Grounds for Repeal: Why It's Time to Ditch Corporate Average Fuel Economy (CAFE) Standards

The One Big Beautiful Bill Act (OBBBA) is a proposed budget reconciliation bill that is making the news with such provisions as removing the tax on overtime, funding Trump's harmful deportations, increasing the SALT deduction, removing the tax on tips, or cutting Medicaid. There is another OBBBA provision that is making the news: CAFE standards. 

In the OBBBA, the fines for the automobile fuel milage standards known as Corporate Average Fuel Economy (CAFE) standards are set to $0. This makes CAFE standards compliance voluntary while indirectly nullifying the standards without explicitly repealing CAFE standards. CAFE standards were part of the Energy Policy and Conservation Act of 1975. These standards were created in response to the 1973-74 oil embargo in order to reduce U.S. dependence on foreign oil. CAFE standards are currently set at 53.4 miles for passenger cars and 38.2 miles for light-duty trucks. 

Over time, CAFE standards came to serve another purpose: reducing greenhouse gases (GHG). The idea behind CAFE standards is to incentivize cleaner and more efficient technologies, which were supposed to benefit consumers through lower fuel costs. So why am I happy CAFE standards will de facto no longer be in effect? In short, because it is an inefficient law with unintended consequences.

CAFE standards will not help save the planet. The National Highway Traffic Safety Administration (NHTSA) estimates that CAFE standards will reduce CO2 emissions by 605 million metric tons from 2026 to 2050. While that sounds like a lot of metric tons, the truth is that 605 million metric tons is the equivalent of six hours of global CO2 emissions in 2021. Given that there are 8,760 hours in a year, never mind a 25-year period, CAFE standards will do virtually nothing to reduce global carbon emissions.

CAFE standards have killed people. CAFE standards create an incentive to manufacture lighter vehicles because it is easier to achieve these standards with lighter vehicles. While lighter vehicles might be good for energy efficiency, they are less safe because the risk of vehicular death increases when a lighter vehicle collides with a truck or SUV, as opposed to a heavier vehicle in the same crash. For each 0.1 mile per gallon (MPG) increase in CAFE standards, there has been an increase of 150 deaths (Jacobsen, 2011). Other studies with more lenient standards have found that CAFE standards increase vehicle deaths (see Anderson and Auffhammer, 2013; National Academy of Sciences, 2002; Crandall and Graham, 1989). It would be an a fortiori assumption that stricter CAFE standards, combined with increased traffic, kill more people. 

CAFE standards increase the price of new and used vehicles alike. As this study from the Mackinac Center shows, complying with CAFE standards entails a lighter vehicle weight, less acceleration, and technological upgrades, all of which are more expensive. A majority of those costs are passed on to the consumer, with an estimated cost of $24.1 billion of consumer costs in 2023 (Jacobsen, 2013). 

We have to remember that CAFE standards do not apply to the individual vehicle, but rather an average across the entire fleet of a given manufacturer. Even so, the standards have become so high that they incentivize greater electric vehicle (EV) manufacturing than would otherwise exist. The average EV costs about $7,000 more than a traditional gas automobile, which means that CAFE standards are both incentivizing EV manufacturing and increasing automobile prices.  

Not only that, used car owners are incentivized to hold onto their car longer, which constricts supply and drives up prices. In 2015 dollars, an increase of CAFE standards by 1 mile per gallon resulted a $164 increase in the average price of a large used car (Jacobson and van Benthem, 2015).

CAFE standards disproportionately harm the poor. 92 percent of U.S. households own a vehicle, which is to say that owning a vehicle is vital for the vast majority of Americans. This is significant since a car will cost a low-income household a higher percentage of household income than a high-income household. CAFE standards can very well make new vehicles out of reach for a low-income household, thereby driving them towards the used vehicle market and driving those prices up further. Additionally, energy efficiency standards are regressive because they require a high upfront cost. One study found that efficiency standards such as CAFE standards force low-income households to buy higher-cost vehicles, thereby being more regressive than an energy tax (Levinson, 2016). 

Postscript. To recap, CAFE standards will do nothing of statistical significance to save the planet. All the while, CAFE standards kill people while driving up new and used automobile costs, especially for low-income households. These unintended consequences make the case even stronger for consumers to have the freedom to choose how to buy, drive, fuel, and insure their vehicles. Granted, the OBBBA's provision is not quite as good as simply repealing it because Democrats can always regain power and increase the fines for violating CAFE standards. But it is nice to have at least some reprieve from a regulations that is as much of environmental feel-good policy such as plastic bag bans, the Endangered Species Act, or the act of recycling plastic.

City Hall Shouldn't Bag Your Groceries: A Case Against Government-Run Grocery Stores

Last week, New York State Representative Zohran Mamdani won the Democratic primary for the New York City mayoral election. In addition to being a Democrat, Mamdani is part of the Democratic Socialists of America (DSA), which is the U.S.' largest socialist organization and represents the Far Left in the U.S. Forget Mamdani's anti-Semitism for a moment. If you read his platform, he is a major proponent of the idea that the government should give the people things for free or should heavily subsidize them. He has advocated for many ill-conceived policies that I have previously criticized, whether it is rent control, fare-free buses, or raising the minimum wage to $30. Today, I would like to criticize another one of his ridiculous ideas: city-owned grocery stores. 

Mamdani sees food prices as being out of control due to profit. He would like to "create a network of city-owned groceries focused on keeping prices low, not making profit." He believes that he can create savings by having the government pay for capital costs while waiving property taxes for these grocery stores. In a TikTok campaign video, Mamdani said that grocery stores should not operate on profit motive, but their mission would be "lower prices, not price gouging." 

