Gina Hinojosa Wants To Freeze Electricity Rates in Texas. New Jersey Shows Why That Won't Work.

In New Jersey, a rate freeze touched only part of the bill, and in some cases left ratepayers with higher bills than before.

By Tosin Akintola of Reason. 

"When Democrat Gina Hinojosa is sworn in as Texas governor in January, one of her first acts, "within an hour of taking the oath of office," she recently told The Texas Tribune, will be to "declare a high-cost emergency in the state of Texas and issue an emergency executive order to: one, suspend the gas and diesel tax; and two, freeze electricity rates." 

Hinojosa—who tied increases in property taxes and electricity bills to Republican Gov. Greg Abbott's policies—promised during her campaign that if elected, she would "direct the Public Utility Commission to freeze the rates residential customers pay until we have laws to ensure that data centers and other high-load users pay for themselves." 

With Texans seeing a 3.3 percent increase in the average electricity price for residential customers between August 2025 and August 2026—roughly in line with the national increase—the state's electorate clearly found Hinojosa's pledge compelling. However, it's unclear if Hinojosa actually has the power to follow through on her campaign promise. 

In Texas' decentralized market, retail providers, not regulators, set electricity prices. This means Hinojosa has very little authority over residential prices, and her order would not lower costs. But as Click2Houston.com points out, Hinojosa could still impact prices; she could use her influence over the state budget "to push lawmakers toward her priorities," including forcing data centers to pay more. Of course, this would do little to address the primary cause of nationwide electricity spikes: transmission and distribution charges. 

Instead of Texas imposing price controls on the free market, Hinojosa could learn from the mistakes of New Jersey Gov. Mikie Sherrill, a fellow Democrat who has failed to meaningfully lower electricity prices in her state despite signing an executive order that declared a state of emergency and froze rate hikes by the state's utilities. 

Sherrill realized that even if she froze rates, it wouldn't erase the factors driving higher electricity prices, such as the supply and transmission costs providers pay. In June, to offset the increases utilities typically pass on to customers, Sherrill signed off on a budget authorization that allocates $500 million to provide ratepayers short-term relief. Yet in October, a CBS News report found that even after the rate freeze, utility costs in the Garden State remained high, with one resident remarking her electricity bill had "nearly doubled."

In July, the consulting firm E3 released a report—commissioned by Sherrill for the New Jersey Board of Public Utilities—that found that changes to state policy mainly affect distribution, which is "roughly a quarter" of the charges on residents' electricity bills, and that "no single reform or modernization option" could be presented as a standalone fix. 

It's not just New Jersey that has tried (and failed) to bring down utility costs by freezing electricity rates; last July Georgia's Public Service Commission unanimously approved an agreement to freeze base power rates for at least three years. A year after the freeze was implemented, the average electricity price for residential customers in Georgia rose by 2.3 percent. Meanwhile, in October, Virginia Democratic Gov. Abigail Spanberger called for a six-year freeze on residential electricity rates as a condition for approving the proposed $67 billion merger between utilities Dominion Energy and NextEra Energy. 

Regardless of where it's proposed, a rate freeze is a superficial fix for a problem that requires less government thumb on the scale, not more. 

At least one Democratic governor has declined to use rate freezes as a temporary panacea for rising energy costs. In a March appearance on CBS 2's "The Point," New York Gov. Kathy Hochul was asked if she thought a "two-year moratorium or freeze on utility rates statewide" was "doable." She quickly rejected the idea, favoring an "all-of-the-above approach to find more sources of energy to help drive down [costs]." 

What rate freezes like Hinojosa's miss is that states have little direct impact on electric prices. As the E3 report notes, "Most of a typical bill…is set in federal and regional markets with limited ability at the state level to influence those costs." 

Still, that doesn't make the idea behind these policies—that government should interfere in the market—any less harmful.

Without the price signals they receive from electricity rates, utilities can't properly plan for upgrades, expansion, or future demand. Freezing electricity rates clearly polls well as policy, but it works better on the campaign trail than in practice."

