Trump's Tax Exemption on Overtime Will Do Little While Costing Many Pretty Pennies

President Trump has made taxation a major part of his campaign this time around. Remembering that tariffs are another word for "import tax," Trump has proposed multiple types of new tariffs, including a 60 percent tariff on Chinese goods and a 10 percent universal tariff. On the other hand, he has proposed exempting taxes, including exempting Social Security benefits and exempting tips. I can add another tax exemption to that list: overtime. 

Earlier this month, Trump proposed exempting overtime workers from taxation while at a campaign rally in Tucson, Arizona. Vice Presidential candidate Senator J.D. Vance clarified that this exemption would cover both income and payroll taxes. Politically, Trump's proposal makes sense since it is an attempt to pander to blue-collar voters. For an economy in which inflation has increased rapidly relative to historic averages and where wages cannot keep up with the increased cost of living, it can sound appealing to employees. Employers also like it because it de facto acts as a raise that the employers themselves do not have to pay. However, it begs the question as to whether such a policy makes sense. 

First, there is a matter of the price tag. Last week, the bipartisan Committee for a Responsible Federal Budget (CRFB) released its estimates on the exemption while comparing it to some other cost estimates. On a static basis, it would cost $1.7 billion over the next decade. 

Then there is the CRFB's dynamic estimate of Trump's proposal costing $6 trillion over the next decade. As CRFB admits, this is an extreme case estimate because it assumes that all eligible workers switch from being salaried to hourly. Employers could plausibly exploit the loophole and convert their workers from salaried to hourly workers. Why would the exemption encourage hourly pay over salary pay? 

Under the Fair Labor Standards Act (FLSA), any FLSA non-exempt and hourly workers are legally obligated to pay 1.5 times the regular rate. At least with the current tax code, there is a consistent tax treatment across workers. With Trump's proposal, it would be a zero tax rate on a completely unprincipled definition of income. From the employee's perspective, it would mean paying less taxes and higher take-home income. For employers, it means paying less in payroll tax. It certainly would not translate into more government revenue since the extra work would generally be non-taxable. 

As the Tax Foundation points out, this exemption would "increase time spent on overtime decisions for employees and worker classification arrangements between employees and employers purely for tax purposes, distracting them from productive activity." It would also increase compliance and administrative costs. Why? 

Because it would not be exempting a portion of wage income. Instead, this exemption would be based on hours worked, which would mean additional reporting of hours. As such, it would be more complicated than Trump's proposals to exempt Social Security benefits or tips. 

While exempting overtime from taxes could create a small boost in hours worked and economic output, I have to question the extent to which it would. As the Competitive Enterprise Institute reminds us, employers have found ways to work around the FLSA. This overtime rule also would not apply to self-employed workers, managers, or freelance workers since they are not covered by FLSA to pay overtime. The number of employees that would be able to work additional overtime would thus be small, thereby rendering the most probable outcome as marginally positive economic input.  

Lowering statutory tax rates could create the increase in labor supply and economic output without complicating the tax code. Yet Trump is opting for the costly choice that will complicate the tax code and increase administrative costs while doing little to boost the economy. 

Instead of buying votes, maybe Trump (or any other politician) could focus on fitting their tax proposals in a way that match revenues to expenditures while being able to pay down the debt. Creating solvency while not ruining ourselves with massive amounts of debt. What a concept! Yes, reducing taxes can and should be part of a greater plan to bring this country's fiscal state into one of good health. Yet all Trump is proposing is distortive tax reform in a bleak fiscal environment in hopes of getting re-elected. We might deserve better, but as both Trump and Harris show us with their policy proposals, we are not going to get better tax policy with the next president.  

Matt Walsh Documentary Exposes DEI for the Racism-Perpetuating Scam It Is (Part I)

I rarely have gone to the movie theater since the COVID pandemic. Last week, I went to see Matt Walsh's documentary "Am I Racist?", which has already ranked as the highest-grossing documentary this year at $9 million. I was both surprised and amused--surprised that people buy into white guilt and amused at the genius of how Walsh gave just enough rope to the anti-activists to hang themselves and expose their extremism, thereby discrediting themselves. I cannot remember the last time I laughed that hard. I really appreciated this comical take on the "anti-racist" crowd. Even Washington Post columnist Megan McArdle seemed to enjoy it enough. In the style of Borat, Walsh goes undercover to pretend he is a Diversity Equity, and Inclusion (DEI) specialist and sets up ruses to expose the DEI movement. A few gems from the documentary (Spoilers Contained):  