Other proponents have argued that government-run grocery stores could increase access to healthy food, especially in areas with food deserts. Their idea is to provide grocery stores to neighborhoods that seem "economically unfeasible." This is where wishful thinking collides into reality in a rather unpleasant way. Similar to when I critiqued Kamala Harris' price controls on groceries last year, Mamdani has a profound misunderstanding of how markets work generally and specifically how the grocery store market works.

How big of a problem are food costs? Yes, food prices have increased. We have pandemic-era expansionary monetary policy and fiscal policy to thank for that price increase. More to the point, as U.S. Department of Agriculture (USDA) data shows, food at home as a percent of disposable income decreased from 12 percent in 1964 to 5 percent in 2024. In the 1940s, it was a quarter of disposable income. If food prices are not a primary strain on people's finances, this makes government-run grocery stores a less urgent policy issue. 

The nature of the grocery market. The grocery store market is a highly fragmented market. Not only that, but Mamdani's premise about grocers' motives is wrong. If grocery stores were looking to gouge customers, they would make a lot more money. In spite of most people believing the contrary, the reality is that grocery stores operate with razor-thin profit margins, ranging from 1 to 3 percent.

The joy of profit motive. Private firms have something that a public-sector one lacks: profit motive. Maximizing profit means maximizing the difference between revenue and expenses. As this article from the Foundation for Economic Education (FEE) reminds us, profit motive incentivizes lowering the cost of inputs (e.g., shopping carts, cash registers), innovation, scaling supply chains, and effectively meeting customer demands. This more often than not leads to lower prices and higher quality. 

Perverse incentives. In contrast to profit motive, city-operated grocery stores create perverse political incentives, including price manipulation, product selection, staffing decisions, and remuneration for political gain. The risk for cronyism minimizes any likelihood that Mamdani's dream would come true. 

Lack of business viability. Private grocery stores have enough trouble with profit margins. Again, city-run grocery stores do not have profit motive to optimize efficiency. They would struggle without relying on subsidies or government funding. That is not mere economic theory. The "best" success story I could find is one small government-owned store in the rural area of Erie, Kansas. This store has created a modest profit of 1.1 percent, required volunteers, and relied on donations. The supposed success story of Erie operated more like a co-op than it did an actual grocery store. However, on the whole, government-run grocery stores have not been viable, as has been the case in Baldwin, Florida and Little River, Kansas. 

That does not even count the catastrophic government ownership of food with Venezuela, the former Soviet Union, or Maoist China and the Great Leap Forward, the latter of which caused the deaths of upwards of 55 million people. I understand that the United States is not the same as communist China, government-run grocery stores come with the same centralized control and bureaucracy, price fixing, and lack of profit motive that the aforementioned Communist countries faced. All the same, it should make us pause and question how much we want the government in charge of food distribution and sales.

Case studies in proxy markets. As we question whether or not New York City (or any municipality) should operate grocery stores, it would be helpful to look at proxy markets. Some in favor of Mamdani's proposal, such as the opinion editor at Washington Post, point to liquor control states where government handles the distribution and sale of all alcohol. That is a bad argument because government ownership of liquor sales resulted in higher prices (Siegel et al., 2014), which undermines Mamdani's fantasy that he can lower grocery prices. In addition, take a look at the New York City's very own Housing Authority, which is straddled with $78 billion with unmet capital needs. I feel like I am beating a dead horse, but a lack of profit motive results in wasteful spending from the government. 

Postscript. It is amazing how socialism's loudest proponents are well-off, educated theorists who understand nothing of how the real world works. Government-run grocery stores face challenges stemming from a lack of profit motive, including inefficiencies and political manipulation. The private-sector grocery market is highly competitive with tiny profit margins. Because of those slim profit margins, government-run grocery stores would have to rely on considerable government funding, which would further drain taxpayers. Private businesses are better equipped to meet customer demands, lower prices, and innovate. Private firms have the advantage of "massive economies of scale, decades of market experience, and complex supply chains." What government-run grocery stores will do is increase prices and lower quality for the citizens that Mamdani is purporting to help. 

Providing tax incentives to grocers and removing zoning laws are two policy alternatives I can come up with off the top of my head. Or in the case of New York City specifically, you can lower the high sales tax and minimum wage, both of which are costs passed on to the everyday grocery shopper. We can sit around and spitball ideas to make groceries more affordable, but I will conclude by unequivocally stating that the government has no business selling groceries.

Iran Is a Legitimate Threat to Israel, But Should the U.S. Have Bombed Iran's Nuclear Facilities?

About two weeks ago on June 13, Israel initiated a surprise attack on Iran known as Operation Rising Lion targeting top military officers and scientists, much like it did when Israel targeted Hezbollah operatives in September 2024. Iran fired missiles on Israel and there have been airstrikes since. These past few days have been an escalation of the animosity that has existed between Israel and Iran since the Iranian Revolution of 1979. 

Iran has financially backed Hamas, Hezbollah, Palestinian Islamic Jihad, and the Houthis. Then there was the Iranian attacks on the Israeli embassy in Argentina in 1992 and the 1994 AMIA bombing in Argentina, the latter of which was the largest terrorist attack in Argentinean history. On top of the proxy conflicts and historical tension, Iran has called for Israel's destruction multiple times over the past few decades. 

Israel attacked Iran on June 13 because Israel reportedly wanted to prevent Iran from developing a nuclear weapon that would annihilate Israel. This would make sense because the UN nuclear watchdog International Atomic Energy Agency (IAEA) submitted a report a day before Operation Rising Lion showing that Iran was in breach of its non-proliferation obligations. President Trump initially said that he will help Israel "if needed." And help he did. 

