Europe's Asylum Dilemma and Why Return Hubs Are a Second-Best Immigration Policy

I have spent a lot of time here at Libertarian Jew discussing immigration policy. In concept, I believe that immigration should work more like free trade: people moving across borders, creating value, and making both sides better off through voluntary exchange. In a U.S.-specific context, I still believe in that ideal that immigration is welfare-enhancing. However, that framework is not unconditional or universal. I have serious reservations about that ideal with regards to Europe because of what is observable in that part of the world. I examined this topic of integrating immigrants in Europe at length last December. 

What I discussed in December were a few things. One was that the influx of Muslim immigrants that hold illiberal views can and will shape how voter preferences shape state power in Europe. The second aspect is describing how the U.S. has better capabilities to integrate its immigrants than Europe, whether that is due to institutional, linguistic, economic, or cultural reasons. When these factors of immigrant culture, weak integration of immigrants, political backlash, economic & labor market rigidity, and lax immigration enforcement collide, it is unsurprising that there is considerable tension in Europe. 

This tension in Europe represents a scenario in which conditions are considerably more constrained. In response to that tension, European lawmakers voted for a proposal late last month to deport rejected asylum seekers to return hubs outside of the European Union. Although not official law, this vote in March overcame a major legal hurdle. While awaiting official enactment, five countries (Germany, the Netherlands, Austria, Denmark, and Greece) are already negotiating pilot arrangements outside of the EU framework. 

This is understandable given the context. Before continuing, I want to say that return hubs are not the same as Trump wanting mass deportation, the latter of which I thought was a terrible idea. For the U.S. context, mass deportation has a high marginal cost because of how much it would need to expand to enforce, low marginal efficiency due to its scale, and the high disruption per unit enforcement. 

With Europe, the return hubs are not about mass deportation. The policy is targeted at asylum seekers that were rejected and decided not to leave. About 20 percent of rejected asylum seekers actually leave Europe. Given that there have been 7.4 million first-time asylum seekers from 2016 to 2025, 80 percent of people staying would mean about 5.9 million people staying. These return hubs be seen as a second-best by attempting to restore enforceability to an asylum system that has been de facto turned into open immigration to Europe.

I do have some concerns about whether this can work. The closest proxy we have to such a policy is Australia's offshoring process in which Australia intercepted asylum seekers at sea and forcibly transfer them to Nauru and Papua New Guinea. It might not have turned out so well. Aside from being costly and violating human rights, it did not necessarily deter asylum seekers, especially after looking at the numbers of arrivals. The Australian case is more border control, whereas in this European case, they have already arrived and might have settled down in Europe. 

I understand the political impetus for this asylum policy, which is why this will likely be part of Europe's approach to immigration more broadly. There has been a greater clash of civilizations between Europeans and immigrant communities. There has been an emergence of the Far Right in Europe, in no small part of Europe's general incapability to control migration. 

And when I say Far Right, I do not mean it like a stereotypical woke person does to insult anyone who disagrees with them. I am referring to a political right that is more nativist, nationalistic, and Euro-skeptic, especially relative to the center or moderate conservatives in Europe. Integration of immigrants is not taking place throughout much of Europe, and the political backlash and the emergence of anti-immigrant sentiment is showing, including through this push for return hubs. 

I personally believe that there are significant cultural and religious frictions that make integration of Muslim immigrants more difficult, if not downright impossible, and that is on top of the institutional constraints of European governments and markets. Whatever what one believes about long-term cultural compatibility, the overall policy direction in Europe indicates that many European countries are not willing to bet their future that these integration challenges are temporary or fixable. 

Irrespective of my take on the political dynamics throughout Europe, I think return hubs could function as a second-best option to the current restraints in the European asylum system. Return hubs operate at the post-adjudication stage. Completing removals makes the designation of "rejected asylum seeker" a meaningful legal endpoint. By externalizing processing arrangements, Europe can restore faith to a system where return enforcement is presently weak. Broadly, this does not reflect an ideal policy choice. It an adaptive institutional response given high migrant inflows, present low enforceability, and rising political backlash.