• So-called "progressive" white women pay $2,500 to attend a dinner hosted by anti-racist activists Saira Rao and Regina Jackson so they can be chided about how racist and privileged white women are. In the documentary, Rao and Jackson called Republicans Nazis and essentially called the United States an irredeemably racist hellhole that needs to be scorched.
• During the documentary, Walsh was interviewing Robin DiAngelo. In the middle of the interview, Walsh gives his black producer, Ben, some money as a form of reparations. Looking stunned and confused, DiAngelo goes to her purse and grabs $30 to give to Ben, although her honorarium for doing the interview was $15,000. She later was mad because she felt duped. She stated that solving reparations needed to be done on a systemic level. Maybe she was mad because it is not good for her business to be caught in her hypocrisy of not putting her money where her mouth is or exposing how much of a racket DEI really is. 
• In 2021, DiAngelo earned $728,000 from speaking gigs and workshops, nothing to say of book royalties (see DiAngelo's accountability statement here). It is not normal for someone to get paid for an interview, DiAngelo would not have taken $15,000. The fact that she does not openly take interviews to spread "the good word" suggests that DiAngelo's motive is financial. 
• Anti-racist activist and co-director for Black Lives Matter in Phoenix Sarra Tekola harassed two white male students in a multicultural center and accosted them trying to get them to leave. In the documentary, she ironically stated that all white people are racist and that we should abolish whiteness.  
• At the end of the documentary, Walsh hosted his own DEI training in which he earned $3,000. The training reached its apex of absurdity when Walsh pulled out whips so the attendees could engage in self-flagellation. What is even crazier is that some of the attendants were considering it. 

One of the features that Walsh illustrates is that with these DEI and anti-racism workshops, the demand for racism exceeds the supply. Pathological, white liberals and self-identifying "progressives" pay to be berated about de-centering whiteness, de-colonizing oneself, and not "tone policing" people. This level of gullibility means that DEI specialists can make money off of white guilt, which is illustrated by a global DEI 2022 market size of $9.4 billion. 

DEI makes racism and racial tensions worse.  As I brought up in 2018, there have been a plethora of studies done showing how diversity training and "implicit bias" training backfires (also read this article from Harvard Business Review here). Diversity training or dealing with "implicit bias" do not help with reducing prejudice. Apparently, the more you obsess over racial differences or publicly shame people for perceived "implicit bias," there ends up being more prejudice and less diversity. That makes sense given the obsession over race results in woke people being racist against white people in a way that eerily parallels Klan members. 

Even Mahzarin Banaji, who pioneered the research on implicit bias, wrote that "the typical DEI training doesn't educate people about bias and may even do harm" and that "people often leave diversity training feeling angry and with greater animosity towards other groups." Is it a surprise that Gallup polling shows a decline in race relations as DEI became more popular? No, because DEI is not about genuine reconciliation or moving past racism, but rather wallowing in racism. 

Not only is DEI discriminatory, but it perpetuates racism. Blaming everything on the nebulous, unfalsifiable concept of "systemic racism" means that the only solution in the woke mind is reverse discrimination. That is not merely my opinion. Anti-racist activist Ibram X. Kendi says that the only way to mitigate racist discrimination, and that the only remedy to past discrimination is present discrimination. This traps us in a perpetual state of racism that does nothing to create a post-racial world. 

DEI tries to prop itself up using faulty reasoning.  For the DEI folk, they believe in collective guilt. This logical fallacy of guilt by association drives the inanity of the support for reparations. In addition to believing in collective guilt, it is not a question of whether racism took place in a given situation, but how it took place, which is a logical fallacy known as begging the question because the premise assumes the truth of the conclusion without any evidence. There is no room for alternative explanations in a given situation. As I will discuss further in Part II, not everything is caused by "systemic racism," whatever that unfalsifiable term means.

To solidify their moral high ground on their unfalsifiable accusations, the "anti-racist" grifters implement a logical fallacy known as a Kafka trap. What this logical fallacy entails is that someone who is accused of something and denies it is taken as evidence that they are the thing of which they are being accused. 

In this case, if you are a white person and you deny that you are racist, that denial is inaccurately taken as evidence that you are indeed racist. An example of "damned if you do, damned if you don't." No actual evidence of racism is required. Woke people claiming that all white people are racist is a) an example of the racism that they purport to be against, b) a way to trivialize actual racism, c) a rejection of such things as the scientific method and "innocent until proven guilty," and d) helps "anti-racists" avoid the counterfactuals and the massive amount of cognitive dissonance that comes with being "anti-racist." 