On June 22, the United States military carried out Operation Midnight Hammer to attack three nuclear facilities: Fordow, Natanz, and Isfahan. The White House is claiming that Iranian nuclear capabilities have been obliterated. Although Trump announced a ceasefire the following day, it is neither clear whether there will be further attacks from Israel or Iran, nor is it clear whether Iran's nuclear capabilities are decimated. As of now, the ceasefire is holding, but it is too soon to tell. Similar to what I pondered three years ago with Ukraine, the question I ask now is whether the United States should have militarily gotten involved in Iran. 

The answer depends in part on how much damage was done to Iran's nuclear facilities. Damage assessments are still preliminary. An initial assessment from the Defense Intelligence Agency (DIA) said that it was only delayed by a few months. On the other hand, the CIA released a statement saying that it would take years for Iran to rebuild. If Iran's nuclear capabilities remain largely intact, it could risk greater regional tension and drag the United States in yet another war in the Middle East. If their capabilities truly were hindered, then this limited military intervention could have prevented World War III. 

Whether the United States should have carried out Operation Midnight Hammer also depends on how the United States, Israel, and Iran will respond. If the United States gets further involved in terms of actual fighting, then it makes Trump look bad since Trump promised in his last presidential campaign that he would not start any new wars. To reiterate, Israel views Iran as an existential threat. While the IDF preliminarily finds that Iran's capabilities have been set back for years, Israel might escalate if it perceives that Iran has not been adequately incapacitated.

As for Iran, the Iranian government has already passed legislation to prohibit the IAEA from entering Iran.  Iran does not have the capability to attack the United States directly. Iran tends to avoid conventional conflict and instead advances its regional operations through propaganda and proxy operations. As such, Tehran could attack the Strait of Hormuz, which could send oil prices soaring. Tehran could also attack U.S. military installations in the Middle East, much like Iran attempted on June 23 with Operation Glad Tidings of Victory when it unsuccessfully sent missiles to the Al Udeid Air Base in Qatar. Domestically, I understand that Iran is militarily weakened and economically pummeled. At the same time, that desperation could encourage the Ayatollah to tighten the screws on its citizens. 

This is a roundabout way of saying that this conflict is very much developing and much is up in the air. Even if Iran has been hobbled, Iran remains a threat. I do not want another war in the Middle East, much like most Americans. Cato Institute calculated that if the war with Iran created displacement at the same rate as Syria, that would mean 23.4 million civilians, which would increase the worldwide refugee population by 76 percent. It would be a tragedy indeed. Ultimately, I hope that further conflict and bloodshed is avoided in the Middle East. Whether that ends up being the case is something that only time will tell.

U.S. v. Skrmetti: SCOTUS Protects Teens & the Law from Gender-Affirming Chaos and Harm

Last week, the justices at the United States Supreme Court (SCOTUS) made headlines with their most anticipated ruling of their 2024-25 term: United States v. Skrmetti. SCOTUS ruled 6-3 that banning puberty blockers and hormone replacement therapy (HRT) for adolescents dealing with gender dysphoria does not violate the 14th Amendment's Equal Protection clause. The Tennessee law (SB1) does not classify on sex because it bans the practice regardless of sex. This law was ruled to not have violated the 14th Amendment because it does not discriminate on such clear-cut examples as race, biological sex, religion, or sexual orientation. The only distinctions the Tennessee law makes are based on age and on medical use, neither of which are reviewed under heightened scrutiny. Tennessee is one of twenty-seven states that prevents such medical interventions for minors, which means that the bans are by and large upheld in other states, as well. 

As I brought up a couple of months ago with a UK ruling on biological sex, the concept of gender identity is incoherent. It is claimed to based on objective truth, but it can be changed on one's subjective whim. Gender identity is supposed to be a societal construct, but somehow is simultaneously biological and internal. Gender identity is identified as independent of biological sex but is also identified in reference to biological sex. It is designated based on self-expression but also as a product of socialization. Human rights and legal protections cannot be based on something as unintelligible, muddled, and disjointed as gender identity. It would also undermine protecting same-sex attraction if we cannot define the material reality of biological sex, as it would undermine women's rights. 

Coherence within the legal system is not the only reason I was happy to see the Supreme Court rule in favor of common sense. As a long-term Dutch study pointed out last year (Rawee et al., 2024), 78 percent of those dealing with gender non-contentedness overcame whatever dysphoria they were dealing with by the time they became adults without any interventions. An additional 19 percent had decreased gender non-contentedness. This means that vast majority of adolescents dealing with gender dysphoria do not need to go to the extremes of gender reassignment surgery, puberty blockers, or HRT.  

Then there is the argument of "having a living daughter is better than having a dead son." This argument assumes that without these treatments, children dealing with gender dysphoria will resort to suicide. Forgetting what we covered in the previous paragraph about most adolescents with gender dysphoria overcoming it without intervention, there has only been one main study conducted to directly assess whether sex-change hormones reduce suicide rates among trans individuals (Ruuska et al., 2024). The study concluded that no such association exists, a finding that was also detailed in the Cass Review. The Cass Review, which is the most comprehensive research on the topic to date, also shows the evidence shows that these interventions do not manage gender-related stress long-term.

Arguing that banning these procedures will increase suicide is a tactic to silence dissent and obscure another issue, which is that these treatments cause considerable harm. As I documented last year, gender affirming "care" lacks the evidence base, not to mention that puberty blockers are shown to have multiple side effects, including decreased bone density, deteriorating mental health, and lower IQ. Keep in mind that it was such European nations as the United Kingdom, Sweden, and Finland that were the trailblazers in providing these interventions a decade before it became trendy in the United States. These European countries have conducted systematic reviews and have concluded that the evidence is lacking. It is no coincidence that these nations recommend that these treatments are offered as a last resort and only offered in a clinical setting. 

