Congress Needs to Cut Medicaid, Even More Drastically Than in the "Big, Beautiful Bill"

Congress has made its way into the news cycle as the House passed the "Big Beautiful Bill" (HR 1). There has been criticism of how this Bill would exacerbate the deficit, between there being tax cuts and spending increasing. I can understand that argument. When you lower revenue while increasing spending, that increases the deficit run. When a government continuously spends more than it has, it creates debt. That is basic accounting. At the same time, what I brought up last year is that the permanent income tax cuts are not the root issue, but rather exorbitant government spending. This much was made clear when the credit rating agency Moody's downgraded the U.S.' credit rating earlier this month. 

One of the more notable spending cuts in the "Big Beautiful Bill" is with regards to Medicaid. Founded in 1965, Medicaid is the U.S. government's program that helps cover healthcare costs for low-income individuals, typically under 65. Medicare, on the other hand, covers healthcare for individuals over 65. Medicaid currently covers 71 million Americans, which is about a fifth of the overall U.S. population and 40 percent of the U.S. children population. 

The Bill is proposing a number of changes to Medicaid, including: imposing work requirements for able-bodied adults without dependents (I analyzed the requirements before for SNAP); increasing eligibility checks to twice a year; lowering the federal match for states that provide Medicaid to undocumented immigrants; cost-sharing for expansion enrollees; and banning new or increased provider taxes used to draw federal funds. The reason why these reforms are causing such consternation is because the Congressional Budget Office (CBO) estimates that the bill a) will cut Medicaid by $698 billion over the next decade, and b) at least 8.6 million people will lose Medicaid coverage by 2034. 

Medicaid proponents treat Medicaid as a sacred cow and look at critics or opponents as cold-hearted bastards who do not care about the poor. The Left-leaning outlet Vox saw the Republican's move as the "cruelest cut in the Republican budget bill." I saw the numbers and thought that the Republicans are not going nearly far enough, especially given that the Republican's bill is not actual spending cuts but modestly curbing cost growth. Here are some realities around Medicaid that we have to contend with:

1. Medicaid spending is not fiscally sustainable. Medicaid spending was $118 billion in 2000, was $557 billion in 2024, and is projected to be $898 billion in 2034. Outside of interest payments, the major government program with the fastest spending growth is Medicaid. Balancing the federal budget without touching healthcare would require a 40 percent cut in other government spending. 

2. High improper payment rates. According to the Centers for Medicare and Medicaid Services (CMS), there was a 5.09 percent improper payment rate in 2024. That may sound small to some, until you realize that means $31.1 billion of improper payments in 2024. Because CMS ignores eligibility checks (which are the biggest source of error), there effectively has been over a trillion dollars (yes, that is trillion with a "t") spent in improper Medicaid payments over the past decade. If you do not think it is that bad, you can read this 2024 testimony from HHS' Office of Inspector General or this 2024 report from the Government Accountability Office (GAO) showing the extent of the problem. 

3. Medicaid does not help save lives. I wrote on this topic in 2017 because a major component of Obamacare was the Medicaid expansion. 2017 was a time when the Republicans were trying to repeal Obamacare and the Democrats were falsely clamoring about how repealing Obamacare would have killed thousands.

I know that a National Bureau of Economic Research (NBER) was released earlier this month finding that Medicaid expansion saved lives. However, it is methodologically flawed in that it used a "difference in difference" framework. What this means is that the NBER study assumed that difference in outcomes by state was entirely due to Medicaid expansion, which is specious to say the least. RCTs have better causal inference because it eliminates selection bias, has stronger internal validity, and has flexibility in measuring multiple outcomes.That is why I prefer to go to randomized control trials (RCT), which are the gold standard with this sort of research. 

As far as RCTs in this topic go, there is the Oregon Medicaid expansion RCT, which showed that Medicaid expansion did not have statistically significant impact on health outcomes (Baicker et al., 2013). Then there is the RAND Health Insurance Experiment. While it was conducted from 1971 to 1986, this RCT remains to this day to have been the largest U.S. public health study conducted. The RAND study found that cost sharing led to reduced healthcare utilization without affecting outcomes. A working paper from the Mercatus Center similarly shows that Medicaid expansion failed at improving the health outcomes of lower-income adults (Sigaud and Bjoerkheim, 2024). I also wrote last December about how those states that took on ACA Medicaid expansion actually fared worse in terms of life expectancy than those who did not. 