How a Lifelong Carbon-Taxer Helped Discredit Climate Policy

By John R. Puri of The National Review.

"The economist William Nordhaus died on October 30. In 2018, Nordhaus won the Nobel Prize in Economics for developing an economic model of climate change. For decades before then, he was an early advocate of addressing climate change through a global “carbon tax.” He was championed by climate activists for taking this stand, but ironically, his prize-winning research led serious policymakers to reject their maximalist approach to slashing emissions.

By aggregating other economists’ studies, Nordhaus estimated that the most probable paths of emissions would likely damage the world economy by a few percentage points of GDP by 2100, rising with each degree of global warming. That would amount to many trillions of dollars each year, giving activists ammunition to push for hugely expensive policies today.

Yet Nordhaus simultaneously modeled the economic costs of the policies necessary to mitigate climate change — and those were enormous as well. As it turned out, eliminating so many emission-producing activities as to reduce global warming to 2 degrees Celsius would cost tens of trillions of dollars more than allowing emissions to continue unrestricted. After incorporating more realistic policy costs, as most interventions are far from economically ideal, the projected cost of forcing temperature growth down to 2 degrees was more than twice as high as unmitigated emissions leading to 4 degrees of warming — $350 trillion versus less than $150 trillion by 2100.

By comparing the costs of global warming to the higher costs of mitigation, Nordhaus settled on an “optimal” amount of warming: 3.5 degrees of warming under ideal conditions, or 3.75 degrees under realistic ones. Such a path would allow global emissions to rise for decades into the future before falling gradually, reducing temperatures by no more than 0.5 degrees from the baseline. To achieve this, he recommended a modest carbon tax rising from under $50 to less than $100 per ton. An alternative path of net-zero emissions would instead require a tax of several hundred dollars per ton.

Crucially, for the carbon tax to work, it would need to be imposed uniformly across the entire world. If just one country tried to mitigate emissions unilaterally, it would bear all the costs while producing minimal climate benefits for the world. Using models similar to Nordhaus’s, policy analysts estimate that eliminating all U.S. emissions would make temperatures in 2100 only a fraction of a degree lower. Eliminating emissions from all industrialized countries wouldn’t fare much better.

In an ideal world, it might make sense for countries to unite around Nordhaus’s 3.5-degree goal. In the real world, however, his model at once showed the futility of individual nations targeting emissions and the relative acceptability of likely warming. In fact, no further intervention may be necessary: Under current policies and trends, global warming by 2100 is now projected at 2.6 degrees relative to pre-industrial levels, or 2.9 degrees on the high end. Under Nordhaus’s model, that may shave 2–3 points off world GDP by 2100, or about a single year’s worth of economic growth.

Nordhaus may be remembered by the left as a carbon taxer, but his true contribution was bringing rigorous cost-benefit analysis to a policy field that was sorely lacking it. In doing so, he showed that a net-zero policy failed the assessment worse than doing nothing at all, and that tolerating a good deal of global warming would be better in the long run for human welfare than overreacting today." 

The authors of The Everywhere Millionaire fall short of celebrating the success and instead fall prey instead to the usual disappointing platitudes about wealth & inequality

Review by Ben Johnson. He is a Partner and member of the founding team at Vitruvian Partners, a growth-focused private equity and growth capital firm. He wrote it for Centre for Enterprise, Markets and Ethics.

"Economists Owen Zidar and Eric Zwick have made a great contribution to our understanding of wealth and social mobility in the USA with a new dataset shining a light on the ‘Main Street Millionaires’: a population rarely discussed but vital to an understanding of modern America and the long-term yield of Reagan-era supply-side reforms. For fans of freedom and capitalism their evidence is exhilarating. A book using the same evidence could be titled: The American Dream Is Alive and Well. Rejoice! It is a puzzle that they fall short of celebrating the success and instead fall prey instead to the usual disappointing platitudes about wealth, rising inequality and power politics, citing that business owners hold congressional seats at roughly ten times their share of the population, and their policy influence tends to fly under the radar because they are less visible than tech billionaires or Wall Street executives. They add that substantial tax and regulatory benefits flow to private business owners and are rarely debated publicly, partly because most people don’t realise how large this group is. Now they will.