It is one thing if an adult wants to undergo such a procedure with informed consent, even though the evidence base shows a lack of benefit for the vast majority of patients and shows considerable risk and harm. I personally do not agree with such activities as having children before getting married, using preferred pronouns, taking out student loans for something as useless as a gender studies degree, eating fast food every day, not exercising, smoking cigarettes, or entering in a polygamous marriage. But as long as you are not harming anyone else, you can do whatever stupid, unhealthy, or disagreeable things you want. 

Because children do not have the maturity, understanding (mens rae), or capacity to fully make their own decisions, how society treats children's rights is different. There are a myriad of activities and decisions from which children are legally restricted that adults are not restricted, whether it is voting, owning property, entering into most contracts, purchasing alcohol or tobacco, or working in hazardous occupations. Gender reassignment surgery, hormone replacement therapy, or using puberty blockers should not be an exception, especially given everything I have highlighted above. 

Although the Supreme Court was asking a constitutional question about the 14th Amendment, the Supreme Court came with the correct ruling in terms of outcome. Gender-affirming "care" is not an evidence-based practice. There is evidence showing the harm that such practices cause, especially ones that life-altering and essentially irreversible. This lack of evidence base is also augmented by the fact that the vast majority of adolescents overcome their gender dysphoria, thereby making these treatments unnecessary for the vast majority of those dealing with gender dysphoria in the first place. Socially progressive European nations understand this reality. I hope that those in the United States who believe otherwise can actually follow the science instead of adherence to ideological compliance for its own sake. 

It Is Not a Snap Judgment to Criticize SNAP's Rising Overpayment Problem

Everyone needs to eat. If people do not eat food, they die. It is part of why the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, is touted as playing a crucial role in fighting food insecurity across the United States. This is especially the case considering that SNAP benefits are second to unemployment insurance in terms of providing assistance during economic downturns. While it is purported as being this wonderful lifeline for struggling Americans, the reality is quite different. 

I am not referring to obesity rates exacerbated by SNAP  benefits (see my 2023 analysis here). When I was doing some research a couple of days ago on what to write about next, I came across a recently released report from the Mercatus Center entitled Reducing Waste and Fraud in SNAP. The most shocking finding of this report was that overpayment rates increased from 2 percent in 2012 to 10 percent in 2023. What this translates to is it costing U.S. taxpayers $10 billion in SNAP overpayments. It is smaller than the $31.1 billion in Medicaid improper payments I criticized last month, but it is still a jarring amount given the size of SNAP.

It is mind-blowing because in spite of the U.S. Department of Agriculture (USDA) spending more on improving retailer integrity and fighting trafficking in SNAP benefits, the overpayment rate continued to surge. Part of the reason for the surge is because USDA applied an improved methodology in 2017 and did not re-calculate the pre-2017 data. Then there are the matters of eligibility misreporting, Electronic Transfer Benefit (ETB) technical issues, and SNAP benefits trafficking, the latter of which account for about 40 percent of overpayments. 

This September 2024 report from the General Accountability Office (GAO) gives a better sense of weak oversight. For example, the GAO recommended in 2018 to increase penalties for when a retailer exchanges recipients' SNAP benefits for cash instead of food. As of September 2024, the USDA did not implement that recommendation provided in a GAO 2018 report. In that same 2018 report, the GAO criticized USDA for not applying previous recommendations from 2016. The Mercatus Center came up with a few recommendations on how to deal with these overpayment rates:

1. Create an office of program integrity within the FNS.
2. Require the disclosure of payment errors of any size, instead of just those over $57.
3. Allow states to retain more of the funds that they recover when they detect fraud.
4. Permit states to dis-enroll retailers that are taking advantage of SNAP. 
5. Encourage states to move over to SNAP EBT cards with chips.
6. Close loopholes that allow those with higher income and assets to collect SNAP benefits so that only genuinely needy households qualify.

I would also add some of the recommendations that I wrote about back in 2013, including separating SNAP benefits from agricultural subsidies, eliminating broad-based categorical eligibility, and modify the gross income limit from 130 percent to 100 percent of the poverty line, and enacting spending caps for SNAP. Sadly enough, there has been such little reform made on SNAP that these recommendations are still by and large applicable about 12 years later. The fact that so little has been done this century to improve SNAP benefits is troublesome.

Aside from the fact that this costs millions in taxpayer dollars a year, why should we care? Misallocating resources vis-à-vis overpayments means fewer dollars actually going to those in need. Eroding public trust in the program can mean less support for SNAP, which can harm those who rely on those benefits. More to the point, if the government cannot manage a program such as SNAP with competence, it makes it more difficult to justify its existence. Yes, libertarian economist Frederich Hayek believed that there should be at least a minimal social safety net. At the same time, all the USDA's intransigence and recalcitrance show is that SNAP should be as small and minimal of a social safety net as possible.

Build Less, Pay More: Another Study Shows The Price of Housing Regulations

There was a time when buying a home with a white-picket fence was a staple of the American Dream. The home was a symbol of stability, independence, and upward mobility. At least in the middle twentieth century, one could buy a modest home with a single income. That started changing in the 1970s when the coastal cities became less affordable and Americans started gravitating more towards such Sunbelt metropolitan areas as Phoenix, Atlanta, Dallas, and Miami. 