In Part II, I will discuss how DEI is problematic beyond perpetuating racism and how DEI does not mitigate racial tensions. 

Credit Card Interest Rate Cap and Removing the SALT Deduction Cap: Trump Should Put a Cap on Economically Unsound Policy

There has been no shortage of economically illiterate and tone-deaf ideas in this presidential election. I have already criticized Kamala Harris on five occasions: excluding tips from taxation, providing a down-payment subsidy for first-time homebuyers, raising the corporate tax rate, price controls on groceries, and a capital gains tax on unrealized gains. Trump has had his own share of economically inane ideas, whether that is exempting Social Security benefits from taxation, excluding tips from taxation, subsidizing in-vitro fertilization, a 60 percent tariff on Chinese goods, and a universal 10 percent tariff. 

I now get to add two more unsound ideas to Trump's policy recommendation list. Normally, I would cover each topic in separate blog entries. However, the reason I am covering them both today is because I have covered these topics in the past. 

The first is Trump's policy to temporarily cap credit card interest rates at 10 percent, which he proposed at a rally last Wednesday. Trump wants to find a way to help everyday Americans recover from the credit card debt that so many have amassed, and he thinks an interest rate cap is the way to go about it. What I find amusing is that Trump called Harris' plan to implement price controls on groceries as communist. But guess what Trump's credit card interest rate cap is? You guessed it--an example of a price control. 

I take issue with price controls generally and Trump's proposal is no exception. I criticized the policy recommendation in 2018 when Democrats Bernie Sanders and Alexandria Ocasio-Cortez proposed a 15 percent interest rate cap for credit cards and other consumer loans. As I pointed out then, Trump's interest rate cap would a) cause thousands (if not millions) of Americans to lose their access to the mainstream credit system, and b) lenders will find a way to modify the loan terms to make up for the loss induced by the cap. You can read the libertarian Cato Institute's analysis of Trump's proposal here.

The second policy proposal is removing cap the state and local tax (SALT) deduction. This deduction allows taxpayers who itemize their deductions to deduct certain state and local taxes from the federal income tax form. Prior to passage of the Tax Cuts and Jobs Act (TCJA), there was no cap. It was with the passage of the TCJA and approval of President Trump that there was a $10,000 cap on the deduction. I would prefer the deduction did not exist because it is costly and it creates perverse incentives for states to increase state-level taxes. I thought the TCJA's cap on the SALT deduction was a step in the right direction in no small part because those who benefit from the SALT deduction are high-income earners in states with high taxes. 

It might seem like a hypocritical flip-flop on his end, but Trump's consideration for the SALT deduction is not economic, but rather political. In 2018, the House went from being Republican to Democrat in no small part because the Democrats that were voted in pledged to restore the SALT deduction. Essentially, Trump is using this policy reversal to try to win over states in the blue-state battleground districts so that the Republicans do not lose the House. 

A resounding pattern emerges with these policy recommendations from both sides of the political aisle is that the economic impact of what they recommend is not a concern. Why let facts or economic reality get in the way of good politics? Perhaps this has always been the case and what has increased is the magnitude of the problem. But it does make it clear that the myopic nature induced by the election cycle means that getting re-elected or maintaining power plays a bigger role than asking if the policy in question actually makes a positive difference for its citizenry. 

Psalm 27: An Elul Lesson on How Doubt Helps Create Authentic Faith

'Tis the Jewish month of Elul, a time of introspection and preparing for the upcoming Jewish New Year. One of the traditional Jewish practices is the daily recitation of Psalm 27. It is intriguing for me because this is a newer practice in Judaism, one that is first mentioned by 18th century Rabbi Ya'akov Emden in the year 1745. Given the overall structure of the Psalm, I also wonder why this particular psalm is recited in Elul. 

The Psalm starts off with assurance in which the psalmist declares that G-d is his light and salvation and seems to fear no man (Psalm 27:1). He is confident that his enemies will fall (27:2) and that G-d will protect him from calamity (27:5). The psalmist keeps his cool in the face of danger, acting as if nothing can harm him. 

However, that confidence dissipates by Verse 9 when he pleads to G-d that He does not hide His presence from the Psalmist. The psalmist becomes abandoned by his parents (27:10) and he becomes surrounded by enemies (27:11). He is so fearful that he is begging that he is not overtaken by his enemies (27:12). The psalmist contemplates the worst: being crushed. In spite of this adversity, the psalmist sees the goodness of G-d. His faith remains intact, but it is not the same sense of faith as it was at the beginning of the psalm. 

