More Housing Fixes (Almost) Everything

By Art Carden of AIER.

He reviews the new book Build Baby Build: The Science and Ethics of Housing Regulation by Bryan Caplan. Excerpt:

"We don’t have as much housing as would be necessary to keep housing costs low because it’s illegal. Governments manufacture scarcity by wrapping building permissions in red tape. It’s absurd, for example, that so much space is zoned for single family detached housing. Many lots where apartment complexes and towers would fit are, unfortunately, limited to single family detached housing: 75 percent of residential land in LA, 77 percent on Portland, 79 percent in Chicago, 81 percent in Seattle, 84 percent in Charlotte, 94 percent in San Jose, and 38 percent in San Francisco. He states his point clearly on page 64, and I paraphrase: the status quo closes off some options, which wastes land, which makes all the options more expensive.

Caplan synthesizes a large body of academic research (so you don’t have to!) to argue that housing deregulation will cure (almost) all that ails us. Housing is expensive, especially in cities like San Francisco, New York, and Boston, because it is prohibitively costly to build. Acreage restrictions, single-family zoning, environmental review requirements, traffic studies, and other rules wrap housing construction in red tape. The result: some new construction happens, but supply is not allowed to expand quickly enough to keep up with rising demand and San Jose homes sell for a median of $1.4 million as of this writing. You can, he explains, get a palace in Lubbock, Texas for what you would spend on a shack in San Francisco.

He answers just about every “what about…?” and argues convincingly that while the costs of housing deregulation are in the billions, the benefits are in the trillions. What we lose from making it easier to build new housing is rounding error compared to what we would gain.

And just what would we gain? We would have cleaner environments with more skyscrapers (Manhattan is probably the most environmentally friendly place on earth in terms of environmental footprint per square foot). We would have cleaner environments and fewer carbon emissions if the housing supply in California could expand more quickly and people didn’t have to move to “browner” parts of the country for cheaper housing — the irony here is that in the name of protecting the environment, we make it harder to build where, from an environmental perspective, we should be building.

Fewer drug-fueled “deaths of despair” with an explosion in construction jobs. Lower crime because more density would mean more eyes on the street and transmission of news about suspicious behavior that is a lot healthier than what you see on Nextdoor.com. Much higher output, to the tune of a 25-40 percent increase in GDP (about $6-$10 trillion). Less traffic. Shorter commutes. Cities that serve people rather than cars. Fewer stubby buildings surrounded by oceans of heat-hoarding blacktop.

When you look at housing, it’s incredible to think about how much public policy is designed to waste resources, like land. While it seems like cities like San Francisco and New York are full, they aren’t. San Francisco, Caplan points out, is a collection of a few skyscrapers surrounded by some “stubby” buildings. To the objection that “there is only so much land out there,” he replies that we can build up, and what’s more, after a building gets to be more than nine floors high, the marginal cost of each additional floor is pretty low. There are, he notes, cost increases after four, six, or nine stories, but then costs flatten. This suggests a rule of thumb he explains “…if it’s worth building 9 stories, it’s probably worth building a full-fledged skyscraper.”

Throughout, Caplan emphasizes consilience: reasons why both left and right should celebrate housing deregulation. As he puts it, “Instead of loudly siding with left or right, [housing deregulation] politely changes the subject.” The right should like that housing deregulation means fewer rules burdening businesspeople and people earn higher real incomes. The left should like that housing deregulation means higher real incomes and lower inequality. As Caplan points out, almost the entire increase in the return to capital charged with worsening inequality is driven by higher housing prices. 

Caplan answers all the usual objections, and in ways I would hope activists might find convincing. “What about the poor?” Is a pretty standard objection to any proposal to price something that isn’t currently priced, like driving. Economists’ proposals to price road access sometimes run into the objection that this would just create “Lexus lanes” for rich commuters, but as Caplan explains, his “package is BETTER for the poor. They might pay a little more to drive, but they’ll pay a lot less to LIVE.” Cheaper housing, better transit, walkability, and lower prices generally would more than offset the extra people would have to pay to drive. Moreover, the price in this case just makes the cost explicit. People are already paying — they’re just paying by sitting in traffic and burning gas.

I’m especially intrigued by his chapter on Frederic Bastiat, housing authority. He exhorts people to consider not just what we’re losing but what we are missing. Yes, we might get rid of some beautiful old architecture (though most of the “historical” buildings and houses I see around me are of dubious architectural distinction), but the cost of protecting beautiful old architecture is the beautiful new architecture we’re losing. We lost the original, beautiful Waldorf-Astoria hotel — but the Empire State Building went up in its place.

Alas, neither side embraces it. H.L. Mencken is said to have defined fundamentalism as the crippling fear that someone, somewhere might be happy. Progressivism, I would argue, is the crippling fear that someone, somewhere might make money. I fear that for progressives, “yes, we would have a lot more affordable housing, but some people would get rich building it” is a deal-breaker. Homeowners love regulation because it protects their property values. Renters, surprisingly, love housing regulation because they just have disdain for rich developers. Environmentalists love housing regulation because dense housing is abstractly green but not visually and tangibly green. Manhattan is probably the most environmentally friendly place on earth, but it doesn’t look like it because it is a concrete jungle. And yet, as Caplan argues based on research by Edward Glaeser and Joseph Gyourko, deregulation could mean 50 percent lower housing costs. Zoning, they argue, means that regulation imposes an effective $1.6 million per acre tax in San Francisco and even $180,000 in relatively laissez faire Dallas.

Finally, Caplan considers how different political philosophies all lead to the same conclusion. Are you a “greatest good for the greatest number” utilitarian? Deregulate housing. An egalitarian who will only put up with inequalities that help the least-well-off? Deregulate housing. A cost/benefit calculator? Deregulate housing. A libertarian? Deregulate housing. And even if you must have some rules governing new housing construction, there are a lot of “keyhole solutions” that cause a lot less damage than the current regulatory hammer. Afraid of tall buildings casting shadows? Tax tall buildings and use the revenue for new parks. Afraid there won’t be enough parking? Let businesses pay to get out of parking requirements.

So how do we get there? He points out that it seems like this should be a slam dunk: “Upshot: Once you grant the TRILLIONS of dollars of gains of housing deregulation, you can’t credibly object with a bunch of BILLION-dollar drawbacks. Yet such innumerate objections can easily win a debate for you.” Status Quo Bias — the conviction that the grass is always browner on the other side of the fence — is a formidable foe. Bright-line property rights, however, are a useful check against stasists who insist on keeping things the way they have always been — and the Supreme Court as it is currently constituted might be positioned to overturn the Euclid v. Amber Realty Co. decision that gave us modern zoning."

Iron Law of Prohibition: Nicotine Edition

By Jeffrey A. Singer of Cato.

"In 2016, the Food and Drug Administration (FDA) assumed the authority to regulate all nicotine‐​containing products, including electronic nicotine delivery systems, such as e‑cigarettes. E‑cigarette manufacturers were given until September 9, 2020, to submit applications to the FDA for the agency to approve the marketing of their products. The agency received nearly seven million applications by the deadline and is still reviewing many of them. It has rejected more than a million flavored vape applications.

However, non‐​nicotine synthetics that have chemical structures resembling nicotine are exempt from FDA regulation. Thus, people who wish to consume relatively harmless nicotine because they value its stimulative and calming effects can work around government obstructions by accessing nicotine‐​analog products. The government does not require makers of synthetic nicotine analogs to obtain FDA approval before they can market them to consumers. And consumers are purchasing these products.

