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? 

Premium in Name Only: The Pricey Truth Behind “Free” Obamacare Under COVID-Era Subsidies

Instead of passing a budget, the United States Congress allowed the government to shut down on October 1, 2025 and has been shut down since. When government shutdowns take place, the federal government limits services and ceases non-essential operations. This is not the first time such a shutdown has occurred. The longest shutdown took place during Trump's first administration in 2018-19 over funding for expanding barriers on the U.S.-Mexico border. The 1995-1996 shutdown under the Clinton administration was over spending cuts, whereas the 2013 shutdown during the Obama administration was about the implementation of the Affordable Care Act (ACA). While commonly referred to as the ACA, I prefer calling it Obamacare over the ACA because the ACA did nothing to make healthcare more affordable (see here and here), but we can call it ACA for shorthand purposes. 

Interestingly enough, the lack of affordability under ACA brings us to today because the current shutdown is primarily about ACA. During the COVID pandemic, Congress passed the American Rescue Plan, which included a temporary expansion of the ACA's premium tax credits (PTCs) to help soften the blow of the COVID pandemic. These tax credits, which account for 7 percent of the Americans who use the Obamacare-run insurance marketplace, had these tax credits extended under the Inflation Reduction Act in 2022. There is nothing permanent like a temporary government measure, right? Because now, the Democrats want to extend the Biden-era tax credits yet again, even though the COVID pandemic ended a few years ago. Democrat's commitment to extending the Biden-era tax credits was strong enough that they refused to pass a budget without them. Let us get into why this insistence to maintain the PTCs is short-sighted and make matters worse. 

It is a common talking point from proponents to say that the premiums will more than double if the PTCs expire. While technically true, the claim is also misleading. The PTCs act as a demand-side subsidy, which both artificially increase price and quantity consumed. Consumers are paying less for out-of-pocket premiums, but it does not mean the total cost of healthcare has decreased.  The subsidies, in fact, shift the cost from the individual enrollee to the taxpayer, a distinction that often involves the same individuals. People think it is cheaper because someone else is footing the bill. It is not about making healthcare cheaper, but it is a matter of budgetary sleight-of-hand. 

This subsidy is a classic economic distortion that functions similarly to the employment sponsored insurance tax credit. Since the subsidies scale with premiums, enrollees are insulated from rising costs, while taxpayers bear the increased burden indirectly. As a result, it encourages overinsurance, thereby reducing market discipline and increasing overall healthcare costs because insurers have less pressure to compete on price, thereby creating an upward price spiral (e.g., Cannon, 2022; Powell, 2012). 

The PTC subsidy fuels premium growth, which in turn raises subsidy payments further. The ACA did not contain premium costs. If anything, individual premiums increased much faster than medical care or overall prices since the ACA was written back in 2009. Individual premiums increased by 143 percent compared to 52 percent of medical care costs and 49 percent for overall consumer prices. Here is data from the Center for Health and Economy showing how ACA premiums have increased over time. As a result, healthcare costs rose in a similar way that federal subsidies to college tuition have caused tuition costs to skyrocket. Even before the pandemic and this PTC expansion, ACA premiums had already doubled, despite Obama's promises of family savings. 

What the PTC subsidies do to make the matter worse is that it lowers price sensitivity. Consumers have less incentive to shop around or demand lower-cost care, which undermines competition and encourages inefficiency. This distorts consumer choice signals, creates a moral hazard, and makes healthcare inflation all the worse. Much like I asked last May with regards to Medicaid, what good does it do to fund an insolvent and unsustainable program?  

In addition to the economic theory and reality of demand-side tax credit, expanding the tax credits will not fix the system. It will merely hide their failures behind market distortion and more debt. Speaking of debt, the Congressional Budget Office (CBO) estimated last month that extending the PTCs will cost $350 billion over the next decade. Combined with the corresponding interest costs of $60 billion, that brings the total cost to $488 billion over the next decade. This is close to the Paragon Health Institute's estimate of $450 billion. 

To put this into context, the PTCs cover 3.8 million enrollees, which would put the per enrollee cost for the premiums at around $13,000. This is crazy because the average spend for all healthcare per person (not only the premiums) is at around $14,000, according to the Centers for Medicare and Medicaid. If those on Obamacare under the PTCs are spending almost the same amount on premiums alone than the average American spends on overall healthcare, this is hardly an efficient or sustainable use of taxpayer dollars. 

To make matters worse, the legislation for the PTCs removed the 400% of poverty line cap, which means that a large share of subsidy dollars are going to higher-income households. The Cato Institute found that a third of those receiving insurance with these PTCs are above the 400% threshold. Similar to student loan forgiveness, these tax credits go to households that are, on average, better equipped to handle their finances, thereby questioning fairness of the PTCs. If you are arguing now that those at this threshold need subsidies, it is another reason showing us how the ACA has failed at making healthcare more affordable. 

This systemic instability is the sort of phenomenon that makes Obamacare even more unsustainable than it was pre-pandemic. As the Tax Foundation argues, the PTCs are a symptom of showing how federal subsidies and tax preferences in healthcare have increased the cost of healthcare, as well as how the healthcare industry is the most subsidized in the United States. The PTCs are another example of how the top-down model of the ACA has failed the everyday American spectacularly. 

The fight is ultimately not about coverage per se, but how far the government is willing to fund a broken system, a question that could also be asked about Social Security. These COVID-era credits were sold as temporary relief during an emergency. The emergency is long over, but the spending remains. This is hardly a new phenomenon. The Cato Institute calculated that at least $12.5 trillion has been spent on emergency spending since 1991. This also shows why the government needs to stop declaring emergencies to continuously expand government largesse into insolvency. As Milton Friedman once quipped, "nothing is so permanent as a temporary government program," and the PTCs are proving the rule.