The form of faith presented in Psalm 27 is in contrast to how other religions portray faith as an unquestioning, blind belief in a deity. If faith were meant to be that simplistic, Psalm 27 would be nothing more than an unambiguous, unwavering declaration of G-d's existence, strength, and kindness. If that is what faith is meant to be, why does the psalmist beg that G-d does not hide His presence when dealing with adversity? 

Yet the psalmist expressed doubt through that plea in Psalm 27. In a previous Psalm, there is even a cry in which the psalmist asks why G-d has forsaken him and why G-d remains silent in the psalmist's suffering (Psalm 22:2-3). In Psalm 13:2, the psalmist wonders if G-d will forget him forever. The Psalmist is depressed in Psalms 43 and is grieving while expressing doubt in Psalm 6. The psalmist has emotional ups and downs throughout the Psalms. The wide array of emotions is one of the aspects that makes the Psalms such a poignant and timeless religious text.  

Unblinding, unquestioning faith is not only immature, but it is unsustainable when it collides with reality. It requires hubris to assume you have all the right answers and cognitive dissonance to deny the reality that G-d Himself created. In verse 27:13, the psalmist makes an "if statement" that he does not complete with a corresponding "then statement." This would imply that the confidence in the first stanza (Psalm 22:1-6) and the anxiety of the second stanza (Psalm 22:7-12) resulted in an incomplete expression of faith in the last two verses. 

I think it makes sense given how we are never the same when tragedy strikes in our lives. How we look at the world afterwards changes. Such a shift is part of the process of being human, even for those who are as holy and revered as Mother Theresa. I have gone through this process myself. My Judaism looks different now than it was when I was a young adult as a result: much more doubt than my youthful years. Short of developing a case of amnesia, we do not get a fresh start because we carry those experiences with us, which is why we cannot go back to the more youthful version of faith or confidence we might have had.

As Psalm 27 illustrates, authentic faith does not mean belief without question. There are moments in which faith is wavering, in which we can question G-d's omnipotence, benevolence, or even His very existence. The psalmist does not develop faith by denying reality or wishful thinking. His faith comes through doubt, effort, grappling, and open communication. Psalm 27 ends neither with fear nor complete confidence. As Professor Benjamin Sommer brings up, the Psalm ends with hope, which is a more moderate, even-keel approach in comparison to the psalmist's previous experiences. 

By dealing with the realities of sadness, betrayal, and abandonment, the psalmist learned to live with the tension between a belief in G-d and the reality of an exceptionally imperfect world. One can oscillate between confidence and doubt while remaining faithful. That is called steadfastness. Faith is not about a "grin and bear it" approach in which we do not disparage. It is acceptable and desirable to bring everything to the table to be honest with where one is at. This gives the opportunity for a more authentic and dynamic relation with G-d. It does not come easy and unquestionably. Having faith means making the choice to believe in spite of that emotional baggage, doubt, trauma, apprehension, and injustice in the world. 

And maybe that is why this Psalm daily during the month of Elul became a practice to prepare for the Jewish New Year. Jewish tradition teaches that our lives hang in the balance during the Days of Awe. I do not take it literally, but I do take it seriously. It is a time of year that one worries about their fate and supplication to G-d is a major aspect of these holidays. Both the High Holidays and Psalm 27 encapsulate the hope that we make it. 

At least in this life, none of us make it at the end. Due to our mortality, I believe that we are meant to make the most of what time we do have. When the Psalmist says that we are meant to dwell in the House of the Lord (Beit Hashem) all of his days, we are meant to sanctify our lives in a way where every place can become a Beit Hashem (R. Sampson Raphael Hirsch). By taking that authentic faith and moving forward with action, we can develop a deeper relationship with G-d than blind belief ever could provide.

Pandemic Unemployment Fraud and Improper Payments Were Worse Than We Thought: Does Anyone Care?

While the media was extensively covering the debate between presidential candidates Kamala Harris and Donald Trump, there was a government report that caught my eye. Entitled Examining Widespread Fraud in Pandemic Unemployment Relief Programs, this report from the majority staff on the U.S. House Committee on Oversight and Accountability covered some disturbing trends regarding the pandemic-era unemployment benefits:

The percentage of fraudulent payments was in the double digits. This report puts the figure anywhere between $100 billion to around $191 billion. In percentages, that would be anywhere from 11 percent to 21 percent. For context, when I covered this topic in February 2023, the Government Accountability Office (GAO) estimated that it was about 6 percent. 