Postscript. As much as I would like government out of healthcare, I do not expect Medicaid to disappear. After all, 71 percent of Trump voters oppose Medicaid cuts. Even so, eliminating the fraud and waste would be a welcomed step in the right direction if there is any chance for Medicaid to have a future. Here are a few ideas that Congress ought to consider:

• Eliminate or lower Medicaid expansion federal match rate. States that implemented Obamacare expansion receive a 90 percent federal match (FMAP) for adults covered under the expansion. The Kaiser Family Foundation (KFF) calculated that removing this FMAP entirely would save Medicaid $1.9 trillion over the next decade, as well as reduce enrollment by 20 million. 
• Penn State's school of health economics argues that a 50 percent federal match floor would be a more measured approach that would still save $530 billion over the next decade without being too burdensome. 
• Eliminate provider taxes. As the Cato Institute points out, provider taxes create the perverse incentive of shifting the costs to the federal government. The "Big, Beautiful Bill" only stops new provider taxes from being created. The CBO found that eliminating the provider taxes would save $612 billion over the next decade. 
• Convert Medicaid into block grant program. This option would provide a capped amount of funding versus open-ended funding based on actual spending. The bipartisan Committee for a Responsible Federal Budget (CRFB) estimates that limiting growth of payments to the level of inflation would save $950 billion over the next decade.
• Reduce supplemental payments. Supplemental payments drive up Medicaid costs by enabling states to inflate total Medicaid expenditures without corresponding increases in care quality or availability, often through financing schemes. You can read the CRFB's primer on supplemental payments here, but essentially, reforming finance law to reduce these supplemental payments would save $500 billion over the next decade (CRFB). 

This piece is not meant to be a treatise on Medicaid reform or to provide a pro/con list of each potential reform, but rather to illustrate how inefficient Medicaid is, how badly it needs spending cuts, and how there is no shortage of policy alternatives. If you are interested in more reforms that would not particularly cut benefits, CRFB created a list, which is below (also see description here). There are clearly fundamental flaws in the Medicaid program that make billions of dollars of waste a prominent feature, not simply a bug. 

If the relatively modest reforms the Republicans are looking to make are unpalatable, the Democrats and Medicaid proponents should wait to see what fiscal chaos waits if the status quo is left to its own devices. It is better that Congress deals with making serious reforms if it wants to avoid even harder choices down the road. However, because politicians tend to operate on myopic thinking motivated by election cycles instead of thinking about long-term sustainability, I suspect that kicking this can down the road is the most likely outcome, one that the American people will pay for dearly. 

Trump Telling Walmart to "Eat the Tariffs" Acknowledges That His Tariffs Ultimately Hurt the American People

President Trump's tariff tantrums continue. After weeks of duking it out with China on tariffs, Trump went on a rant about Walmart and tariffs on Truth Social. In addition to implying that Walmart makes too much, he said that Walmart should "eat the tariffs" and to "not charge valued customers anything." Forget for a moment that he implicitly threatened a business into telling it how it should handle its pricing strategy or that he peddled a right-winged version of "greedflation", the latter of which is a theory that I debunked in 2022.

By telling Walmart to eat the tariffs, he both shows a misunderstanding of the economics of tariffs and undermined his previous argument for tariffs. Throughout the 2024 presidential campaign, both Trump and Vance continued to claim that it will be other countries that will ultimately pay the cost of tariffs. It is convenient for Trump to forget that he insisted at an August 2024 campaign rally that a tariff is a tax on foreigners. Trump touted tariffs as a magic bullet in which China would bear the brunt of the costs, jobs would magically appear, and the United States would become rich again. Once again, what Trump shows is that he really does not understand how tariffs work. 

The tariffs are paid by the company to Customs and Border Protection (CBP) at a port of entry before the good can enter the United States. That's basic tariff tax collection. Since the vast majority of industries do not have the adequate net profit margin to absorb Trump's massive tax hike in the short-term, it makes sense that passing the costs to the consumer would be a logical business choice, especially since Trump's tariffs are higher and cover a broader base of goods than they did during Trump's first term. As over a dozen academic studies confirmed (also read Tax Foundation research here), the tariffs during Trump's first term were paid for by American consumers and companies. I also covered this topic last year twice (see here and here) because I was hoping that Trump would not double down on tariff tomfoolery. Yet here we are. 