According to a letter to FDA Commissioner Robert Califf, MD, from Altria LLC, a nicotine product manufacturer that has complied with FDA regulations, several companies, including many in other countries, are marketing nicotine analogs to consumers. The letter states, “The introduction and growth of chemicals intended to imitate the effects of nicotine, if left unchecked, could present unknown risks to U.S. consumers and undermine FDA’s authority,” urging the FDA to “carefully and quickly evaluate these new compounds to determine what regulatory authority it has over these products.”

Now comes a report by the Reuters news agency stating that the FDA and independent researchers believe that many of these analogs, such as 6‑methyl nicotine, might be “more potent and addictive” than nicotine.

This is another example of the “iron law of prohibition”—the harder the law enforcement, the harder the drug—in action. In this case, the government, largely driven by nicotinophobia, is prohibiting the manufacture and sale of numerous nicotine products, many of which have helped smokers quit the habit.

Prohibition resulted in drug trafficking organizations moving from diverted prescription pain pills to heroin, from heroin to fentanyl, from fentanyl to fentanyl mixed with xylazine, and now from that to fentanyl mixed with medetomidine and nitazenes.

Rinse and repeat.

We are now seeing the same process at work with nicotine. Nicotine prohibition begets more potent forms of nicotine, and new opportunities appear to be on the horizon for the prohibition/​law enforcement complex."

Cell Phones and Competition

By Kevin Corcoran of EconLib.

"Here’s a hot shopping tip that I suspect most readers won’t be able to take advantage of – at the moment, Apple is discounting the iPhone in China. But I don’t bring that up because I’m actually hoping to influence anyone’s shopping behavior. I find it noteworthy for other reasons. 

It may seem odd that I’d find it noteworthy that a company was offering a discount on one of their products. Isn’t that something companies do all the time? Not in Apple’s case. They rarely – almost never, in fact – sell their devices at a discount. Take, for example, the “Black Friday” shopping experience in the United States, which is usually what kicks off the holiday shopping season leading up to Christmas. Many cell phone companies offer huge discounts during this event. In fact, in recent years these holiday discounted prices have been appearing well before Black Friday and lasting well past the Thanksgiving weekend. Google and Samsung will often offer their phones at significantly marked down prices, as well as offering bundle deals and enhanced trade-in values for older phones.

Last year, for example, Google knocked $200 of the price of their high-end flagship phone, the Pixel 8 Pro, even though it had only been released the month prior, and took $400 off the price of their folding phone/tablet hybrid, the Pixel Fold. Meanwhile, Apple only had promos for the actual Thanksgiving weekend, and rather than discounting their products, items were sold at full price, but certain purchases would come with an Apple gift card that could be used to buy more Apple products. So, buying a new Apple TV 4K would also get you a $50 gift card to Apple. 

So why is Apple now offering their top-end iPhones at discounts equal to hundreds of dollars in China, when they don’t offer anything like that kind of a discount in the United States during the quintessential holiday discount shopping event?  It’s because in China, Apple is facing steep and increasing competition from companies like Huawei – competition it doesn’t have to face in the United States market, because the United States government has banned those companies from competing in the US market on transparently thin “national security” grounds. (Although not as thin as the case pointed out by Jon Murphy, where protectionists invoked “national security” as a reason to ban not Chinese electronics, but Chinese garlic.) As a result, Chinese consumers are able to get iPhones at better prices than American consumers, because the Chinese government allows more competition in the cell phone market than the American government allows. And it seems like this move on Apple’s part has been successful, as Chinese consumers have responded positively to the price cuts. It’s just a shame American consumers don’t get the same benefits from this competition.

I’ve written before about how the Department of Justice’s assertion that companies like HTC and Microsoft failed to compete with Apple in the United States because of “barriers to entry” is absurd on the face of it. To recap, my claim there was that it’s absurd to say that Microsoft, which had been selling smartphones for years and had an established user base of millions upon millions of customers well before the iPhone existed failed to compete with the iPhone because Microsoft faced “barriers to entry.” But this does not mean no barriers to entry exist in the cell phone market in any sense. However, the most important barriers that exist right now are in place because of government regulations. Before the government tries to remove the speck from the market, it should first turn its attention to the plank created by its own policies."

Deadly Precaution (by the FDA on sunscreen and other things)

By Alex Tabarrok.

"MSNBC asked me to put together my thoughts on the FDA and sunscreen. I think the piece came out very well. Here are some key grafs:

…In the European Union, sunscreens are regulated as cosmetics, which means greater flexibility in approving active ingredients. In the U.S., sunscreens are regulated as drugs, which means getting new ingredients approved is an expensive and time-consuming process. Because they’re treated as cosmetics, European-made sunscreens can draw on a wider variety of ingredients that protect better and are also less oily, less chalky and last longer. Does the FDA’s lengthier and more demanding approval process mean U.S. sunscreens are safer than their European counterparts? Not at all. In fact, American sunscreens may be less safe.

Sunscreens protect by blocking ultraviolet rays from penetrating the skin. Ultraviolet B (UVB) rays, with their shorter wavelength, primarily affect the outer skin layer and are the main cause of sunburn. In contrast, ultraviolet A (UVA) rays have a longer wavelength, penetrate more deeply into the skin and contribute to wrinkling, aging and the development of melanoma, the deadliest form of skin cancer. In many ways, UVA rays are more dangerous than UVB rays because they are more insidious. UVB rays hit when the sun is bright, and because they burn they come with a natural warning. UVA rays, though, can pass through clouds and cause skin cancer without generating obvious skin damage.

The problem is that American sunscreens work better against UVB rays than against the more dangerous UVA rays. That is, they’re better at preventing sunburn than skin cancer. In fact, many U.S. sunscreens would fail European standards for UVA protection. Precisely because European sunscreens can draw on more ingredients, they can protect better against UVA rays. Thus, instead of being safer, U.S. sunscreens may be riskier.

Most op-eds on the sunscreen issue stop there but I like to put sunscreen delay into a larger context:

Dangerous precaution should be a familiar story. During the Covid pandemic, Europe approved rapid-antigen tests much more quickly than the U.S. did. As a result, the U.S. floundered for months while infected people unknowingly spread disease. By one careful estimate, over 100,000 lives could have been saved had rapid tests been available in the U.S. sooner.

I also discuss cough medicine in the op-ed and, of course, I propose a solution:

If a medical drug or device has been approved by another developed country, a country that the World Health Organization recognizes as a stringent regulatory authority, then it ought to be fast-tracked for approval in the U.S…Americans traveling in Europe do not hesitate to use European sunscreens, rapid tests or cough medicine, because they know the European Medicines Agency is a careful regulator, at least on par with the FDA. But if Americans in Europe don’t hesitate to use European-approved pharmaceuticals, then why are these same pharmaceuticals banned for Americans in America?

Peer approval is working in other regulatory fields. A German driver’s license, for example, is recognized as legitimate — i.e., there’s no need to take another driving test — in most U.S. states and vice versa. And the FDA does recognize some peers. When it comes to food regulation, for example, the FDA recognizes the Canadian Food Inspection Agency as a peer. Peer approval means that food imports from and exports to Canada can be sped through regulatory paperwork, bringing benefits to both Canadians and Americans.

In short, the FDA’s overly cautious approach on sunscreens is a lesson in how precaution can be dangerous. By adopting a peer-approval system, we can prevent deadly delays and provide Americans with better sunscreens, effective rapid tests and superior cold medicines. This approach, supported by both sides of the political aisle, can modernize our regulations and ensure that Americans have timely access to the best health products. It’s time to move forward and turn caution into action for the sake of public health and for less risky time in the sun."

Review of Brad DeLong’s Book “Slouching Towards Utopia: An Economic History of the Twentieth Century”

Berkeley economist Brad DeLong has an exceptional ability to get just about everything on the 20th century fantastically wrong in his book "Slouching Towards Utopia: An Economic History of the Twentieth Century."

