Why Eliminating the Social Security Payroll Tax Cap Is Not an Easy Fix

Every few years, politicians think they have found the silver bullet for solving Social Security's financial woes. This time, it is Senators Elizabeth Warren (D-MA) and Bernie Moreno (R-OH) proposing to eliminate the Social Security payroll tax cap of $184,000. The argument is simple enough: tax earnings above the current cap, collect more revenue, and the program can keep going. If only it were that simple.

As I detailed last year, Social Security's challenges are rooted in demographics and the structure of the program itself. Eliminating the payroll cap sounds like a sound solution, but it is an expensive workaround that does not deal with the declining worker-to-beneficiary ratios, longer life expectancy, or the pay-as-you-go financing structure.  

If eliminating the payroll tax cap were an obvious solution its supporters claim, you would at least expect broad agreement among tax policy experts. But even the Left-leaning Tax Policy Center (TPC) argues that the Warren-Moreno proposal is flawed.

The TPC calculated that this proposal would bring in $2.5 trillion in revenue over the next decade. That sounds like a lot of cash, but here's the catch. It does not actually save Social Security. It only closes about half of the long-term financing gap, and annual deficits return in about 4 years. By the way, this is the best-case scenario. 

TPC points out another issue: severing the link between contributions and benefits. Social Security was created as a a safety net during the Great Depression, but policymakers also deliberately structured it as social insurance, with benefits tied to workers' earning histories and payroll contributions. Workers have generally viewed their benefits as something they earned through payroll contributions. 

Eliminating the cap while leaving benefits largely unchanged weakens that relationship. For many higher-income workers, additional contributions would no longer purchase additional benefits. Once the program is perceived more as income redistribution, it risks undermining the broad political support. 

Higher marginal tax rates can create economic distortions by educing the incentives to earn additional income, invest, or expand business. When taxpayers keep less of each additional dollar earned, some may alter their work decisions, compensation arrangements, or investment strategies to minimize tax exposure. While these effects may be modest for some, policymakers should consider the broader consequences of increasing taxes on productivity, economic growth, and future revenue generation. A policy intended to strengthen Social Security should not undermine the economy that funds it. 

The debate over eliminating the payroll tax cap shows that policymakers are more focused on finding more money over reforming a structurally flawed program. Higher taxes can postpone difficult decisions, but they cannot fix demographic realities, a low return on investment, or the lack of personal ownership over retirement savings. The people of America need more than paying more to Social Security. It needs reform that can provide the working American with the ability to comfortably retire instead of struggling in their later years.

What Does Nonbinary People's Day Celebrate If Anyone Can Be Nonbinary?

July 14 is not only Bastille Day in France, but it is also International Nonbinary People's Day, which takes place tomorrow. It was chosen as July 14 because it's the exact midpoint between International Women's Day and International Men's Day. It was created to raise global awareness about nonbinary people, but it begs an essential question: what in the world is nonbinary?

Every commemorative day celebrates an identifiable group of people. Veterans Day celebrates veterans. International Women's Day celebrates women. Before celebrating a category, it is reasonable to ask what distinguishes its members from everyone else. That is a surprisingly difficult question to answer when it comes to nonbinary people. 

Nonbinary: The Identity That Means Everything and Nothing

Most organizations and nonbinary individuals define nonbinary in roughly the same way: someone whose gender identity is not exclusively male or exclusively female. At first glance, that sounds straightforward enough. But after further examination, it doesn't answer the question because then there is the follow-up question of "What does that look like?"

Depending on who you ask, being nonbinary can be a range of things, whether that is identifying as both male and female, neither male nor female, something in between, outside the gender binary altogether, gender-fluid, or possessing multiple genders. These descriptions point in dramatically different directions. Instead of identifying a single, distinguishable category, "nonbinary" appears to function as an umbrella term for a wide variety of subjective experiences. 

That in itself presents a conceptual problem. Categories exist to distinguish one thing from another. The category of "veteran" distinguishes those who have served in the military from those who have not. The category of "citizen" distinguishes between those who possess a particular legal status from those who do not. 

But what distinguishes a nonbinary person from a man or woman who simply rejects traditional gender stereotypes? If the answer comes down to subjective self-identification, then the category has no ascertainable membership criteria. It tells us only what someone calls themselves, not what distinguishes them from everyone else. That "definition" offers no independent criteria by which anyone can distinguish between a nonbinary person from an ordinary variation between men and women. As such, the category of "nonbinary" has no meaningful limiting principle. 

The "Because I Say So" Problem: A Definition That Defines Itself

The problem becomes even more obvious when one asks a self-identifying nonbinary individual how they know they are nonbinary. The answer is usually with some form of "Because that's how I identify." But identify with what? Again, the most common definition is someone whose gender identity is neither exclusively male nor female. It is not descriptive because it does not answer the question of what gender is in this framework. 

If a man is defined as someone who identifies as a man, if a woman is someone who identifies as a woman, and a nonbinary person is defined as someone who identifies as nonbinary, the explanation becomes circular. If gender is not biological sex, personality, clothing, interests, or gender stereotypes, then what positive characteristics remain? The definition tells us who identifies, but it provides zero insight into what they are identifying with. Instead of pointing to an independently recognizable characteristic, the label appears to refer only to itself. 

At this point, I can see someone objecting to this description of nonbinary by saying that many identities involve self-identification. After all, no one can peer into another person's mind to determine whether they are truly a Christian, a Democrat, or homosexual. But those identities refer to something beyond the declaration itself. 

Biological sex refers to observable biological characteristics. Sexual orientation describes enduring patters of romantic or sexual attraction. Religion encompasses identifiable belief and practices that exist independently of merely claiming the label. While each of these identities contains subjective elements, they also refer to concepts that can be understood apart from self-identification. 

Nonbinary is different. Since the only criterion for membership is declaring oneself to be nonbinary, then the declaration is not merely evidence of the identity; it is the identity. The category then becomes self-referential, which makes it impossible to distinguish between the label and the thing the label is supposed to describe. That may suffice for personal self-expression, but it does not provide a foundation for a category, certainly one that is supposed to have an international day of recognition and observance. 

Everyone Is Different, and....?

Even if we wanted to set aside the definitional problems with nonbinary, there is another problem: the characteristics often associated with nonbinary identity are not unique to nonbinary people. Human beings have always varied in personality, interests, appearance, and behavior. Some men are more traditionally masculine, while others are more traditionally feminine. 

This is especially true when looking at gay men and lesbians. For gay men, there is everything from the muscle gays and jocks to the fem boy, and everything in between. Lesbians range on the femininity spectrum from lipstick lesbian to being butch. One of the contributions of the gay rights movement was challenging the idea that a man must conform to a narrow definition of masculinity or that  a woman must conform to a narrow definition of femininity. 

Men who are less masculine are still men, and women who are less feminine are still women. That does not mean that they are this third category. If nonbinary identity is based on not fitting neatly into traditional gender norms, then it risks treating ordinary human diversity as evidence of a separate identity category. A category that encompasses anyone who does perfectly conform to gender stereotypes, which is basically everybody, ultimately ceases to distinguish between anything meaningful. 