Unfortunately, affording homes in these Sunbelt metropolitan areas is becoming more elusive with skyrocketing housing costs and housing stock decreased (see above). A new National Bureau of Economic Research (NBER) working paper from leading economists at Harvard University and the University of Pennsylvania provides an answer (Glaeser and Gyourko, 2025). From the abstract of the paper:

If the U.S. housing sock had expanded at the same rate from 2000-2020 as it did from 1980-2000, there would be 15 million more housing units...New housing growth rates have decreased and converged across these and many other metros, and prices have risen most where new supply has fallen the most. A model illustrates that structural estimation of long-term supply elasticity is difficult because variables that make places more attractive are likely to change neighborhood composition, which itself is likely other influence permitting. Our framework also suggests that as barriers to building become more important and heterogeneous across place, the positive connection between building and home prices and the negative connection between building and density will both attenuate. 

It is not a lack of land because Sunbelt metropolitan areas have plenty of land. What these economists found is that the major culprits for increasing housing costs in the Sunbelt area are zoning laws and other land-use regulations. This is basic supply and demand. When demand for housing increases, whether because of population growth, job opportunities, or migration, and supply does not grow at the same rate, prices are bound to increase. 

To give you some examples of these regulations. Zoning laws restrict what can be built and where, which constricts supply. Height restrictions and density caps further constrain supply by limiting the number of people that can live on a given parcel of land. Lengthy permitting processes and environmental reviews create delays and uncertainty for builders, which also limit the number of houses built. When all these housing regulations are combined, they create an artificial scarcity of housing. 

This both plays out in economic theory and in practice. This new NBER study is hardly the first study to come to this conclusion. Back in 2017, I illustrated how deregulating the housing market and removing these regulations would boost housing supply. Here is some other research since 2017 illustrating this point:

• In April 2025, the Bush Center estimated in its counterfactual analysis that such pro-growth housing policies as lax zoning laws, reducing minimum lot sizes, and eliminating parking requirements for apartments implemented throughout the country would have lowered housing prices by $115,000 and monthly rent by $450 per month.
• Another NBER paper shows how municipalities with stricter land-use regulations have particularly small and unproductive construction firms (D'Amico et al., 2024).
• The American Enterprise Institute (AEI) wrote a paper about light-touch density (LTD), which is a zoning strategy that incrementally allows for more diverse housing types within existing single-family zones. AEI researchers calculated that LTD could create an average of 930,000 additional housing units per annum over the next 30 to 40 years (Pinto and Peter, 2023).
• The Institute for Transportation & Development Policy reports on how minimum parking requirements contribute to increased construction costs and limit housing availability. 
• A study from the Mercatus Center shows that build-to-rent housing bans further constricts housing supply (Furth, 2022).
• The Bipartisan Policy Center released this explainer in 2022 illustrating how housing regulations impact housing supply. 

Expensive housing in the United States is no longer an outlier on the east coast or in California. Housing has become less affordable because zoning laws and land-use regulations that have constricted housing supply, thereby increasing housing prices. The housing crisis in the United States is clearly a supply-side issue caused by government regulations. Whether local jurisdictions realize the damage of these regulations and reverse them remains to be seen. What we do know as long as they remain intact, Americans will continue to pay through the nose for housing.

San Francisco's "Equity Grading" Is an Example of Why Schools Need to Purge Equity from Teaching

Late last month, San Francisco Unified School District (SFUSD) Superintendent Maria Su publicized that the SFUSD was going to start using "equitable grading." You can read the SFUSD proposal for yourself, but SFUSD was looking to remove such traditional metrics as homework completion, class participation, and attendance in favor of summative assessments focused on "learning mastery," whatever that means. In addition, SFUSD proposed lowering the grading where an 80% was an A and a 41% a C. Popularized by author Joe Feldman, the purpose of "equitable grading" is to not have students be compliant automatons, but able to show critical thinking and deep understanding. Although San Francisco is an exceptionally Left-leaning city, the framework was yanked before it even began due to the political pressure.

For those of us who are not woke and attribute every disparity to racism and discrimination, it becomes clear as to why "equitable grading" is not a good idea. As the above implies, "equitable grading" incentivizes students to do the minimum required. To quote analysts over at the Fordham Institute, "Ability and behavior go hand in hand in determining success, which is probably why course grade point average has historically been such a powerful predictor of later success." 

The analysts also pointed out how there is ample evidence to show that not grading homework or allowing for unlimited test retakes does not work (e.g., Tyner and Petrilli, 2018; Lichtman-Sadot, 2016; Barua and Vidal-Fernandez, 2014; Vidal-Fernandez, 2011). Another working paper shows that more lenient grading resulted in higher GPAs, but did not translate into better student achievement or attendance (Bowden et al., 2023). To quote the Fordham Institute again, "Moreover, there is not an iota of evidence that reforms making grading more lenient benefit students in the long run." 

This idea hardly floors me. The fact that rewards and punishment are consequences of human behavior that shapes human action is an essential part of behavioral sciences. In 2018, I analyzed the high college dropout rate and illustrated how academic preparedness in high school was a strong predictor of whether a college student would drop out. After all, if you do not show the ability or motivation to show up and put in the effort as a child, there is a good chance that it will be difficult for you to do so as you get older. Deadlines are shown to accelerate a child's developmental process in their executive skills (Dawson, 2021) and "grades are shown as an effective means of motivating students (e.g., Gershenson et al., 2022; Gershenson, 2020; Docan, 2006; Figlio and Lucas, 2004; Betts and Grogger, 2003)." Watering down expectations to the point of reducing motivation and accountability harms the students that the "equity grading" was meant to help in the first place. 