To reiterate, the European case study is not the same as the U.S. I previously made the case for letting in Afghan refugees in response to Biden pulling out of Afghanistan, and similarly did so for Syrian refugees coming to the U.S. My default belief is that migration can create significant economic and humanitarian gains when properly governed and managed. In Europe, however, there is institutional failure that has made lower-intensity enforcement of immigration law non-credible. Removal of rejected asylum seekers is the exception, not the norm, thereby making the European example one of system-level limitations. 

As much as I support the principle of allowing people to migrate and pursue a better life, the European experience is making it clear that a comprehensive immigration system is only as strong as its enforcement mechanisms. Without basic governance over boundaries, immigration becomes self-sabotage in the guise of compassion.

In Its Conversion "Therapy" Ruling, the Supreme Court Draws the Wrong Line in the Sand

Conversion "therapy" has long occupied a fraught space in public debate, and rightfully so. Historically, it referred exclusively to therapeutic efforts at changing an individual's sexual orientation. Many critics argued that not only they are ineffective, but they actively harm the patient. More recently, the term conversion "therapy" has expanded to include gender identity. Over the past decade, a growing number of states banned such practices for licensed therapists working with children. 

The Supreme Court threw a wrench in that approach. In a decisive 8-1 ruling, the Court struck down Colorado's conversion "therapy" ban, holding that even controversial or disfavored therapeutic conversations are protected by the First Amendment. In other words, the government does not get the ultimate say on what viewpoints a therapist is allowed to express. 

At first glance, this case seems like a familiar clash between freedom of speech and government regulation. Many are inclined to either view this simply as a free speech victory or a rollback of protections for vulnerable children, pick a side, and go on their merry way. Neither of these gets at the core issue here. The harder truth to accept is that this ruling lumped together two fundamentally different issues. Until those are disentangled, it will be hard to draw the line where it actually belongs. 

Stop Messing With Kids' Sexual Orientation

In 2018, I wrote about how conversion "therapy" was harmful for those trying to change sexual orientation. The research for sexual orientation-specific conversion "therapy" spans decades. Multiple studies, including the 2009 APA Task Force review and various retrospective reviews, show that the practice fails to change sexual orientation and is associated with such harms as depression, low self-esteem, and suicidal ideation. 

For minors, the state has a narrow, legitimate role in preventing harm. Just as we intervene in response to murder, fraud, arson, or assault, protecting children from conversion "therapy" is defensible, even under a libertarian framework. 

I have argued that adults should be allowed to make decisions I might not agree with, such as having children before marriage, entering a polygamous marriage, regularly smoking cigarettes, eating fast food daily, or not exercising. I also believe that as long as they are not harming anyone else, adults should make whatever decision, even if it harms themselves. Conversion "therapy" for an adult is not an exception. As for a minor, that is a whole different matter, as previously discussed.  

Gender Identity: Affirmation Isn't a Prescription

Unlike the decades of research on sexual orientation-specific conversion "therapy", the evidence base on gender identity-specific conversion therapy is much thinner and only goes back to 2018. Plus, many studies lump together sexual orientation and gender identity conversion "therapy," which means that research on gender identity-specific conversion "therapy" is scant. Meanwhile, the practices that so many call "affirming," whether that is social transitioning, puberty blockers, hormones, gender reassignment surgery, are experimental, risky, and often harmful:

• A Finnish study released just this week showed that transgender children have increased psychiatric morbidity as a result of gender reassignment surgery. 
• The Cass Review, which is the most comprehensive review on the subject, concluded that gender affirming medical interventions do not improve long-term outcomes, reduce suicide risk, or reliably address gender distress. 
• A long-term Dutch study found that over 80 percent of adolescents grow out of gender dysphoria by adulthood without intervention, which is to say that most adolescents who experienced gender dysphoria were never truly transgender to begin with. 
• England banned puberty blockers because they are shown to have some nasty side effects, like lower fertility, decreased bone density, deteriorating mental health, and a lower IQ.
• The American Society of Plastic Surgeons refused to endorse gender reassignment surgery because of insufficient evidence for long-term benefit, concerns about irreversible harm, and performing these procedures on developing bodies without clear, robust evidence. 

