The New Transportation Bill Puts Special Interests Above Safety

Some safety recommendations are treated as essential—while others become negotiable once influential people object

By Veronique de Rugy. 

"Congress loves to wrap legislation in the language of the public interest. This year's surface transportation reauthorization bill is no exception. Supporters describe the House Transportation Committee–passed package as a major safety bill designed to make America's transportation system more secure and efficient.

Beneath their rhetoric lies the familiar Washington story of a bill shaped less by evidence than by the demands of organized interests.

Perhaps the clearest example comes from the rail provisions. If the bill is being driven by a coherent safety philosophy, why would legislators soften rules requiring the faster replacement of old hazardous-materials tank cars, despite repeated recommendations from the independent National Transportation Safety Board? Some safety recommendations are treated as essential, while others become negotiable once influential people object.

The reason, of course, is politics, which come with clientelism.

Much of the debate over freight car inspections didn't center on the frequency, timing, or type of inspections required—things the conversation would focus on if safety was the overriding goal. Instead, most of the argument centered on who would perform inspections.

Labor organizations pushed provisions that would narrow who counts as qualified to inspect freight cars, thereby reserving those jobs for organized carmen. They opposed railroads' de facto practice of routing inspection volume to non-carmen staff (conductors) as a cost saver that didn't affect safety. Legislators ultimately crafted a compromise that reflects the competing interests of these two powerful stakeholders more than measurable safety outcomes. This is regulatory capture in action.

The role of organized labor is especially revealing. At a recent Senate hearing, Teamsters union officials openly acknowledged that autonomous trucking is going to happen and that workers have historically adapted to technological changes. Rather than trying to prevent deployment of the technology altogether, they argued that policymakers should proactively focus on worker transition issues. This is sensible enough. Yet many of the same labor groups strongly oppose automation and technology deployment in freight rail, including with systems believed to improve safety and detect defects far earlier than traditional inspection methods.

Why is automation acceptable in trucking but unacceptable in rail? The distinction, once again, is less about safety than politics. Where technological change threatens existing, strongly pro-labor work rules, opposition is intense. Where resisting new tech is less practical, the conversation shifts to something else. That may be understandable from a labor relations perspective, but legislators should not treat it as a sound basis for national transportation policy.

The broader bill suffers from a litany of problems. Together, they point toward the same influence issues.

Fiscal conservatives, assuming there are still enough of them to be heard in Congress, should be particularly concerned about a package that authorizes roughly $580 billion in spending while doing little to address the long-term insolvency of the Highway Trust Fund. Legislators are instead choosing to promise more spending while avoiding the structural reforms necessary to put transportation funding on sustainable footing.

Meanwhile, they inserted a controversial new federal registration fee structure for electric and hybrid vehicles. Progressives oppose it because they believe it discourages E.V. adoption. Many conservatives oppose it because it expands federal fee collection and further entangles state governments in administering federal policy.

The growing coalition of critics extends well beyond those issues. Transit advocates argue the bill underfunds transit and passenger rail. Environmental groups oppose permitting and climate-related provisions. Labor unions object to autonomous-vehicle language. Federalism-minded Republicans question federal preemption provisions.

When a bill generates opposition from nearly every direction, it is worth asking whether legislators are solving problems or trying to accommodate too many competing interests.

That's the deeper lesson here. Congress increasingly treats transportation policy as an exercise in stakeholder management. Instead of establishing clear goals and allowing innovation and competition to deliver results, legislators pile on mandates, carve-outs, protections, and special-interest provisions designed to satisfy whichever constituency has secured a seat at the table.

The result is predictable: Every organized interest receives something of value. Taxpayers inherit the costs.

The Senate will have an opportunity to reject this approach. Senators should evaluate every one of the House's mandates and favors using a simple test: Does it produce a measurable public benefit that likely exceeds its cost? If the answer is no, it should be removed.

Transportation policy should be guided by safety outcomes, economic efficiency, and fiscal discipline—not by whichever stakeholders have the strongest lobbying operations. Unfortunately, Washington still struggles to distinguish between the public interest and the interests of those who are in the room."

The Incidence of the "Liberation Day" Tariffs

From Jeffrey Miron.