I bring this topic up because SFUSD is not the first major school district to try this inanity. Due to the COVID-era school closures and their deleterious effects on achievement levels and student attendance that still persist, other such school districts as San Diego and Montgomery County, Maryland. While I understand teachers and principals trying to find ways to rectify the situation, equitable grading is not the way to go about it, as previously illustrated. What is more is that grading is not the only facet of K-12 education that this equity nonsense has reared its ugly head. 

I have criticized removing honors classes, the time when the state of Oregon suspended its basic skills requirement, and the insidious critical race theory that perpetuates racism. Knowledge and skills gained through education are a major predictor of one's wellbeing and quality of life as an adult. To allow for equity to come in and the quality of education in the United States is not only a threat to the individual students, but also the vitality of the United States to the point one could argue that equity is a national security threat. Moments like San Francisco's equity grading show us that woke influences are still with us. If we truly want to make education great again, we need to replace the mediocrity, laxness, and catering of feelings so prominent with the equity crowd by embracing academic rigor and valuing effort and good conduct once more. Otherwise, equity will continue to steamroll the U.S. education system. 

"Free Palestine" Rhetoric Has Become a Free Pass to Justify Anti-Semitism and Attacking Jews

October 7, 2023 was a horrific day for Israel. Hamas militants crossed into Israel to carry out the worst pogrom against Jews since the Holocaust. They carried out unspeakable acts against humanity: rape, kidnapping 251 civilians, murdering over 1,200 civilians, torture, decapitation. In terms of per capita death rates, October 7 was the equivalent of September 11 about 15 times over. The bodies of the murdered were not even buried and yet the pro-Palestine "activists" were already out protesting against Israel. This first wave of post-October 7 Jew-hatred broke out before the Israeli Defense Forces even entered Gaza, which tells you how much the motives are about hating Israel and Jews. Since October 8, 2023, these protestors have been out in full force across the planet. 

Fast-forward to May/June 2025. In a two-week timespan, there were two violent and unfortunate anti-Semitic attacks that made international news. The first was the murder of two Israeli embassy staff members outside of the Capital Jewish Museum in Washington D.C. The murderer was screaming "Free Palestine" as he was being arrested for this heinous act. 

The second attack took place in Boulder, Colorado. There was a rally for the hostages who have been held captive in Gaza for over 600 days. The assailant threw Molotov cocktails at the participants. The savage seriously injured eight participants, including an 88-year Holocaust survivor. As he threw the Molotov cocktails, he was screaming "We need to end Zionists." These attacks got me thinking a lot about the rhetoric used by pro-Palestine protestors and how it influences anti-Semitism and violence against Jews in the Diaspora. Let us examine the most commonly used rhetoric.  

"Globalize the Intifada". The word intifada comes from the Arabic انتفاضة, which is derived from the Arabic verb that means "to shake off" or "to get rid of." Within the political context of the Israeli-Palestinian conflict, there have been two intifadas. The First Intifada was in the late 1980s to early 1990s, whereas the Second Intifada took place in the early 2000s. In both intifadas, there was political violence against Jews that resulted in over 1,000 Jewish deaths. Suicide bombing was commonly used during the Second Intifada. Since intifada against Israel has historically meant indiscriminate violence against Jews, does it surprise anyone that globalizing the intifada would translate into violence against Jews, Israelis, and pro-Israel institutions across the world?   

"From the river to the sea, Palestine will be free". It would behoove us to ask which river and which sea. Answer: the Jordan River to the Mediterranean Sea. What country is between those two bodies of water? Israel. This is not a call for a two-state solution, but to extend the clout of this proto-state (if you can call it that) by eliminating the state of Israel. At a bare minimum, this translates into the ethnic cleansing of Jews. More likely, it is a call for the genocide of the Jewish people, especially after the pogrom of October 7 and the uptick of anti-Semitism afterwards. This phrase ends up being problematic in practice because it is ultimately not about a call for justice or equality; it crosses the line into bona fide anti-Semitism and the political extremism of eliminating the world's only Jewish nation-state. 

"Resistance by any means necessary." This little beaut is commonly used by anti-Israel group Within Our Lifetime - United for Palestine (WOL). Hopefully, this one should not require that much explanation. Any means necessary means the ends justify the means. This includes multiple acts of violence, whether that is slaughtering children and the elderly, suicide bombings, shootings, and setting synagogues on fire. If you have any doubts about that, October 7 and the subsequent rise in anti-Semitism across the global should have settled that "any means necessary" literally means "any means."

False accusations of genocide and settler colonialism. Genocide and settler colonialism are evils in the world. The problem in this instance is that Israel is guilty of neither. When you are under the delusion that Israel is committing genocide (see my three-part refutation of the false genocide accusation here, here, and here), this sort of accusation fuels the flames of Jew hate. Why? 

It does not matter that the Jews are indigenous to Israel (also known as Judea) or that Israel has legal rights to the land under international law, thereby refuting the "settler colonialism" argument. If your take is mistakenly that the "evil Jews" are the most heinous human rights violators out there (especially when you are ignoring actual violations of human rights), then you might be inspired to do something drastic about stopping these misperceived injustices, as was the case in the Washington DC and Boulder attacks. 

Postscript

As I pointed out last October, anti-Semitism has been on the rise and at significantly higher rates than anti-Muslim crimes. Anti-Semitism has only gotten worse since the war between Israel and Hamas began in October 2023. Let there be no mistake. Words have power. When pro-Palestinian protestors chant "From the river to the sea" or "Globalize the intifada," what they are doing is endorse, glorify, and encourage the bloodshed of Jews and Israelis. It is the public celebration of mass murder.  