The enhanced PTCs do not lower costs, but instead masks the cost increases. Instead of helping the vulnerable, they increasingly benefit higher-income households. Instead of fostering competition, they entrench price-insensitive behavior while rewarding the healthcare insurance industry with corporate welfare. And these premiums come at a cost that exceed the average cost of all healthcare spending. These PTCs are fiscal malpractice disguised as compassion. Do not get me started on how the ACA as a whole increases healthcare costs while receiving less care and fewer options. As I wrote last year, Obamacare has unsurprisingly fulfilled its promises, especially the one about more affordable healthcare. 

In the short run, the PTC expansion under the Inflation Reduction Act should expire because pretending that the PTCs make healthcare more affordable is a dangerous illusion. If we are going to have any serious conversation about how to make the quality of healthcare bette while lowering costs, Congress needs to stop doubling down on the very policies that make the problem of skyrocketing healthcare costs a problem in the first place. I am not going to waste my time to highlight real reform if lawmakers cannot take that first step of recognizing that endlessly expanding subsidies masks the systemic failures that they think they are fixing. First, Congress needs to end the PTC expansion and recognize the role that these subsidies play in artificially increasing healthcare costs. Then we can talk real reform.

Biden Was Not Lax on Immigration and the Border, In Spite of What Right-Wing Outlets Say

In his first days of office, President Trump did not waste any time, particularly with immigration. On his first day of his second term, Trump signed ten executive orders relating to immigration. This flurry of executive orders was to help fulfill Trump's campaign promise of mass deportation, a policy goal I had criticized last October. I am not going to get into particulars with each executive order today, whether it is about birthright citizenship, enhanced vetting, or expanding "expedited removal." I will say that this brings up a major, overreaching concern I had with Trump's immigration policy during his first term, which is that takes issue with legal immigration as much as he does illegal immigration. I strongly believe that such a stance on immigration is inopportune and unacceptable from an economic lens, as well as with regards to civil liberties. 

Along with international trade, immigration is the topic I have found myself most critical of the Trump administration. You might think that Biden was more amenable to immigration or his stance was so much more lax than that of Trump's. The idea of a border crisis was echoed by the think tank Heritage Foundation in multiple analyses. Fox News blamed Biden and his "border crisis" for causing a "tidal wave" of immigration, increasing the number of terrorists in the country, and also worsening K-12 education. The House Committee on Homeland Security and House Committee on Oversight also presented Biden as being weak on immigration and cracking down on the border crossings. 

The problem with asserting that Biden did not crack down on the border or that he was lenient on immigration is that it is not true. The Cato Institute was kind enough to provide a four-part series on why Biden did not cause the border crisis (Part I, Part II, Part III, Part IV). Here are some nuggets from the research:

Border enforcement did not decline during the Biden administration. You can look through the Department of Homeland Security data for yourself, but Biden expelled more immigrants than Trump. As we can see from the chart below, Biden wasted no time in expelling more immigrants in his first month in office than Trump ever managed during his entire first term. 

Not only did Biden expel more immigrants, Biden also expanded border detention and detention capacity from what Trump had during his first term. Right before the pandemic started, Trump's Custom and Border Protection (CBP) had 2,811 individuals in custody in February 2020. In the Biden administration, the peak reached to over 19,000 individuals, which was nearly twelve-fold in comparison to Trump. 

In February 2021, Biden opened up an additional processing facility and three more facilities two months later. Biden also sent 1,500 National Guard members to the border, as well as more asylum officers. Furthermore, Biden increased U.S. removal flights by 55 percent in comparison to the Trump administration. It was not only border detention that increased, but Immigration and Customs Enforcement (ICE) detention, as well (see below, as well as ICE data here).

As Migration Policy brings up, there were significantly more encounters at the border during the Biden administration than there ever were during Trump's first term. 

Far from being lax or lenient on the border, Biden was quite strict when it came to the border. If anything, Biden did more in terms of arrests, detentions, and expulsions than Trump did at any point during his first term in president. It might seem convenient to blame Biden because the influx of immigrants happened under Biden's watch. But there were factors that were not of Biden's doing or were in his control. 

One had to do with the pandemic itself. The economic impact of the COVID-era lockdowns caused enough of an economic downturn in the economies in the Western world. In the United States, the economic damage from the lockdowns was an estimated $9.8 trillion. Imagine what it did to parts of the world that were less economically stable, such as Central and South America. People want to leave that carnage for greener pastures, and understandably so. Combine that with the spike with the demand in labor that took place in February 2021 when businesses started opening up again. 

Then there was Title 42, which was Trump's idea to use the pandemic as a guise to expel immigrants and refugees. As I pointed out in my May 2023 analysis of Title 42, Title 42 most likely ended up incentivizing repeat border crossings. It was a combination of decreased labor demand, eliminating Title 42, and increasing the legal entries of asylum seekers that brought the spike in border crossings down in 2024. 

What worries me is that the "Biden was weak on immigration" argument has been used as a pretext by the Trump administration to be even more gung-ho on cracking down on immigration. This myth will contribute to the decline of immigration overall. The truth is that legal immigration decreased under Trump while illegal immigration increased. Much like Trump did first term, he will likely go after legal immigration much more than he will illegal immigration, especially since legal immigration is higher and illegal immigration much lower than it was during Trump's first term. Immigration is a net boon for the United States, even when you factor in those immigrants that are considered "low-skilled." Trump clearly did not learn that lesson during his first term as President. It looks like he will spend his second term undermining immigration, thereby undermining American prosperity.  

