about getting a COVID vaccine, but once sifting through the science and getting past the hesitancy, I felt comfortable enough to get my vaccine. 

Although I had been in favor of COVID vaccines, that did not mean I was in favor of vaccine mandates. That is part of being libertarian. Simply because I think something is good personally does not mean I think that the government should force it onto people. That had been my take on this issue: I was in favor of COVID vaccines, but I was also against vaccine mandates. As a study from BJM illustrates (see figure below), there were potential negative unintended consequences (Bardosh et al., 2022). 

In September 2021, I created a list of ten reasons as to why the government should not mandate COVID vaccines. One of those reasons was that it would erode trust in the government. The vaccine mandates ended up having a spillover effect of distrust. It is not only regulatory oversight that fewer people trust. This excerpt came from a recent study from the National Academies of Science (Rains and Richards, 2024) and gives yet another reason to be against vaccine mandates:

We used state-level data from the CDC to test whether vaccine mandates predicted changes in COVID-19 vaccine uptake, as well as related voluntary behaviors involving COVID-19 boosters and seasonal influenza vaccines. Results showed that COVID-19 vaccine adoption did not significantly change in the weeks before and after states implemented vaccine mandates, suggesting that mandates did not directly impact COVID-19 vaccination. Compared to states that banned vaccine restrictions, however, states with mandates had lower levels of COVID-19 booster adoption as well as adult and child flu vaccination. 

The first finding here is that vaccine mandates did not incentivize or accelerate vaccine intake. What is worse is the second finding: vaccine mandates are likely to have disincentivized people to take COVID-19 boosters and flu vaccinations. Why did people resist? To quote the authors, "the theory of psychological reactance serves as one longstanding explanation for why freedom restrictions int he form of governmental mandates cause people to reject the advocated behavior or otherwise have unintended consequences." 

In other words, this visceral reaction to vaccine mandates was entirely predictable (also see Mtimkulu-Eyde et al., 2022). If individuals feel that their freedoms are unduly being infringed upon, the more likely they will retaliate. Vaccine mandates are part of a larger pattern of public health policy throughout the COVID pandemic. 

We were told to lock down large swathes of the economy, even though there was no evidence that lockdowns work. On the contrary, prevailing pandemic guidance right before the pandemic told us not to implement lockdowns. It turns out lockdowns caused much more harm than prevented it. There was more opposition to face masks as it became clearer that face masks are not effective in preventing COVID transmission. A similar phenomenon happened with school closures, travel bans, and figuring out whether COVID vaccines would prevent COVID transmission. 

What was becoming plain as day as the pandemic progressed was that the powers that be who were bludgeoning the people with "Follow the Science" were in fact ignoring the science. I would contend that by the time the vaccine mandates came around, people were fed up with pandemic restrictions that were not based in science. It is "too little, too late" that Dr. Anthony Fauci, who was initially a proponent of vaccine mandates, admitted in a congressional testimony this year that COVID vaccines are likely to have increased vaccine hesitancy for years to come. 

This is what happens when you politicize a pandemic and, by extension, a vaccine. People are less likely to trust public health officials to give basic health guidance in the future. More to the point, people feel distrust about other vaccines that have nothing to do with COVID. Vaccine opt-outs were already increasing prior to the pandemic (Hargreaves et al., 2020), but COVID vaccine mandates made matters worse. If this trend indeed holds out in the medium-to-long-term, do not be surprised that we see outbreaks of diseases we thought were relics of the past, whether that is measles or polio. That is the power that Big Government has when playing fast and loose with emergency powers and thinking they know what is best for our health.  

New Jersey and California Show How Plastic Bag Bans Increase Carbon Footprint

Groceries have been on my mind a lot lately. Last week, I examined whether states should be exempting groceries from the sales tax. Earlier this week, I discussed the pending merger between two grocery stores: Kroger and Albertsons. Now I am here to look at an environmentally-related topic of grocery store shopping: plastic bags. Environmentalists believe that plastic bags are bad for the environment because of their adverse impact. Aside from the energy and carbon footprint creating the bags, there is also the fact that they contaminate soil and water once they begin to decompose. 