The vast majority of people experience themselves differently from some idealized form of gender norms and expectations. Since there are no criteria that separate nonbinary people from men and women who share those same traits, the category has no clear boundary. Without clear boundaries, the category of nonbinary is meaningless because virtually anyone can qualify simply by interpreting their own relationship with gender in a particular way. A description that includes just about everyone who feels different in some way ceases to be a category at all. 

So What Is Being Celebrated?

A meaningful category should tell us who belongs, what members have in common, and how they differ from everyone else. Yet nonbinary lacks a clear definition, objective membership criteria, and distinguishing characteristics beyond self-identification. If a category can include almost anyone who feels different from traditional gender expectations, then it is not a distinct group of people. Since there is no clear defined group of people to celebrate, what does Nonbinary Day celebrate exactly? 

It seems like it is one of the first awareness days in human history for a group of people who cannot explain who is in the group. In short, it is the culmination of coddling every subjective experience simply because someone says "it's my lived experience" and of the Participation Trophy mindset. When words no longer describe anything beyond what someone says they describe, categories themselves lose their purpose. It is a death knell of words having any meaning. 

Why Restricting International Students Is Trump's $481 Billion Mistake

There are a number of features that make the United States a unique and exceptional country. One of those drivers of American innovation has been that it has attracted ambitious people around the world, which means having an immigration policy open enough to allow them to work and live in the United States. America has historically understood that importing talent is one of the best investments it can make, but the current administration has lost sight of that concept. 

As I pointed out earlier this year, the Trump administration has attacked legal immigration to the United States. One of those foci of attack has been restricting international students to study in U.S. universities. The Trump administration asserted that foreign adversaries have exploited American universities to steal sensitive research and technology and that stricter visa screening was needed to safeguard U.S. interests.

Whether these restrictions ultimately improve national security remains difficult to measure. What is much easier to estimate, however, is their economic cost. A recent study from the Peterson Institute for International Economics estimates that restricting international STEM students could reduce U.S. GDP by as much as $481 billion over the next decade.

The reason for this decline in GDP is intuitive. The mechanism is fairly intuitive. International STEM students don't simply earn degrees. They become part of America's innovation ecosystem. Many stay to work in research labs, high-tech firms, and startups, where they help develop new products, improve existing technologies, and increase productivity throughout the economy. 

By reducing the number of these future innovators, restrictions shrink the pool of human capital that drives long-term economic growth. The projected GDP loss is therefore not an accidental correlation, but the estimated value of the discoveries, companies, and productivity gains that never materialize.

This immigration restriction especially hits hard for the science, technology, engineering, and mathematics (STEM) industry because as the PIIE study points out, 35 percent of all STEM workers with a PhD are foreign-born and U.S.-trained.

Scientists and engineers develop new products, improve manufacturing processes, write software, discover medical treatments, and launch companies that employ thousands of people. These innovations make workers across the economy more productive, which is ultimately what drives rising incomes and long-term economic growth. International STEM graduates have played an outsized role in America's innovation economy for decades. Restricting their numbers reduces the number of future breakthroughs that make the entire U.S. economy more prosperous.

Ironically enough, these restrictions can actually undermine the President's rationale for the restrictions. Economic strength is one of the foundations of national security. A larger, more productive economy generates greater capacity in research, development new technologies, and gives the United States the resources needed to maintain a technological edge over its rivals. 

Policies that reduce innovation therefore carry national security costs of their own. Restricting international STEM students may prevent some security risks, but it also reduces the supply of scientists and engineers who drive economic growth. If America becomes less innovative, it also becomes less capable of sustaining the military and technological superiority that has underpinned its security for decades.

The irony is that policies intended to protect American workers and strengthen American security can end up undermining both. In an effort to protect America, policymakers risk reducing the very economic dynamism that has made America powerful. STEM students do not simply compete for jobs. They create knowledge, launch companies, and develop technologies that make the entire economy more productive. Restricting their ability to study in the United States means fewer innovations, fewer businesses, and less economic growth.

Restricting international STEM students risks sacrificing one of America's greatest strategic assets: its ability to attract talented people who create new ideas and technologies. In addition to economic implications, it harms national security because it risks reducing the innovation and technological leadership that make the United States secure in the first place. This is yet another reminder that protectionist policies have this uncanny ability to limit economic freedom and American prosperity at the same time.

United Nations Falsely Accuses Israel of Genocide: Targeting Children Edition

Astronomer Carl Sagan once said that extraordinary claims require extraordinary evidence. That principle is especially relevant when the claim in question is not merely whether a military has committed wrongful acts in war, but that it has deliberately targeted children as a part of a broader strategy amounting to genocide. In both moral and legal terms, this is among the most serious accusations that can be leveled against any state or armed force. The accusation of targeting children heightens the claim because under humanitarian law, children are treated as a protected category. It also implies a level of moral depravity and legal culpability that international law reserves for the worst of the worst.

Yet a recent United Nations Commission report precisely makes that allegation against Israel in the context of the war in Gaza. It concludes that Israel not only caused widespread death and suffering, but that it formed part of a broader strategy to destroy the future of the Palestinians in Gaza by targeting children as a "biological and social continuity" of that group.  

This is not the first time that the UN has advanced sweeping claims against Israel that later proved controversial or methodologically fragile. The UN falsely accused Israel of causing food shortages of Gaza, implying it was part of some master strategy to starve Gazans. The UN also blindly accepted Gazan casualty statistics that exaggerated children fatalities, with the effect of making it look like the Israeli Defense Forces (IDF) were targeting women and children. The UN perpetuating refugee status and Jew-hatred under UNRWA also does not help matters.

This does not by itself prove the UN's latest allegations false, but it does warrant extraordinary caution of what the UN claims. Therefore, it is necessary to determine whether the Commission's findings themselves actually confirm if the IDF deliberately targeted children in Gaza or not. 

To conclude that Israel deliberately targeted children, the Commission would need produce evidence of intent, not merely evidence of harm. In the law of armed conflict, intent may be established from direct proof, whether it is orders, directives, or communications. This was the sort of thing observable during the Nanjing Massacre, the murder of children during the Holocaust, ISIS targeting Yazidi children in Iraq, and the Srebrenica massacre. Alternatively, such intent could be inferred through highly compelling circumstances evidence that excludes reasonable alternative explanations. 

The Commission does not present this kind of evidence. Instead, it infers intent from the scale and pattern of child casualties, assuming that a) each child killed in Gaza was killed by the IDF, and b) the child was targeted simply because a child died. Another way to put it: what the UN Commission does is it makes the evidentiary leap from "children have died in this war" to "Israel is targeting children." But even if one were to acknowledge the existence of large-scale harm, that by itself does not prove intent. 

As I have explained before when refuting false claims accusing Israel of committing genocide, for something to be considered genocide, one would have to be able to infer that genocidal intent is the only reasonable inference from the evidence. Here are some things that the United Nations conveniently leaves out of or minimizes in its reporting that show that is far from the case. 

We have to remember that it was Hamas that started this war by raping, kidnapping, torturing, and murdering over 1,200 civilians. Since 1948, Israel has been surrounded by Arab entities that want to wipe it off the map, including the genocidal entity known as Hamas. That by itself does not give the IDF a carte blanche to do what it wants in response. But what follows points out that genocide is not a reasonable conclusion based on the evidence. 