Studies Show Hurricanes Not Increasing in Power Dissipation: Another Coup to Climate Change Hysteria

Those who believe that climate change will be the end of mankind tell us that all we need to do is drastically cut our carbon emissions to avert Armageddon. It would explain why the Biden administration was gung-ho with such climate policies as onerous power grid regulations, water heater energy efficiency standards, stricter emissions standards to encourage electric vehicle purchases, or the Inflation Reduction Act. Let's take a look at President Biden's response to Hurricane Helene as an example:

Nobody can deny the impact of climate crisis anymore. At least I hope they don't. They must be brain-dead if they do. Scientists report that with warming oceans powering more intense rains, storms like Helene are going to get stronger and stronger. 

Forgetting the irony of a man with clear cognitive decline commenting on brain function for a moment, I have to question the general premise of his claim that "climate change's impact on hurricanes is so obvious that someone with half a brain can realize it." I hate to break it to Biden and climate change activists everywhere, but it is decidedly not the case. 

In September 2024, the scientific journal Nature published a study showing a decreasing trend in the destructive potential of cyclones, which include typhoons and hurricanes (Tu et al., 2024). These Chinese meteorologists used a "power dissipation index" (PDI), which combines storm intensity, duration, and frequency, to determine whether hurricanes, cyclones, and typhoons have become more intense in the past four decades. Guess what they found? The overall global trend is that the PDI is on the decline, whereas it remains steady in the North Atlantic (see below; see Addendum for further detail). 

As much as I would like to say that I am surprised by these findings backed by meteorological data, I am not. Shortly after Hurricane Ian in 2022, I wrote a piece on how the media continued to exaggerate the effects of climate change on hurricanes. I had pointed out how weather-related deaths have been on the decline, the normalized cost of hurricanes (which adjusts for population and property construction increases) remained relatively constant, and that the number of overall hurricanes and major hurricanes has not increased. 

I can point to a study from the Heritage Foundation that was released in December (D'Aleo and Dayaratna, 2024) about how the lack of trends in hurricane activity since the mid-1800s (see chart above). I suspect that Biden would not read a Heritage Foundation report, much less heed it, because the Heritage Foundation is on the Right. Instead, maybe President Biden should listen to his National Oceanic and Atmospheric Administration (NOAA), which found the following: 

• "There is no strong evidence of century-scale increasing trends in U.S. landfalling hurricanes or major hurricanes. Similarly for Atlantic basin-wide hurricanes, there is not strong evidence for an increase since the late 1800s in hurricanes, major hurricanes, or the proportion of hurricanes that reach major hurricane intensity." 
• "After adjusting for a likely under-count of hurricanes in the pre-satellite era, there is essentially no long-term trend in hurricane counts. The evidence for an upward trend is even weaker if we look at U.S. landfalling hurricanes, which even show a slight negative trend beginning from 1900 or from the late 1800s." 
• While the NOAA projects that the lifetime maximum intensity of Atlantic Hurricanes will increase by about 5% during the 21st century, NOAA also projects "substantial decrease (~25%) in the overall number of Atlantic and tropical storms." 
• "After adjusting for such an estimated number of missing storms, there remains just a small nominally positive trend (not statistically significant) in tropical storm occurrence from 1878-2006." 
• "We conclude that historical Atlantic hurricane data at this stage do not provide compelling evidence for a substantial greenhouse warming-induced century-scale increase in: frequency of tropical storms, hurricanes, or major hurricanes, or in the proportion of hurricanes that become major hurricanes." 

Aside from the ubiquitous nature of climate change, what draws people's attention is the notion of "if it bleeds, it leads." That is why climate change activists and their allies have to resort to using low-probability models with tenuous assumptions to make their case. The fact that actual meteorological data show that hurricanes in the Atlantic or cyclones and typhoons in other regions of the world are not getting worse, at least indicated by the PDI, in spite of increased carbon emissions undermines the climate change hysteria. It is why I remain skeptical of climate change fear-mongering. We should focus on policy alternatives to mitigate the effects of hurricanes, which can include constructing hurricane-resilient buildings, privatizing flood insurance, and eliminating price gouging laws. Giving into climate change hysteria like the former President has done will do nothing to help us weather future hurricanes.

1-30-2025 Addendum: I had a spouse of a longtime friend reach out and comment on this blog entry since he is an electrical engineer by trade and has a passion for climate change. He correctly pointed out that the Nature study points out there has been a slight increase in intensity (See Figure below, Part B) and that this increase was caused by various atmospheric phenomena. I concede this point where I changed the title of this blog entry and made some other tweaks to acknowledge the fact that intensity has indeed been increasing. 

I will also point out that the overall PDI is on the decline due to decrease in frequency and duration (See Figure above, Parts A and C). The authors point out that the PDI has been more commonly used in the literature instead of focusing on a singular factor, such as intensity or frequency. There could be a methodological flaw in how each factor in the PDI is weighted or whether there are other considerations that should be factored into PDI. I am sure that debate could be had by experts who know more about this than I do because my profession in the field of public policy and I cannot possibly know everything about every topic. 

At the same time, it begs an important question for me. If PDI is indeed being more frequently used as a metric for tropical storm severity in the field of climate change, why is PDI not increasing if climate change is supposed to engender apocalyptic change? At the very least, it has me think that the magnitude of climate change is not as obvious as President Biden makes it out to be. Maybe I will get a lengthy response from my friend's spouse addressing some of these concerns, which is why I would not be surprised if this topic ends up being a future blog entry.