69 percent of workers received benefits that exceeded their salary and non-salary benefits. To put this in layman's terms, most recipients were paid more to not work than they were to work. I expressed my concerns in April 2020 that this would cause considerable problems, including exacerbated unemployment. It turns out that I was right. In September 2023, I covered how these benefits disincentivized people to look for work. Intuitively, it makes sense. Why look for work when you are being paid more to not work?

It is not only that there was fraud, but why the fraud was so rampant. The reasons outlined in this report were multiple, including staffing shortages, outdated IT systems, the high number of claims, and not requiring applicants to provide proof of prior employment or wages. This resulted in criminal organizations taking billions of taxpayer dollars to line their own pockets because it was that easy to defraud the U.S. government. 

What ultimately shocks me is that the government can make upwards of nearly $200 billion in fraudulent payments and no one is held accountable. If someone in the private sector had carried out a comparable level of fraud à la Enron, they would have been prosecuted and would have gone out of business. When the government does it, what is the punishment? A slap on the wrist. The government did not hold Fauci accountable for his subpar recommendations, whether that was the social distancing at six feet, school closures, lockdowns, vaccine mandates, or his obnoxious flip-flop on face masks. This is such a disservice to taxpayers. 

It is not like there are not solutions to the problem. The Oversight Committee report outlines in Section VI of their report. The GAO published a report covering recommendations last month, as does a report from the Right-leaning American Enterprise Institute released in January 2024. The problem here is our lack of accountability. We cannot look at nearly $200 billion in fraud and think it is nothing. It is that mentality that has resulted in climbing debt and having the United States' credit rating continuously downgraded. 

There are a lot of values that American society has lost sight of, but government spending and oversight thereof is certainly one of those things. It is certainly clear in a presidential race in which neither candidate is interested in restraining government spending or holding anyone accountable for the havoc that the government wreaked on the American people during the pandemic. We cannot be half-awake at the wheel of a car that is headed towards going off the cliff of insolvency. If we do not wake up (obviously, not in the destructive Far Left, woke sense) and get a hold of that wheel, we will find what was once a shining city on a hill become a hellhole that is nothing more than a shell of its former self. 

I Wish Kamala Harris Would Realize How Ridiculous an Unrealized Capital Gains Tax Is

As current Vice President Kamala Harris has gotten her campaign underway, she made her policy stances more clear. I have already criticized a few of them, including excluding tips from taxation, price controls on groceries, a corporate tax hike, and down-payment assistance for first-time house-buyers. From the looks of it, the Harris campaign is embracing the tax hike proposals from Biden's 2025 budget, including a minimum tax on unrealized capital gains. 

As Investopedia brings up, an unrealized capital gain is a theoretical profit that exists on paper, but has not been actualized because the investment has yet to be sold for cash. The unrealized gain does not affect taxation because the investment has not been sold. Once sold, the gain is realized. Harris would like for those with a net wealth above $100 million to pay a minimum tax on their unrealized capital gains on such assets as stocks, bonds, and privately held companies. While lower than Biden's proposed 39.6 percent, Harris is still proposing a 25 percent on unrealized gains. 

The bipartisan Committee for a Responsible Federal Budget (CRFB) estimates that this tax would bring in $500 billion over the next decade. Even if that is accurate, the minimum tax would be an unstable source of revenue. As the Tax Foundation points out, much of the revenue in the first decade is from taxing previously accumulated tax gains. Afterwards, the revenue moving forward will be smaller. Plus, stock market and macroeconomic performance will make the tax collection more volatile. 

Another aspect of the unintended consequences would be that this tax would add burden onto taxpayers while complicating administrative burden. Why? To comply, the taxpayer would have to calculate to see if their net wealth exceeds $100 million. They would then have to calculate their effective tax rate. If it is below 25 percent, they would have to pay additional to make sure their effective tax rate is 25 percent. See the Tax Foundation's chart below to see how complicated this calculation can get. If she were going to be consistent, Harris would implement a tax refund for unrealized losses, which would create even more complications.

This additional compliance would not only affect those with net wealth over $100 million because those with net wealth below, but closer to, $100 million would also have to file to show that they would not owe the IRS on the unrealized capital gains tax. To quote the Tax Foundation, "Changing the definition of taxable income to include unrealized capital gains presents significant administrative challenges, including how to value non-tradable assets and how to treat illiquid taxpayers who may have paper gains but lack cash on hand to pay their minimum tax bill."