By Joakim Book. 

"The Berkeley economist Brad DeLong hates Friedrich Hayek — that much is clear from his oversized 536-page tome, Slouching Towards Utopia: An Economic History of the Twentieth Century, 25 years in the making. And that’s also about the level of scholarship we can expect. The key ingredients in this politically slanted misinterpretation of the “long” century, 1870 to 2010, are taunts, insults, and extreme value judgments. In the first five pages no less, Hayek is both demoted to a “mere” moral philosopher and explicitly called an “extraordinary idiot” — only to be resurrected as “a genius” towards the end of DeLong’s excruciating narrative. It’s anybody’s guess why.

The book inches forward with long asides and biography paragraphs for characters as unremarkable as the man who brought Hitler into his political party. The kindest thing one can say about DeLong’s occasionally humorous rants is that the book’s subtitle is misplaced: This is not an economic history of anything, but a political and ideological one.

An economic history of the 1940s, say, would involve production, government wartime dirigisme, debt financing, and postwar inflation. It would consider the faulty notion that big government wartime spending brought depressed economies out of the Great Depression of the 1930s. Instead, what DeLong delivers is a dull, textbook-type account of Britain and Germany’s warmongering. It’s the old-fashioned “maps and chaps” type of history — that aristocratic British flavor of academic investigations that look at all the wrong things (warfare, diplomatic correspondence, voting, or politicking).

Western governments of the interwar years — larger and more invasive than they had ever been — were to DeLong’s eyes pursuing “doctrines of orthodoxy and austerity,” with an “insistence on pure laissez-faire, that the government should simply leave the economy alone.”

We’re given many florid phrases about the horrid “anarchy of the market” and how the market “failed” to provide this or that imagined good. DeLong often seems to believe that because things exist in abundance somewhere in the world, we can all have anything we desire — physical distribution, durability, or political and institutional obstacles be damned. That’s an odd thing to publish in 2022, at the tail end of skyrocketing inflation and an energy crisis that, in part, resulted from insufficiently movable energy.

The book’s title refers to what Western society has implicitly aimed for since the mid-nineteenth century: material well-being, abundance, and dignity for all. That’s the “utopia.” DeLong chalks up the wealth of today — which most of our ancestors indeed have called utopian — to three pretty disparate things: world globalization, the industrial research lab, and the modern corporation. None of those are completely immaterial to the progress and economic growth miracles of the last two hundred years, but none of them pack enough punch to have delivered the incredible improvements in the average person’s livelihood, 1850 to today.

His overarching grand narrative divides the market-friendly Hayekians from the people-rights-proposing followers of Karl Polanyi. It’s no big mystery who DeLong thinks the bad guys are. The Hayekian right-wingers “understood that the market is made for some men, but not all — and likewise that some men, but not all, would benefit.” The Polaniates, in contrast, recognized that people imagine certain rights being owed to them — livelihood, stable social environment, a decent job. If we just say so, we can have nice things.

Though the deployment of new technologies and the corporate organizational form seem to belong to market institutions, and thus the Hayekians, DeLong claims them for his own side: The market “cannot by itself deliver enough research and development, for example, or environmental quality, or indeed, full and stable employment.” That’s another failure for the market, unfixable unless a benevolent politician or bureaucrat balances the erratic tendencies of the marketplace. “A prosperous market economy could only flourish if it was protected by authority.”

The book is irrelevant in the exact meaning of that word: It does not answer the question it sets for itself, does not rise to the task of chronicling the big economic changes of the extended twentieth century, does not adequately and accurately capture a believable grand narrative that characterized this long century. Instead, ramblings. Jabs at this or that conservative or market-friendly character — Charles Murray and George Gilder being some particular favorites.

What we get is a social history of America, pages jam-packed with woke-speak and some fascinating nuggets from America’s failure to live up to its ideals. These are all valuable in small doses, tiring in actual delivery, yet marshal not an iota toward the “economic” topics the author ostensibly set out to capture (except for a few pages that feature Claudia Goldin’s work on the disappearing wage gap).

We learn that there is enough food on the planet, so nobody must endure hunger; enough shelter, so nobody ought to lack any; enough clothing in our corporate warehouses such that nobody needs to be cold. The market is bad because it creates too-large riches for the wrong people; because it caters only to the rich; and because it rewards only those “lucky enough to control resources that produced things for which the rich had a serious jones.”

In contrast, economists up and down the century, such as Ludwig von Mises, have thought of capitalism as mass production for the masses. DeLong didn’t get the second part of that decades-old memo and instead, surprisingly, lumped Mises in with the fascists — calling him “a darling of the far right.” The citation to Mises is completely out of context, taken from a section in his 1927 book Liberalism that attacks fascism’s adoration of violence and warmongering, not supports it. (Mises is a difficult read, everyone knows who has tried, so we should have some compassion with DeLong’s oversight here.)

In the last few chapters, the message gets blurry. From the three reasons for our wealth, we suddenly get four factors that best define the twentieth century — technology-fueled growth, globalization, American exceptionalism, and “confidence” that humanity could progress by having the government fix market problems. Add to that the two most important moments: Keynes’ Economic Possibilities for our Grandchildren and FDR’s many big government policies of the 1930s.

That would have been a more interesting framing for this book’s “grand narrative.”

In a lecture on the book from around its publication, DeLong confessed that he thinks “at least 20 percent of this book is big-time wrong.”

Let’s just say that’s an optimistic figure."

Fossil fuels not going away anytime soon

By Jock Finlayson of The Fraser Institute.

"At a time of persistent cost of living pressures and mounting worldwide geopolitical tension, it’s not surprising that energy issues are in the spotlight in Canada and beyond.

Earlier this year, the Trudeau government decided to freeze its carbon tax for home heating fuels in Atlantic Canada in the face of ferocious opposition to further tax hikes from premiers, local communities and MPs in the region. Smart politicians understand that Canadians today are attuned as never before to energy prices, including fuel prices at the pump.
  
With policymakers in Canada and elsewhere also preoccupied with climate change, we are exposed to sharply conflicting narratives about the future of energy. In one corner are those who spy a rapid and epic shift away from the fossil fuels that still supply 80 per cent of the world’s energy. In the other corner are skeptics who doubt that the dominant place of fossil fuels in the energy system will soon disappear.

As the debate continues, the U.S. Energy Information Administration (EIA) is an important source of well-grounded information. It provides regular updates on trends in energy supply and demand, both in the United States and globally. EIA forecasts deserve attention given the agency’s solid track record of predicting energy market developments.

On crude oil prices, the EIA now believes the main U.S. benchmark price will hover between US$85 and $90 per barrel over 2024-25. That’s good news for Canada, as crude oil ranks as our number one export. In its May 2024 market update, the EIA observes that “the startup of the Trans Mountain pipeline expansion… will alleviate existing distribution bottlenecks and allow for a gradual increase in oil production.”  While one would never know it from scanning federal government news releases, Canadian oil production and export volumes are set to climb over the rest of the decade. And Canada’s energy-based export earnings will also receive a sizable boost once shipments of liquified natural gas (LNG) commence from LNG projects nearing completion in British Columbia.

Meanwhile, the EIA sees global oil consumption increasing further, after dipping briefly during the pandemic, reaching 105 million barrels per day by 2026.

Globally, there’s little evidence that consumers are turning away from petroleum and other liquid fuels, contrary to the claims of some Canadian politicians and environmental groups. Amid endless chatter about energy transitions and governments allocating gargantuan sums to an expanding hodgepodge of programs to reduce greenhouse gas (GHG) emissions, the world collectively still depends on oil and other carbon-based fuels for the vast majority of its energy.