Zidar and Zwick identify roughly 3m American private-business owners worth more than $5m, with mean wealth of around $25m. It is tempting to assume Musk, Bezos and the other billionaires are dragging the average up. In fact, by the authors’ analysis, this group collectively holds more than 13 times the wealth of the 400 richest Americans, the billionaires listed in the Forbes 400. The interesting new finding is the thickness of the ranks beneath the billionaire tail. That in itself is enough to commend the authors and their work as a major contribution.

Rich in Examples

These people are also everywhere. Our mental map of American wealth is too often coastal: Manhattan hedge funds, Palo Alto founders, Beverly Hills entertainment money. Zidar and Zwick find a substantial car dealer, HVAC magnate or franchise owner in virtually every congressional district, many in what coastal Americans condescendingly call ‘flyover country’, making fortunes from gutters, toilet-paper distribution, hamburger buns, urinal cakes and waxing salons.

The book opens with the Brockway family, whose fortune came from Florida car dealerships. Their daughter’s 2023 wedding reportedly cost about $60m and lasted five days in Paris. Guests flew in by private jet, Versailles was hired for a party, the Paris Opera hosted the rehearsal dinner, there were fireworks by the Eiffel Tower and Adam Levine performed. To snobby English tastes, their consumption and lifestyles can be gauche, though this reviewer, a committed Americanophile, delights in their unapologetic enjoyment of their just rewards, and regrets missing an invitation.

Many such case studies bring the phenomenon to life. My favourite may be Nancy Mueller, who began making quiches for parties in California and kept going until Nancy’s Specialty Foods was the world’s largest frozen-quiche producer; after selling it she commissioned a super-yacht and sailed around the world. Ex-Marine Dick Portillo began with a hot-dog stand in 1963, despite by his own account not knowing how to cook a hot dog, sold the business for around $1bn and acquired a 130-foot yacht called, inevitably, Top Dog. It reminds me of the thrill, as a young Goldman Sachs banker newly arrived in Manhattan from the UK, when I saw the yacht ‘EBITDA’.

All this is loud and occasionally tasteless. It is also evidence that America manufactures capitalists on a scale few of us understood, which deserves celebrating before it is processed into another seminar about inequality and taste.

There is a great achievement here in putting together the data. Working inside the US Treasury, Zidar, Zwick and their collaborators joined up tax records on businesses, owners and workers that had sat in separate parts of the system, a painstaking exercise which required a visit to a retired systems engineer in Utah to understand the coding of various archaic US government databases.

Context

For a British reader, the book’s references to S corporations and pass-through businesses need translation. Income passes through the entity and the tax is payable by its owners, an idea familiar to anyone who, like me, has spent years as an LLP member. What surprised me was the scale: roughly 95% of American businesses are pass-throughs of some form, while Britain’s 51,000 LLPs are estimated to be under 1% of the Companies House register.

The context for this is Reagan’s 1986 Tax Reform Act, which moved the top personal rate significantly below the corporate one, incentivising businesses to operate through tax-transparent pass-through entities. S corporation filings rose 36.5% in 1987 alone, and pass-throughs went from 20.7% of American business income in 1980 to 54.2% by 2011. The research cannot establish causality. But policies compound, and Reagan’s reforms are a plausible part of why so many wealthy proprietors now live inside that architecture.

‘The Rich’ Who Start Small

The nature of this wealthy population and the source of their spoils sit awkwardly with the celebrated Piketty rentier-class critique of modern extractive capitalism. Admittedly, around 70 cents of every dollar of pass-through income accrues to the top 1%, consistent with the familiar power law of distribution. Yet these top profits cluster not among the heirs of a gilded age but among working-age owners of mid-sized, closely held firms.