Here's an unpleasant truth. If gender "affirming" "medicine" is untested and harmful, then pressure to delay or question a minor's self-professed gender identity is not inherently evil. If anything, it is most likely a protective measure. Given that gender identity itself is conceptually incoherent, and medical interventions to affirm it carry real risk, withholding affirmation could plausibly spare children unnecessary harm. 

Protecting Children without the U.S. Becoming a Nanny State

Many of the Justices in this ruling framed this strictly as a First Amendment issue, claiming that the Colorado law was regulating speech based on viewpoint. If it were mere abstraction, I would wholeheartedly agree. Some might see my stance on conversion "therapy" in conflict with me defending abstract speech, such as opinions, insults, or political rhetoric. That apparent paradox dissolves once we recognize a core principle: speech is protected unless it is inseparable from conduct that reliably and objectively causes harm. 

Last year, I presented my case that words are not violence because abstract speech by itself does not cause objective harm. In 2018, I argued for the protection of hate speech because "hate speech" is often a cudgel for "opinion I dislike." I even argued for the First Amendment rights of pro-Palestine protesters protesting peacefully, which is quite the litmus test because I view them as the modern-day equivalent of Nazis. Where I drew the line with the pro-Palestine crowd was when their speech crossed over into the realm of harmful conduct. 

That concept applies here. Conversion "therapy" is not abstract speech or merely expressing an idea. It is a professional intervention in which a therapist uses speech as a tool with the goal of changing a child's sexual orientation. Even if conversion "therapy" has a component of speech, it is an embedded professional practice that has a direct, predictable record of causing harm. 

Conversion "therapy" is not the only scenario in which speech is a component of harmful conduct. With fraud, speech is inseparable from the act of taking someone's money under false pretenses. With direct threats and incitement, the harm is embedded into the speech itself. With perjury on the stand, the false statements can cause harm and legal or financial injury. Doctors or therapists giving advice or treatment that foreseeably harms clients is considered malpractice, and conversion "therapy" for sexual orientation falls under that category of malpractice.  

From a libertarian standpoint, this distinction is ultimately consistent. We protect words when they are abstract, subjective, and speculative in harm (which is the vast majority of words), but we allow narrow state intervention when speech is inseparable from predictable, harmful action. Regulating conversion "therapy" is not an attack on free expression. It is a principled defense of vulnerable children against a practice with a long-documented record of harm. At least for sexual orientation, it would sit comfortably alongside other recognized exceptions to the First Amendment.....if the Supreme Court ruled as such. 

The Wrong Line in the Sand

Instead, the Court chose to frame the case purely as a free speech issue while missing the crucial distinction between abstract expression and professional conduct that causes predictable harm. By choosing to protect conversion "therapy" for both sexual orientation and gender identity, the Court drew the wrong line when they should have drawn the line by protecting the speech for gender identity only.  

This decision has another dimension beyond the harm caused to children. It is a reflection of a broader problem in how LGBT discourse has evolved. By lumping sexual orientation together with gender identity in legal, social, and research contexts, the unique experiences and vulnerabilities of gay people ends up being overshadowed. The result is policies, rulings, and societal practices that leaves gay people more harmed, a concept I discussed in 2024 when arguing for the gay rights movement to divorce from the trans rights movement.

For sexual orientation-specific conversion "therapy," SCOTUS' ruling is a missed opportunity to defend minors while protecting libertarian principles, especially when it comes to the intersection of freedom of speech and the nonaggression axiom. It is a reminder that conflating distinct issues can have real-world implications for those who should, even under a libertarian framework, be protected. 