None of this is surprising. The “dense” energy provided by fossil fuels is greatly valued by consumers and remains difficult to replace with other primary energy sources. Fossil fuels have played a central role in economic development since the dawn of industrialization. That will not change anytime soon.

Which is why the EIA doesn’t expect much progress in reducing GHG emissions in the coming one or two decades. In its recent comprehensive forecast, it projects that “global energy-related… emissions will increase through 2050” under almost all of the policy scenarios it models.

How can that be, with all of the political attention being given to climate change in many countries? Because rising populations and incomes, particularly in China, India and other emerging economies, “will offset the effects of declining energy and carbon intensity on emissions.” And also because outside of the electricity sector, there simply aren’t enough reliable cost-effective non-fossil fuel energy sources to satisfy the world’s still growing need for energy."

The Exxon Directors and the Proxy Abusers

Progressives retaliate after the company fights back against a shareholder resolution that would harm other investors

WSJ editorial. 

"Progressives are abusing the shareholder proxy process to drive their climate and social agenda, and now they want to punish Exxon Mobil for daring to fight back.

California Public Employees’ Retirement System (Calpers) on Monday said it would vote against all of Exxon’s directors at its shareholder meeting next week. Proxy adviser Glass Lewis last week recommended that shareholders reject Exxon’s lead independent director Joseph Hooley’s re-election, citing “unusual and aggressive tactics” against activist investors.

Majority Action, a leftist outfit, is also prodding institutional investors to oust CEO Darren Woods and Mr. Hooley for “attacking shareholder democracy and failing to address climate risk.” Far from protecting shareholder rights, these agitators want to punish Exxon and its investors for refusing to surrender.

Exxon filed a federal lawsuit in January to block a shareholder resolution by Follow This and Arjuna Capital that sought to force steep cuts to the company’s CO2 emissions, including any from the combustion of its products. As Exxon explained in its suit, the resolution would force it to “change the nature of its ordinary business or to go out of business entirely.”

Follow This and Arjuna invest in companies to drive their anti-fossil-fuel agenda. As Follow This says, “we buy shares in order to work on our mission to stop climate change, not to make a financial profit,” and to make producers “stop exploring for more oil and gas and start exploring for new business models.”

The Securities and Exchange Commission’s longstanding rules let public companies block shareholder resolutions that affect a company’s “ordinary business operations.” But current SEC Chair Gary Gensler has declined to let companies nix resolutions if they have a “broad societal impact.” Read: political impact.

As a result, annual proxy voting has increasingly become a shareholder plebiscite on environmental, social and governance (ESG) matters. All shareholders pay for the costs that companies incur responding to such resolutions, which the SEC estimates at $150,000 per proposal. They also distract boards from more important business.

Arjuna and Follow This in February dropped their resolution, perhaps worried that they might be required to pay legal damages if they lost. Yet Exxon has continued its lawsuit because it says “the underlying issue remains and must be resolved.” That is, can progressive activists harass companies with ESG resolutions that seek to harm other shareholders?

“Until the courts weigh in, activist investors will continue, with the SEC’s approbation, to inundate public corporations with proposals designed to push an ideological agenda divorced from the success of the corporation,” the U.S. Chamber of Commerce and Business Roundtable wrote in a friend-of-court brief for Exxon.

Courts have ruled that cases aren’t moot unless it’s clear that defendants won’t resume their allegedly wrongful behavior. Arjuna and Follow have twice pursued unsuccessful resolutions to force Exxon to reduce its emissions. Who doubts that they will introduce similar proposals in the future?

This explains the retaliation against Exxon because progressives fear a judge could stop their corporate harassment. “Decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful U.S. corporation, designed to punish two small groups that dared to speak truth to power,” Calpers leaders said Monday.

The real threat to shareholders is progressive investors with minor stock holdings who want to commandeer and destroy companies for their own political ends."

Lower taxes for the rich spur investment, which is good for people of all classes

See You Say ‘Trickle Down’ as if It’s a Bad Thing by Steven E. Rhoads. He is a professor emeritus of politics at the University of Virginia. Excerpts:

"Even some prominent 20th-century liberal economists, including Paul Samuelson and Alfred Kahn, agreed that the innovation and investment that lead to capital formation are crucial to economic growth. Kahn once wrote: “The most powerful engine of productivity advance is technological progress, generated in large measure by expenditures on research and development and embodied in improved capital goods and managerial techniques.” That process confers benefits on everyone, he added, “precisely by trickling down.”"

"For his 2019 book, “The Billion Dollar Secret,” entrepreneur Rafael Badziag interviewed 21 self-made billionaires. He found that they generally derived more pleasure from investing in technologies to create new and improved products—a benefit to everyone—than from spending on personal luxuries.

A good example is the smartphone. Wealthy Americans were among the first buyers of and investors in the product when it was a new technology. In time, costs dropped and smartphones became ubiquitous."

"We all gain from new, improved products made possible by innovative startups funded by the wealthy. Excessive taxation, doubtless a feature of a “middle-out” plan, could deplete the funds that entrepreneurs use to start and sustain useful ventures."

The IRS Money Hole Gets Deeper

The agency is already pleading poverty despite its 2022 windfall

WSJ editorial. 

"The Internal Revenue Service can’t write its own checks, which means it has to ask Congress for funding like any other agency. But if lawmakers have been tracking its misspending, they’ll turn down the tax collectors’ new $104 billion budget request and demand an audit instead. 

Commissioner Danny Werfel appeared before the House Appropriations Committee recently and told legislators that the IRS faces financial collapse. “Resources are limited,” he said, and the agency “will likely use them entirely before the funding expires.” In other words, the IRS doesn’t think the $60 billion bonus it received from Congress in 2022 is enough, though it is supposed to last through 2031.

The IRS has a brilliant solution for this cash burn: Add more to the pile. Instead of explaining where the money went, Mr. Werfel asked the House to look away and grant his team another massive funding boost, this time through 2034. The extended bonus he seeks would bring total supplementary funding to $104 billion over 10 years.

Mr. Werfel also hinted at mass layoffs if Congress doesn’t pay up. The bad news for taxpayers is that jobs would be cut from the customer service team rather than the growing audit squad. “The vast majority of taxpayers would be unable to reach an IRS representative for assistance,” Mr. Werfel warned. He’s betting that voters will blame their representatives who don’t give him the money he wants and then the agency keeps taxpayers on hold for an hour. This is called political blackmail.

Missing from the IRS’s request was an accounting of how its last round of funding has been run down so quickly. The money it received in the 2022 Inflation Reduction Act (IRA) was meant to fund a strategic overhaul, but not much of the plan has been carried out.

The biggest dud so far has been the hiring spree the agency promised. The strategic plan called for about 20,000 new hires by the end of 2024, and another 10,000 by next year. The IRS fell short of its first-year target and has struggled in particular to recruit auditors, one of its highest-paid types of staffer.

The agency has had an even worse start reforming its taxpayer service arm. Early reports suggest that progress has been flat since the last round of funding. By December the IRS said it had almost 700,000 returns still waiting to be processed, most of which were filed earlier last year.

Another money pit is Direct File, the new government-run platform for submitting returns. Democratic lawmakers have sought in-house tax filing for years to push private preparers out of business, and they funded an IRS study of the program. Yet the IRS went ahead and launched a pilot this year, spending about $114 million for a platform currently serving only 140,000 filers.

All of this is proof of mismanagement at the agency, which howled in protest when House Republicans clawed back $20 billion from the original $80 billion Democrats gave the agency in the 2022 IRA. Despite his pleas, Mr. Werfel is making a strong case for stripping the remainder instead of adding another cent of additional cash."