Not only does this create a greater compliance burden for taxpayers, but the already-overwhelmed Internal Revenue Service (IRS) would have to create a new wealth reporting system to make sure that taxpayers are in compliance. Not only would such a reporting system mean increased government surveillance and intrusion into private affairs. As I brought up when I was criticizing the wealth tax, measuring the value of wealth is more complicated than with income. 

The valuation will be even more complicated to determine since the assets have not been realized (sold). Until there is an actual transaction, the valuation is more subjective and the compliance more onerous, which means taxing unrealized gains would be more open to interpretation and ultimately government abuse because the government would have greater control over assets. This would explain why European countries wait to tax capital gains until the gains are realized, and also why the United States has taxed capital gains when the gains are realized. Not only is it unfair to tax on paper gains that may never materialize. As prominent Left-leaning economists recognize (Piketty and Saez, 2022), "No income tax system to date has been able to tax the full return on wealth, including unrealized capital gains." 

Another reality is that this would increase tax burden on U.S. savers and reduce the savings rate in this country. In the long-run, this would reduce American incomes because the investment returns would flow to foreign savers instead of U.S. savers. This would also likely disincentivize angel investing, entrepreneurship, and risk-taking, all of which would result in less economic dynamism. After all, start-ups and small businesses rely on investments from individuals willing to take risks in the hopes that their investment pays off in the long-run. One research paper modeling the effects estimates how a tax on unrealized capital gains could lower the GDP, purchasing power, and investment while reducing jobs by 300,000 individuals (Kumar, 2023).

And if you think this tax would only hit the wealthiest in the long-run, think again. This would set a dangerous precedent for more deleterious taxation in the future. Here are some examples from U.S. taxation history of how taxes on the rich eventually hit us all. In 1898, the government passed an excise tax on telephones. It only affected the rich then because only the wealthiest had phones in 1898. Once the phone became commonplace, everyone paid the 3 percent tax on long-distance phone service until the tax was discontinued in 2006. 

A bigger example is the federal income tax. When it first was enacted in 1913, it was only 7 percent and fell on those making a half million or more [in 1913 dollars]. What started off as "soaking the rich" eventually soaked the everyday American. We can thank Franklin Roosevelt for expanding the income tax base, which is one reason in a long list of reasons I do not like him. A similar phenomenon happened with the Alternative Minimum Tax and the inheritance tax. 

If you give the government an inch, it will take a mile. Senator Wyden (D-OR) already proposed an unrealized capital gains tax for those with a net wealth as low as $10 million. Although not inevitable, it would not be at all surprising given precedent if an unrealized capital gains tax would eventually make its way down to the upper-middle class or even middle class. 

To recap, this unrealized capital gains tax would create a complicated tax regime, new compliance costs, disincentivize savings and investments, create more difficult administrative challenges for the IRS while giving them more access to private affairs, and create a minimal amount of government revenue. It does not take all that much foresight to see how much this untested idea would harm the economy. If Harris cared about creating economic opportunity for all, she would remove the government barriers of spending, taxes, and regulations to make it work. Unfortunately, all her economic plan indicates is using heavy-handed government to make the lives of Americans more difficult.  

Trump's In-Vitro Fertilization Plan Is Costly and Manages to Annoy All Sides of Political Aisle

As much I have enjoyed criticizing such kooky Kamala Harris ideas as excluding tips from taxation, price controls on groceries, a corporate tax hike, and down-payment assistance for first-time house-buyers, I think I need to take a bit of a break and come back to criticizing Trump's campaign ideas. A couple of weeks ago, Trump made a campaign promise that either the government or health insurance would pay for all in-vitro fertilization (IVF) costs. The IVF procedure entails taking mature eggs collected from ovaries and are fertilized by sperm. After the egg undergoes embryo culture for 2-6 days, it is transferred to the uterus in the hopes of a successful pregnancy. IVF is a form of assistive reproductive technology to help women with fertility issues become pregnant. 

From a political lens, Trump's IVF plan can be seen either as a ploy to placate suburban women voters, appear pro-natalist, or to brand himself as an advocate for reproductive rights. What is a political move has managed to annoy both the Left and the Right. The anti-abortion activists on the Right are outraged because the IVF process disposes of unused embryos, embryos which many in the pro-life movement view as fully human as born human beings. The pro-abortion activists on the Left are enraged because they see Trump's move as a distraction from Roe v. Wade being overturned. 