Biden Blocking Nippon's Acquisition of U.S. Steel Undermined National Security Instead of Improving It

In December 2023, Japanese steelmaker Nippon Steel offered to buy U.S. steelmaker U.S. Steel at a 40 percent premium on its stock price. Nippon Steel even offered unprecedented veto power over the merged entity's future U.S. plant closure decisions to allay Biden's concerns, but it was not enough. It also did not matter that 98 percent of the U.S. Steel shareholders approved the $14.9 billion deal in April 2024 or that Biden's Committee on Foreign Investment in the United States (CFIUS) could not find a national security threat from the acquisition.  Biden decided to block the proposed acquisition last week anyway. Why? Biden believes "there is credible evidence" that Nippon Steel "might take action to impair the national security of the United States." Biden does not actually state what credible evidence might exist. That reason for that is because there is no credible evidence. 

As I pointed out in my April 2024 analysis on the acquisition, the acquisition would not have harmed the United States' national security. Forget for a moment that Japan has been a military ally to the U.S. since the 1960s or that Nippon Steel already operates numerous steel plants in the United States. The Pentagon only needs about 3 percent of domestic steel production. Rather than looking to hinder steel production, Nippon Steel was looking to inject money into capital investments ($2.7 billion, to be precise) to produce steel in the United States. The steel industry needs new technology and innovation, which the U.S. has now been deprived of due to Biden's decision. 

Third, the Pentagon does not procure steel from U.S. Steel, making the national security argument all the more tenuous. More to the point, I illustrated how the acquisition could actually help with national security. By making U.S. Steel more efficient, the acquisition could have bolstered the U.S.-Japanese alliance. Here are a few additional points to consider on how Biden actually made matters worse:

• U.S. Steel was unprofitable for most of the past fifteen years. Even if the Pentagon procured steel from U.S. Steel, how exactly does allowing for a steel producer to continue flailing help national security?
• The Right-leaning Hudson Institute, which is known for its national security expertise, concluded in its report on the Nippon Steel-U.S. Steel proposal "that this proposed transaction would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount."
• As the authors pointed out, Japan is the leading foreign direct investor in the United States. The Nippon Steel acquisition was meant to be a sign of goodwill to bolster that alliance. 
• Nippon Steel's injection of capital would have better empowered the United States to withstand the dumping of excess Chinese steel into U.S. markets. 
• Economic and industrial competitiveness is what has historically been helpful to U.S. national security. Strengthening the U.S. steel in the capacity, quality, and cost-effectiveness that would have come with the U.S. Steel acquisition would have put the U.S.' national security on better footing in the future. 
• In December 2023, the bipartisan Select Committee on the Chinese Communist Party recommended that Japan be added to a whitelist of allies to received fast-track investment approval precisely because Japan has been such a good ally (see page 32 of the report). That hardly sounds like the consideration one would give a national security threat. 
• Blocking the acquisition contradicts the Biden administration's own articulation of national security assessments. As the Atlantic Council brings up, this precedent could "justify interventions into transactions for broader economic competitiveness reasons or to favor domestic political allies." No kidding! Biden caved into the influences of steelmaker Cleveland Cliffs, much like Biden acquiesced to the American Federation of Teachers with school closures in the pandemic era (see p. 415 of this House Oversight Committee report). This sort of politicization has the real potential to undermine national security in the future.
• The acquisition could have helped advance such elements of national security as friend shoring and de-risking from China. 

The aforementioned arguments should make it evidently clear that Nippon Steel acquiring U.S. Steel is not a national security threat. By Biden erroneously labeling it one, it makes it more difficult for allies and partners to trust the United States, which also undermines national security because it erodes trust in the U.S.' allies while abusing the law out of political gain. Giving into these protectionist instincts to prohibit the investment and operation in the U.S. also means less foreign investment which, you guessed it, undermines national security. Economic logic are legal arguments go to the back burner when politicking is involved. Biden has tarnished his political career and made his reputation more disgraceful by making the national security of the United States worse off with his decision to block the acquisition. 

Biden's Rent Control Proposal Would Screw Over Americans Looking for Affordable Housing

While political pundits are focused on President Biden dropping out of the race, I want to turn attention to a policy that Biden proposed last week: nationwide rent control. Biden is urging Congress to put a 5 percent cap on rental units for landlords with over 50 rental units with the threat of losing depreciation write-offs. The reason for this plan is because Biden wants to "make renting more affordable for millions of Americans." For Biden, affordable housing is part of the American Dream. With affordable rent being more out of reach for millions of Americans, Biden believes that rent control is the solution. While his proposed rental cap would only exist for two years and not apply to all landlords, it is still enough to do damage that would be counterproductive to the goal of making rental units more affordable. 

Forget for a moment that Biden nothing to tailor the policy to local marketing conditions and simply imposes a blanket cap. Rent control is a disaster policy that hurts those that it was meant to help. I first wrote about rent control in 2014 when I pointed out the macroeconomy theory of rent control and price ceilings, as well as how that has resulted in multiple unintended consequences. It was only last month that I analyzed a meta-study on rent control that illustrated the following costs of rent control:

• Reduces housing mobility
• Makes non-rent-controlled property more expensive
• Constricts housing supply because of disincentive to create new housing, which worsens affordability
• Disincentivizes rent controlled-property upkeep, which means more people living in property unsuited to their needs
• Decreases property value, which not only hurts the value of the rental unit, but also the neighborhood

Apparently, Trump is not the only president to descend into economic lunacy. Rent control has been discredited by economists on all sides of the political spectrum. The fact that Biden proposed this could suggest he was trying to buy votes just as easily as illustrating how much more political clout the extreme Left has in the Democratic Party. Exploiting economic ignorance is not a solution to rising housing costs. 