That is recognisable to me after decades in private equity. Few of the hundreds of entrepreneurs and business owners I have met resemble the caricature of ‘the rich’, and their businesses are frequently heroically dull: industrial distribution, vertical software, niche clinics, specialist manufacturing. A founder spends 20 or 30 years learning an industry, surviving recessions and reinvesting cash until five employees become 500. A plumber earns an income; someone who employs 200 plumbers owns an asset. Somewhere along the way the entrepreneur becomes one of ‘the wealthy’. What is striking is that, in contrast to the vogueish Silicon Valley mantra of ‘Move Fast and Break Things’, these lifelong builders have followed a humbler logic: move slow and make things.

In a previous (2019) assessment of another financially very successful group, Daniel Markovits’s The Meritocracy Trap described an elite trained through expensive schools, selective universities and the uber-demanding professions, and an unending, accelerating treadmill of elite performance from childhood to late career, with all its associated performance anxiety.

By comparison, the owner of the world’s largest frozen-quiche company may have accumulated rather less cultural capital than a Yale professor or McKinsey partner, but she ended up owning rather more yacht.

The book’s mobility data should also make some parents think twice when insisting on another maths tutoring session for little Jonny, and planting dreams of Big Law in a ten-year-old Mary. Of Americans born between 1980 and 1982 who rose from the bottom fifth of the income distribution to the top fifth, 9% became business owners, nearly three times the 3.7% rate for their whole cohort; only 1.3% of them attended an Ivy Plus college, barely above the 0.9% for the cohort as a whole. And the top tenth of test scorers become founders only 1.3 times as often as those at the median.

Rent-Seeking and the Creation of Wealth

Which brings me to the book’s final section. Zidar and Zwick document some real rent-seeking, from car dealers’ franchise protections to the regulatory privileges of alcohol distributors. None of this should trouble a serious defender of capitalism; Adam Smith knew perfectly well that businessmen can and do conspire against the public. He also knew that, as in those two examples, the state is often bound up in their conspiracy against the public. What matters is the distinction between wealth created through competition and wealth maintained by suppressing it, and the authors’ own evidence suggests much American wealth is of the first kind.

Success Deplored

However, the authors sadly decline to celebrate the success story their data has revealed. They are tempted by the too familiar political syllogism: high inequality is undesirable; successful entrepreneurs increase inequality; their success therefore contributes to an undesirable outcome. Quod Erat Demonstrandum. Their narrative assumes what this dataset ought to make us question. Even the book’s own jacket copy has its subjects ‘both growing the economic pie and grabbing bigger slices for themselves’. A novel dataset, then, matched by a rather less novel failure of political nerve.

Britain suffers from the same confusion, and I see it constantly in discussion of private equity, where ‘vultures’ and ‘asset strippers’ turn up in populist speeches and beneath articles in the Financial Times alike. There are bad deals, and excessive leverage can destroy companies. But the business community knows that you cannot indefinitely compound investors’ money in a competitive market by circulating a shrinking pile of stripped corporate carcasses. At some point the businesses have to be built, organically and through growth-oriented acquisitions, to become more valuable.

Our usual categorisation of ‘the rich’ is almost useless economically, lumping together an heir living off property, a protected monopolist, a surgeon and an entrepreneur who employs 2,000 people and sells for £500m. Treat them as interchangeable and policy will eventually lose track of what it is trying to discourage.

Malcolm Offord exposed the confusion neatly in a Scottish television election debate this year. He recounted having arrived in London, from inauspicious beginnings, with £2,000 of debt, and later going on to employ large numbers of people (through his years at the private equity firm Charterhouse) and pay a total of £45m in tax. He asked the Scottish Green co-leader Ross Greer: ‘Do you want more people like me, or fewer people like me?’ Greer’s rather extraordinary answer was ‘Fewer people like you.’

Since the early 1990s the number of American private-business-owning decamillionaires ($10m+) has more than doubled and the number of centimillionaires ($100m+) almost quadrupled. Some start with hot dogs. Some with car dealerships. One started with party quiches. Eventually there are private jets, $60m weddings and yachts called Top Dog (and EBITDA). Hallelujah!

The great surprise in the numbers is not that yesterday’s rich became richer. It is how many new rich people keep being created, and in how many unexpected places. The American dream, on the authors’ own evidence, is alive and remarkably well. They should permit themselves to enjoy it."