What is jarring is that this rhetoric has become normalized and covered up with the excuse of "We're not anti-Semitic, just anti-Zionist," a phenomenon I explored in 2016. It does not matter what your views about Israeli policy are. It is possible to criticize the Israeli government without calling for its eradication. Israeli citizens do so frequently. Far too many on the pro-Palestine side has gone beyond mere political disagreement about Israel's foreign policy and venturing into bona fide anti-Semitic territory. If we are to live in a free, democratic society, support for violence against Jews needs to be deemed as abhorrent and unacceptable. Anything less is letting the terrorists win.  

Anti-Semitism across the world has become loud, brazen, unapologetic, and violent in a way that is giving me a taste of how Jews felt in 1930s Europe as the Nazi Party ascended to power. It is even worse when the "mainstream media" sanitizes the anti-Semitism in its reporting and parrots Hamas propaganda without doing a basic fact-check, which begs the question of how much the likes of BBC, Washington Post, and New York Times can be held accountable for spreading libel. It is even worse still because the pro-Palestine attempts to normalize violence against Jews as a form of being a freedom fighter or social justice warrior. What is scary about this framework is that it is working. The silent majority across the world has kept quiet as jihadism and anti-Semitism become palatable and trendy.

Yes, I am for the First Amendment right of peaceful protest, even that of pro-Palestinian protestors who I have come to view as the modern-day equivalent of Nazis. Where the present situation gets murky in practice is when the anti-Semitism of these chants are normalized and become weaponized as a justification to attack Jews. The line between acceptable free speech and incitement of violence has become blurred, which begs the question of what does a Jew who advocates for freedom of speech such as myself believe should be done. 

I both value freedom of speech and believe that Jews should be able to live without having to constantly worry about violence being carried out against them simply for being Jewish.  Granted, Jews have adapted to anti-Semitism over the centuries and are continuing to do so. At the same time, I have no easy answers in this muddled grey area. I am inclined to believe that charging those who commit illegal acts not covered under the First Amendment, such as violence, incitement of violence, threats, intimidation would be a good start, as would be dismantling radical groups calling for revolutionary violence. That way, violence can be targeted without degrading freedom of speech. 

You might be reading this and think this only affects the Jews, so you should probably be fine. Why does this affect everyone? The Jews have historically been the canary in the coal mine. What is befalling the Jewish people will eventually reach other groups of people, especially those who have been oppressed or disenfranchised. Plus, this global intifada will not stop with the Jewish people. As I pointed out in my critique of "Islamophobia" earlier this year, Islam is the one religion on the planet whose mainstream followers seek to impose their religious taboos on everyone else. As we already see in Europe, this political violence will get worse if not confronted. Until this rhetoric is addressed and we can make political discourse civil once more, this sort of domestic violence will continue to be normalized and the pro-Palestine side will continue to wreak havoc on civil society. 

Is the Reign of the U.S. Dollar Coming to an End?: Assessing the Future of Global Reserves

Tariffs notwithstanding, the United States has fiscally been in such a tumult in recent years. Last month, the credit rating agency Moody's downgraded the United States from Aaa to Aa1. This downgrading is significant for two reasons. One is that the United States is the largest economy in the world. The second reason is that Moody's is the final major credit rating agency to downgrade the United States below its top credit rating. Much like with Fitch's downgrade in 2023, Moody's cited long-term debt issues fueled by the mandatory spending. Moody's anticipates that the United States' fiscal performance is to deteriorate at a faster rate relative to other highly-rated sovereigns. 

This got me thinking about a major topic related to all this mess. The United States dollar (USD) is the most held currency in global reserves. However, that clout has been declining over the years (see above). International Monetary Fund (IMF) data show that at the end of 2024, 58 percent of foreign exchange reserves are USD. Contrast that with the dollar being 65 percent a decade earlier. How legitimate is the concern that the percent of dollars in foreign reserves will continue to decline over time?  We should first ask what could replace the dollar as the primary global reserve. 

• Chinese yuan (人民币). China has the second largest economy and is continuing to grow, hence why it is a main contender. However, as long the Chinese central bank (中国人民银行) has exchange rate regime (currency manipulation), capital controls, and institutional weakness, the Chinese yuan will not be a global currency reserve. 
• The euro. The European Union rivals that of the United States and has political stability. However, it has internal economic issues that I have critiqued since 2010 and have done so since then (see here, here, and here). It is not only the lack of a common treasury or a unified European bond market, not to mention that its capital markets are inadequately integrated to muster the assets necessary to become a global leader. As a research paper from the European Commission points out, the euro zone crisis last decade resulted in the downgrade the credit rating of various European countries, thereby strengthening the dollar (Arroyo, 2022). 
• Other currencies. The Japanese yen, Korean won, Australian dollar, Canadian dollar, and British pound lack the scale and liquidity to pull it off. The BRICS countries cannot cobble together a currency basket to rival the U.S. economy because of the structural challenges that do not make their countries' central banks robust. 
• Digital and blockchain alternatives. This option could have potential in the future. However, given current regulatory hurdles and the fact that these alternatives are still relatively nascent, they are not viable options, certainly in the short-term.

There is still no viable contender to step in and replace the U.S. dollar in the short-term. The United States remains a large, powerful economy that accounts for 26 percent of the world's GDP with rule of law and investor confidence. Because it takes a lot of time, money, effort, and political willpower to change currencies, there is inertia vis-à-vis the network effects that are in the U.S.' favor. The U.S.' market for Treasury securities remains large and liquid. The dollar is still the dominant currency choice for international trade transactions because the dollar is so entrenched in global trade and finance. That being said, it is clear from the Moody's downgrading that the U.S.' fiscal situation is untenable and it is looking like there is a lack of political will to change things. 