"Reporters and economists alike spilled much ink predicting the impacts of Trump’s “Liberation Day” tariffs. New analysis offers clarity on the actual impact of these tariffs.

First,

enacted policies remain much smaller than announced policies. This is a key reason why the price effects of the tariffs remain below many forecasts made in April 2025.

Second,

most of the incidence of recent US tariff hikes has fallen on US consumers. And given the significance of imported inputs in US manufacturing, domestic producers have also shouldered much of the burden.

Third, the tariffs have also

led to striking changes in sourcing patterns. … [For example, t]he share of Chinese goods in US imports collapsed from 22 percent at the end of 2017 to about 12 percent at the end of 2024.

Lastly, while

[e]conomic theory posits that increasing US import tariffs should appreciate the dollar … [it instead] depreciated significantly after the 2025 tariffs. … [This may be because] other policies and macroeconomic forces counterbalanced the effects of tariff hikes on the dollar exchange rate."

Hamilton’s Economic Vision Had One Crucial Blind Spot

Hamilton recognized the importance of manufacturing but overlooked the market processes that create lasting prosperity

By Donald J. Boudreaux. 

"Speaking in January at Davos, US Trade Representative Jamieson Greer said that President Trump’s protectionism revives the policy first proposed by Alexander Hamilton. Like countless attempts to justify US protectionism and industrial policy, Greer’s effort praises Hamilton’s Report on Manufactures (“Report“). 

More recently, Scott Bessent, now holder of a job first held by Hamilton — US Treasury Secretary — also boasted of the administration’s Hamiltonian creed. Given the fame of Hamilton’s Report, and Hamilton’s key role in America’s founding, a close look at his Report is warranted.

Impetus for the Report

Requested by the US House of Representatives in January 1790, Hamilton submitted his Report on December 5, 1791. It was the longest and most famous of four major reports submitted to the House by Secretary Hamilton.

According to Hamilton, the House requested that he devote attention to “the subject of Manufactures; and particularly to the means of promoting such as will tend to render the United States, independent on foreign nations, for military and other essential supplies.” He complied.

America’s Economy Should Have a Strong Manufacturing Sector

The Report opened by making the case that America would benefit from a larger manufacturing sector despite America being unusually rich in land. Without naming Thomas Jefferson, the Report‘s opening was a challenge to Jefferson’s conviction that America should remain a nation mostly of yeomen farmers.

Offering this challenge, Hamilton relied on Adam Smith (also without naming him) to expose the errors of physiocracy — that is, the belief that net economic value is produced only by agriculture. Yet Hamilton went further, arguing that manufacturing can be more productive than agriculture. In making this argument, Hamilton was impressive; one might even sense in it an anticipation of some insights revealed by economists’ marginal revolution of 80 years later.

Regardless of how much or little Hamilton intuited of marginalism, he deserves credit for emphasizing the reality and significance of opportunity costs. To produce some increment of agricultural output requires that some increment of manufacturing output not be produced. And that increment of agricultural output is worthwhile to produce only if its value exceeds that of the foregone manufacturing output. Thus did Hamilton defuse the arguments of persons who believed that, to establish the case for keeping America an agricultural nation, it’s sufficient to point to the positive market value of agricultural output.

In this way, and some others, Hamilton revealed a keen ability to think insightfully about economic matters. Nevertheless, on a full assessment, Hamilton in the Report got more wrong about economics than he got right. Not content to support only the removal of artificial barriers in the US against domestic manufacturing, Hamilton argued strenuously that the government must actively promote American manufacturing. That promotion should consist chiefly of subsidies (“bounties”) supplemented by protective tariffs.

Hamilton Respected But Rejected Adam Smith

The renown of Smith’s Wealth of Nations obliged Hamilton to try to refute Smith’s argument that, in Hamilton’s summary, “industry, if left to itself … without the aid of government will grow up as soon and as fast, as the natural state of things and the interest of the community may require.” For Hamilton, what Smith called “the obvious and simple system of natural liberty” was too simple, at least for a young country without much industry. Here’s Hamilton:

Against the solidity of [Smith’s] hypothesis … cogent reasons may be offered. These have relation to — the strong influence of habit and the spirit of imitation — the fear of want of success in untried enterprises — the intrinsic difficulties incident to first essays towards a competition with those who have previously attained to perfection in the business to be attempted — the bounties premiums and other artificial encouragements, with which foreign nations second the exertions of their own Citizens in the branches, in which they are to be rivalled.