Civilian casualties are sadly a consequence of armed conflict. Children casualties are going to be an outcome given that about half of Gaza's population is under 18. More to the point, Gaza is one of the most densely populated battlefields in modern history, making this outcome even more inevitable.

There is one other sad truth to acknowledge: not all individuals under 18 in this conflict zone are necessarily noncombatant casualties. Armed groups in Gaza have been known to recruit and train minors to participate in hostilities against Israel. This further underscores why aggregate references to "child casualties" is insufficient, and is one other area in which the UN overstates their case. 

Even if one were to accept the Commission's casualty figures (which again, I would hesitate since the UN has accepted exaggerated casualty numbers before), neither a high civilian death toll nor a particular civilian-to-combatant ratio can substitute for genocidal intent. 

Hamas has a long-standing practice of using its civilians as human shields. The UN also ignores that Hamas has embedded vast tunnel networks, weapons stockpiles, booby-trapped buildings, and command facilities in civilian infrastructure. Without this context, the UN does not capture the complexities that the IDF faces while fighting Hamas and dismisses that these deaths could have been caused by crossfire, militant Hamas activity, or an unfortunate consequence of urban warfare. 

Furthermore, Israel's conduct is inconsistent with genocidal intent. The IDF has put warnings to civilians out before strikes (e.g., evacuation notices, phone calls, text messages), which no other military in history has done because they would lose the tactical advantage and incur military cost. The IDF has also allowed for humanitarian corridors and humanitarian aid to enter to reduce civilian suffering. 

Another point: Israel has a multi-ethnic and multi-religious population that includes about 2 million Muslims who are given equal rights under the law. It would be an odd policy for a government that was intent on exterminating Muslims to simultaneously extend full legal equality to Muslims in its borders. But then again, these are the sort of loops that the anti-Israel side jumps through to believe in this accusation. 

Ultimately, the UN does not prove evidence showing its headline allegation that the IDF is targeting children. All of this context in the previous paragraphs provides a reasonable, alternative explanation for the scale of child casualties in Gaza. However, the report gives those alternative explanations insufficient considerations and jumps straight to genocide as the only explanation, which is out of touch with the reality on the ground. This sort of inferential leap without sufficient evidence not only should give us reason to pause, but for any rational and sane person, it is yet another example that puts the UN's supposed objectivity and impartiality into question.

America at 250: Where Has My Country Gone?

I remember back in 2009 watching a South Park episode called Dances with Smurfs.  In the episode, the troublemaker Eric Cartman becomes the reader of the elementary school announcements. He takes on the persona of political commentator Glenn Beck, and repeatedly invokes the What happened to my school? I don't consider myself a conservative or one to have blind patriotism, but that episode recently had me ask a similar question of What happened to my country? 

Sure, there are great things about the United States. The United States has the world's largest economy and is still the main superpower. Many of the world's top universities and largest companies are in the United States, and is still a hub for innovation. It is a country that was built on a creed and where your ancestry did not determine your lot in life. Freedom of speech and freedom of religion are still faring well, certainly relative to Europe. But there is so much that has me concerned:

• Capitalism is declining in popularity while nearly two-thirds of Americans from the age of 18 to 29 who favor socialism. An economic system once considered synonymous with the American Dream is now viewed with skepticism. Instead, more of today's youth are attracted to an ideology that has been tried and has failed. 
• According to Heritage Foundation's Index of Economic Freedom, the United States was faring better a couple of decades ago. A similar decline is on Fraser's Economic Freedom index. It shows that this country is less committed to the economic liberty that fueled generations of innovation, entrepreneurship, and prosperity. 
• There was a time where Congress cared about fiscal discipline, but the U.S. credit rating continues to spiral downwards with the debt-to-GDP ratio showing no signs of slowing down and shrinking.
• The Federal Reserve continues to have a large balance sheet, not to mention the U.S. dollar declining as a percent of global reserves. While the dollar is still dominant, it does signal concerns about the long-term fiscal and monetary foundations of the United States. 
• Homeownership and education are increasingly out of reach. Starting a family is more expensive, whether it is child care or providing a proper education. 
• More Americans think the First Amendment goes too far. The freedoms of religion, speech, protest, and press are civil liberties are not merely inconveniences that should be tolerated. They are some of the defining features of a free society. Cancel culture has only made this trend worse. It shows that this country is less tolerant of opposing ideas, beliefs, and ways of life. 
• Populism has become popular on both sides of the political aisle. The Left promises protection from corporations, inequality, and unfairness. The Right promises protections from foreign competition, free trade, immigrants, and cultural change. Both increasingly believe that the government is the solution, not markets and civil society.  

This list is not about one president, one party, one election, one Supreme Court decision, or one public policy. It is the sad realization that over the course of my lifetime, the country I thought represented life, liberty, and the pursuit of happiness is disappearing bit by bit. America used to stand for many noble ideals. Here are some that come to mind:

• All people are created equal and are entitled to equal protection under the law. 
• With enough hard work and disciple, anyone can thrive, regardless of their station in life. 
• Markets generally work better than the government. 
• Capitalism provides prosperity and excessive government is anathema to the American spirit. 
• Government should be small and liberty is the default. 
• The extent to which government is in it is in our lives, it exists to serve the people, not the other way around. 
• A person's status and success should be determined by their merits, talents, and efforts, and not on their wealth, class, gender, or race. 
• Personal independence and individual accomplishments. 

What makes me sad is that many of the ideas that once made America exceptional now have to be defended in a way they never did before. The principles of liberty, limited government, free enterprise, and constitutional restraint have survived wars, depressions, and national crises over the past 250 years. I want those ideals to triumph both because they are morally just and because they create the most prosperity. Even so, I am less hopeful that those ideals can survive in this country for another 250 years. 

Elon Musk, the First Trillionaire: A Capitalist Success Story with Some Caveats

Just when you thought Elon Musk could not have gotten any richer, he announced the initial public offering (IPO) of SpaceX, an aerospace manufacturing company. The SpaceX shares combined with Tesla made Musk the world's first trillionaire. 

There were those, particularly on the Left, flipping out. The Institute for Policy Studies called it a dark day for democracy. Senator Elizabeth Warren decried it while making a call for a wealth tax, which is a bad idea. Senator Bernie Sanders thought it was absurd and pitched the idea of removing the cap on taxable income for Social Security. It is certainly a reminder that the income inequality debate is not dead, and neither is envy for success or rich people. 

Forget what I think about his missed opportunity to reduce government largesse with DOGE, the man's accomplishments are remarkable. He helped the foundations for PayPal, built Tesla into a transformative company, and founded SpaceX. If he is successful in making routine space travel possible, it would rank among one of the biggest entrepreneurial achievements in human history. 

More importantly, Musk is creating value. And that brings us to a point often lost in this discussion. Elon Musk is not sitting on a trillion dollars in cash. A net worth is not a bank account. It is largely an estimate of the value of investments, businesses, and other assets. 