Three Decades of Fiscal Progress in Sweden

By Dan Mitchell.

"Sweden is a classic example of a government that has a mix of bad policies (bloated public sector) and good policies (school choice, partially privatized pension system, repeal of death tax).

Today, let’s focus on a negative feature that is becoming less negative. And not just for a handful of years.

Using IMF data, here’s a look at what’s happened to the burden of government spending over the past three decades. Sweden has been complying with my Golden Rule.

It may not seem overly impressive to have government grow 3.5 percent annually, especially when compared to Switzerland.

But what matters most is that 3.5 percent spending growth is lower than 4.3 percent GDP growth.

And even though that may not seem like a big gap, what’s key is that the gap has existed for 30 years.

To see how modest amounts of annual progress can translate to major long-run improvements, here’s the same chart, but modified to show what’s happened to the overall spending burden and overall debt burden.

As a libertarian, I’m horrified that government is consuming 49 percent of GDP in Sweden. But that’s a huge improvement compared to having 60 percent of the economy being diverted to government.

And because the burden of government spending is declining, it’s no surprise that government debt has dramatically declined. And those are the numbers for gross debt. Net debt has declined even more, dropping from 46 percent of GDP to less than 14 percent of GDP.

To get where it needs to be, Sweden needs to maintain current levels of spending restraint for…well…um…another 100 years or so. But a journey of a 100-plus years begins with the first three decades.

P.S. I started my analysis in 1996 because the IMF had debt data starting that year. Looking just at spending data, Sweden started moving in the right direction a few years earlier.

P.P.S. For a look at overall economic policy developments in Sweden, feel free to peruse my four-part series (here, here, here, and here)."

US Immigrant Share Ranked in the Bottom Third of Wealthy Countries in 2024

By David J. Bier of Cato. Excerpts:

"According to Census Bureau and United Nations data, the immigrant share of the US population (14.8 percent) ranked 54th worldwide among 206 countries in 2024. Among the 51 wealthiest countries—nations with a GDP per capita PPP greater than $50,000—its ranking has fallen from the 43rd percentile in 2000 to the 24th percentile in 2024. Its ranking for per capita growth in its immigrant population since 2015 was similarly low: the 29th percentile. The US accounted for most of the net increase in the worldwide immigrant population in the 1990s but accounted for only 17 percent of it since 2020." 

"Australia is slightly above the trendline and is roughly where the United States would be expected to be based on its GDP per capita. The United States is about 76 million immigrants short of Australia’s share of immigrants." 

The 1960s Automation Freak-Out

By James Pethokoukis of AEI.

"Fears that machines will eat all the jobs are nothing new. In a recent Substack essay, “Technological Progress and the Meaning of Work,” economists Soumitra Shukla of the Burning Glass Institute and Alex Imas of Google DeepMind outline the history of worker anxiety from the Luddites in the early Industrial Revolution to Hollywood creatives here in the early days of the AI Revolution.

Shukla and Imas also touch upon a period of concern about impending mass automation and mass unemployment that’s pretty much forgotten, at least among the general public. But I wrote about it in my 2023 book The Conservative Futurist: How to Create the Sci-Fi World We Were Promised and in an essay for my own Substack newsletter.

Let us journey back to a tech-optimistic period I call Up Wing 1.0, from the mid-1950s through the early 1970s. So basically the Atomic Age and the Space Age. But all that obvious progress had a downside. In February 1961, Time magazine reported that the “rise in unemployment has raised some new alarms around an old scare word: automation. How much has the rapid spread of technological change contributed to the current high of 5,400,000 out of work?”

Time returned to the theme with a 1965 cover story on computers: “At least for now, the computer seems to raise almost as many problems as it solves. The most pressing and practical one is, of course, displacement of the work force.”