The first-mentioned impediment to American manufacturing was Americans’ alleged lack of entrepreneurship. Habit-bound and excessively risk-averse, too many Americans would stick with familiar agricultural pursuits and refrain from launching new manufacturing endeavors. Further discouraging Americans from venturing into manufacturing were the established competitors abroad who would out-compete upstart rivals. 

For Hamilton, simply being long-established was, in free markets, a nearly insurmountable competitive advantage. But in addition, foreign manufacturers might also practice what we today call “predatory pricing,” as well as enjoy their own subsidies. Therefore, Hamilton believed that manufacturing would arise and thrive in America only if the rates of return on these enterprises were boosted by the government.

Hamilton here forgot his own counsel to attend to opportunity costs. He simply presumed that whatever additional manufacturing activities were encouraged by the government would increase the net value of US economic output. He also ignored both the knowledge problem (How do politicians know which particular industries to encourage?) and the public-choice problem (With subsidies and protection being doled out by politicians, what prevents this doling from being distorted by interest-group politics?).

Hamilton also had a cramped understanding of economic competition. (In fairness, this understanding still infects economics textbooks today.) For him, competition consisted of firms producing a largely given set of outputs with largely identical technologies. Although he can’t be faulted for not reading Joseph Schumpeter’s 1942 work on creative destruction, even in 1791 evidence was growing that the major source of economic growth was entrepreneur-driven creative destruction. Such innovation introduced not only new products, but also completely new and improved means of producing existing products. 

In such an innovative economy, being long-established wasn’t the great advantage that Hamilton assumed it to be. Just ask, for example, the American millers whose traditional manner of milling flour was rendered obsolete starting in the 1780s in Delaware by Oliver Evans‘s automated flour mill.

Hamilton’s Curious Evidence

Attempting to augment his case for active government encouragement of manufacturing, Hamilton offered curious evidence. Responding to opponents who insisted that America’s economy was unfit for manufacturing, he boasted that America’s economy was already demonstrating an impressive ability to support manufacturing.

Writing about the prospects of profitable investment in manufacturing, Hamilton said that “it is certain that the United States offer a vast field for the advantageous employment of capital; but it does not follow, that there will not be found, in one way or another, a sufficient fund for the successful prosecution of any species of industry which is likely to prove truly beneficial.” He continued: In addition to America’s “multiplying” banks, another ready source of funding for manufacturing was foreign capital, which he wisely welcomed as “a precious acquisition.” Indeed, “the attraction of foreign Capital for the direct purpose of Manufactures ought not to be deemed a chimerical expectation. There are already examples of it.”

Question for Hamilton: If it was certain that the US offered vast opportunities for profitable investments in manufacturing, and if such investment was already occurring, why did such investment need to be further stimulated by the government? Hamilton’s inconsistency is evident.

Another example of Hamilton’s inconsistency is worth mentioning. When he argued for subsidies and protective tariffs for goods produced with iron, his evidence for the worth of such government assistance was the fact that such manufacturing had significantly grown in the US since the American Revolution and was flourishing. His argument was that this industry deserved protection precisely because it had proven itself capable and successful. Presumably, Hamilton would defend this inconsistency by maintaining that, without government assistance, this industrial growth — and that of other critical manufacturers — would stop short of its optimal point.

Here’s where Hamilton-as-economist faltered most seriously. He made the incorrect presumption that markets fail to generate optimal economic growth because, in the end, he didn’t appreciate just how effectively resources are allocated by market signals and incentives — by competitively determined prices, profits, and losses. 

At least for fledgling nations with relatively little industrial capacity, he believed that intervention from the top was required.

The Lasting Lesson

Studying the Report on Manufactures makes clear that Hamilton, contrary to the assertions of Greer and Bessent, was far from being a protectionist in the mold of Donald Trump. 

Not only was Hamilton’s case for protection confined to the need to stimulate industrial capacity in a country lacking such capacity, he also preferred subsidies over tariffs (because tariffs, unlike subsidies, reduce supplies of targeted goods), and he welcomed, rather than bemoaned, net inflows of foreign capital. 