Nor is he hoarding wealth. The economy is not a fixed pie in which one person's gain necessarily comes at another person's expense. Wealth is created through innovation, investment, and productivity. Musk's fortune reflects the belief of millions of investors that the companies he built have generated enormous value and may generate even more in the future. 

His rise to trillionaire status is a reminder of what can be accomplished through ideas, perseverance, risk-taking, and a market economy that allows individuals to create wealth on a massive scale. That being said, I would say that there are two important caveats. 

The first has to do with monetary policy. The Federal Reserve spend decades expanding the money supply and eroding the purchasing power of the dollar. One consequences has been rising asset prices, which in turn have produced ever-larger fortunes on paper. Musk unquestionably created wealth, but the emergence of the world's first trillionaire is less shocking given how much the dollar has devalued. 

The second has to do with the government subsidies, contracts, or regulatory breaks received by Musk's companies as evidence of unfair advantage. This argument often misses the broader institutional point. When the government has the authority to subsidize industries, grant tax advantages, and regulate entry into markets, it inevitably creates incentives for rent-seeking.

Musk's success is best understood not as the product of government intervention, but it cannot be understood as something that happened in a purely free market either. His success and value creation took place in a system in which markets remain the dominant engine of value creation, but also where political discretion occasionally distorted outcomes at the margins. 

Musk's story is one that took place in an economy with considerable rent-seeking and monetary expansion.  The story is less about whether anyone should be a trillionaire and more about the fact that propserity depends on sound money, competitive markets, and limits on political favoritism. 

Another Reason to Dislike Obamacare: Fraud Rates Costing Taxpayers As Much As $25B a Year

Remember back nearly two decades when the Affordable Care Act, also known as Obamacare, was meant to expand coverage and lower costs? Guess what it ended up doing instead? Far from delivering on its promises, premiums and deductibles remained high, insurer competition was weakened, and Congress continues to spend money. 

As if those shortcomings weren't enough, a new study from the Paragon Health Institute suggests Obamacare may suffer from another serious problem: large-scale enrollment fraud and improper subsidy payments.

The Paragon Institute estimates that approximately 6.2 million people enrolled in Obamacare may be improperly receiving subsidized insurance, which accounts for can account for as much as one-quarter of total exchange enrollment. In fiscal terms, the report argues this could translate into as much as $20–25 billion in annual improper federal subsidy spending, depending on assumptions about eligibility verification and income reporting accuracy.

These issues are not coincidental; they are structural. First, eligibility for subsidies is heavily dependent on self-reported income, which is often based on projections as opposed to verified real-time earnings. This creates natural friction between reported income at the time of enrollment and actual income over the course of the year, especially for workers with variable earnings, gig income, or fluctuating hours.

Second, the system relies on delayed verification and post-enrollment reconciliation instead of strict upfront screening. This means discrepancies may not be corrected until after coverage has already been granted and subsidies disbursed.

Third, the growth of third-party brokers and automated enrollment platforms has increased the number of intermediaries involved in sign-ups. While many operate legitimately, the report argues that commission-based compensation tied to enrollment volume can weaken incentives for careful eligibility verification.

Finally, automatic re-enrollment mechanisms can allow previously enrolled individuals to remain in coverage even if their eligibility status has changed and was never fully rechecked.

This gets into a debate about how estimates of improper ACA enrollment vary widely depending on how “error” is defined and how aggressively small discrepancies are extrapolated across the full exchange population. Federal auditors like the Centers for Medicare & Medicaid Services and the Government Accountability Office generally focus on confirmed, verifiable errors, which tend to produce lower, single-digit to low-teens estimates.

Higher-end estimates, on the other hand, attempt to capture what those same processes are likely to miss when eligibility is based on self-reporting, delayed verification, and automatic renewal. Put simply, the lower estimates only measure what the system catches and acts as a low-bound estimate. The higher estimate is more plausible because it attempts to measure the full scale of eligibility drift.

Enrollment is frequently cited as evidence of the Obamacare’s success, but it is an incomplete metric. It captures participation in the system, not the accuracy or stability of that participation. In a framework built on self-reported eligibility, delayed verification, and automatic renewal, enrollment can rise even as underlying errors persist. The Paragon Institute’s findings highlight how large those gaps may be at scale.

The latest evidence on enrollment and subsidy error does not stand alone. It reinforces a longer pattern of structural problems that have followed the ACA since its inception, much like I pointed out in my 2017 piece listing 15 reasons we should all dislike Obamacare. Whether it is fraud rates, higher premiums, or fewer options, this latest Paragon Health report is a sobering reminder of why Obamacare should never have existed in the first place and how the American people are still paying for this boondoggle.

Illinois Finds Yet Another Ineffective Way to Raise Revenue by Implementing a Social Media Tax

Illinois' spending problems are nothing new, but how the Illinois General Assembly handles it is. Earlier this month, Illinois passed a new social media tax to help fund its proposed $56 billion budget. Platforms with 100,000 to 500,000 "Illinois users" will have to pay $0.10 per user each month; platforms with 500,000 to 1 million "shall pay $40,000, plus $0.25 per month" per user; and platforms with over 1 million users will pay $165,000, plus $0.50 per user, each month on the number of users over 1 million. 

Aside from dealing with budgetary issues, some view this tax as paying "its fair share." Some might view this as a fair and just tax. In practice, this is a complex, legally fraught tax that will cause all sorts of headache. 

Let's start with the first problem, one addressed by the Tax Foundation: no one seems to know what exactly is being taxed. For starters, what is a user? Is a user a person or an account? If a person has multiple accounts on the same social media platform, does each account constitute a separate user, or is the person one user? 

Then there is the question of whether someone with accounts on multiple platforms is taxed separately. What about who constitutes as an Illinois user? What happens if you are visiting from outside of Illinois temporarily? And what constitutes an Illinois user from whom a platform collects data? When lawmakers cannot clearly explain what is being taxed, businesses cannot reliably comply and taxpayers cannot hold government accountable.

Traditionally, governments have imposed special taxes on products that they regard as socially undesirable. Cigarettes have long been subject to punitive taxes. More recently, politicians have advocated taxes on sugary drinks, unhealthy foods, and other products they believe people consume too much of.

Instead of taxing economic activity neutrally, Illinois has singled out a particular industry for unique taxation. The state is effectively saying that because social media companies are viewed as problematic, they should bear additional financial burdens.

This approach suffers from the same flaw that afflicts most sin taxes. It substitutes political judgments for sound tax policy. Whether one believes social media has positive or negative effects is beside the point. Tax systems should raise revenue in the least distortive manner possible. They should not be designed to reward favored industries and punish disfavored ones.

One of the most troubling aspects of the social media tax debate is how quickly constitutional concerns are dismissed. Many people dislike social media companies, but constitutional protections do not vanish simply because the target lacks public sympathy.

The First Amendment issue is particularly significant. Social media platforms have become central venues for political discussion, news dissemination, and public debate. When government imposes a special tax on a particular category of communications platform, courts may reasonably ask whether the state is burdening speech-related activity in a manner that raises constitutional concerns.

The tax also raises questions under the Commerce Clause. Social media companies serve users across state lines, and internet activity rarely respects geographic boundaries. If Illinois can impose a unique tax based on user activity within the state, other states may adopt competing systems that subject the same activity to multiple layers of taxation.