When Trump says "eat the tariffs," what he is really is saying is "the costs are real and you need to suck it up, even if that means paying more." So much for making America great again! Like with any other tax, you cannot tax your way to prosperity. The costs are real. Americans pay for the tariffs in the form of higher consumer prices, lower GDP, lower wage growth, and lower employment. Trump has eroded goodwill and triggered an economic downturn that did not need to happen. The ignorance with which Trump continues with his tariff delusions will ultimately end up being at the expense of the American people and economy, not China. 

Moody's Downgrades U.S. Credit Rating, But Congress Still Chooses Insolvency Over Fiscal Discipline

As Congress debated Trump's tax cuts with the "Big Beautiful Bill," the credit rating agency Moody's delivered another coup to the U.S. government. Last Friday, Moody's decided to downgrade the U.S. government's credit rating from Aaa to Aa1. This is significant not simply because of the U.S.' economic clout or that Aaa is Moody's highest credit rating. All three major credit rating agencies (the other two being Fitch and Standard & Poor's) have downgraded the United States below their top credit rating.

Why did Moody's decide to make this call? It is due to "the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns." It is not only what has led the United States to this precipice, but also what is to come. To quote Moody's once more: 

We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat. In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher. The U.S.' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns. 

Pro-Trump economist Stephen Moore questioned the timing of the downgrading. Trump thought it was a political hit job, even though he conveniently neglected to mention that Fitch Ratings downgraded the U.S. government's credit rating during the Biden administration. And while the Biden administration made some fiscally poor decisions (e.g., Inflation Reduction Act, American Rescue Plan Act), this is not the world trying to stick it to Trump, no matter how much Trump would like to think otherwise. 

For those who have been paying attention the United States' fiscal outlook, this downgrade does not come as a shock. This downgrade is quite frankly overdue given how the U.S. government has spent money as if it grew on trees. I have covered this topic about long-term government debt since 2013 and have covered it since (see here, here, here, and here). When a government consistently spends more money than it has and spikes its debt-to-GDP ratio in such a fashion, this is an example of "you reap what you sow." And as Moody's was correct to illustrate, Trump's income tax reduction extension from the Tax Cuts and Jobs Act (TCJA) is only going to exacerbate that ratio. If you need more information on how rising debt will have negative impacts on economic growth, jobs, investment, and income, you can read this report from the Peter G. Peterson Foundation that was released last week. 

The significance of Moody's downgrading is not simply about the exorbitant spending. As I brought up during the COVID pandemic when I wrote about how we should still be concerned about growing federal debt, there is a certain debt-to-GDP ratio that focuses more government expenditures on interest payments and less on other programming. Moody's is correct to point out that the United States has reached that level. As the Peter G. Peterson Foundation pointed out last January, interest payments have gotten to the point of surpassing what the United States pays in defense spending. This likely means that the days of the United States borrowing tons of money without dealing with inflation or higher interest rates is over, which will have ripple effects not only in the U.S. economy, but also the global economy. In the meantime, lagging economic growth and a debt spiral will ensue if Congress does not act.

What Moody's has to say should not be taken lightly. All major credit rating agencies are sounding the same alarm. The U.S. fiscal situation is unsustainable and what Congress is looking to do is only going to make matters worse. The American Action Forum accurately identifies Social Security, Medicare, and Medicaid as the major culprits since those programs account for the majority of non-interest federal spending. Not addressing that entitlement spending is also why DOGE's attempts to deal with government has been paltry thus far. There is not even an independent fiscal committee to deal with the matter. Whether the political will exists remains to be seen (I doubt it does), it is clear that not even Moody's is hopeful in the short-term. I will say that if Congress does not work to make important decisions now, the United States will go through some truly hard times as this century progresses. 

Reexamining Economic Sanctions: Why Trump’s Syria Sanction Decision Was a Smart Move

In his second term, Trump has worked on trying to make Greenland great again by offering to buy it, as well as trying to make Gaza great again by proposing an annexation. Now Trump has his sights on making Syria great again by saying that he will remove economic sanctions. This decision is a considerable change in how the United States has dealt with Syria in the past few decades. 

