U.S. Airlines and Carmakers Need to Go Global

Policies that insulate them from competition created the conditions that led to bailouts and bankruptcies

By Clifford Winston of the Brookings Institution. Excerpts:

"While we rightly celebrate the 1978 Airline Deregulation Act, airports and foreign competitors that could serve U.S. routes weren’t deregulated. Public airport monopolies and duopolies allow airlines to raise fares. With foreign carriers prohibited from flying domestic U.S. routes, domestic fares have been kept artificially high even while load factors approached 85% just before the Iran war. As a result, when a domestic shock hits, the system lacks the diversified global networks and capital depth needed to absorb the blow.

The car industry suffers from a similar condition. While the automakers aren’t currently liquidating, they are operating on a margin-over-volume strategy that has pushed the average transaction price of a new car to a record $50,000. This wasn’t a natural market evolution. It was manufactured by decades of trade barriers.

From the 1964 “Chicken Tax” to the 100% tariffs on Chinese electric vehicles in 2025, Washington has walled off the American consumer. These barriers have allowed domestic makers to abandon the low-cost econobox segment entirely, focusing instead on $80,000 SUVs. Because they are shielded from the $15,000-a-car global competitors that are modernizing fleets in Europe and Asia, automakers have become addicted to a narrow, affluent demographic."

 

When Rudy Giuliani Made New York Great Again

His recent successors failed to learn the lessons of the great reformist mayoralty of the 1990s

By Myron Magnet. Excerpts:

"in 1994 . . . Crime had skyrocketed in the preceding decades, with murders doubling in the 1960s and doubling once more over the next two decades before reaching 2,154 in 1991—one every four hours, roughly. Dope dealers hustled on the street alongside pushy panhandlers and prostitutes. Derelicts slept alongside graffiti-smeared buildings. An epidemic of car break-ins led owners to post “No Radio” signs in their windows, and auto alarms blared indignantly at all hours. Businesses fled: The 116 major corporate headquarters in Gotham in 1971 had dwindled to 49 by 1995. Small-business owners buzzed customers in through locked doors and, at closing time, rolled down metal security gates, luring graffiti vandals."

[Giuliani] "grasped the theory of social scientists James Q. Wilson and George Kelling that stopping small crimes would prevent more serious crimes, just as replacing a broken window halts more window-breaking by showing that somebody watches and acts. He had seen this theory proven in the subways in the two years before his election, when Robert Kiley, head of the Metropolitan Transportation Authority, kept subway trains and stations hosed clean of graffiti and transit police chief William Bratton started arresting turnstile jumpers and graffiti vandals. Crime in the subways began to fall. When Mr. Giuliani entered City Hall, he named Mr. Bratton the city’s police commissioner." 

"arresting “squeegee men” who smeared dirty rags across motorists’ windshields, holding them hostage for a “contribution.”"

"Police stopped, questioned and frisked those suspected of carrying weapons or casing a business, dissuading the ill-intentioned from packing guns while reducing shootings. Mr. Bratton made computer maps of crime hot spots and concentrated cops where thugs operated. City Hall’s revolutionary idea was that cops should prevent crime"

"Murders fell 20% to 1,561 the first year and a further 58% to 649 in 2001"

"the Giuliani administration started an ambitious workfare program. Welfare offices became “job centers” and set welfare recipients to painting park benches, raking leaves and cleaning courtrooms. Recipients learned discipline and gained self-respect. Many moved into conventional jobs and, as in the nation as a whole, caseloads dropped dramatically." 

‘The Well-Educated Child’ Review: Where Love Meets Learning

How did Harlem Village Academies improve student performance? The charter network’s founder lays out her philosophy of education

By Naomi Schaefer Riley. Riley reviewed the book The Well-Educated Child: How the Principles and Practices of Quality Thinking, Agency, and Ethical Purpose Cultivate Deeper Learning by Deborah Kenny. Excerpts:

"It is true that for the schools catering to wealthier families, assessments are the floor and not the ceiling. No one in Scarsdale is impressed when more than 90% of students pass the Regents exams or are marked “proficient” on statewide tests. The teachers don’t teach to the test, but students learn the material they need to know through the school’s curriculum. There are exceptions. Many wealthy schools embrace the “whole language” approach to reading, but the parents acted as a backstop, ensuring that their children learned how to read even if they didn’t learn it well in school. Unfortunately, children from less-wealthy and less-educated families don’t have that advantage, and so they often fall further behind."

"Similarly, Ms. Kenny is a fan of restorative justice. She doesn’t like systems of demerits where students behave well only because of extrinsic rewards. Though she assures readers that students do suffer consequences, including suspension, for infractions, the goal at HVA is for students to understand what they have done wrong and to make amends. Of course, the way restorative justice is practiced often lacks real consequences and, again, research suggests it has led to more dangerous schools and poorer academic results. Similarly, her belief that smaller class sizes and higher teacher pay will improve our schools has no basis in evidence. (The average teacher salary at Sidwell Friends, where the Obama children went to school, is about the same as that in the New York City public schools.)"