If angering both the Left and Right was not enough, let us think about what it would take to actually implement. The libertarian Cato Institute estimates that Trump's plan would cost about $7 billion annually. Then there are the indirect costs:

• For one, this would likely be paid by the taxpayers in one fashion or another, which means it would continue to put upward pressure on healthcare costs in the United States. Why? Because health providers will inevitably pass the costs on to the consumer. This is all the more so the case given that Trump has not specified an exemption for small businesses or even businesses that have moral or ethical objections to IVF.
• Second, most IVF patients are self-pay. This means that IVF providers have an incentive to keep costs affordable so they can attract patients. Having the government pay for the procedure will remove that incentive. Patients will no longer consider comparing costs, which means that providers will be incentivized to push prices even further upward. It would be the same phenomenon of cost inflation we see in the myriad of healthcare goods and services where the government meddles.  
• Third, this can incentivize couples to delay childrearing. This is important since CDC data show that the success rate declines with age, from 50 percent for women under 35 to 8 percent for women over 40. Not only would this give older women false hope, but it would be a waste of taxpayer dollars and resources, assuming that the government subsidy delays IVF. The subsidy could incentivize women who might not be candidates to keep trying IVF instead of considering adoption.

Not only does an IVF mandate agitate both the political Left and Right, but there is a considerable price tag attached to Trump's IVF plan that has a high likelihood of perverting incentives. As another Cato Institute report illustrates (Calder and Follett, 2023), subsidizing childbearing has done nothing of statistical significance to increase fertility rates while managing to increase childbearing costs. 

Instead, we have to remind ourselves that healthcare is a commodity, not a right. To maximize IVF access, we should focus on removing regulatory barriers that make IVF more difficult to acquire, such as a cap of number of embryos created, a ban on pre-implantation genetic testing, or mandating how many eggs can be fertilized. Tangentially, a paper from George Mason University shows that childcare regulation causes an increase in the fertility gap (Flowers et al., 2024). Deregulation in the IVF marketplace, as well as the childrearing market more generally, will do a great deal more to help out families than a subsidy or mandate that will distort healthcare decisions and end up costing taxpayers. 

We Deserve Better Housing Reform Than Harris' Down Payment Assistance Scheme for First-Time Buyers

When Vice President Kamala Harris first took on the mantle of being the Democratic presidential candidate, it was a mystery as to what she advocated for on a policy level. Then she announced her economic plan on August 16. Needless to say, it has given me both plenty of fodder for my blog and plenty to make me worry. I already lambasted Harris' price controls on the grocery market as taking the cake for dumbest policy proposal this presidential campaign. 

The economic plan addressed housing in a few ways, including stopping investors from marking up and buying homes in bulk and using price-setting tools to increase rents. The policy idea I would like to cover today is the idea of giving a $25,000 down-payment support for first-time homebuyers that have paid their rent on time over the past two years. The Harris campaign believes this tax credit would help 4 million homebuyers over a four-year time period. The purpose of this tax credit is to provide relief for those who struggle with saving enough for a down payment on their first home. While it sounds noble, we have to dig into the details to find out why it is far from a good idea and even drew some ire from the Washington Post. 

There is the matter of the price tag. According to the bipartisan Committee for a Responsible Federal Budget (CRFB), the estimated cost for this tax credit is $100 billion. The CRFB believes that more than four million would receive this tax credit, thereby increasing the cost. Furthermore, this would cost more than four million if the government decided to make the tax credit permanent. 

Forget for a moment how Harris would pay for this tax credit, as well as the myriad of policy ideas she has proposed. This demand-side tax credit does not get at the crux of the issue in the housing market, mainly that there is not enough housing supply. Due to the fungible nature of money, the down-payment assistance will only provide additional purchasing power to bid up the price of homes that are already in short supply. It will be likely that the tax credit is capitalized, i.e., the seller will charge more if they know the buyer is receiving a tax credit. Rather than solve the problem, Harris' idea will perpetuate crippling housing prices. 

If you want to enact actual housing reform, look no further than this policy report that the Mercatus Center released shortly before Harris released her economic plan. The report addresses multiple aspects of housing, whether it is the regulatory overreach, ways to streamline procedures, improving legal frameworks, or updating construction standards. 

State and local jurisdictions could remove land use regulations and zoning laws, especially those that prevent multi-family housing. There could be a reduction in building and permitting fees, not to mention tariffs on construction materials that get in the way of producing good housing stock. Addressing housing supply will help Americans with the dream of owning a home. Without that supply component, throwing money at the problem in a supply-constrained housing market merely serves to perpetuate the problem by raising housing prices. 