Bread Without Illusion: Rethinking Matzah and Pleasure on Passover

On the Jewish holiday of Passover (Pesach), Jews do something that seems backwards at first glance. To celebrate freedom, Jews do not have the most succulent of food available. Jews greatly constrict their dietary options by cutting out leavened products made from wheat, barley, rye, oats, or spelt. The term for these leavened products is chametz. Instead of eating these leavened products on Passover, Jews eat an unleavened bread called matzah. It is flat, dry, one or two steps above eating cardboard. It is a peculiar choice for celebrating freedom. It fulfills some of the roles of bread without feeling filling. Matzah is many things, but it is far from luxurious. 

An article from Rabbi David Kasher at Yeshivat Hadar about matzah touches on this point. R. Kasher said that matzah is almost an anti-bread, something that is not supposed to be enjoyable. My past experiences with matzah corroborate that there is some truth in that insight. R. Kasher also emphasizes that matzah is eaten because it is commandment (a mitzvah) and even links the word matzah to mitzvah. 

From this perspective, the focus is on obedience and symbolic meaning rather than enjoyment. While that framing captures part of the experience, it also presents a false choice: either eat the bread that is meaningful or the bread that is pleasurable. In fact, matzah can be both, but not because it denies pleasure altogether. 

Bread Without the Hype

Chametz is bread with ambition. It rises, it fills, and it projects abundance. It is, in a sense, a metaphor for ego: it amplifies our sense of fullness, of richness, of our sense of self. Passover throws us out of that paradigm. Matzah is flat, dense, and unpretentious. You can eat a lot and still feel hungry, or at least not overstuffed. By limiting ourselves to matzah for a week, we are recalibrating. We taste the difference between substance and show, between satisfaction and the false fullness of indulgence. We learn to enjoy without needing to swell, impress, or flatter the ego. 

The Ego Problem, Not the Appetite

R. Kasher's take of "matzah is not meant to be enjoyable" or that we do it because it is a commandment is not unique to him. It is one I have come across in the Jewish community numerous times. I found it to be problematic when he created a false dichotomy between doing mitzvahs or enjoying life. Judaism does not ask Jews to reject pleasure the same way you would find in some other world religions. It asks us to discipline it, to refine it, to sharpen it. Matzah reminds us that by temporarily limiting ourselves, we cultivate awareness, discernment, and depth. True freedom is not about mindless or frivolous indulgences, but the ability to make meaningful choices. 

The Joy of Enough

In Jewish tradition, another name of matzah is lechem oni (לחם עוני), which means the "bread of affliction" or the "poor man's bread." It sounds bleak at first, doesn't it? However, upon further examination, I believe it asks us a question about what richness is. We live in a world where material wealth, a prestigious and/or lucrative career, and fame are highly valued. The Sages (Pirke Avot 4:1) put it plainly: "Who is rich? The one who is satisfied with their lot." In a world that constantly sends us the message that we are lacking, whether through social comparison, advertisements, or the rat race, matzah reminds us that wealth is not about accumulation, but rather awareness and connection.

This lesson is not unique to Passover. Last Sukkot, I wrote about how sitting in the sukkah teaches a similar truth: simplicity can liberate us. Without distraction, we can learn what really matters: humility, gratitude, connection, and meaning. Matzah does not extract that pleasure. It teaches us to recognize and bask in the richness already in front of us, and to do so while the ego takes a back seat. 

Conclusion

Passover is a reminder that pleasure is not something to suppress or ignore, but to refine. Chametz, the bread of abundance, has its place the rest of the year. It fuels our bodies, satisfies cravings, and reflects the world of fullness in which we live. For a few days of the year, matzah asks of ourselves whether we can enjoy life without inflating the ego. It asks us to recalibrate our appetites and our awareness. And when Jews return to eating chametz, it is with a renewed sense of appreciation for chametz. In that respect, matzah becomes a portal through which pleasure can be enjoyed more fully and wisely. 