The AI Pork Barrel Arrives

Chuck Schumer has found a new excuse to spend $32 billion a year, and some Republicans are going along for the ride

WSJ editorial. Excerpt:

"AI innovation is accelerating. ChatGPT has undergone iterative improvements since it was first released in November 2022. As has the rest of the AI field. Mr. Schumer said Wednesday that AI is hard to regulate because it “is changing too quickly.” Fair point. But then why does Washington need to subsidize it?

Goldman Sachs estimates that U.S. private investment in AI will total $82 billion next year—more than twice as much as in China. Big tech was late to catch the AI wave. But businesses of all sizes are now using AI to develop medical treatments, improve productivity and logistics, assist customers and more.

Government has been a laggard in adopting AI, but it usually is with new technology. It’s true Beijing is spending heavily to boost its AI capabilities, especially for military uses. However, one reason the U.S. leads China in innovation is that about three-quarters of R&D is directed by private industry. Beyond pure research that private actors won’t do, government is a poor allocator of capital."

For the Sake of Free Speech, Keep Section 230

Conservative speech might be the first to go under the justification of increased legal risk

Letters to The WSJ. 

"Reps. Cathy McMorris Rodgers and Frank Pallone Jr.’s op-ed “Sunset of Section 230 Would Force Big Tech’s Hand” (May 13) fundamentally misunderstands Section 230. It doesn’t give Big Tech “unlimited immunity from legal consequences.” Platforms and users are liable for their own illegal actions. The internet isn’t lawless.

Section 230 protects platforms from being held responsible for hosting user posts. Without it, platforms would be left with three choices: Implement extensive content censorship by surveilling every post and taking down any post that could possibly lead to a lawsuit; allow all content to stay up no matter how repulsive; or prohibit users from posting at all. Any of these scenarios would devastate free speech and forever change the way we interact online.

Section 230 allows platforms to keep problematic content off their sites because it provides that platforms can moderate without risking liability for the speech they do host. By empowering platforms to remove objectionable content, Section 230 enables platforms to protect children.

It’s easy to blame Big Tech for all the harms online, but many of these problems are social, not technical. To promote safety online, we must give people stronger privacy protections (which includes more control over their online experience), not repeal a law that has fostered innovation and free speech for decades. Our leaders must back away from this dangerous proposal.

Jenna Leventoff

American Civil Liberties Union

Washington

The only remedy Reps. McMorris Rodgers and Pallone Jr. offer for online harms is to turn the plaintiffs’ bar loose on tech companies, a curious solution for Republicans who historically favor tort reform. Eradicating or curtailing Section 230 will ensure that only those companies already big and rich enough to pay legal-defense bills will survive.

The First Amendment already ensures that social-media companies don’t have to carry any content they don’t wish, but Section 230 makes it fiscally safe to carry content they might not otherwise. Changing that should worry those concerned about the removal of online conservative speech, as those sentiments might be the first to go under the justification of increased legal risk.

Those same tech giants will also, inevitably, be the ones with seats at the table crafting a new regulatory regime during the 18-month window after repeal, likely leaving nascent and yet-to-be-founded firms at a disadvantage. Today’s most successful platforms benefited greatly from the liability shield, but they would have every incentive to deny it to future competitors.

Eliminating Section 230 won’t solve the already illegal harms the authors mention, but it will kill innovation that could result in better social-media options in the future. Better to avoid unintended consequences and increase funding to law enforcement rather than lining the pockets of trial lawyers.

Jessica Melugin

Competitive Enterprise Institute"

The Big Green Transmission Coup

Schumer and FERC end-run Congress on permitting reform and socialize energy costs

WSJ editorial. 

"Senate Majority Leader Chuck Schumer must have uncorked some vintage champagne last week after the Federal Energy Regulatory Commission finalized a 1,363-page transmission rule to accelerate the green-energy buildout. Now Democrats can bypass Congress on permitting reform.

FERC’s actions are “what we need to see the clean energy revolution we catalyzed with the Inflation Reduction Act come to fruition,” Mr. Schumer crowed. What he means is that renewable developers will now capitalize on more taxpayer largesse while states and businesses socialize the costs of their climate policies.

***

Most Americans don’t know what FERC is, and in a normal world they shouldn’t need to. But as energy policy has become politicized, Democrats are using FERC to drive policy they can’t pass in Congress. The goal is to transform the U.S. electrical grid to accommodate solar and wind power while rolling over states that object.

The 1935 Federal Power Act included a federalist compromise that maintained state authority over transmission-line permitting while giving FERC authority to apportion costs of regional grid upgrades. Congress recognized that power transmission affects state-regulated utilities, but also that state disputes over costs may require federal intervention.

This balance has worked for nearly a century, but the left’s climate goals threaten reliable energy. Renewables are intermittent and far from population centers, which increases transmission costs. The transmission share of wholesale power costs has tripled over the last decade on the PJM grid in the eastern U.S.

Many states don’t want to pay for power they don’t need. Heavily subsidized renewable power can also undercut fossil-fuel and nuclear plants, which provide 24-hour baseload power. Some states are subsidizing nuclear plants to stay open to ensure reliable power.

As Mr. Schumer suggests, tens of thousands of miles of new transmission are needed to reach the climate lobby’s net-zero nirvana. But this won’t be quick or cheap. Princeton researchers in 2021 estimated the grid buildout will cost $3.5 trillion by 2050—and inflation has further run up costs for everything from copper wire to transformers.

Democrats want to expedite construction of renewables and transmission, but little else. Sen. Joe Manchin’s small-beer permitting reform bill in 2022 would have let FERC overrule states and apportion transmission costs based on ill-defined benefits, including CO2 emission reductions. After Republicans balked, Mr. Schumer ordered FERC to take over.

FERC’s new rule requires regional grid operators to develop a transmission plan to meet state and corporate climate goals over the next 20 years. This will free liberal state lawmakers from having to consider the effects of their climate policies on grid reliability.

FERC’s rule will effectively subsidize “socially responsible” corporations, as Republican commissioner Mark Christie noted in his dissent. Google will no longer have to worry about how to move wind power in one area to support its data centers in another. That will be the job of grid operators.

It gets worse. Grid operators will also socialize transmission costs across states in their region. FERC currently apportions transmission costs based on reliability and economic benefits. So if New Jersey residents mostly benefit from lower-cost and more reliable power produced by a Pennsylvania natural gas plant, they will pay most of the transmission costs.

Under the FERC rule, all states will be considered beneficiaries from a new transmission line that increases renewable generation because this will supposedly reduce the likelihood of blackouts and electric prices—never mind that solar and wind must be backed up at exorbitant cost. This means Pennsylvanians will subsidize New Jersey’s anti-fossil fuels policies.

This will give Democratic-leaning states an incentive to ratchet up their renewable mandates because grid operators will be responsible for achieving them. The costs of their policies will be shifted to GOP-run states.

***

Mr. Schumer and Democrats are cheering FERC because they believe they will also no longer have to compromise with Republicans on permitting reform to advance their climate goals. But FERC’s rules don’t override the National Environmental Policy Act, which means states and third parties can still sue to block transmission lines.

The U.S. electrical grid is already wobbling under the strain of growing renewable production. By favoring transmission of renewables over fossil fuels, FERC’s rules will reduce electric reliability and increase the cost. Who will benefit? Not Joe the Plumber in Ohio, but Gavin Newsom, Google and President Biden’s donors in the climate lobby."

Test Scores Down, GPAs Up: The New Angst Over Grade Inflation

Teachers say they have to balance ‘giving grace’ to struggling students with maintaining high expectations

By Matt Barnum of The WSJ. Excerpts:

"Dating back to 2020, when the pandemic upended American education overnight, many schools have adopted a more lenient approach to grading. Some eliminated zeros or removed penalties for late work. Many teachers report “giving grace” to struggling students. Others say they have felt pressure from administrators to limit failure rates."

