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 healthcare 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 different 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 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 in the 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. 

The FTC Should Not Dispute the Kroger-Albertsons Merger

I wrote about grocery taxes last week. I only thought it fitting to write about another piece of news in the grocery industry this year. In late 2022, there were two major grocers that announced a merger: Kroger and Albertsons. If it goes through, this $24.6 billion acquisition will be the largest supermarket merger in U.S. history. 

The merger was supposed to be completed this year. However, the U.S. Federal Trade Commission (FTC) has taken such issue with the merger that the FTC filed a lawsuit last week in federal court to block the merger. In its filing, the FTC makes two main arguments. One is that the merger will make the grocery market less competitive, which will result in higher grocery prices and reduce grocery quality. The second argument is that it will harm union grocery labor because the merger would increase leverage over the laborers. 

The FTC became a major topic at my blog last year when the FTC decided to go after Amazon with a lawsuit alleging that Amazon is anti-competitive. I asked whether Amazon is a monopoly (it is not!), whether Amazon harms third-party sellers (it depends), and whether Amazon is beneficial to consumers (it really is). After writing this three-parter, I found that the FTC has an ideological axe to grind when it comes to companies that benefit consumers and makes for a healthier retail market. I have to wonder if the FTC is similarly grinding that axe with the Kroger-Albertsons merger. 

Let us start with whether this merger would turn Kroger into a monopoly. I ask this question because when the FTC went after Amazon last year, the FTC omitted various retail competitors from their market sizing to make Amazon's market share look larger than it actually is. It looks like the FTC made the same mistake because the market has expanded beyond traditional supermarkets. The FTC's market sizing with Kroger-Albertsons excludes club stores (e.g., Costco), limited assortment stores (e.g., Aldi), dollar stores, or such e-commerce stores as Amazon. Determining proper market sizing helps us accurately answer whether or not this merger would create a monopoly.  

Since data for 2023 have not been fully released, I am going to use 2022 market size data. Kroger had $148.3 billion in sales and Albertsons had $77 billion in 2022. Given that Kroger had 5.6 percent market share that year, that would give Albertsons and Kroger a collective 8.5 percent market size. Even market research firm Numerator estimates that it would be 10.8 percent of the grocery market size. A market size of 8.5 percent or 10.8 percent seems large for a market as fragmented as the grocery market. Conversely, it hardly constitutes as a monopoly. Even if combined, Kroger's market share would trail behind Wal-Mart's market size of 25.2 percent. 

As the Wall Street Journal brings up in its editorial, the grocery store industry is by its nature a competitive market:

It's hard to think of a more competitive business than groceries. Traditional supermarkets have been squeezed from all directions. Most Americans shop and buy food and household products  from a variety of sources, including dollar stores, farmers markets, big-box retailers, and online delivery services. 

Competition has driven hundreds of supermarket stores to close in recent years. The Kroger-Albertsons merger is intended to make the two more competitive by increasing their leverage with suppliers and making their supply chains more efficient. 

If you want to read more on the effects on union labor power, you can read this piece from the International Center for Law and Economics. Since antitrust law has historically been based on the consumer welfare standard, I am going to conclude with whether this merger would harm or benefit consumers. 

As previously mentioned, there are new types of stores that have expanded the market, thereby making the market more competitive. As economics professor and Chair of Georgetown University's business school John Mayo pointed out, the merger provides real opportunity to lower its distribution costs and the prices it pays to wholesalers. 

Rather than diminish competitiveness, this merger was created in response to compete in an ever-evolving market. As this article from Food Industry Executive illustrates, Kroger will need to strengthen initiatives across its value chain to compete with others, whether that it is its rewards program, converting existing storefronts into micro-fulfillment centers, or adapting to evolving buying journeys. To compete with other grocery stores, Kroger will have to ramp up the quality of its product line rather than diminish it.

If the FTC is successful, all they will have succeeded in is strengthening the market share of the likes of Wal-Mart, Amazon, and Costco. Rather than operate under the facile assumption of "big is bad" and trying to pick which companies should win or lose, maybe the FTC should be more concerned about whether the merger will help with consumer welfare.