In July 2024, the CFA Institute surveyed nearly 4,000 global financial professionals. Not only did 77 percent of respondents find that the U.S.' finances are unsustainable, but nearly two thirds had the professional opinion that the U.S. will lose its global reserve status (52 percent in a marginal way and 11 percent in a material way). It was also interesting to see the reasons that respondents thought this would happen. Debt was number one, followed by a downright default (see below).

What does this mean for the global reserves system? Going back to the CFA Institute survey, what the respondents believed to be the most likely systems to replace the dollar would be a multipolar currency system, a digital currency, and hard currency (e.g., gold). If I were to speculate, I would say the system is becoming more multipolar and there will be an emergence of digital currency in global reserves. I believe that the dollar's prominence will remain in the short term but also decline gradually, much like it has in the past couple of decades. The fiscal cliff is not imminent, but it is the direction in which the United States is heading.

What came as a result of the COVID pandemic and the lockdowns has taught me to be more humble with my educated guesses, especially when prognosticating beyond a year or so. What I can say with certainty is that that more the United States government avoids meaningful fiscal reform and adds on deficit spending, the more that dollar will lose its dominance. The question simply will be a matter of how much dominance is lost, what will take its place, and how ugly of a process it will be.

King Charles Shows Us That Land Acknowledgments Are Performative and Virtue-Signaling

Last week, King Charles III of England made a trip to Canada to deliver the speech from the throne, which set out the agenda for the new Liberal government of Canada. This is the third time in Canada's history in which the British monarch delivered Canada's throne speech, the other two which were during Queen Elizabeth II's reign. During this speech, King Charles began with the following:

I would like to acknowledge that we are gathered on the unceded territory of the Algonquin Anishinaabeg people. This land acknowledgment is a recognition of a shared history as a nation. While continuing to deepen my own understanding, it is my great hope that in each of your communities, and collectively as a country, a path is found toward truth and reconciliation, in both word and deed.

This sort of statement is known as a land acknowledgement. A land acknowledgment is a formal statement that recognizes and respects indigenous people as the traditional stewards of the land. It is supposed to be a way to honor the original inhabitants of the land while acknowledging the subsequent effects of displacement. While they are intended to show respect and promote reconciliation, they act as nothing more than a performative gesture. 

Let us start with the reality that for much of history, conquest was a widely accepted means of acquiring land. The modern day concept of property rights (e.g., John Locke, Adam Smith), as well as international law stating that conquest is not a legitimate means of acquiring land (e.g., UN Charter, Article 2(4)), is relatively new. As reprehensible as the actions of Christopher Columbus, Hernán Cortés, and Francisco Pizarro were by modern standards, white people do not have a monopoly on violence, brutality, or colonization. 

The Iroquois partook in aggressive warfare, whether through the Beaver Wars or mourning wars. The Crow Creek Sioux tribe had the Crow Creek Massacre in the 1300s, which killed about 500 people. The Inca Empire was created by a combination of peaceful assimilation and conquest for those who did not accept Inca rule peacefully. The Aztecs fought large-scale wars to expand their empire, as well as partook in ritualized violence and human sacrifice. The Māori tribe of New Zealand committed mass murder, enslavement, and cannibalism of the Moriori people. Then there was Genghis Khan, Attila the Hun, Aurangzeb of the Mughal Empire, the creation of the Ottoman Empire, the Achaemenid Persian Empire, and the Songhai Empire in western Africa, to name a few. 

If I were a betting man, I would say that everyone has at least one ancestor who partook in conquest of some sort or fashion. Why? Violence, colonization, and conquest made up much of pre-modern history, regardless of race or ethnicity. Some were simply more effective and brutal than others. Rather than acknowledge historical reality, it provides another opportunity for woke people to oversimplify racial relations into the racist and inaccurate claim of "White people = bad; minorities = good." History is more complicated than that and there are brutes across all races and ethnicities. 

For argument's sake, I will be a good sport about it and give the a benefit of a doubt. Let us assume for a New York minute that the indigenous people are unquestionably the rightful owners of the land. If so, there is another major issue that arises. The purpose of these land acknowledgements is reconciliation. Do land acknowledgments lead to genuine reconciliation? 

Ever since the beginning of modern-day land acknowledgments in the late 1970s, there has not been a single land acknowledgment that has resulted in the restoration of land ownership to indigenous nations or the establishment of indigenous governance over ancestral territories. What these land acknowledgements are in practice is being akin to someone stealing your possessions, writing a half-hearted, hand-written note admitting to the theft, and then doing nothing to either return the possessions or compensate you for the loss. How does that show respect for the aggrieved party? 

It is even more mind-boggling to do a land acknowledgment for a tribe that no longer exists as a distinct, unified entity, whether that is the Yamasee, Susquehannock, or the Massachusett tribe. To reconcile is to restore a sense of peace or harmony between both parties. Short of a Casper the Friendly Ghost situation, you cannot reconcile with a group of people that no longer exist.    

In the Canadian case cited at the beginning of this piece, it is not as if King Charles were a plebeian with zero clout. Although the monarch of England is largely a ceremonial role, he is still on the throne of one of the world's largest powers. If these land acknowledgments were meant to be about actual reconciliation and compensation, something of substance should have come about as a result of these land acknowledgements. 

The lack of outcomes as a result of land acknowledgements show how hollow and disingenuous land acknowledgments truly are. If you actually want to make a difference, put your money where your mouth is. Either give the aggrieved party their land back (or at least some form of compensation to help out indigenous people) or shut your hole. Otherwise, the moral exhibitionism that is land acknowledgement is as feel-good and useless as using plastic straws or recycling.

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.