Illinois’ social media tax is not really about social media. It is about a state government that has become structurally dependent on finding new revenue sources to support an ever-expanding set of spending commitments.

The problem is not that Illinois lacks creativity in taxation. The problem is that it rarely shows restraint in spending. When budgets become tight, the solution is rarely reform or prioritization. Instead, lawmakers turn to new, narrowly targeted taxes that are politically easier to justify than broader fiscal discipline. Matters end up being even worse when the tax is poorly defined and designed.

That pattern has consequences. Targeted taxes on unpopular industries may be politically convenient, but they do little to address the underlying fiscal imbalance. Worse, they risk creating a tax system that is increasingly fragmented, unstable, and vulnerable to legal challenge.

Social media companies may be unpopular today, just as smoking, fatty foods, and sodas have been in other political moments. But fiscal policy built on shifting political fashions is not a substitute for structural reform. Illinois does not need more inventive taxes. It requires a serious conversation about the scale and scope of government itself.

Social Security’s 2032 Cliff: The Countdown That Congress Would Prefer to Ignore

Social Security is an insolvent and unsustainable retirement program. That much I wrote about last year during Social Security's 90th anniversary. It has become that much more apparent with the latest Trustees Report that was released earlier this week. The big finding from that report is that the retirement benefits, under the Old-Age and Survivors Insurance (OASI), is set to expire at the end of 2032. This is one year sooner than was projected last year. 

Why was this deadline accelerated? To quote the Peter G. Peterson Foundation, "Legislation includes the January 2025 passage of the Social Security Fairness Act that repealed the Windfall Elimination Provision and the Government Pension Offset, and the July 2025 One Big Beautiful Bill Act that expanded the income tax deduction for seniors. The former legislation increases program outlays, while the latter decreases revenues." 

What does this mean once the Trust Fund is depleted? All beneficiaries regardless of age, income, or need will see their benefits slashed by 22 percent. This decrease in benefits is to allow Social Security to keep going for the next 75 years. But here's the thing: even after the depletion of the Trust Fund, "Social Security will still spend more than it earns in payroll tax revenue. Over the next decade, Social Security will spend $3.8 trillion more than it collects, which is 2.7 percent of taxable payroll or 0.9 percent of GDP." 

Additionally, lower fertility and lower immigration are both contributing to Social Security's deteriorating state. The Cato Institute argues that the Social Security Administration is being overly optimistic on their fertility rate assumptions, which creates rosier financial projections for Social Security.

The Trustees Report reinforces a familiar but uncomfortable reality: Social Security’s imbalance is no longer marginal. Even after the Trust Fund is depleted, the program is projected to spend trillions more than it collects over the following decade.

What makes this particularly consequential is that the system does not gradually adjust as insolvency approaches. It waits, then it cuts. That design choice means policymakers are not managing a slow-moving problem. They are managing a countdown. 

In that sense, the choice facing policymakers is not whether Social Security will change, but whether change will be deliberate or forced. And the window for choosing the former is closing.

When Housing Meets Immigration: Is the Swiss Referendum Capping Its Population Asking the Wrong Question?

Next week, Swiss voters are going to head to the ballot box to decide whether to cap the Swiss population at 10 million by 2050. Supporters of immigration caps can often be presented as Far Right, fearful, and parochial. I have felt this way in a U.S. context. But then I have to remind myself that the U.S. and Switzerland have two different contexts. Switzerland does not even have the integration issues that many of its European neighbors have. This is in part that Switzerland is able to integrate its immigrants better because they mainly come from countries like France, Italy, and Germany. Although the primer on the initiative lists Islamic culture as a reason, the main reasons for the Swiss ballot is a combination of housing and infrastructure strain.

In 2014, I expressed concerns about a similar Swiss referendum for a quota on immigration. Switzerland's immigration quota was a self-defeating policy because immigration is driven by labor demand and it is empirically shown to strengthen employment and economic performance. Less immigration means less economic output and less revenue. 

But I keep coming back to the housing component. In the United States, J.D. Vance wrongfully blamed housing affordability on immigrants. In the U.S. case, it is true that immigrants consume housing, but they also disproportionately build housing, so much so that stifling off the construction labor with strict immigration policy makes matters worse. I cannot help but think that something similar is going on here. It seems like Switzerland is trying to solve a housing problem with immigration policy. 

On the one hand, Zurich has made strides by boosting housing supply by 9 percent with upzoning. On the other hand, only land inside designated "building zones' can be developed, and done so over a 15-year demand rule (Swiss Spatial Planning Act [RPG], Article 15). The RPG also has agricultural zoning laws that further limit sprawl (Art. 16) to construct more housing. On top of that, each canton has their own zoning regulations and permitting rules that get in the way of housing construction. 

The Swiss case against immigration is not reactionary restrictionism. Switzerland faces housing and infrastructure strains. At the same time, Swiss housing scarcity is not occurring in a vacuum. The land use restrictions, zoning regulations, and permitting laws fundamentally limit Switzerland's housing supply. If this referendum passes, Switzerland will be treating a housing supply problem as a population problem, and will be doing so to its own detriment. 

The Retirement of the RCP8.5: Why Apocalyptic Modeling Should Not Dictate Climate Change Policy

While I was on vacation in Portugal last month, I really made sure I wasn't paying attention to politics or the media circus. One of those moments that I missed around that time was this post from President Trump:

It was in reference to some recent news about climate change modeling. In its 2014 Intergovernmental Panel on Climate Change (IPCC) report, the United Nations prepared four main scenarios. The gloomiest of these scenarios was the RCP8.5 scenario. 

In late April of this year, the IPCC retired the RCP8.5 scenario as a plausible future emissions pathway. There are those who believe, including the authors of the IPCC paper, that this is being scrapped because there has been enough progress with climate change policy intervention to merit its retirement. I did not buy in 2018 that the RCP8.5 scenario was plausible back then. 

American Enterprise Institute scholar Roger Pielke, Jr. and Competitive Enterprise Institute scholar Marlo Lewis Jr. explain why the scenario was never plausible to begin with. For one, coal production would have had to implausibly increase by 900 percent and become the predominant form of energy, which is peculiar given that coal was already declining as a form of energy in the 2010s. The RCP8.5 also assumed that the population would reach 12 billion, which is a far cry from the 10.2 billion that is projected. And the idea that low-income countries would stay considerably poorer than other countries? Then there are the assumptions of unabated fossil fuel use and no negative emissions technologies. 

The problem here was not mere theoretical modeling for its own sake. As this article from Carbon Brief details, RCP8.5 was treated as a "business as usual" and likely outcome when it came to climate change policy and activism. At best, it was meant to be an upper-bound, highly improbable stress test. When such scenarios are used as a baseline, they exaggerate projections of future warming and damages. 

This exaggeration leads to a form of policy overcorrection, and results in regulatory and fiscal responses that are larger, faster, and more intrusive than would be justified if a more accurate model were being used. That is how we get such policies as emission standards for electric vehicles, gas stove bans, carbon capture & sequestration mandates, and energy efficiency standards.