Washington took note. On August 19, 1964, President Lyndon Johnson signed a bill creating the National Commission on Technology, Automation, and Economic Progress. In his remarks on the commission, Johnson didn’t seem all that worried about technological unemployment as long as government planned for the inevitable disruption it would cause. Keep in mind that this was a peak period of policymaker confidence in government’s ability to manage the American economy through fiscal and monetary policy:

Automation is not our enemy. Our enemies are ignorance, indifference, and inertia. Automation can be the ally of our prosperity if we will just look ahead, if we will understand what is to come, and if we will set our course wisely after proper planning for the future. . . . The techniques of automation are already permitting us to do many things that we simply could not do otherwise. Some of our largest industries, some of our largest employers would not exist and could not operate without automation, and some of those employers are here this morning. . . . We could not provide our great shield for the security of this country and the shield for the security of the free world if we did not have automation in the United States. If we understand it, if we plan for it, if we apply it well, automation will not be a job destroyer or a family displaced. Instead, it can remove dullness from the work of man and provide him with more than man has ever had before.

Others wanted a more vigorous response. The left-wing Ad Hoc Committee on the Triple Revolution warned Johnson that “cybernation” had produced “a system of almost unlimited productive capacity which requires progressively less human labor.” The capability of machines, it argued, was rising more rapidly than the capacity of many human beings to keep pace. It wanted federal action such as a guaranteed income and government licensing power “to regulate the speed and direction of cybernation to minimize hardship.” Martin Luther King Jr., philosophically in tune with the group, warned of “automation and cybernation” in his final Sunday sermon on March 31, 1968.

Oddly, this was all happening during a time when productivity and pay were tightly linked—and both were rising. The jobs alarm was being sounded at the very same time a fast-growing economy was grinding down joblessness to levels not seen again until the 1990s tech boom. (When unemployment finally rose in the 1970s, it coincided with a productivity slowdown.)

Here again, we are at a time of low unemployment and spiking fears about automation. Maybe history has a lesson for the automation worriers."

Quaaludes Might Be Back. The Iron Law of Prohibition Never Left.

This counts as progress in the war on drugs?

By Jeffrey A. Singer and Josh Bloom. Excerpts:

"In 1984, lawmakers passed legislation ordering methaqualone moved to Schedule I, the category reserved for drugs deemed to have "no currently accepted medical use and a high potential for abuse." Congress bypassed the Controlled Substances Act's normal scheduling procedures and ordered the Food and Drug Administration (FDA) to withdraw its approval." 

"Reports of renewed interest in methaqualone are now accompanied by another development: the emergence of methaqualone analogs, chemical cousins that may differ in potency and toxicity. The pattern resembles what we're seeing today with fentanyl analogs. A 2026 review reported that some methaqualone derivatives were roughly 100 times as potent as the original drug, while researchers still know little about their risk in human beings."

"In April 2026, the Center for Forensic Science Research and Education reported detecting 2-methoxyqualone, a structural analog of methaqualone, in illicit drug material collected in Pennsylvania and California.

Small changes to a drug's chemical structure can profoundly alter its pharmacological properties. In the case of 2-methoxyqualone, essentially nothing is known about its effects, potency, or toxicity in humans, as is the case with many illicit fentanyl analogs. From a synthetic chemistry standpoint, producing a virtually unlimited variety of methaqualone analogs is trivial, requiring relatively simple chemistry and readily available starting materials.

A 2026 scientific review identified five newer methaqualone analogs reportedly 100 times more potent than the original drug, although those potency estimates remain preliminary. Meanwhile, Australian drug-checking researchers identified a pill submitted as a Quaalude that actually contained methylmethaqualone. An earlier American clinical case report documented a patient who believed he had ingested methaqualone but had actually taken another analog, SL-164.

This emerging market offers another example of what drug policy analysts call the iron law of prohibition. As enforcement raises the risks and costs of supplying prohibited drugs, illicit suppliers have incentives to favor more potent substances that are easier to conceal and transport. Prohibition also encourages underground chemists to develop more potent chemical substitutes or to adulterate existing drugs with other substances to intensify their effects, exposing consumers to products of uncertain composition, potency, or toxicity.

The appearance of methaqualone analogs is consistent with that pattern. Although it is too early to establish that prohibition caused their development or that they are widely used, it's a pretty sure bet."