A Misguided Millionaire Tax Comes to Washington State

Governments love to talk about fair taxation. In the State of Washington, lawmakers decided to do something about having what they claimed was the second most regressive tax system in the country to deal with that perceived unfairness. In response, Governor Bob Ferguson signed into law a 9.9 percent excise tax on any income that exceeds over $1 million, which will take into effect in 2028. While the idea of fighting for the little guy while making sure people pay their "fair share" (whatever that means), the unintended consequences are exactly why this sort of tax is ill-advised. 

First, let's tackle the fairness argument. As the Left-leaning Institute for Taxation and Economic Policy (ITEP) points out, the bottom quintile pay 13.5 percent of their income to state and local taxes, as opposed to 4.1 percent for the Top 1 percent. However, that's an incomplete picture. About three quarters of those earning less than $25,000 do not pay federal income taxes. More to the point, as the Washington Policy Center details, the top earners pay way more in absolute dollars than everyone else (see below). 

And then there's the fact that this new tax will make Seattle have the highest de facto income tax rate in the country, which I can tell you will do nothing for tax competitiveness. The lack of a de jure income tax was one of the last few positive features of Washington's tax system. This will take away Washington's tax competitive edge. The Common Sense Foundation estimated that if 5 percent of the millionaires left Washington, it would mean a loss of 8,000 private sector jobs and a decline of personal income of $19 billion from 2028 to 2032. 

Similar to the U.S. federal government, Washington State does not have a revenue problem: it has a spending problem. Washington State passed $9 billion in tax hikes last year, which is the largest in the state's history. The state still managed to create a $2.3 billion deficit that it needs to solve this year. And the proponents wanted to pass this millionaire tax to fund even more money on education, healthcare, and other government services? 

Washington's millionaire tax is an exercise of what it looks like to have an obsessive, singular, narrow focus on "fairness" without looking at the bigger picture. The top earners already contribute more. Yet this risks driving away high earners, deterring businesses to move to Washington, shrink private-sector jobs, and slow economic growth. Rather than solve fiscal problems, this tax will further erode Washington's competitiveness while ignoring the fact that Washington continues to be a state that continues to spend more than it makes. Chasing fairness seems noble until you realize that ignoring the consequences is expensive. 

A Passover Lesson from Song of Songs: The Courage to Keep Going Without Certainty

On the Shabbat of Passover, many Jewish communities have the practice of reading the Song of Songs (Shir HaShirim; שיר השירים) during services. Unlike the Book of Esther for Purim or the Book of Lamentations for Tisha B'Av, this pairing with Passover is not self-explanatory. Passover is a national story about the Jewish people going from slavery to freedom. Song of Songs is a poetic love story celebrating love and intimacy. 

A couple of weeks ago, I attended a class in which we analyzed verses from Song of Songs and compared them to midrashic texts to analyze it further. One of the questions that lingered for me after this class was how these passages about longing and searching have to do with the Passover story. 

In chapter 5 of Song of Songs, the woman is sleeping when she hears a knock at the door. It is her male lover knocking (5:2). She hesitates for but a moment (5:3). When she arrives at the door, he is already gone (5:6). Rather than going back to bed, she goes out in the middle of the night to look for her lover (ibid). 

She does not know where he can be or whether he can be found. She does not know whether her search will yield any results, but she carries on. Upon her search, she was physically assaulted by watchmen (5:7). Even when met with harm and misunderstanding, the search does not collapse. 

Rather, she continues the search. But why? One answer is that she has a reference point: the lover. Not even assault deterred her from finding him. She is already in motion. When people are often in a state of grief, loss, spiritual yearning, or love, people persist and take that momentum, even with the pain. She does not stop to ask if it is worth continuing. She simply presses on. Why?