"But Eva Moskowitz, Success Academy’s founder, has the same goals for her students. The test scores are also the floor, not the ceiling. The 20,000 students at her schools read complete books. And they learn to appreciate art and music. In “A+ Parenting” (2023), Ms. Moskowitz recommends great works of literature as well as games and music and movies to help children “become enthusiastic learners.” In the past 20 years, though, HVA’s scores have fallen while Success Academy’s have not. While they are still outperforming many neighborhood schools, Harlem Village Academy East, for instance, only has a 52% proficiency rate in reading. Sorry, Ms. Kenny, this won’t fly in Scarsdale." 

Pennsylvania’s New Education Hope

Private donors help Philadelphia students, even as Gov. Josh Shapiro turns hostile to choice scholarships

WSJ editorial. Excerpts:

"Only a third of Philadelphia students were proficient in English, and a quarter in math, on state tests last year. That’s the horrifying return on school district spending of about $32,000 per student"

"District-staffing surged while enrollment dropped 12% from 2016 to 2025."

"More than 100,000 mostly lower-income children used the tax-credit scholarships in 2023-24, the most recent year with data available. But funding caps leave tens of thousands of students on waiting lists" (tax credits to businesses and individuals who donate to scholarship organizations) 

Is the 340B Discount Drug Program Working?

Letter to The WSJ.

"Your editorial “The Great 340B Healthcare Grift” (May 8) highlights a program that has strayed far from its original mission. While drug therapies are essential to cancer care, access to these medications is increasingly entangled in the 340B discount drug program—an initiative in desperate need of reform.

The American Society of Clinical Oncology recently published a policy statement detailing how to make the program more transparent and accountable. Essential reforms include requiring participating entities to meet select federal nonprofit charity care standards and implementing strict rules to ensure savings are used for direct patient care rather than unrelated hospital acquisitions or construction projects. Transparent financial reporting should demonstrate measurable improvements in care for underserved areas, backed by financial penalties for noncompliance.

Reform must also allow community-based nonhospital providers, which form the backbone of oncology in rural and underserved areas, to participate if they meet established thresholds for treating Medicaid and uninsured patients.

The 340B program is so embedded in our healthcare system that complete elimination risks harm to vulnerable patients. Instead, oncologists and policymakers must reform it.

Clifford Hudis, M.D., FASCO, FACP

American Society of Clinical Oncology

Alexandria, Va."

The World’s Most Surprising Capitalist Makeover Is Under Way in Sweden

The shake-up of cradle-to-grave care is lowering government spending, spurring innovation and stirring fears about those left behind

By Tom Fairless of The WSJ. Excerpts:

"nearly half of primary healthcare clinics are privately owned"

"One in three public high schools is privately run"

"The capitalist makeover has allowed Sweden to . . . shrink the size of the state. That has enabled the government to sharply lower taxes and . . . sparked a surge in entrepreneurship and economic growth."

"Its total public social spending bill . . . has fallen to 24% of gross domestic product, similar to the U.S. and well below the over 30% for nations like France and Italy."

"Sweden’s economy is expected to grow by around 2% a year through 2030, roughly the same pace as the U.S. and double the growth rates of France and Germany"

"Sweden didn’t always have a big public sector. The country climbed from being one of the poorest to the third-richest country in Europe over 100 years through 1970 without high levels of taxation. 

But starting in the 1960s, the center-left Social Democratic Party—which dominated the country’s postwar politics—sharply raised taxes and spending, ultimately taking government spending as high as 70% of GDP by the 1990s. 

The changes triggered a long period of weak growth, stagnant after-tax incomes and ballooning budget deficits and debt that culminated in a banking crisis in the early ’90s."

"the government instituted sweeping economic reforms over the next two decades. They included cuts to unemployment benefits and housing subsidies and the privatization of public services, as well as tax cuts and a reform of the pension system to make it more affordable. Strict limits were imposed on government debt. (Sweden’s debt to GDP is a meager 36%, compared with 129% for the U.S.) In the mid-2000s, the government eliminated wealth and inheritance taxes."

"Wealthy entrepreneurs who had fled Sweden’s high taxes have been returning"

"The country saw more than 500 initial public offerings over the 10 years through 2024, more than Germany, France, the Netherlands and Spain combined"

"It has now moved ahead of the U.S. in the number of billionaires per capita"

"healthcare spending per capita in Sweden grew around 1% a year on average between 2014 and 2024 after adjusting for inflation—roughly half the pace in the U.K. and a third of the pace in the U.S."

"Stefan Fölster, an economist and former Finance Ministry official, argues that the vast majority of Swedes have benefited from the reforms. Households’ inflation-adjusted incomes have doubled on average since the 1990s, after stagnating during the 1970s and ’80s under high taxation, Fölster noted."