The United States has implemented at least some form of sanctions on Syria since 1979, which is when the U.S. declared Syria a terrorist state. Sanctions intensified in 2004, and again in 2011 when the civil war began in Syria. The purpose of these sanctions, particularly the 2011 version, has been to deprive the al-Assad regime of resources to harm their citizens, as well as ultimately transition to a democratic regime. 

I am not here to say that the sanctions were the only thing to shock Syria in recent year. In addition to the civil war and the sanctions, there was the COVID pandemic, the Lebanese banking crisis that limited Syria's access to credit, an earthquake in 2023, the fluctuation in food prices caused by the Russia-Ukraine War, and regional conflicts that disrupted trade flows. That being said, it took about 13 years of civil war to finally overthrow Bashar al-Assad, and Syria is still not a democratic regime. Aside from that, the results do not look good:

• The World Food Programme reported in 2023 that "following 12 years of conflict, an economy crippled by runaway inflation, a currency that has collapsed to a record low and soaring food prices, 12 million people do not know where their next meal is coming from."
• As a February 2025 report from the United Nations Development Programme mentions, "Sanctions have played a key role in isolating Syria from the global financial system, restricting trade, increasing import costs, and significantly reducing both exports and remittances. These factors have contributed to the continued depreciation of the national currency." 
• A research paper from Security in Context shows how the sanctions deteriorated the humanitarian situation by bludgeoning the agriculture and health sectors (Arslanian, 2024).
• Even with carveout exemptions, financial institutions were wary of doing business with Syria, thereby cutting off banking channels and making it difficult to process transactions for humanitarian aid, trade, and private sector engagement (Human Rights Watch).
• Reuters reported on how the sanctions hit Syria hard. One such outcome was resorting to the black market for ill-gotten gains, particularly from fuel smuggling production of an amphetamine-like substance called captagon.

It is clear that the sanctions on Syria have not deterred human rights abuses, but rather has exacerbated human suffering in Syria. This is hardly the first time that economic sanctions have failed. As the Cato Institute points out in its academic review, sanctions can range from ineffective (see Pape, 1997) to backfiring because an oppressive regime's response to the desperation caused by the sanctions is to be even more repressive (e.g., Wood, 2008). 

A meta-analysis from the Peterson Institute for International Economics (PIIE) analyzing 200 economic sanctions from World War I to the early 2000s found that sanctions made at least "a modest contribution to a goal that was partly realized" 34 percent of the time (Hufbauer et al., 2007). If we are going to be fair to economic sanctions, economic sanctions have the potential to work when the scope is limited and the goals are targeted in nature. 

However, that has hardly been the case for Syria. The broad sanctions on Syria have caused humanitarian suffering to the point where 90 percent of Syrians live in extreme poverty, as well as having undermined Syria's ability to economically recover. If this recent transition has any chance of succeeding, Syrians need to see that their economic wellbeing is improving. 

This is not to say that removing the sanctions comes with zero risk. As the American Enterprise Institute points out, it is not clear that the current leader, Ahmad al-Sharra, has complete control of Syria. AEI also mentions that this could have spillover effects in terms of accelerating terrorist aggression in the Middle East. 

Forget for a moment that such an argument comes with mission creep and is well beyond the initial mission of quelling Assad's attack on his own people. Much like the Brookings Institution argues, continuing the sanctions could likely be more costly because Syria needs economic relief to best guarantee  a legitimate political transition. Given the humanitarian and economic situation in Syria, Trump is right in acknowledging that the costs of the sanctions outweigh the potential benefits.

Trump's Attempt to Slash Prescription Prices with Price Controls Will Slash Healthcare Quality

In an attempt to slash prescription drug prices, President Trump signed an executive order earlier this week addressing high prescription drug prices. Trump is going to implement a "most favored nation" (MFN) pricing model, which means that the cost of a prescription drug does not exceed the lowest price that other high-income countries pay for the same drug. Trump is exerting pressure on drug manufacturers to accept MFN pricing. While the executive order directs the Secretary of Health and Human Services to take "aggressive measures," it is unclear what those measures are. 

What we see President Trump doing is implementing price controls, which is rich since he called Kamala Harris a communist for her ridiculous idea of price controls for groceries during the presidential campaign. It does not matter which political party endorses price controls: they are a bad policy idea. It is not simply because there are centuries of price controls that have failed, whether that those are rent control, an overdraft fee cap, fixed exchange rates, price-gouging laws during natural disasters, and consumer loan interest rate caps. 