Thankfully, Biden needs Congressional approval to pass this nightmare (although it is possible to skirt the filibuster by making this proposal part of the tax code). Plus, Biden has bigger issues to deal with now than a housing proposal that is very unlikely to pass. If we care about increasing affordable housing, the focus should be on making it easier to expand housing supply, not policies that will further contract it. As the Cato Institute brought up in its recent analysis, allowing for homebuilders to construct more housing could easily reduce housing prices by 50 percent. Whether the next President realizes that reality of the housing market remains to be seen. 

Biden's Climate Crusade With EPA Power Plant Regulations Will Take Out Electric Grids and Jobs

Since President Biden started campaigning for president in 2020, he vowed to get rid of fossil fuels. That goal has translated into over 200 ways in which the Biden Administration has made it more difficult to acquire energy from fossil fuels. One of those ways was in May 2023 when the Biden Administration proposed power plant rules that would make it more difficult for existing coal plants, existing gas plants, and new gas plants to operate. On May 9, 2024, the Biden Administration's Environmental Protection Agency (EPA) released final rules on the Federal Registrar that are to take into effect today: July 8, 2024. 

The purpose of these rules is to "protect all communities from pollution and improve public health without disrupting the delivery of reliable electricity." This rule requires that existing coal plants planning to operate past 2039 and new gas plants to employ best system of emissions reduction (BSER) to control 90 percent of carbon reduction based on carbon capture and sequestration (CCS) technology. Essentially, CCS technology siphons the carbon dioxide from a plant's smokestack before reaching the atmosphere and would store the carbon underground. While this sounds fine and dandy, the proposal comes with a few major issues:

1) CCS technology is neither reliable nor able to comply with the law. In spite of the millions that the U.S. Department of Energy has spent on CCS, the technology is not fully proven. As of date, there is no power plant on the planet that is capturing 90 percent of its carbon. As this report from the Congressional Budget Office (CBO) shows, CCS can capture 10 percent on a good day. Why is the Biden Administration creating onerous regulations based on unrealistic expectations and technology that does exist according to the regulation's specifications? 

2) The final rule is predicted to have negligible impact on carbon emissions. You would think that if the EPA were to enact such regulations, it would help bring down carbon emissions in a statistically significant manner. Much like with the Inflation Reduction Act and the Paris Agreement, this proposed rule will fail in that endeavor. Per EPA modeling, the proposed rule will reduce carbon by 1 percent (Chamber of Commerce, p. 6). Since power plants produce 30 percent of U.S. carbon emissions, that means that this would only reduce 0.3 percent of the United States' carbon emissions, never mind global emissions.

3) This final rule will most probably cost more than the EPA estimates. An analysis from the Chamber of Commerce found that this proposed rule has a number of flaws, one of which being cost suppression. As we see in the chart above, there is a difference between the projections from the EPA and Energy Information Administration (EIA). If the EPA is indeed rosier in their projections about coal and natural gas demand, as well as their prices, then the EPA is neglecting regulatory costs in addition to the $960 million per annum costs that the EPA is anticipating. A sensitivity analysis to better sense of the costs and benefits would solve the discrepancy between the EPA and EIA calculations. 

As the libertarian Cato Institute points out in its analysis, the EPA continues to overestimate the growth of wind and solar energy, as well as the growth of technological development that makes its projections so rosy. 

If that were not enough, the state of North Dakota commissioned a report to determine the effects of this EPA rule. To quote the report: "The Finalized Rule will increase costs, which, compounded with inflation, will negatively impact the affordability electric and gas services, resulting in a disproportionate effect on low-income citizens." 

4) This final rule is anticipated to cause further strain to the country's electric grid. As I brought up last year, fossil fuel demand is high and is only going to get higher. To replace the increase of fossil fuel demand, renewable energy production would have to increase sixfold. Quite frankly, trying to aim for green energy without increasing nuclear power production is a fool's errand. 

That is because wind and solar energy are intermittent and weather-driven forms of energy. Incentivizing renewable energy over fossil fuels will strain the electric grid and reduce grid reliability. Remember that North Dakota study from the previous point? The study determined that blackouts would be more likely if the EPA rule passes. 

Postscript: Last year, Pew Research found that 50 percent of Americans disagree with Biden's climate policy and 45 percent agree. Count me among the 50 percent who disagree. I have criticized Biden's climate policy, whether it was his water heater energy efficiency standards, electric vehicle standards, the misleading Inflation Reduction Act, or his administration proposing a gas stove ban. 

In his misguided attempt to lower carbon emissions, Biden's climate change policies neither help the economy nor the environment. Biden continues that pattern with his EPA power plant regulations. Not only will this power plant final rule do very little to reduce emissions, but it will make this country's electric grid more insecure by relying on intermittent energy sources. Expect higher electricity prices, brownouts, and blackouts as a result of this misguided policy. 

Biden's Asylum Executive Order Will Not Fix the United States' Broken Immigration System

As more and more undocumented workers cross the border between Mexico and the United States, President Biden is figuring out how to placate the majority of Americans on the immigration issue, especially in an election season. Last week, Biden announced his executive order to de facto shut down asylum for those crossing the border. According to the executive order, the U.S. government will cease to take asylum cases when there are more than 2,500 border apprehensions a day over a seven-day period and will expire two weeks after that number falls below a per diem average of 1,500 apprehensions for a week. 

This executive order has a number of problems. The first, as pointed out by Cato Institute's analysis on the executive order, is that there have not been less than 1,500 apprehensions since October 2020, which, as a reminder, was during a pandemic. Why would you set a goal that has not been attainable in post-pandemic times? It also means that asylum is based on number of border crossing and not the strength of an asylum case. This defeats a primary purpose of providing asylum. 