"A national analysis of the class of 2022 found that among students who took the ACT, high-school grades had risen, even as ACT scores had dipped."

"many school systems have enacted new policies that continue to affect students’ grades.One increasingly common approach is a minimum grade—often 50%—for each assignment, even if a student doesn’t turn it in."

"High-school grades have been rising for at least two decades. A U.S. Department of Education study found that the typical GPA of a high-school graduate had risen from 2.7 (a C+) in 1990 to 3.1 (over a B) in 2019. Teachers cite pressure from parents and administrators, as well as the heightened competitiveness of college admissions. 

But the recent divergence between grades and test scores has vexed education advocates. “Grades are sending signals that students are doing well at a time when there is serious reason for concern,” said a recent report released by three education groups."

"Research has found that students tend to learn more in classes with teachers who are tougher graders."

What It’s Like Being Jewish at Harvard

An alumni report on antisemitism on campus includes startling testimony from students and faculty

WSJ editorial. 

"Antisemitism has emerged on America’s college campuses recently in a way that might seem sudden, but it has been growing for years. The Harvard Jewish Alumni Alliance last week published a report that compiles testimony, much of it anonymous, from 50 current and former Jewish students and faculty. Here are a few of the disturbing things they said:

“Harvard signals that Jews are only acceptable so long as they don’t fully embrace Judaism.” The only way to cope is “not to dress ‘too Jewish,’ request the university accommodate Jewish holidays, speak Hebrew, or, God forbid, actually support Israel’s right to exist.”

• “It’s so much harder for the students who are visibly Jewish. I have a friend who wears a kippah who was physically cornered by a group of students demanding he denounce the so-called genocide.”

• “Because of my Jewish and Zionist identity, people think I am a monster. I have heard people say, ‘Zionists should be slain.’ I have heard people say, ‘You can’t possibly believe an Israeli, they are all settlers.’”

• “It’s pretty scary to walk around campus,” and pretty much all the Orthodox guys “have started wearing baseball caps.”

The report says bullying of Jewish students took place well before Oct. 7, when Hamas massacred Israelis civilians and precipitated the current war in Gaza. But since then, the problem has become “louder, prouder, and more visible.” While fellow students have been responsible for much of the problem, the Jewish alumni also document how it’s fueled by the Harvard professoriate and the school itself.

This year 112 Harvard faculty and staff called for a boycott of Israel and all companies that “sustain Israeli apartheid, settler colonialism, and systematic human rights abuses.” A visiting professor in 2022-23 offered a course called “Jihad, War and Peace in Islamic Law and Practice.” Required reading, according to the alumni report, included such insight as: “The suicide bomber belongs in an important sense to a liberal tradition of armed conflict.”

Harvard’s School of Public Health has a partnership with Birzeit University in the West Bank, which the report says “prohibits Israeli Jews from campus” and “hosts military parades for Hamas.” While students were reluctant to speak on the record, the authors say that faculty were even more so, because they worried it “could get them fired or undermine a promotion.”

The report also reminds readers that after Hamas’s brutality on Oct. 7, the protests at Harvard began long before Israel launched a single response in Gaza. On Oct. 8 more than 30 student groups signed a statement saying that they held “the Israeli regime entirely responsible for all unfolding violence.” The ink was dry before Israel had buried its dead and counted the hostages.

Progressives claim to draw a line between anti-Zionism and antisemitism, but the two are impossible to disentangle in these student encampments, amid the chants about freeing Palestine “from the river to the sea.” As one student put it: “Zionist is a code word for Jew.” Harassment is the same no matter the language."

The Radicals Getting Your Tax Money

The EPA awards $50 million to a group that says Palestine is a ‘climate justice issue.’

WSJ editorial. 

"The Biden Administration is showering far and wide more than $1 trillion in climate largesse from the Inflation Reduction Act (IRA). Still, who could have thought that taxpayer funds would flow to a left-wing group that thinks “climate justice” involves everything from freeing Palestine to dismantling capitalism?

That’s the discovery made by West Virginia Sen. Shelley Moore Capito’s office. Democrats appropriated $3 billion in the IRA to the Environmental Protection Agency for “environmental justice” grants, including $600 million for a “national grantmaker” program. In December the EPA awarded $50 million to Climate Justice Alliance, a network of nearly 90 affiliates, which plans to use the money to “resource community-based organizations (CBOs) to address past, current, and future environmental health and justice challenges.”

What else does Climate Justice Alliance do? Last November it helped to coordinate a “March on Washington,” where protesters waved the banner “Free Palestine Is a Climate Justice Issue.” Other slogans included “Our Government Funds Palestinian Genocide” and “Only Socialist Revolution Can Stop World War III.”

The group’s website includes a “Free Palestine” section, with a video that uses “an anti-colonial framework to show how Climate Justice and the liberation of Palestine are connected.” It doesn’t disappoint. “Climate change did not begin with the burning of fossil fuels,” the narrator says. “It began with settler colonialism, imperialism and extractivism.” He asks viewers “to demand that we cut military funding to Israel and begin the process of demilitarization, so that we can all be free.”

Climate Justice Alliance’s website also offers a collection of anti-Israel art “that you are invited to use for Palestine solidarity protest actions.” One shows a bulldozer tearing down an Israeli fence. Another has a man waving a Palestinian flag standing atop a tank, with the quotation: “Where there is oppression, there will be resistance.” That line is attributed to Assata Shakur, who fled the U.S. to Cuba after being convicted of murdering a New Jersey state trooper in 1973. A third poster says: “Abolish Prisons Everywhere.”

The group has echoed calls to shut down Immigration and Customs Enforcement, or ICE, such as in a 2020 blog post. “Why is it important, as we figure out how to stop contributing to climate change and how to adapt to climate change, to also figure out how to abolish ICE or dismantle racist institutions?” it asks. “The key is, they all work together to support this broken system and the status quo.”

In disbursing the EPA’s $50 million, Climate Justice Alliance plans to work with the NDN Collective. That group published a manifesto in 2022 that argues: “We should not treat the struggles we face against zionism, white supremacy, and imperialism as separate from one another, because they act as one to oppress and eliminate us.”

Climate Justice Alliance has a member called Grassroots Global Justice Alliance. It includes a working group called DemilitaRISE, which aims to “move resources away from police, prisons, the Pentagon, and war, and invest in Black, Brown, and Indigenous-led restorative justice, reparations, community leadership, and collective healing.”

A Global Justice Alliance video of a 2022 protest at the United Nations COP27 climate confab shows a sign saying, “Militarism is the # 1 polluter, killer, colonizer.” A speaker argued the military “is the avenue through which indigenous peoples are dehumanized,” and it protects “capitalism and colonialism, and capitalism and colonialism cause climate change.”

In other words, banishing fossil fuels won’t be enough to arrest rising temperatures and sea levels. Israel, the military, the police, immigration enforcement, prisons, and capitalism all will have to go, too. The EPA is funding radicals whose aim is to sow division and dismantle U.S. institutions.

***

Climate Justice Alliance’s website says that “more than $3 trillion will move through federal agencies” from the IRA and Congress’s 2021 infrastructure law, and “now is the time for grassroots organizations to influence the direction of, and step into governance of, these monies.” It’s no surprise that radicals are trying to get the money, but it’s disturbing that the Administration would give it to them.

The charitable explanation is that the Biden Administration, in its rush to hand out taxpayers dollars, isn’t scrutinizing the recipients. More worrisome is the idea that federal officials might agree with them."