Trying to prevent a scenario that is essentially not going to happen is a waste of money, time, and resources. If we are basing policy on false assumptions, it means that we cannot begin to understand the costs and benefits of each policy decision. As we learned during the COVID pandemic, a miscalibration at that scale is a form of harm in which the cure is worse than the disease. Retiring RCP8.5 is a "better late than never" moment, but this whole debate acts as a reminder that we should let skepticism be at the helm of energy and climate policy instead of hyperbole and alarmism. 

7-3-2026 Addendum: If you want a detailed analysis on why the RCP8.5 was an extreme, unrealistic model, Competitive Enterprise Institute Senior Fellow Marlo Lewis Jr. provides a detailed description in Part I and Part II of his series on the RCP8.5 model.

Portugal's Economic Recovery Looks Real, But So Do the Warning Signs of Another Crisis

Last week, I went on a lovely trip to Portugal. I went cycling and surfing. I tried the extreme sport of coasteering for the first time. I got to try pastel de nata, bacalhau, and frango piri-piri. Being there for a week, I got notice the way things work, from public transportation and work ethic to housing and health care. 

Then you learn things like Portugal needed a €78 billion bailout during the eurozone crisis last decade. In response, Portugal was able to reduce its deficit spending and close the gap on its bond spreads with fiscal restraint. The Organization of Economic Co-operation and Development (OECD) recently called Portugal's fiscal performance "among the strongest in the OECD and the Euro Area in the past few years." Continued debt reduction, disciplined budgets, strong nominal GDP growth all help explain why both Fitch's and Standard & Poor's have a positive outlook for Portugal. 

These are certainly reasons to be hopeful. Yet there are some concerns about the Portuguese economy:

• Portugal has a birth rate of 1.4, which is well below the replacement rate of 2.1. 
• Portugal is the third country in Europe with the lowest proportion of young people, which makes it more difficult to pay for social programs and to keep the economy growing with a stable labor force. 
• A study from the University of Lisbon reminds us that brain drain is compounding these effects. Up to 40 percent of Portugal's graduates emigrate to other countries.
• A recent report from the European Commission found that Portugal has the most overvalued housing prices, which makes it that much more difficult for everyday Portuguese citizens to afford housing.
• If the conflict in the Middle East is prolonged, it could weaken economic growth and exacerbate inflation for Portugal. 

Portugal does not fit neatly into an optimistic or pessimistic narrative. On the one hand, Portugal has made impressive fiscal strides since requiring a bailout just over a decade ago. Compared to some larger European economies, Portugal's fiscal trajectory actually looks relatively disciplined. 

On the other hand, strong tourism, balanced budgets, and improved credit ratings do not solve deeper structural problems. Low birth rates, emigration of educated workers, and housing affordability issues could create significant economic pressures in the years ahead. Portugal seems to have escaped one crisis while gradually wading into another one. 

Trump's Golden Dome Is More Costly Than Simply Not Striking Gold

There is something alluring about the idea of a "Golden Dome": a single, encompassing shield that can render a nation like the United States untouchable. Missile defense systems have long made that psychological appeal that enough technology can be a security risk and neutralize all potential risks. Similar to Reagan's "Star Wars" initiative, the result is a cycle of ambition, technical constraints, and spiraling costs. The question is whether Trump's Golden Dome is a sincere military strategy or a political blunder wrapped in a security blanket. 

Trump's recent "Golden Dome" proposal is a multilayered missile defense system intended to shield the U.S. from ballistic, hypersonic, cruise, and potentially space-launched missiles. The most controversial part of this proposal is thinking about missile defense from space because it would place interceptors in orbit. The idea is to technologically be at the cutting edge while expanding the strategic military scope of the United States.

There are a few reasons to question the proposal, one of them being technological feasibility. As the Cato Institute points out in its Golden Dome analysis, this proposal is based on Israel's Iron Dome. Israel only has to worry about covering 8,500 square miles, as opposed to the U.S.' 3.8 million square miles. Also, ballistic missiles are much more difficult to intercept than short-ranged missiles, which is noteworthy because the U.S. would be more likely to be attacked by long-range missiles. 

Furthermore, this report from the American Physical Society details how defending a country even from a few ballistic missiles is a challenge due to timing and geometry limits, as well as the ability for a defense system to discriminate the warhead from the rest of the "threat cloud." Once a missile is launched, a defender only has minutes to track, detect, and intercept the missile. Even under highly simplified scenarios, reliability drops quickly as the number of missiles increases. The challenge is developing a system at scale.

Even if proponents were to bypass the physical limitations, there is the issue of the price tag. According to a recent report from the Congressional Budget Office (CBO), this system will cost $1.2 trillion over a 20-year period, an amount significantly higher than Trump's estimated $175 billion. In terms of composition, up to $540 billion of that $1.2 trillion is due to the deployment and operation of the space-based interceptors.

The price tag also begs the question about opportunity cost. A trillion-dollar-plus commitment to missile defense necessarily crowds out other investments, including conventional force readiness, cyber defense, or a call towards greater fiscal restraint from the government more generally. This goes beyond the actual price tag. It is a question of whether such a large investment is justifiable given other priorities. 

Aside from the costs, a core issue that such a system might actually provoke adversaries to escalate their military behavior. As the Cato Institute argues, the U.S. upping its interception architecture could incentivize other countries to expand missile inventories, more sophisticated decoys, or systems that would be designed to saturate and overwhelm the U.S.' missile system.

We already have seen this escalatory spiral take place. The situation between the U.S. and the USSR became so destabilizing during the Cold War that they needed to create the Anti-Ballistic Missile Treaty of 1972. Similarly, MERV development and Reagan's Star Wars initiative also escalated tensions rather than de-escalating. History "dealt" with these issues through arms control agreements and strategic stabilization to counter the escalatory nature of enhanced defense systems. 

The Golden Dome tries to soothe people by promising the promise that enough technology can help avoid all risk. However, such promises provide a false sense that we can avoid all risk, much like during the COVID pandemic. The truth is that the Golden Dome cannot override the physical limitations, the absurdly high costs, and the escalation dynamics. A golden dome may project strength, but projection is not the same thing as protection of the American people. 

It Would Be a Gas If Trump Took the Fast Lane and Eliminated the Gas Tax

Every few years, when gas prices get high enough to be politically dangerous, politicians "discover" the idea of a gas tax holiday. Senator John McCain proposed it in 2008, President Joe Biden in 2022, and now President Donald Trump this week. It is peculiar to have politicians tacitly admit that high taxes harm consumers, but I will set aside that irony. Nevertheless, it does set an uncomfortable question: If temporarily suspending the tax would help consumers, why should the tax exist in the first place?

After all, nobody proposes a hiatus from something that is harmless or helpful. The very existence of multiple calls for a gas tax holiday should give us good reason to pause. Much like emergency waivers of the Jones Act after natural disasters, gas tax holidays inadvertently expose the hidden costs of a policy that politicians generally insist is reasonable. 

Before delving into issues about the gas tax, it would be worth noting that the gas tax is 18.4 cents per gallon, which will not do that much to alleviate the average cost of a gallon, which is $4.50. Now let's get into the main issue of its regressive nature, meaning that it takes a larger share of income from lower-income households than from higher-income ones. That is hardly a surprise for a consumption tax tied to a necessity like transportation fuel. For many Americans, driving is a price of participating in the labor market. 