Nevertheless, Hamilton ultimately had too little confidence in free markets. The late Gordon Wood’s assessment of Hamilton-as-economist is accurate:

Hamilton was so wedded to a hierarchical view of society that he could only imagine industrial investment and development coming from the top down. Thus he was incapable of foreseeing that the actual source of America’s manufacturing would come from below, from the ambitions, productivity, and investments of thousands upon thousands of middling artisans and craftsmen who eventually became America’s businessmen. Hamilton’s historical reputation as the prophet of America’s industrial greatness therefore seems somewhat exaggerated. He certainly wanted a powerful and glorious nation, but he was no more capable of accurately foretelling the future than the other American leaders."

Rent Control: The Ceiling Trap

From Alex Tabarrok.

"Rent control is in the news again. Check out my new website, Rent Control: The Ceiling Trap. Here is just one bit:

Norway abolished its rent control in 1982, and the economist Are Oust realized the newspapers had been quietly recording the whole experiment. He collected housing classifieds from Oslo’s Aftenposten from 1970 to 2008 and watched the market turn inside out.

Under rent control, Oslo’s listings pages looked nothing like a housing market. It was tenants who advertised, pleading their qualities to landlords — “housing wanted” ads outnumbered “housing for rent.” Ten to fifteen percent of those ads were placed by the tenant’s employer, vouching for them the way a bank vouches for a borrower. Tenants offered babysitting, gardening, snow-shoveling, and janitorial work on the side to sweeten the deal. Landlords, for their part, could demand a tenant of a particular gender, age, occupation, region of origin — some ads specified “strong Christian beliefs.” Deposits commonly ran to 50 or 60 months’ rent, occasionally 100 or more: tenants effectively lent the landlord the equity of the flat, interest free. And only about 20 percent of “for rent” ads dared print the rent, much of which would have been illegal.

Then the ceiling lifted. Within a few years the page flipped: landlords advertised to tenants, roughly 80 percent of listings printed an asking rent, the mega-deposits vanished, and the demands for snow-shoveling Christians of specified gender dwindled to nothing. The price went back to doing the rationing — so nothing else had to.

Check out the whole thing–it’s fabulous."

Chile's free-market reforms still seem to be working

Tweet from Steve Hanke.

"Chile still basks in the afterglow of the free-market reforms put in place by the Chicago Boys. Chile's neighbor, Argentina, the world's biggest deadbeat, struggles under the weight of a mountain of debt." 

 

Impact of rent control in Buenos Aires

Tweet from M. Nolan Gray.

"I haven't studied it in detail, but from what I have seen, the natural experiment that Buenos Aires ran over the past six years seems like yet more clear evidence that rent control limits supply and (ironically) raises rents." 

 

Chevron Deference Is Gone. Where Is Kagan’s ‘Massive Shock’?

Loper Bright isn’t without costs, but it has benefits too—and it hasn’t proved particularly disruptive.

By John Chisholm. He is a trustee of the Santa Fe Institute and of the Foundation for Economic Education. Excerpts:

"When the Supreme Court ended Chevron deference, one of the most consequential doctrines in American law, Justice Elena Kagan warned in dissent that it would “cause a massive shock to the legal system.” Two years later, that hasn’t happened.

In Loper Bright Enterprises v. Raimondo (2024), a 6-3 majority discarded a 40-year-old rule for interpreting “ambiguous” statutes. Under Chevron v. Natural Resources Defense Council (1984), judges were obligated to defer any time a federal agency made a “reasonable” interpretation of the law. Loper Bright was the last in a series of cases in recent years narrowing Chevron. Now courts, not agencies, must determine the best reading of the law."

"Two economic lenses bring those benefits into focus, revealing why Loper Bright is the sounder doctrine in the long run."

"The first lens is regulatory stability."

"The second lens is cognitive diversity. Social scientist Scott Page has shown that for hard problems, a diverse group of decision-makers tends to outperform a homogeneous group of higher-ability experts."

"public debate and cost-benefit analyses systematically overweight Loper Bright’s costs—the same bias that drove Chevron’s centralization in the first place."

"Two years on, no “massive shock” has materialized. Agencies still prevail in most challenges. Empirical studies put their win rate at roughly 75% when courts applied Chevron and near 60% on established rules since Loper Bright."