The second is that the United States has been down this path before with shutting off asylum. It was a pandemic-era policy called Title 42 that was started by Trump and was continued by Biden. Title 42 did not work out well. As my analysis on Title 42 from last year illustrates, Title 42 neither had an effect on COVID cases nor did it slow down immigration. If anything, there were more border crossings during Title 42 than there was during the heyday in border crossing in the 1990s.  

Third, closing off asylum will give asylees no other legal recourse. Instead of trying to go through a legal path such as asylum, they will be incentivized to enter illegally and evade detection. This means more trespassing on private property, more crimes, more deaths of migrants, and more altercations between Border Patrol agents and migrants, much like we saw during the Title 42 era. 

This leads to my fourth point, which is that this executive order is ignoring the labor demand to work in this country, which includes 8.9 million job openings in the private sector as of April 2024. There is no legal path for 99.4 percent of those who want to work in the country, not to mention that the average asylum case takes about four years to process. As I brought up last month, allowing for lawful entries into the country minimized the number of illegal border countries. Immigration is good for the U.S. economy, and yes, that includes the immigration of those identified as low-skilled labor. The sooner that the U.S. government makes entry to the country easier by removing arbitrary caps and red tape, the sooner we can solve the issues at the border. While Biden adopting Trump-like immigration policy might score some political points, it will do next to nothing to help with this country's broken immigration system. 

The Section 232 Steel and Aluminum Tariffs Under Trump and Biden Unsurprisingly Underdelivered

Economists have long recognized tariffs as having a negative impact on the economy, which makes sense when you look at the mainstream microeconomic theory on tariffs. In 2018, President Trump enacted tariffs on steel and aluminum under Section 232. Before enacting these tariffs, I criticized President Trump's idea based on the merits of the argument. Trump was unable to meet a burden of proof to show how a tariff would help national security nor did he consider the economic implications of such a tariff in light of the fact that past steel tariffs for national security purposes harmed the economy. As a research paper released last week from the Right-leaning Tax Foundation about the Section 232 tariffs on steel and aluminum illustrates, I was right to worry about the tariffs. Here are a few key findings from the Tax Foundation's research paper:

• For each 1 percent increase on the tariffs, export growth fell by 0.11 percent (Handley et al., 2020). 
• While the tariffs raised aggregate in the steel industry in 2018, it also cost steel consumers $5.6 billion. Not only did the tariffs create net economic growth, but it also meant that each of the 8,500 that the tariffs did create cost $650,000 each.
• Contrary to Trump saying that China would pay the tariffs, it turns out that it was U.S. firms and consumers that paid the price (Amiti et al., 2020). Prices increased 22.7 percent for covered steel and 8.0 percent for covered aluminum. 
• The U.S. International Trade Commission estimated that the tariffs reduced steel and aluminum imports by 24 and 31.1 percent, respectively. 
• Downstream industries that use steel and aluminum experienced an annual $3.4 billion loss in production from 2018 to 2021.
• According to Tax Foundation estimates, removing the tariffs would increase long-term GDP by 0.02 percent and create more than 4,000 jobs. Some estimates have Section 232 tariffs reducing manufacturing employment by a net of 75,000 jobs.

As we see above, these tariffs have been far from being a steal. These tariffs harm the economy with no apparent national security benefit, which is why I in favor of repealing them. Tariffs are taxes on imports, so it would not surprise me to see the repeal of those taxes boost GDP and create more jobs. As much as President Trump initiated the Section 232 tariffs, it was Biden who kept them intact. As I pointed out a couple of weeks ago, Biden is as capable of being protectionist as Trump. Unless action is taken to return powers regarding tariffs over to Congress, as has historically and constitutionally been the case, Biden will not be the last president to abuse Section 232. 

Latest China Tariffs Show That Biden Can Be as Protectionist as Trump

Before becoming President, Joe Biden criticized President Trump's tariffs on China. He said that "we're going after China the wrong way” with a trade war. Shortly after becoming president, Biden implemented import quotas on steel. He kept many of Trump's tariffs intact and has managed to collect more in tariffs than Trump did. And if that were not enough, Biden imposed a series of new tariffs this Tuesday, including: 

• Steel and aluminum, from 0-7% to 25%
• Semiconductors, from 25% to 50%
• Electric vehicles, from 25% to 100%
• Batteries and components, from 0-7% to 25%
• Medical syringes and needles, from 0% to 50%

Last month, I illustrated how Trump's 60 percent tariff on China would be tantamount to economic foolishness. In another piece I wrote last August, I showed how Trump's tariffs caused such economic harm as lower employment, reduced GDP, and lower wages. I specifically pointed to how Trump's Section 301 tariffs reduced U.S. real income by $1.4 billion per month (Amiti et al., 2019), which is notable since Biden is using Section 301 to justify this latest round of tariffs. 

What compounds the inanity is that the Biden administration's United States Trade Representative released a report about how harmful Section 301 tariffs are on the same day that he announced that he was going to increase tariffs under Section 301, which would suggest hypocrisy or a lack of situational awareness. If you want to read more analysis, you can read what the Tax Foundation, Reason Magazine, Competitive Enterprise Institute, and American Enterprise Institute, published on Biden's latest tariffs. 

What I can say is this. Biden calling his tariffs "strategic" does not change the economic reality that tariffs harms consumers and the economy as a whole, which is illustrated by this research brief from the Tax Foundation. It is clear that electing Trump would cost billions through his trade war. Much like with Biden’s erroneous take on shrinkflation or attempting student loan "forgiveness," it is a reminder that election brings out ideas that make for better politics than they do better policy. If we do not want to feel the economic pain of tariffs, Congress needs to take back the power it has given to the executive branch to regulate tariffs. 