The burden is uneven because transportation is not evenly substitutable. Higher-income households are more likely to have flexible work arrangements, shorter commutes, and/or access to multiple modes of transportation. Conversely, lower-income households are more likely to rely on older vehicles, need to take longer commutes, and have jobs that require physical presence. Rural commuters similarly have constraints, whether with longer baseline distances or fewer substitutes for automobile travel. 

The broader economic problems with the gas tax are longstanding. I previously examined its inefficiencies in detail, including its distortion of transportation choices, weak alignment with actual road usage, and broader market-side effects. Much like the Cato Institute argues, this is why state governments should  meet their infrastructure needs instead of the federal government.

The recurring gas tax holiday debate implicitly admits that the tax is burdensome. The question should be what to replace the federal gas tax with. States could implement their own, especially since most roads are not federally owned. But greater fuel efficiency and higher prevalence of electric vehicles is making the gas tax more passé. There is the option of mile-based user fees, as well as a "quant" framework that accounts for usage. Regardless of what it is replaced with, one thing is for certain: it is difficult to call a gas tax "necessary infrastructure funding" when it regularly needs a vacation to survive public opinion. 

You Can't Deport Supply and Demand: How ICE Enforcement Contributes to Labor Shortages

For years, advocates of mass deportation insisted that aggressive immigration enforcement would strengthen the economy and help natives born in the U.S. find a job. The theory is that you remove enough workers, somehow businesses, customers, and local economies adjust without any pain. Beyond this political rhetoric begs an important empirical question: what actually happens to labor markets when Immigrant and Custom Enforcement (ICE) enforcement increases? Is ICE actually making the labor market better? A recent paper from the National Economic Bureau of Research (NBER) using data from areas affected by immigration raids and related enforcement policies. 

Instead of relying on simple "before-and-after" comparisons, the author of this NBER paper use regional differences in ICE enforcement to examine how labor market outcomes diverged over time. One of the big conclusions is that greater ICE enforcement led to less employment for undocumented workers. But the effects did not stop there. The study found little evidence that this enforcement helped native workers. Meanwhile, businesses with immigrant-heavy sectors experienced labor shortages and operational disruption. The fact that this study compared changes across regions, as opposed to simple national trends, provides a stronger analysis than a basic correlation analysis.  

Broader economic literature on immigration explains why this NBER study's findings are unsurprising. Despite the political rhetoric of immigrants taking jobs from native-born workers, economists have found very little evidence that immigration substantially reduces native employment overall. If that claim were true, we would have seen ICE enforcement generate clear increases in employment opportunities for native workers. Yet no such clear increase emerged in the study. As a matter of fact, the study points toward labor-market disruption and spillover effects. 

That is because the economy is not a fixed pie. Economic literature already indicates that immigrants are often complements rather than simple substitutes for native labor. In industries such as housing construction, hospitality, agriculture, and food processing, different categories of workers frequently depend on one another to maintain production. Removing that part of the workforce can and does reduce productivity and labor demand elsewhere in the economy. 

There is also evidence that immigrant workers can increase wages for native workers. That is because immigrants are not only workers competing for jobs. They are also consumers, renters, entrepreneurs, and customers. When policymakers treat the labor market like a fixed pie, they ignore this high level of interconnectedness. 

It is that level of interdependence that makes these findings unexpected. Large-scale immigration enforcement acts as a supply shock. That shock propagates throughout supply chains and affects firms, consumers, and workers beyond the targeted population of the mass deportation. The fact that the pro-mass deportation argument is based in a simplistic view of the economy is part of why I was against mass deportation in 2024. 

None of this determines the question of how much immigration enforcement is appropriate. What it does show is that mass deportation is not costless or uniformly beneficial. While "deport them and it will work out" is a snazzy political slogan, it still does not repeal arithmetic or basic laws of economics.

Grounded by Government: How Blocking a Merger Helped Sink Spirit Airlines

Last Saturday, Spirit Airlines announced that it is shutting down its doors. Some were treating this bankruptcy as if it came out of nowhere or it were simply an issue of a poor business model. It is true that there are businesses that go under because they made poor life choices. With Spirit, however, the beginning of its demise was made with a key decision well before last Saturday. 

The earlier decision did not happen in Spirit Airlines' boardroom or from the fact that Trump decided not to bail out Spirit (which would have been a terrible idea), but in Washington. Starting in 2022, Spirit Airlines and JetBlue attempted to merge. But Senator Elizabeth Warren (D-MA) wouldn't have any of that. She led the charge that would ultimately block the merger in 2024. The argument used was that Spirit needed to remain independent to maintain a competitive market in what a concentrated market. 

Warren thought she was helping Spirit, but was in fact hurting it. Why? Because she had a static view of how the market worked. She thought the main factor for competition was the number of firms. But in a capital-intensive market like the airline market, there are times when mergers can help make the market more competitive. 

When firms are structurally fragile as was the case with Spirit, consolidation can be a way to stabilize capacity, preserve service networks, and sustain price discipline over time. By focusing on firm count instead of capacity (e.g., routes, seats, financial viability), the policy gave the appearance of preserving competition. In practice, Spirit and JetBlue were less equipped to compete in the market while further solidifying the market concentration of the big four airlines: American, Delta, Southwest, and United.

If Spirit and JetBlue were able to merge, they would have created a larger and more financially resilient airline in the low-cost segment of the market. In industries like aviation, fixed costs are high and margins are thin. Scale can be the difference between restructuring to grow and failure. But Spirit and JetBlue were not given that opportunity to become a strong mid-tier competitor. 

Spirit's employee count went from 11,331 employees in 2024 to 7,482 employees in 2025 before it went under. That decline reflects more than normal business cycles. It signals a firm in financial distress heading toward bankruptcy that could have been saved had it had the chance to merge. As Spirit's revenue weakened and restructuring pressures mounted, the airline reduced capacity, scaled back operations, and cut labor costs to stay afloat. Yet that was not enough to save Spirit. 

While Spirit's ultimate demise is the most visible part of this unnecessary demise, the effects on JetBlue are still important. Without the merger, JetBlue was unable to expand. It remained in a constrained capacity focused on cost constraints and modest route expansion. In a capital-intensive industry, the absence of economies of scale shaped JetBlue's long-term competitiveness. 

These firm-level decisions also made their way downstream. Changes in route activity affect airport activity, especially those who relied on these low-cost routes. Tourism flows are expected to feel a hit, especially those leisure-heavy destinations. This all affects airport revenue, local travel demand, and the availability of affordable travel destinations for travelers. 

There is a broader lesson to be had. Look at Dodd-Frank's "too big to fail" approach. It was supposed preserve competition and market stability. Instead, smaller banks exited at larger rates, the number of new banks declined substantially, and larger banks increased their market share through consolidation. Instead of playing by the regulators' rules, markets adapt in a way that often benefits that largest market players. In retail and tech, the government had similar impulses of "the size of the firm matters" when blocking the Albertsons-Kroger merger and scrutinizing whether Amazon was a monopoly. 