"Sweden has recently fallen down international education rankings, a shift that proponents of free schools attribute to high levels of immigration." 

Mass Transit in the Sky: How Air Travel Went from Elite to Affordable

The golden age of airline service was also an era of restriction and high prices. From deregulation to the downfall of no-frills Spirit, competition exposes what travelers are truly willing to pay for. 

By Donald J. Boudreaux. Excerpt:

"Prior to deregulation that began in the late 1970s, interstate commercial air travel was governed by the 1938 Civil Aeronautics Act. With that legislation, the federal government restricted entry into the industry. It also established and assigned interstate routes, and regulated the fares that airlines charged passengers for seats on planes that flew those routes. This regulation was meant to ensure airline profitability and, thus, aimed to restrict competition among the airlines. On interstate routes, airlines could not compete for customers by lowering prices, which were set by the Civil Aeronautics Authority, later to become the Civil Aeronautics Board (CAB).

The airlines in the mid-20th century did indeed profit from the government’s regulatory efforts on their behalf. Nevertheless, even the government cannot prevent competition; its interventions can only divert competition into other channels that are less beneficial for consumers.

Unable to compete by lowering fares, airlines competed on the customer-service front. Compared to today, the standard coach seat during the era of regulation had more legroom. Full meals were common. As opposed to today’s use of the hub-and-spoke system, direct flights were the norm. (Although this costly feature was required by the regulators, it likely would have been commonplace even without being mandated.) And flight attendants were overwhelmingly young and attractive single women. Forced to pay high prices to fly, at least customers got something in return for the additional dollars the regulators obliged them to fork over for the privilege of flying.

Deregulation of fares allowed market experimentation to discover how better to serve airline passengers. Airfares fell dramatically, which seems necessarily to be an obvious benefit for consumers. But we know this fall in airfares to be a benefit to consumers only because it happened in a more-competitive market. Obviously, consumers would love to pay the lower fares while still having more legroom, more direct flights, and full meals with free booze in coach class served by attractive and charming flight attendants.

These nice amenities aren’t free, however. They must be paid for. If the flying public had valued those regulation-era amenities enough to continue paying regulation-era airfares, airlines would have been happy to continue to supply those amenities at those high fares. But the public spoke with its purse: competition revealed that most air passengers prefer to pay lower prices, even if doing so means fewer amenities, than to pay higher prices in exchange for the many amenities. (The relatively few customers with different preferences choose to upgrade to seats in ‘economy plus’ or in first class.)

Flying today is much less costly, in real terms, than it was before airlines were deregulated. (And, by the way, deregulation did nothing to slow the improvement in airline safety.) As such, the commercial-aviation experience today — unlike when I was a boy and young man — is commonplace and hardly luxurious (adjusting for the reality that, nevertheless, when in an airplane you are flying through the air while seated in a chair, an experience that everyone before the twentieth century would have regarded as miraculous). Even for a working-class American family today, going to the airport simply to behold a relative boarding an airplane is as unimaginable as going to a local bus stop simply to behold that same relative boarding a bus.

It’s worth noting that competition also reveals the limits to consumers’ tolerance for sacrificing amenities for lower fares. Spirit Airlines’ business model was to eliminate as many as possible ‘free’ amenities, stripping the base ticket price down and charging separately for virtually everything else, including carry-on bags, seat selection, snacks, even water. Spirit also offered infamously little legroom.

Because ‘optimal’ market outcomes cannot be divined in the abstract — because these outcomes can only be discovered through competitive market processes in which entrepreneurs are free to experiment — it was a good idea to run this experiment. As it happens, though, too few consumers were willing to pay even low fares for that level of minimal amenities. Spirit was on the verge of bankruptcy well before the price of aviation fuel was sent soaring by the war in Iran, which is why JetBlue in 2022 offered to merge with Spirit – a move that would have enabled JetBlue to obtain Spirit’s equipment and landing slots.

In a monumental feat of economic ignorance, the Biden administration sued to block the merger on the grounds that it would reduce competition and raise fares. Spirit has now gone forever to the economic spirit world.

Here’s the view from 30,000 feet. When producers are allowed to compete on all margins, including price, they discover the optimal mix of prices and amenities that best satisfy their customers. When governments obstruct that competition, it gets redirected into changing the quality of goods and services such that the resulting price-quality mixes are less desirable than would be the mixes that emerge without government intervention.

After airlines were deregulated almost 50 years ago, consumers revealed that they wanted lower prices with less quality. And by more recently rejecting the bare service offered by Spirit Airlines, consumers revealed that quality can be so low that even very low prices are insufficient compensation to put up with such low quality. These results emerged from competitive market processes and deserve respect. But alas, just as airline regulation forced American air passengers to buy what they would have preferred not to buy, the government’s continuing itch to override market processes will oblige consumers in the future — whenever such interventions occur — to suffer worse economic outcomes."