In 2022, I heavily criticized President Biden for the prescription drug price controls in the Inflation Reduction Act (IRA). I will be bringing those same criticisms to Trump's proposal because they still hold. By definition, price ceilings create shortages because the drug companies will be disincentivized to produce more drugs at reduced prices. The truth is that price controls do not eliminate costs, but rather shift costs at the expense of something else. What is that something else? 

One outcome of these price controls is that lower access to drugs would mean greater death. One study from the University of Chicago estimated that the casualties caused by the IRA would be 331.5 million life years across a 20-year timespan (Philipson and Durie, 2021). To give you some context, the COVID pandemic resulted in the loss of 9.7 million life years (Quast et al., 2022), which would be about 34 times the life lost during the worst pandemic in the past century. 

Not only that, but drug price controls in Europe translated into less drug research and development (Golec and Vernon, 2006). Fewer new medicines means worsening healthcare outcomes than would have occurred otherwise. That is not only for the United States, but across the globe. Another study found that the drugs that do get developed can have their entry into the market delayed by a year (Maini and Pammolli, 2023; Danzon et al., 2004). To reiterate an earlier point, a longitudinal study found that these delays reduce life expectancy (Lichtenberg, 2005).

Trump's executive order is going to be even worse than Biden's IRA price controls. Why? At least under the IRA, the laws mainly affected Medicare. With this executive order, Trump is expanding the scope of the price controls to the private sector, which means it will affect all prescription drugs. If Trump actually cares about reducing prices and making prescription drugs great again, he could focus on policy that makes the prescription drug market more competitive, such as allowing for increased reimportation of drugs, expanding access to generic drugs, or ending prescription requirements for a number of drugs. Otherwise, Trump will make prescription drug pricing an even bigger disaster than under the Biden administration.

Let's Get Real: The REAL ID Is Unnecessary and an Invasion of Privacy

The September 11 attacks in 2001 left an imprint on the American psyche that had not been as strong as the Pearl Harbor attack in 1941. It ended up shaping how Americans perceive safety and what they were willing to give up for that feeling of safety. It is not only how we got the Patriot Act, but the REAL ID Act. What the REAL ID Act did was set minimum security standards for state-issued driver's licenses and identification cards. 

The premise behind improving the accuracy and reliability of these identification documents was to make it more difficult to obtain fraudulent IDs and prevent terrorists from using them. Yes, the REAL ID Act was passed in 2005. The reason why I bring it up now in 2025? After multiple delays of the deadline, REAL ID is finally here, even though 17 states have less than 50 percent REAL ID compliance. 

Forget for a moment that all but one of the 9-11 hijackers had identification documents and were already in the United States legally. It has been over twenty years since September 11 and yet the United States has not had a terrorist attack remotely close to 9/11's impact since then. The country has been safe from catastrophic terrorists attacks without REAL ID, which was the whole impetus behind creating REAL ID. If the REAL ID were so crucial for the safety of air travelers, it should have been implemented by now. So why exactly do we need REAL ID? 

While it will not protect us from terrorists, REAL ID will certainly infringe upon the freedom of U.S. citizens. REAL ID acts as a de facto national database because it consolidates personal data into linked state databases. While it is not technically one large system, the linkage of the smaller databases make it act as if it were. Because it is a larger system with more data, it becomes more alluring for hackers and identity thieves. REAL ID makes it more harmful to national security by giving criminals another credential to opportunity. 

With all this information centrally accessible, do you think that the federal government is going to stop there? REAL ID is nothing more than an excuse for additional surveillance, as the Electronic Frontier Foundation correctly illustrates. An intuitive reason why REAL ID opens up such mass surveillance is because REAL ID makes the erroneous assumption that treats all citizens as potential terrorists until proven otherwise. In 2013, I expressed similar surveillance concerns with the NSA collecting metadata. Even then-Homeland Security Secretary Michael Chertoff bragged about how REAL ID could be required for such activities as cashing a check or hiring a babysitter. Because that does not reek of mission creep at all!

Then there are the matters of applying a double standard to aviation versus rail, the constitutional issues with prohibiting interstate travel, foreign-born or lower-income individuals having additional hurdles to compliance, or enforcement costs. REAL ID does nothing substantive to improve national security while it results in a serious encroachment on privacy while hindering the right to travel. As such, REAL ID should not be going into effect--it should be abolished.