Another Reason to Defend Trump’s Tax Reform

By Dan Mitchell.

"Guided by the principles of good tax policy, I have mostly focused on two important provisions when writing about Trump’s 2017 Tax Cut and Jobs Act (TCJA).

• Reducing the federal corporate tax rate from 35 percent to 21 percent, thus improving incentives for growth and making the United States more competitive for business activity.
• Scaling back the itemized deduction for state and local tax payments, thus reducing an incentive for higher taxes and bigger government in states like California and New York.

Today, let’s look at a third feature of the Trump tax plan that deserves applause.

In both direct and indirect ways, the TCJA made tax filing simpler by making itemized deductions less attractive.

In part, this is because of the already-mentioned limit on deducting state and local taxes. But Trump’s tax package also included changes – such as much bigger standard deductions – that made it more attractive to file a basic tax return.*

Those provisions caused a major change in taxpayer behavior. Here’s a chart from the Tax Foundation that was recently shared by the Committee to Unleash Prosperity. The data is a few years old, but you can see that a big shift occurred. Far fewer taxpayers use itemized deductions today.

I would have preferred a flat tax, which means getting rid of all itemized deductions, but I also don’t make the perfect the enemy of the good.

Trump’s TCJA moved the tax code in the right directions. Keep in mind the three principles of good tax policy.

1. Low marginal tax rates
2. No tax bias against capital
3. No distorting loopholes

The TCJA made progress on all three categories. I’m especially happy that we got the right combination – which is reduced use of loopholes and less money going to Washington.

Now we need to take the next step, which means going after big remaining loopholes (such as the fringe benefits exclusion and municipal bond interest exemption) as part of another tax reform that is either a net tax cut or revenue neutral.

* For readers unfamiliar with the U.S. tax system, the personal income tax does not apply to every dollar of income. Households can protect some of their income from tax by using either a standard deduction (In 2024, $14,600 for single taxpayers and $29,200 for married taxpayers) or by using itemized deductions (for things such as home mortgage interest, charitable contributions, and state and local taxes). Needless to say, all sane taxpayers (including leftists who say they want to pay more) pick the option that will minimize their tax burden."

Creating So Many Jobs that Destroy Wealth

By Gary M. Galles. He is a Professor of Economics at Pepperdine. Excerpt:

"Professors Susan Dudley and Melinda Warren have studied federal regulatory agencies that explicitly restrict private sector transactions. They found 277,000 such regulators in 2015 (substantially larger than General Motors’ worldwide workforce) and an 18-fold increase in those agencies’ inflation-adjusted budgets since 1960, to over $57 billion (in 2009 dollars). 

More recently, The American Action Forum reported that Biden administration agencies “published $875.3 billion in total costs and added 4.7 million annual paperwork burden hours” in just one week last month, “just $20 billion less than what President Obama did in two terms,” which its president Douglas Holtz Eakin called “simply a jaw-dropping regulatory blitz.”

Forcible federal interventions often lead to multiplier effects on state and local government employment as well (even if not the Keynesian multiplier effects students hear about in macroeconomics courses). Further, interventions at all those levels also create private sector jobs to comply with the growing extent of their dictation. Many human resources and health care industry jobs, for example, were created to comply with Obamacare, and the mushrooming of Medicaid since then. But for ill-advised programs and restrictions, such jobs can create costs rather than benefits for society.

The sharp increase in government’s “Peter-Paul” (robbing Peter to pay Paul) approach evident in almost every area of public policy also multiplies into more lobbyists being hired to help special interests benefit at others’ expense. Others, in turn, are forced to hire more of their own in self-defense, to combat the extent of robbery they will be forced to bear. The expanded fight to control federal government theft has created a booming job market in the influence industry, which has dramatically stimulated the economy in Washington, DC, but destroyed wealth for people everywhere else in a massive negative-sum game.

Similarly, when laws or rules of questionable constitutionality or legality are promulgated (as with the Biden Administration’s environmental and education policies), it increases the number of lawyers and legal resources the government employs. It also increases the number employed by those who would be abused. Such opposition can be one of the most valuable investments for Americans in stopping such inroads on people’s rights, but even fighting them to a standstill leaves Americans worse off than if those overstepping initiatives had not been advanced in the first place."

The Left on FDA Peer Approval

From Alex Tabarrok. 

"Robert Kuttner discovered an excellent treatment for colds while vacationing in France and is rightly outraged that it’s not available in the United States:

Toward the end of our stay, my wife and I both got bad coughs (happily, not COVID). We went to our wonderful local pharmacist in search of something like Mucinex or Robitussin, which are not great but better than nothing.

“We have something much better,” said he. And he did. It’s called ambroxol. It works on an entirely different chemical principle, to thin sputum, facilitate productive coughing, and also operates as a pain reliever and gentle decongestant with no rebound effect.

We experienced it as a kind of miracle drug for coughs and colds. A box cost eight euros.

Ambroxol is available nearly everywhere in the world as a generic. It has been in wide use since 1979.

But not in the U.S.

He continues the story:

…You can’t get ambroxol in the U.S. because of the failure of the Food and Drug Administration to grant reciprocal recognition to generic medications approved by its European counterpart, the European Medicines Agency, when they have long been proven safe and effective. To get FDA approval for the sale of ambroxol in the U.S., a drug company would need to sponsor extensive and costly clinical trials. Since it is a generic, as cheap as aspirin, no drug company would bother.

…I’ve petitioned the FDA, asking them to create a fast-track procedure, whereby generic drugs approved in Europe, and well established as safe and effective, could get reciprocal approval in the U.S.

This would produce approval of ambroxol as over-the-counter medication for coughs and colds without unnecessary new clinical trials. And should ambroxol turn out to have real benefits for Parkinson’s as well, it would already be well established in the U.S. as an inexpensive generic.

Influenced by my work on FDA reciprocity aka peer approval, Ted Cruz introduced a bill, the Result Act to fast-track approval in the United States for drugs and devices already approved in other developed countries. Similarly, AOC has noted that the FDA is far behind the world in approving advanced sunscreens. Perhaps there is an opportunity here for bipartisan support.

Hat tip: the excellent Scott Lincicome."

Why Are Both Homelessness and Homelessness Spending Growing?

By Christopher J. Calton of The Independent Institute.

"Over the past decade, homelessness in California has been rising at alarming rates. California already topped the national list in 2014 when it had a homeless population of 114,000, but according to the Department of Housing and Urban Development’s 2023 Homelessness Assessment Report count, that number has grown to more than 180,000—nearly a 60 percent increase—and an astonishing two-thirds of these individuals are entirely unsheltered. In fact, with a total unsheltered population of 123,423, California is shamefully only about 10,000 shy of the other 49 states combined.

Yet California has spent a record $24 billion fighting homelessness over the past five years, according to a state audit published last month. In other words, the homeless population and homelessness spending have grown in tandem. How is this even possible?

The sad reality is that the current homelessness policy, known as Housing First, virtually guarantees an ever-ballooning homelessness budget, regardless of how effective it is in reducing the homeless population. This is because the measure of success under Housing First is not independent self-sufficiency, but in homeless persons becoming de facto wards of the state.

In 2013, the federal government adopted Housing First as its approach to homelessness, and California followed in 2016. This means that both state and federal homelessness grants are reserved exclusively for providers who comply with Housing First principles.

The Housing First philosophy contends that the most effective way to address homelessness is to offer people immediate, no-strings-attached housing. Service providers forfeit their grants if they make housing conditional on, say, sobriety or participation in treatment programs. In theory, supportive services are voluntary, but in practice they are almost non-existent.

Instead, California’s approach to Housing First entails little more than warehousing people in permanent-supportive housing (PSH) units. PSH residents are not classified as “homeless” for official counts, but they remain dependent on taxpayer support, which is paid out of the homelessness budget.