Biden Should Keep His Protectionist Nose Out of Nippon Steel's Acquisition of U.S. Steel

In December 2023, U.S. Steel Corporation (U.S. Steel) announced that Nippon Steel was going to acquire U.S. Steel. Nippon Steel (Nippon) is currently the fourth-largest steel producer worldwide and would become the third largest post-acquisition. What should be a simple business transaction in the private sector has been sucked into the politics of an election cycle. 

In March, President Biden expressed his opposition to the acquisition by saying that U.S. Steel is to remain in the United States. A day later, Nippon Steel announced that there would be no plant closures or layoffs in the United States as a result of the acquisition. Of course, that did not stop Biden from visiting the United Steelworkers Union headquarters last week. After Biden vowed that U.S. Steel would remain in the United States, U.S. Steel's stock price dropped. Contrast this to when stocks soared after U.S. Steel announcing the deal in December. Here are some facts about this acquisition that Biden would prefer to ignore:

• U.S. Steel is not what it used to be. President Biden might have some nostalgia about the good ‘ole days, but U.S. Steel has waned in its influence. In its heyday, U.S. Steel produced 40 percent of the world's steel. Now it is the 27th in world output and 2nd in U.S. output with 11.2 million tons of steel last year. At its peak, U.S. Steel employed over 340,000 employees. Now, that employment figure is at 15,000, representing a 96 percent decline from its peak. It is the 652nd largest company in terms of market capitalization, which is less than 1/100th of its size in 1901 as a proportion of the overall economy. Why? It was a combination of mismanagement and government interventions (e.g., import restrictions, subsidies, "Buy American" procurement preferences) that the U.S. government used to prop up U.S. Steel. 
• Japan is a friend and ally. Japan is not a hostile power, certainly not like China. Quite the opposite! Japan and the United States started developing their military relationship with the Treaty of Mutual Cooperation and Security in 1960. The fact that Japan is not the economic competitor that it was in the 1980s would explain why Japanese investors have not been on the radar of the Committee on Foreign Investment in the United States (CFIUS) since the 1980s. Plus, calling Nippon Steel a foreign company is misleading because it has been operating in the United States for 40 years and already has operations across eight U.S. companies employing 4,500 U.S. employees. Blocking this acquisition would risk alienating a key economic and security partner of the United States. 
• The acquisition does not harm U.S. national security. Those making the national security argument assume that putting this steel production into foreign hands would lead to domestic shortages. This is problematic for a number of reasons: 
• One is that the Pentagon only needs 3 percent of domestic steel production. 
• Two, Nippon is not looking to close U.S. production. Nippon is injecting $1.4 billion in capital investments at the U.S.-based plants because Nippon wants to ramp up steel production in the United States. This is in no small part because Nippon wants a presence in the U.S. market and the Trump/Biden steel trade barriers are getting in the way. 
• Three, the Department of Defense does not procure steel from U.S. Steel. Even if Nippon were to move production to Japan (which we established in the previous sub-point they are not going to), it would not impact the U.S. government's ability to procure steel. 
• This acquisition can help with national security. Rather than harming U.S. Steel, Nippon is saving U.S. Steel and actually contributing to the U.S. economy. While U.S. Steel will not be domestically owned, it will still have operations in the U.S. If anything, Nippon's capital and expertise will enhance the U.S. economy by making U.S. Steel's operations more efficient (see below). Together, Japan and the U.S. can better confront China's increased dominance in the global steel market, as well as its general influence in the Asia-Pacific region, with this acquisition. 

• Impact on foreign direct investment (FDI). Foreign investment encourages other companies to invest into the United States, thereby creating more wealth and job opportunities. It is because of Nippon's capital and expertise that most steel industry experts believe that this acquisition will help U.S. steelworkers and the overall manufacturing sector. The synergy with the acquisition will improve steelmaking (see below). If this acquisition is blocked, what sort of message does that send to investors in allied countries in the future? Japan is a leading source of FDI, which helps employ 900,000 U.S. citizens at U.S. subsidiaries of Japanese-owned companies. Disincentivizing foreign direct investment would only be a shot to the metaphorical foot of the U.S. economy. 

Postscript: What should be clear is that Biden is not motivated by sound economics or national security concerns, but rather with his eye on electoral concerns. Even NPR admits that Biden is opposing the acquisition to court the unions and blue-collar workers in swing states. 

Plus, this is part of a perturbing trend of the Biden administration to block several notable mergers and acquisitions, including that of Albertsons and Kroger. One of the main premises of capitalism is that parties voluntarily enter an economic transaction that both find to be mutually beneficial, which is the case here with Nippon and U.S. Steel. Private companies should not need a slew of lawyers to gain approval from the government to engage in voluntary, mutually beneficial business deals. 

The fact that Biden thinks that a nominally Japanese corporation purchasing a nominally American corporation is inappropriate should have zero place in U.S. trade or national security policy. Much like with Biden's student loan "relief" program, Biden is putting good politics over good policy. If Biden wants to be better at economic and national security policy, he needs to go beyond a limited, domestic view and take on a broader view that entails working with allies to strengthen economic and national security ties. 

Biden Is At It Again With Some Costly Student Loan "Forgiveness"

"If you at first don't succeed, try, try again." That is the approach of President Biden and his attempts with student loan "relief." It does not matter that the U.S. Supreme Court struck down his student loan forgiveness program last year in Biden v. Nebraska, which the bipartisan Committee for a Responsible Federal Budget (CRFB) estimated would cost $400 billion. That does not stop Biden from giving up on the idea. Last week, the White House announced a new plan to "provide relief to borrowers disproportionately burdened by student debt." This plan entails multiple provisions, including:

• Waiving up to $20,000 of accrued and capitalized student loan interest
• Eliminating student loan debt for those who have had debt for more than 20 years
• Assisting borrowers who experience hardship in paying back loans
• Applying the most favorable repayment options, whether under this latest version or from the previous version (known as SAVE)
• Helping borrowers enrolled who enrolled in low-financial-value programs or institutions

The Penn State Wharton School of Business, which is the premier business school in the country, modeled the cost of Biden's student loan plan. When combining the overlap between the new plan and previous SAVE plan, Biden's student loan plan is going to cost $559 billion!