The Movie Industry Needs More Market Competition, Not Trump's Tariffs on Foreign Film Production

Lights, camera, and tariffs! On part of his tariff binge, President Trump has announced a new proposed tariff: a 100 percent tariff on any movies produced in foreign countries that come into the United States. According to Trump's post on Truth Social, the American movie industry is dying. Per Trump's argument, this has become a national security threat because other countries are offering incentives to produce movies. He then ended with "WE WANT MOVIES MADE IN AMERICA, AGAIN!" Where to begin? 

One is that the U.S. movie industry is not dying. Using the country of origin data from Internet Movie Database, blogger Stephen Fellows found that about one third of movies produced since 2000 can be classified as originating from the United States. Being the industry leader in a growing market is not exactly a coup to Hollywood.

Similar to Trump's logic on auto tariffs, Trump does not understand that supply chains in the 21st century are complex and multinational. Goods and services these days are most often a mix between domestic and foreign inputs. Films do not have a single location; they typically have multiple countries of origin. United Kingdom and Canada are the top foreign locations for U.S. studios, with 23.9 percent and 19.4 percent of films, respectively, being shot in those locations.

I would love see the Trump administration try to argue with a straight face that German rom-coms, telenovelas, Amélie, or the latest Bollywood smash hit is a national security threat. I cannot wait to read the report on that investigation!

Then there is the matter of implementing the tariff. Trump's other tariffs have been levied on goods. Movies are an entertainment service. There has not been a moment when tariffs were levied on services. At what point would the government tax the movie? At movie tickets? Would there be a tax on Amazon, Netflix, and other streaming services? Would it be paid by the studio, the producers, or distributors? Plus, how can you assess the value of the movie without knowing how popular it would be or how many views it would create? Streamed services are intangible, which means they would be governed by royalty taxes, not tariffs. Even if you tried to implement a tariff, it would require "customs officers inspecting data or monitoring IP packets at ISPs." Good luck with that!

As is the case with other tariffs, that means fewer imports. As Reason Magazine rightly points out, this would not only be a barrier to goods, but ideas. Forget for a moment that the International Emergency Economic Powers Act explicitly protects "informational materials" such as film as an exemption to regulate or prohibit under a national emergency. Opening Hollywood and other U.S. film producers to competition means greater film quality and appealing to the wide variety of tastes and preferences in film. Since tariffs constrict supply, this would also make it more difficult for domestic independent producers to access financing. This would also have an impact of variety of films. 

With increased production costs induced by the tariffs, domestic producers will most likely play it safe and take fewer risks. It would hit domestic film producers in terms of financial losses. Furthermore, Trump's tariff would translate into fewer incentives to innovate, be efficient, and satisfy customers, which makes sense because that is what happened when the United Kingdom (Cinematograph Act of 1927) and Canada implemented quota laws analogous to Trump's proposal. 

As the Foundation for Economic Education illustrates, "Great cinema is born from talent, innovation, and competition." If Trump actually wants to make the American film industry stronger, he needs to make it more competitive, not stifle it with protectionism. All Trump's film tariff will do is incentivize Hollywood producers to make derivative dribble instead of making American film great again. 

Death By 1,000 Paper Cuts: The High Cost of U.S. Government Regulation

Although Tax Day took place last month, the American people pay for the government through more than taxes. That is right -- there is the hidden cost of regulation that very few directly see. But the Competitive Enterprise Institute (CEI) has shown the cost in its latest Ten Thousand Commandments report. CEI estimated that U.S. government regulations cost the country $2.117 trillion. If U.S. regulation were an economy, it would be bigger than the Canadian economy. 

This hidden cost is equivalent to costing the average American household $16,016 annually, which is the equivalent of 16 percent of income. Aside from housing, these regulations cost more than any other cost of living, whether it is health care, food, transportation, or entertainment (see below).

 

The National Association of Manufacturers (NAM) put the estimate at an even more indicting figure of $2.6 trillion (Crain and Crain, 2023). Last year, the Cato Institute estimated that U.S. regulatory compliance to firms was 1.3 to 3.3 percent of its total wage bill (Trebbi et al., 2024). Why should we care? Higher regulations translate into higher prices of goods, slower wage growth, and fewer job opportunities. As the Mercatus Center illustrates in its report, these regulations disproportionately affect low-income households (Chambers et al., 2019). The higher prices also make it more difficult for smaller businesses to grow (Chambers and Collins, 2016).