We did not always treat permanent dependency as the best-case scenario for homeless individuals. When the Clinton administration first established the continuum of care system for homelessness services in 1994, the Department of Housing and Urban Development explicitly stated that “the goal of the comprehensive homeless service system is to ensure that homeless individuals and families move from homelessness to self-sufficiency, housing, and independent living.”

When Sam Tsemberis, a clinical psychologist, conducted the first Housing First experiment in New York City, he altered the measure of success to “housing stability,” achieved not through self-sufficiency, but through perpetual subsidies. Tsemberis found that 88% of his clients remained stably housed, compared to 47% of patients in treatment-oriented programs. However, Tsemberis worked exclusively with people suffering from severe mental illnesses—those who would have been institutionalized in an earlier era—so it is reasonable that perpetually subsidized housing may have been the best possible outcome for this particular subset of the homeless population.

But should permanent dependency be the goal for all homeless persons? In FY 2022-2023, California spent $116 million on permanent-supportive housing for homeless youth. A policy that functionally treats homeless and at-risk children as lost causes is not only financially unsustainable, it’s downright inhumane.

A significant portion of homeless individuals suffer not from incurable mental illness, but from untreated substance-use disorder, and the overdose mortality rate of PSH residents is disturbingly high. But studies of crack-addicted homeless persons in drug-abstinent housing, work therapy, and day treatment programs found that upon completion, roughly half of the participants remained sober, housed and stably employed. Yes, “housing stability” was lower than Housing First experiments, but independent self-sufficiency is an unquestionably better outcome for those capable of achieving it.

We can accept that there will always be people who require permanent assistance, but state policy should not treat this assumption as universal. Even if we could end homelessness by permanently warehousing people, we should strive to do better.

But after following the Housing First playbook for nearly a decade, the results are clear: the more money we spend on this strategy, the faster the homelessness crisis grows."

Emergency Spending and the Erosion of Congressional Fiscal Norms

By Romina Boccia and Dominik Lett of Cato.

"Irresponsible emergency spending practices have eroded fiscal norms, contributing directly to America’s mounting debt challenge. Over the last three decades, Congress designated 1 in 10 dollars of federal spending for emergencies. Most of this emergency funding was provided through deficit spending with no plan to pay down the accumulated debt with future surpluses. Myopic spending practices harm the fiscal credibility of the federal government, elevating the risk of a devastating fiscal crisis.

On May 3, Cato hosted a Hill briefing featuring panelists Veronique de Rugy (Mercatus Center), Kurt Couchman (Americans for Prosperity), and Cato’s Romina Boccia (that’s me!), moderated by David Ditch (The Heritage Foundation). Together, we delved into America’s deteriorating fiscal trajectory, recent episodes of emergency spending, the erosion of fiscal norms, and budget reform. We are grateful to all who attended. Here are some insightful excerpts from our otherwise not‐​public discussion.

Irresponsible Emergency Spending Habits Have Eroded Fiscal Norms

Since the 1990s, Congress has spent roughly $12 trillion on emergencies (plus an extra $2 trillion, including associated interest costs). That’s equivalent to roughly half of the $27.5 trillion public debt. Most of that spending, especially recently, hasn’t been offset in any meaningful way. This stands in stark contrast to most of the nation’s history, where legislators generally followed informal fiscal norms.

One Hamiltonian fiscal norm is that emergency spending can be paid with borrowed funds, assuming it will be repaid later. Many major emergency borrowing episodes before the 21st century, including World War II, followed this norm. Borrowing skyrocketed to fund the war effort, and legislators maintained primary surpluses for years after the conflict ended to reverse the growth in the debt.

This norm has eroded significantly in more recent decades. Even between the Great Recession and the pandemic, there are notable differences in the national dialogue over budgetary responsibility. Following the 2008 financial crisis and the subsequent fiscal stimulus, policymakers engaged in a national debate on austerity. Legislators on both sides of the aisle and President Obama worked together to put together a fiscal reform package that constrained spending.

Not only was the fiscal stimulus significantly larger in response to the pandemic than was the case for the Great Recession, but efforts to rein in spending have been far tamer by comparison. A lackluster spending cap deal and repeated emergency spending supplementals are two major reasons why the federal deficit is reaching unprecedented new heights. As Veronique concluded,

“It’s because we followed these budget norms that US treasuries have become the cornerstone of the financial world. Losing that is at risk. And how you lose this is by borrowing money without ever talking about repaying your debt.”

The Fiscal Trajectory Is Dire before Considering Emergencies

Debt is set to surge over the next three decades. According to CBO, public debt as a share of GDP will exceed the World War II record high in just four years (2028). This high debt will slow the economy and reduce American incomes.

Worse still, CBO’s projections don’t assume the realistic possibility of another war, pandemic, or other emergency in the next 30 years. Should the deficit continue to grow at an unprecedented rate, the US may not be able to respond adequately to a future crisis. As I noted,

“We are going to have unexpected emergencies, but we don’t have the fiscal space to fund the programs that are already on the books, let alone respond to major emergencies which we should be able to do. One of the most important features of a nation‐​state is to be able to defend itself when under attack, and the nations that survive major wars are those that are able to borrow during times of crisis. We are hamstringing our ability to do that by borrowing during peacetime in a way that will eliminate our ability to borrow when crisis calls.”

In the last year, several weak Treasury auctions have indicated lower investor demand for government bonds. At some point in the future, investors may decide treasuries are not worth the risk at prevailing interest rates. Such a scenario could quickly spiral into a fiscal crisis with catastrophic implications for the US economy. As Couchman pointed out,

“I think the inherent challenge with all of this is we’re not going to see it coming. We see some indicators. We saw Moody and Fitch downgrade the rating, downgrade the outlook. We’ve seen the IMF, World Bank, CBO, OMB, and everyone else in the world be like, ‘Woah, things are getting pretty bad; we better do something.’ If you’re tearing down the mountainside in a mountain bike, when do you know you’ve gone off the cliff? It’s when you’re dropping really fast, and then you’re screwed.”

Unlike what happened in Europe when Greece suffered a debt crisis in 2009, there is no equivalent to Germany to bail out the US should the fiscal situation go south, noted de Rugy. Indeed, if America faces a fiscal crisis, it’s not just Americans who will suffer the economic consequences. A US debt crisis will likely manifest as a crisis of global proportions.

Designing Better Budget Controls

Kurt Couchman outlined three main principles that should guide budget reforms:

First, “You want things to be neutral. If it’s not something that will get broad support from Republicans and Democrats, or at least most of them, you’re not going to get it passed, and it’s not going to stick around.”

Second, “Reforms have to be comprehensive. Our budgeting is very piecemeal. That disjointedness is a lot of the reason for the dysfunction that we’re seeing.”

Finally, “You need to have fiscal targets that are reasonable, stable, and predictable.”

The Responsible Budget Targets Act introduced by Rep. Emmer (R‑MN) and Sen. Braun (R‑IN) (H.R.7420 and S.772, respectively) is a good example of a sensible budget reform. Alongside establishing realistic spending caps, the bill would implement emergency offsets over a six‐​year period. Establishing an offsetting mechanism gives appropriators the flexibility to address emergencies when necessary while also incentivizing forward‐​thinking budget planning. Additional legislative proposals can be found in this PDF or in Couchman’s Townhall article.

Sensible and commonsense budget reforms can improve the appropriations process and reduce the risk of a debt‐​driven fiscal crisis. It is up to us, the American people, to cultivate a culture where deficit spending and irresponsible fiscal practices are the exception, not the rule. Congress will follow the wishes of its electorate."