It is not because the search has been fruitful at this stage. It is because the assault of the watchmen does not resolve the absence of her beloved nor does it change her North Star. Her North Star is not a guarantee of outcome or even a clear sense of direction. It is a relational anchor that persists even when clarity is missing. The beloved is not visible and his location is not know, but he remains meaningful. It is carried forward in spite of the uncertainty.

This echoes a dynamic I explored with Psalm 27, a passage Jews traditionally read during the Jewish month of Elul. Faith is not build because of doubt, but through that doubt. Although the Psalmist's enemies are closing in on him (Psalm 27:3), he has trust even though he does not know the outcome. It is the ability to remain emotionally and spiritually oriented when one is surrounded by uncertainty, instability, and threats. Doubt is not the deterioration of faith. It is often the very thing that makes it stronger.  

Interestingly enough, she continues when she talks with her friends (6:1-3). She does not respond with confusion or despair when her girlfriends ask her where her lover is. She still has no clue where he went or whether he will return. Yet she speaks with confidence and clarity, that he's in the garden looking for lilies and that "I am my beloved, and my beloved is mine" (אני לדודי ודודי לי). In that sense, faith is not the elimination of uncertainty. It is the ability to move forward when that uncertainty remains intact. 

This structure of faith is not confined to the love story in the Song of Songs. It reappears on a far larger scale in the narrative of the Exodus from Egypt. Although they were slaves under Egyptian rule, the Israelites leaving Egypt without knowing the full shape of the journey ahead was scary. That uncertainty was not a minor detail. It was a major underpinning of the emotional and existential difficulty of the journey of the Exodus. It helps explain why the process of leaving Egypt is marked not only by movement forward, but also by such unstable moments as the Golden Calf and multiple episodes of kvetching.

Song of Songs and Passover ultimately reflect the same spiritual movement, although one was intimate and the other collective. In Song of Songs, a woman searches through absence and disruption yet continues forward without certainty of outcome. In the Exodus narrative, an entire people leaves Egypt while still inhabiting uncertainty, fear, and internal resistance along the way. After all, how does a walk that should take a few weeks turn into 40 years? 

Perhaps this is why Song of Songs belongs on Passover. Liberation in the Exodus narrative is not a clean transition from bondage into clarity. It is the beginning of freedom lived inside uncertainty, fear, and unfinished longing. Even after leaving Egypt, the journey is marked by desire for what was left behind and uncertainty about what lies ahead. 

Seen this way, liberation and longing are not opposites are not opposites, but rather intertwined realities within the same act of moving forward. The same people who step into freedom also carry with them hesitation, complaints, memories, and emotional baggage. Becoming free does not give you a clean slate. In this sense, liberation is not the end of longing or searching, but rather its beginning in motion.

Means-Testing Social Security Is a Better Band-Aid, But Still Not a Cure

Social Security was born out of crisis. In the depths of the Great Depression, about half of the elderly in America lacked sufficient income to be self-supporting. The idea was simple: ensure that those less fortunate, the elderly in particular, would not fall into destitution. It was not meant to be elegant. It was simply meant to help people stay afloat during a time of economic crisis. 

Nearly a century later, the program has exceeded its initial scope and is struggling under the weight. Social Security's long-term financing is no longer a concern in the distant future. The Social Security Trust Fund could be depleted as early as 2032. Once that happens, there will be a statutory cut to Social Security benefits up to 24 percent. 

Faced with this fiscal reality, policymakers have proposed increasing taxes, cutting benefits, or some combination of both. Increasingly, politicians have eyed benefits to higher earners, both for political and fiscal reasons. Earlier this week, the bipartisan Committee for a Responsible Federal Budget (CRFB) proposed a Six Figure Limit (SFL). The SFL would cap a couple's normal retirement age (NRA) earnings at $100,000, whereas that cap would be at $50,000 for a single person. For clarification, those caps are for not just Social Security income, but all income, including wages or earnings from work, investment income, pension income, and any other income sources. 