The airline industry was no exception. Spirit and JetBlue had a chance to be a better contender in the airlines market. Instead, the government stepped in to help in the name of "market protection" and ended up making the market less competitive. The deeper question is whether this "government knows best" model can meaningfully help if they misread the dynamic, evolving nature of markets. In case we did not have enough examples, Spirit Airlines is another casualty to remind us that the answer to that question is a resounding "No!"

Hotter Doesn't Always Mean Worse: The Value of Healthy Skepticism Towards Climate Change Activism

A senior fellow from the American Enterprise Institute, Roger Pielke Jr., took aim at climate change economics. It was not enough for Pielke to point to a redacted paper that claimed doing nothing with climate change would cause a whopping $38 trillion in damage. Keep in mind that this paper was quite influential in climate change policy, much like Neil Ferguson's COVID lockdown model was an abject failure. Pielke pointed out a recent study from the University of Wyoming entitled The Empirically Inscrutable Climate-Economy Relationship.

Why does this new study come with an inconvenient truth? Most climate change activists do not simply say that global temperatures are increasing. They posit that each increase in global temperature means that it will produce immeasurable harm. It is from this assumption that you get policy suggestions like Net Zero or the Paris Agreement. A lot of climate change modeling translates temperature into dollar losses. The problem, as this new study details, is that it is based on shaky ground. 

There are countries out there that have similar temperatures and affluences. The authors point to El Salvador and Iraq as examples to remind us that there are a number of confounding factors that influence economic growth beyond temperature: institutions, education, technology, trade, and culture. Certain adaptations also change the relationship to heat, including air conditioning, crop switching, migration, and infrastructure changes. It means climate change scientists are trying to estimate a moving target, not a stable law. 

This does not even get into the fact that reliable economic data goes back only a few decades, especially for more developing countries. The problem is not only with imperfect data. It is impossible to isolate temperature as the sole factor, which makes the house of climate change economics built on quicksand. 

Is this to say that climate change is a hoax? No, it does not. To quote Mercatus Center scholar Jack Salmon, "they [the authors of the study] are not claiming that climate change is harmless or that reducing emissions lacks value. The existence of a negative carbon eternality remains well-established. What they are challenging is the confidence with which economists, and especially policymakers, treat specific numerical estimates of climate change."

Good policy is supposed to weigh the costs and benefits. However, if the benefits of avoided damage is highly uncertain, model-dependent, and sensitive to assumptions, as is the case with climate change economics, then you cannot reliably say that a given policy is worthwhile. 

Does it sound familiar? We dealt with this during the COVID pandemic. Lockdown Lovers kept forcing lockdowns down our throats during the pandemic. They claimed that skepticism of the lockdowns meant that you wanted Granny dead. How did that weaponization of kindness turn out? You can read more here, but it meant trillions in economic damage, causing even more health problems than the lockdown solved, and helping society writ large take a nosedive. 

What does that mean for climate policy? If this core relationship between temperature and economic output is fragile, then the foundation for confident, large-scale climate policy like carbon taxes, cap-and-trade, or energy-efficiency mandates is tenuous. 

This does not mean we should do nothing. It means getting off the moral high horse and stopping virtue-signaling the fake certainty. It means injecting a little humility into the conversation. After all, we have seen this movie play out with the COVID pandemic. Uncertain models get translated into certain policy prescriptions, dissent gets quashed, and tradeoffs get shunted to the side because it is too inconvenient to address. 

The sad irony is that the more uncertain the underlying assumptions become, the more confident climate change activists come in with sweeping mandates and regulations. What emerges is not better policy, but simply more confidence where it becomes less and less defensible. But don't worry. We're still told to "follow the science."

Why Trump's $500M Bailout of Spirit Airlines Won't Make Air Travel Great Again

Flying Spirit Airlines has come with the philosophy of "you get the lowest fare possible, and everything else costs extra." That is not merely a pricing model. Apparently, it has been the government's way of doing business lately. The government promises it won't cost that much, it hides the true costs, and when the system fails (as it often does), tack on extra costs in the form of subsidies, tax credits, bailouts, and "emergency" spending. President Trump's proposal to bail out Spirit Airlines is not an anomaly. It would be another line item in a very long balance sheet of the U.S. federal government. 

I think the first point to mention is that we would not be in this mess if the government did not intervene in the first place. Spirit Airlines was looking to merge with Jet Blue in 2024. But guess what happened? The Biden administration led the initiative to ultimately block the merger. American Action Forum President Douglas Holtz-Eakin said that there were already private-sector solutions of mergers or bankruptcy. A bailout is not necessary. 

More than being unnecessary, it harms the airline industry. As Competitive Enterprise Institute Director of Technology & Innovation Jessica Melugin reminds us, blocking the merger of smaller competitors to scale up when the industry is dominated by four major airlines makes little sense. CEI Policy Analyst Steve Swedberg details how the airline industry is suffering from a lack of competition and how competition helps keep the airline industry thriving instead of stagnating. All this bailout would do is have the airline industry flounder while making sure the Big Four (Delta, American, United, and Southwest) maintain their 70-plus-percent market share over the industry. 

As Holtz-Eakin is right to mention, this is reminiscent of the Soviet Union. Trump is using the power of the state to allocate capital. It does not take much imagination to see how political interference could get in the way of Spirit's management and operational decisions. 

Senior Fellow John Berlau points out, this sort of bailout creates a moral hazard because it incentivizes companies like Spirit Airlines to take excessive risks. Why should the taxpayers have to pay to bail out a failing airline, especially when there are other remedies available? This won't stop at Spirit. As a matter of fact, Frontier and Avelo are already seeking $2.5 billion in bailouts, as well. 

Cato Institute policy scholar Ted DeHaven illustrates how the Defense Production Act (DPA) angle to provide this Spirit bailout borders on the absurd. DPA is aimed at reducing shortfalls in goods essential to national defense. This is the Trump administration pursuing a bailout under the guise of bailouts, much like it has pursued tariffs on trucks and furniture under a flimsy national security argument. At least with other bailouts that I did not agree with, there was at least an argument of systemic risk. There is no such pretext. It is simply a first step towards greater nationalization of the airline industry. 

Strip away the rhetoric and the proposal is hard to justify on any grounds. The government creates the conditions for Spirit's instability, blocks private-sector measures to remedy it, and comes in to "fix" the problem that it caused in the first place. This decision distorts competitive markets, rewards risky behavior, and invites a litany of companies to beg for a handout and corporate welfare in the name of "national security." 

The bailout is not a solution. It merely masks an issue while expecting the taxpayers to clean up the mess. If a company is not doing well, it should be allowed to fail. If it wants to stay alive, that is what bankruptcy, restructuring, and acquisition are there for. The state is blocking voluntary exchange while preventing firms from adapting. It is a sober reminder that it does not matter who is in the White House. The underlying hubristic assumption is the same: the government can outguess the markets and improve upon an economic system that is second to none. 

Spirit Airlines has to earn your business. If it succumbs to incompetence, at least it costs them customers. It is worse with government because Spirit Airlines at least asks for your consent before charging you. Washington just reaches deeper in your wallet, keeps billing you for inane ideas like bailing out Spirit Airlines, and calls it reform. What ever happened to making airlines great again?