When Biden first tried student loan "cancellation" with the SAVE Plan, I was critical enough to provide a list of 13 reasons why such a policy does such a disservice. These reasons ranged from the unfairness, cost, and lack of economic stimulus to its regressive nature, the moral hazard, and doing nothing to prevent that the problem from resurfacing. As the CRFB brought up in its response to Biden's latest plan:

You can't solve a very real debt problem by issuing more debt. The President's previous student loan cancellation plan was expensive, inflationary, poorly targeted, and would have boosted rather than reduced tuitions. This plan similarly misses the mark.

Knowing that it is an election, I know this is more than wanting to help out the little guy. It is about fulfilling a 2020 campaign promise, as well placating a certain demographic amongst the Left that is more likely to be critical of Biden's stance on the conflict in the Middle East. Biden's student loan plan is not going to do anything to lower tuition costs. If anything, Biden's plan will create inflationary pressures, both in the higher education market specifically and the macroeconomy generally. If the Biden Administration were to do the responsible thing, it would abandon this plan and work on reforms that would actually reduce college tuition costs. Sadly, it looks likely that good politics will defeat good policy once again.

4-16-2024 Addendum: Apparently, the Wharton School is not the only one to come up with an estimate. The CFRB released its analysis today (4-16-24) and found that it could cost anywhere between $250 billion and $750 billion. 

How Free Trade and Trade Liberalization Help Out the Poor Domestically and Globally

Last month, the White House released its annual Economic Report of the President. In the report, there was a chapter on International Trade (Ch. 5, p. 173). One of the interesting admissions in the report is how trade with China has improved the purchasing power, especially of lower-income Americans (p. 203). As a matter of fact, the report calculated that 68 percent of those benefits went to low-income Americans. This finding is echoed in a report from the Federal Reserve Bank of Minneapolis that was released just last week (Horwich, 2024).

The author of the Minneapolis Fed report, Jeff Horwich, says that much of the research of international trade on consumer welfare looks at the effects on a national level. Rarely is it done to see the effects of a certain demographic, such as the poor. Even so, the fact that international trade helps out low-income households both in the United States and globally does not surprise me in the least. Why is this the case? How does international trade help out the poor specifically? 

Improved quality of life with greater imports. As this article from the Houston Chrolinc brings up, it can be cheaper for a country to import goods or services than it can be to produce them. To quote the Australian Department of Foreign Affairs and Trade (DFAT), "trade expands the markets local producers can access, allowing them to produce at a more efficient scale to keep down costs." This ensures a constant flow of more goods, which can improve the quality of life and give options they otherwise would not have. 

Lower prices lead to greater purchasing power. To quote the International Monetary Fund (IMF) from 2001: "Trade liberalization helps the poor in the same way it helps most others, by lowering prices of imports and keeping prices of substitutes for imported goods low, thus increasing people's real incomes...An open trade regime also permits imports of technologies and processes that can help the poor." 

I was first criticizing Trump's obsession with tariffs in March 2016, which was before he was president. I pointed out that tariffs decreased economic welfare. Conversely, countries with fewer trade barriers had less poverty. To quote DFAT, "Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, boosting their competitiveness by reducing their production costs."

Free trade improves innovation and efficiency. The Mercatus Center mentions a good point in its brief on the benefits of free trade: "Over time, free trade works with other market processes to shift workers and resources to more productive uses, allowing more efficient industries to thrive. The results are higher wages, investment in such things as infrastructure, and a more dynamic economy that continues to create new jobs and opportunities." Those wage increases help out the poor, as well. 

Postscript. As a 2015 report from the World Trade Organization illustrates, free trade creates new job opportunities for the poor, raises the real wages of unskilled labor, lowers prices of goods consumed by the poor (which means greater purchasing power), and improves access to external markets for the goods that the poor consume. All of these phenomenon aggregately improve the quality of life for the poor. 

Freer trade is vital for the poor because, as the World Economic Forum states, "Open trade is particularly beneficial to the poor, because it reduces the cost of what they buy and raises the price of what they sell." Farmers and manufacturers especially can reach a wider market when there is open trade (ibid.). As the World Bank has brought up, free trade has lifted over a billion people of poverty. The Heritage Foundation, amongst many others, has shown how greater economic freedom creates greater economic growth while lowering poverty (see below). This is a truth I detailed when showing how trade liberalization does a much better job than foreign aid at alleviating poverty. 

With the overwhelming evidence in favor of greater international trade, it does beg a question for the upcoming presidential elections. If the relatively lower tariffs from Trump's previous administration made items more expensive and made Americans poorer, what will Trump's proposed universal 10 percent tariff or 60 percent tariff on China will do to the poor both in the United States and abroad? This November's election is between a Republican whose tariffs will make Americans poorer and Bidenomics that has increased inflation in a way that has made life more expensive for the poor. And let's not forget that Biden has maintained many of Trump's tariffs. While it is clear that free trade helps out those in low-income households, it is also clear that we are in an age of protectionism, regardless of who gets elected this November. It is the everyday citizen, especially the poorer ones, that suffer because politicians on both sides of the political aisle ignore the fundamentals about the benefits of free trade.