The SFL has a number of benefits. One is that would close at least 20 percent of Social Security's solvency gap. This option would save at least $100 billion over a decade while reducing the debt-to-GDP ratio by at least 2 percentage points. Since debt is a drag on economic growth, this is indeed good news.   

Some might complain that the SFL might weaken the link between benefits and contributions. However, the SFL would bring it back to what Social Security was in its inception: a modest safety net. The fact that Americans receive more in retirement benefits from the government than even the French do is ridiculous (see below). 

A proposal like the SFL that can improve solvency and reduce government debt while scaling back Social Security is definitely an improvement over the status quo. However, I would still contend that the SFL is a second-best option. 

Last year, I criticized Social Security in honor of its 90th anniversary and pointed out how it is structurally problematic. One issue is the pay-as-you-go payment mechanism. This is unsustainable due to demographic shift of fewer workers supporting more retirees, which creates an inevitable shortfall. The second issue is precisely that there is a strong link between contributions and benefits. Higher-income individuals receive disproportionate benefits, which acts more like a redistribution scheme rather than a safety net. 

As much as I can appreciate that the SFL can help mitigate the fiscal woes with Social Security, it does not address or resolve Social Security's structural and systemic issues. The pay-as-you-go mechanism will continue to be untenable, whereas the link between contributions and benefits imposes more costs on those with lower earnings. 

On the other hand, a private social security account would allow individuals to control their own retirement savings while being able to have way more saved for retirement. It is time to stop treating Social Security like a handout and start treating it like an investment. Ditching the Social Security program would put retirement savings where they belong: in the hands of the people, not the government. 

Shock and Oil: The Hidden Economics of War with Iran

About a month ago on February 28, the United States and Israel launched surprise attacks on Iran that killed Iranian Supreme Leader Ali Khamenei and other military bigwigs. Since then, there have been military strikes from both sides. The fallout from this war and how it will end remains to be seen. We have already seen one of the predictable outcomes come to fruition. 

There is about 20 percent of the world's petroleum and liquified natural gas that passes through the Strait of Hormuz. Because of the Strait being all but closed, oil barrels have already increased from $73 a barrel at the eve of the war to around $113 a barrel. What is interesting here is not merely the magnitude of the spike, but its timing. The market did not wait for a sustained disruption in supply. They moved almost immediately after the war started. 

And because energy is a universal input into the economy, the price movement does not stay confined to the oil market. It feeds directly into transportation costs, manufacturing inputs, agricultural production, and electricity-intensive sectors like artificial intelligence and data infrastructure.

But this is more than the immediate shock of the military escalation. It is uncertainty about the future. A study from the Federal Reserve Bank of Dallas finds that even when the increase in the probability of a worst-case scenario rises, the prices start to rise and the output starts to drop. As the conflict progresses, the probability does not disappear; it intensifies. 

The risk becomes more realized with higher insurance costs, higher shipping costs, and increased precautionary behavior. The risk premium driven by expectations blends into a price increase driven by reality. As this other study from the Federal Reserve Bank of Dallas calculates, the longer the conflict persists, the more permanent those price hikes remain and the bigger the impact on the GDP (see below).

The costs go beyond the energy market. As of March 23, there has been nearly $29 billion spent on this war. The Cato Institute points out that this undefined war has no clear exit strategy, which makes it more like the war in Afghanistan. Then there's the fact that when geopolitical risk rises, companies do not invest; they wait. Research from the Federal Reserve shows that heightened uncertainty about wars and conflicts causes business to delay capital spending and hiring, which leads to a sizable drop in investment.  

Taken together, the economic consequences of war extend beyond headline figures. Higher gasoline prices are the most visible cost, but it one of many costs in a long chain of government expenditures, business decisions, and long-term economic growth. As uncertainty rises, investment falls along with economic growth. 

In that sense, war operates like a hidden tax that shows up in the form of higher prices, larger deficits, and a slower-growing economy. It's amazing because it's a tax that no one in the U.S. voted for, that no one in the U.S. can escape, and will get explained away afterwards as if nothing happened.