This leads many to believe that the logical conclusion to this problem is to ban plastic bags. In 2014, California was the first state to ban single-use plastic bags. Since then, ten states have followed suit, including the state of New Jersey in 2022. I wrote on plastic bag bans in 2014, which was right around when California started its ban. I speculated about whether there would be unintended, adverse consequences as a result of the ban. It looks like I was correct to be concerned that the cure (i.e., the ban) would be worse than allowing for single-use plastic bag consumption.

International market research firm Freedonia Group released a research paper on New Jersey's plastic bag ban. This ban had mixed results. On the one hand, the number of plastic bags produced went down by 60 percent, to 894 million bags. On the other hand, the state's consumption of alternative bags increased plastic consumption for bags by nearly three-fold. Six times as much woven and non-woven plastic polypropylene was produced to make these alternatives. This increase in plastic polypropylene increased greenhouse gas emissions by 500 percent. 

If that were not bad enough, market research firm Freedonia also showed that 90 percent of the reusable bags in New Jersey had been tossed into landfills after two to three uses. As University of Michigan professor Sheli Miller pointed out, you need to use these thicker polypropylene bags at least 10 times to break even with the additional energy and material required. According to a 2018 study from the Danish government, the break-even point is higher with cotton bags: 52 times to offset the climate change impact and 1,700 times to offset all environmental impacts. 

Then there is the state of California. A report from PIRG earlier this year ironically called "Plastic Bag Bans Work" showed how the California case study did not work. Of course, the authors contend that a well-crafted ban works when they encourage reusable bags over single-use bags. The report shows that per capita disposal of plastic bags in California increased since the implementation of the ban. Why? Because the new "reusable" bags required four times the amount of plastic as the standard single-use plastic (p. 14). University of Sydney professor Rebecca Taylor found that Californians were replacing the single-use bags with thicker trash bags (Taylor, 2019), thereby reducing the environmental effectiveness. This ban has a similar result to the United Kingdom's mandatory five-pence fee on all plastic bags, as this Greenpeace report shows. Even the Left-leaning Los Angeles Times calls California's ban a failure.

These case studies get at two important points with regards to public policy. The first is that policies should be judged on their outcomes, not on their intentions. The second is that we should not base our assumptions of policy effectiveness on what people theoretically do. We should base it on how the policy plays out in practice. This was a mistake with the face masks during the COVID pandemic. Those who clung to their face masks thought that because mechanistic studies in a laboratory could produce positive outcomes, those same outcomes could be replicated in the real world. Assuming that people would consistently wear face masks in ideal conditions ignored human nature. The same goes here assuming that most people will reuse the heavier bags enough times to create a net-positive effect on the environment. 

Going back to Professor Miller, she illustrates how reusable is not always best for the environment. Every item has their tradeoff. Take paper bags as an example. Per a United Nations report, "Paper bags contribute less to the impacts of littering but in most cases have a larger impact on the climate, eutrophication, and acidification, compared to single use plastic bags." As already pointed out, reusable cloth bags need to be used considerable amount of times before creating a net-positive, an amount that many bags likely will not experience. There is also the bacteria contamination issue that comes with reusable cotton bags, especially since most rarely, if ever, clean their cotton bags. None of this gets into getting at such issues as consumption patterns or how we need to improve recycling infrastructures and technology. 

Without considering the environmental impact of substitutes, we end up with the ruinous results that we see in New Jersey and California. The plastic bag ban reveals itself as another example in a growing list of examples of what happens when governments apply broad economic bans on products it deems bad. Rather than assume that a plastic bag ban is good for the environment, the burden is on proponents to show that the alternative products used under a plastic bag ban is preferable to single-use plastic bans.