As I brought up in 2016, each regulation has its unique effects. There is no "typical regulation." As such, we should analyze the individual impact of each regulation. That being said, the cumulative effect of increased regulation on the United States has a way to stifle economic growth and prosperity. While I have my criticisms of DOGE, I hope that a second term of Trump can at least come with cutting more red tape and needless regulations. 

Migrant Crime Wave Is a Myth: New Study Shows Immigrants Are Much Less Likely to Commit Crimes

During Trump's presidential campaign, he pushed the idea that there is a "migrant crime wave." Essentially, his argument that was due to the influx of immigrants, there is a corresponding and substantial increase in crime that is caused by these immigrants, particularly undocumented migrants. It is a justification that Trump has used for his mass deportation plan. Earlier this week, the White House lawn was lined with mugshots of arrested immigrants accused of crimes, thereby reinforcing the notion of a "migrant crime wave." Even about half of U.S. citizens believe that immigrants are causing an increase in crime (Gallup). The problem is that as much as Trump likes to scapegoat immigrants, the "migrant crime wave" is a myth.

Last week, the Cato Institute released an analysis entitled Illegal Incarceration Rates, 2010-2023. With all the stories on the news about "illegal immigrants committing crimes," you would think that they are a menace to society and are committing crimes like mad. But guess what this analysis found? "Illegal immigrants are half as likely to be incarcerated as native-born Americans. Legal immigrants are 74 percent less likely to be incarcerated than natives. If native-born Americans were incarcerated at the same rate as illegal immigrants, about 806,000 fewer natives would be incarcerated."     

If the "migrant crime wave" theory played out, there would have been a surge in crime in 2023 at the border states that corresponded with the record 2.3 million immigrants that were encountered at the southern border. Yet Texas' violent crime rate decreased 15 percent in 2023, and Arizona's violent crime rate dropped by 8.8 percent. More interestingly, Texas is the only state that tracks crime data by immigration status. Guess what Texas' data has to say? The homicide conviction rates for legal and illegal immigrants are 36 percent and 62 percent lower, respectively, than for native-born Americans living in Texas. 

Sadly, this moral panic about immigrants committing a disproportionate amount of crime is nothing new. Even a 1931 report from the Hoover Administration pointed out that blaming immigrants for crime is about as old as the U.S. colonies themselves. Yet the results remain the same. A working paper at the National Bureau of Economic Research looked at immigrant crime rates from 1860 to 2019 (Abramitzky et al., 2023). Over the past 150 years, immigrants have consistently had lower crime rates than native-born citizens. The authors estimated that immigrants are 60 percent less likely to commit crimes than native-born citizens. 

When you think through the reasoning, it makes sense that immigrants are less likely to commit crimes than native-born citizens. The fact that immigrants make the conscious decision to leave their home country behind for a better future shows resilience, ambition, and a focus on the future. There is a high deterrence factor, especially for illegal immigrants/undocumented workers, because the punishment is higher. Since immigrants have higher employment rates than native workers, better economic opportunity and a steady job mean less likelihood of committing crime. Also, immigrants are more likely to have stronger bonds with family and civil society, thereby reducing likelihood of crime.  

What does this all mean for the "immigration and crime" conversation? The data do not substantiate the idea that more immigrants equal more crime. Quite the opposite! The U.S. government previously tried implementing a program to deport illegal immigrant criminals called Secure Communities. It did not do anything to lower crime rates. Peddling this myth harms the Latino community in particular while fracturing the relation between police officers and the overall community. If anything, this fracture can foment mistrust that makes people less likely to report crimes or cooperate with the police. This can hamper the police's ability to conduct investigations, thereby increasing the crime rate. None of this surprises me since immigration creates black markets, and black markets make matters worse. 

As this report from the American Immigration Council illustrates, greater immigration keeps crime down because the social ties and robust community programs that are common with immigrants help maintain lower crime rates. Immigrants are a net positive for the economy (even "low-skilled" immigrants) and significantly contribute to tax revenue. The social and economic positives of immigration help keep crime rates down. If the anti-immigrant side is legitimately concerned with crime rates, what we should do is allow for more legal immigration while channeling more resources from immigration enforcement to ordinary police. Otherwise, the anti-immigrant, nativist crowd is all talk and no action that will actually help with reducing crime rates.