Why Free Trade Is Good for National Security

One of the aspects that has made the United States a prosperous nation was its embrace of freer trade. In spite of becoming an economic powerhouse, the question of national security has been intertwined with free trade. Even Adam Smith recognized that national security could arguably be an exception to the free trade norm. 

Those who advocate for these protectionist or neo-mercantilist policies on the national security argument assume that we as a nation should have economic independence and self-sufficiency. This self-sufficiency, which is known as autarky, would allow us to have necessary supplies to fight or keep the economy going in the event of wartime. If autarky was such an easy and viable option during wartime, then blockades would be pointless. Yet blockades are an effective military and economic tactic precisely because that economic self-sufficiency is not feasible in practice. Tangentially, this zero-sum mentality explains why economic nationalists erroneously worry about trade deficits.

But I digress because I have to question the dichotomy between free trade and national security. It is instances such as these that make me feel despairingly about national security becoming a guise for such subpar economic policy as tariffs. But maybe I should not despair. This research paper from the American Institute for Economic Research (AIER), entitled A Free, Prosperous and Secure America, made me think that trade and national security are not such rivals. 

Much like with the "environment versus economy" argument, the two do not need to be at war with one another (pun intended). Rather, freer trade could improve national security. The AIER paper makes two arguments. One, enhancing economic growth allows the United States to resource its national security needs effectively. Second, it facilitates (but does not guarantee) more peaceful relations between other nations. While I was reading the AIER paper, I came across a research paper from the American Security project highlights five benefits of free trade to national security (Day, 2014): 

1. Signaling commitment to allies: Not only does the free trade with the country show a favorable relationship, but that it symbolizes commitment. While free trade agreements are not perfect, they are still better than having soldiers in another country. 

2. Secure access to military technology: By using comparative advantage, militaries can keep production costs low and within budget. Free trade also helps ensure a diverse, stabler market in case a certain region experiences instability. Contrary to what nationalists believe, renationalizing international supply chains does not increase a country's resilience in the wake of severe disruptions (e.g., Bonadio et al., 2020).

3. Promoting global stability: As we have seen during the Great Depression, the oil crisis in the 1970s, and the 2007-08 global financial meltdown, not working together economically causes more instability. As I am fond of saying, "Those who trade together stay together." Why? Because with established economic ties and cross-border investment, they are less likely to metaphorically shoot themselves in the foot by going to war. This article from Law & Liberty highlights the "substantial empirical evidence indicating that growing trade between nations lowers the odds of serious military conflicts with other countries." 

4. Setting a free trade precedent: The ball really got rolling after World War II with the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (GATT). Setting this precedent will allow for more stable and predictable trade relations and investment opportunities, which also stabilizes national security. 

5. Enhanced global influence. In the 21st century, we measure power by military strength (hard power) as much as we do economic prowess, the latter of which is a form of soft power. Whether it is economic, social, or cultural in nature, soft power lends international legitimacy to a country. As developing countries continue to economically develop, the United States contributing with soft power can develop more stable relations, thereby solidifying the country's national security for decades to come. 

Example to Counter Protectionism. I could select multiple examples, but I will select President Trump using Section 232 to impose tariffs on steel. I criticized the tariffs in 2017 because there was no national security rationale and I was right to criticize the tariffs. It turns out that the Section 232 steel tariffs have done a bad enough of a job that raw steel production sank to a level lower than when the tariffs were imposed. In the meantime, the numerous amount of goods and services that require steel have gotten more expensive thanks to Trump's tariffs. I pointed out this past May how Trump's steel tariffs lowered export growth, decreased the GDP, caused a net loss of 75,000 jobs, and increased consumer prices because U.S. consumers were the ones who paid the price for Trump's folly. This example serves to show the overall trend of how protectionism harms the economy while doing nothing positive for national security (or even harming national security).

Conclusion. Since the days of ancient Greece, there has been government interference in trade policy. There are certain countries that are not going to play nice or adhere to the standards set in international relations, as is the case with China. Geopolitical rivalries do exist and there are times in which at least some benefits of trade have to be traded off for national security considerations. As this article from Econlib shows, many of those arguments are flimsy and tenuous. 

As such, it is generally true that freer trade is better for national security. It is a benefit of free trade we can add to the list of benefits along with the economic arguments, moral arguments and social welfare arguments. While I do not see either presidential candidate or either major political party in the United States clamoring for freer trade, I do hope that we get ourselves out of this protectionist rut so that we can implement international trade policy that is both good for the economy and national security.