The WTO Isn’t Dead, but America Is Breaking It

Reform can’t happen if the U.S. keeps pretending it didn’t help cripple the institution it’s now eulogizing

Letter to The WSJ. 

"Jamieson Greer’s frustration with the World Trade Organization is understandable, but his op-ed ignores how the U.S. unwisely accelerated the organization’s decline (“Another Fish Story From the WTO,” April 8).

The American middle class has prospered in the era of open trade, and U.S. manufacturing job declines—driven mainly by productivity gains—long predate China’s WTO accession. The U.S. was the WTO’s chief architect and reaped significant economic and geopolitical value from the system. Its retreat, which began before the administration, ignored these realities and instead prioritized U.S. farm subsidies and trade remedies, often resisting the disciplines Washington demanded of others.

Fealty to these and other insular political issues stymied multilateral negotiations and motivated four separate U.S. administrations to neuter the WTO dispute settlement by blocking Appellate Body appointments. Washington’s participation in disputes has also ground to a halt. You can’t complain about the rules of the game after you stop playing and strangle the referee.

Worst of all, the U.S. has been a bad-faith abuser of the rules it helped write, blowing through tariff bindings and invoking narrow WTO exceptions for national security and balance-of-payments crises to maintain President Trump’s global tariff wall.

Mr. Greer is right to decry the WTO’s consensus problem and the abuse of certain rules by other WTO members. The institution does need reform. But members’ continued participation shows the institution isn’t dead. And reform can’t happen if the U.S. keeps pretending it didn’t help cripple the institution it’s now eulogizing.

Clark Packard and Scott Lincicome

Washington

Mr. Packard is a trade policy fellow and Mr. Lincicome is Vice President for Economics and Trade at the Cato Institute."

Dr. Makary and Mr. Hyde at the FDA

The agency kills a therapy for melanoma despite the evidence of progress against deadly tumors

WSJ editorial. Excerpts:

"Patients with metastatic melanoma who stop responding to other immunotherapies typically die in less than a year. In Replimune’s trial, tumors shrank in nearly all patients and vanished in one of six. About a third went into remission. FDA staff were so impressed by the results that the agency designated RP1 a “breakthrough therapy” in November 2024 to expedite its review."

"As we’ve reported, Dr. Prasad last summer overruled career staff to reject RP1. The agency’s main criticism was that its trial lacked a control arm, though this would be unethical in late-stage patients who failed to improve on other therapies."

"Start with the claim that the tumor-shrinking effects of RP1 could not be disentangled from that of another immunotherapy that patients were taking concurrently. But all patients had previously relapsed or failed to respond to other immunotherapies. RP1 is intended to help these refractory patients by boosting their response to other therapies."

"cancer in responding patients advanced after a median 30.6 months when they also got RP1, versus 4.4 months of being treated with other immunotherapies."

"The FDA implicitly concedes that the RP1 results are impressive by contriving ridiculous reasons to argue they could be exaggerated." 

Virginia Is for Higher Taxes—and Gerrymanders

Gov. Spanberger’s popularity takes a hit as she abandons the center

WSJ editorial. Excerpts:

"Unlike in private industry, collective bargaining in government isn’t adversarial. Public unions sit on both sides of the table since they fund the campaigns of the politicians with whom they “negotiate.” The incentive is to give away the store to union allies"

"Wisconsin Republicans in 2011 ended this cycle by limiting government collective bargaining, which has saved taxpayers some $35.6 billion, according to the MacIver Institute. Studies have also found that the law improved student test scores, in part by allowing schools to pay teachers more for performance."  

Los Angeles Schools Can’t Do Math

Teachers get a rich new union contract despite awful student results

WSJ editorial. Excerpts:

The contract "increases salary scales by 11.65% over two years—double the rate of inflation—plus four weeks of paid parental leave and expanded student support services that will invariably require more hiring. Pay for new teachers will jump nearly 12% to $77,000."

"state per-pupil spending has soared in recent years to $27,418"

They will "have a workforce that is larger than when the district had 40% more students than we have today"

"the district and state are required to make payments equal to 30% of teacher salaries for their pensions. Teachers can retire at age 63 with a pension worth 85% of their final pay, plus free health benefits for life."

"Only 18% of Los Angeles eighth-graders scored proficient in math on the National Assessment of Educational Progress, compared to 27% nationwide." 

The Truth About the Cuban Blackouts

By Mary Anastasia O’Grady. Excerpts:

"Blaming the U.S. embargo for Cuba’s economic disaster has lost its political firepower because the law has been watered down. Today Cuba can buy, with cash, all the food, medicine and construction materials it wants from the U.S. It can get lots of other stuff from the rest of the world."

"Cuba’s economic crisis is caused by a hard-currency shortage. Output from once-vibrant export industries like sugar, tobacco, coffee and fruit can’t even supply the domestic market. Barren agricultural fields are covered in weeds. Manufacturing is gone. Even tourism, which the regime has tried to hype since the 1990s, is in bad shape. Handouts from the Soviet Union, bilateral lenders and Venezuela, which kept the country afloat for decades, are no more."

"Even before January, . . . the monthly Cuban ration book supplied food for less than two weeks." 

"If not for remittances, families would suffer even greater privation." 

"he cause of the power failures is the antiquated grid which, . . . requires an investment of $8 billion to $10 billion over three to five years."

"new power plants have to be built because the existing ones sit on polluted land." 

Around 14% of Enrollees in ACA Plans Failed to Make Payments, Data Shows

Decline in January payments is driven by loss of federal Affordable Care Act subsidies

By Anna Wilde Mathews of The WSJ. Excerpts:

"Normally, the rate of falloff in ACA plan membership early in the year is in the midsingle-digit range.

ACA enrollment was already declining."

"Many ACA policyholders saw their insurance bills mushroom after expanded federal subsidies that started during the pandemic lapsed at the start of January, when insurers were already implementing major rate hikes largely because of rising health costs."

"When health-insurance prices rise, younger, healthier people are more likely to drop coverage, leaving a greater proportion of sicker people who are costlier for insurers.

Among people who signed up with the same ACA insurers in 2026 that they had last year, Wakely data showed that those who made their initial premium payments were about 10% less healthy, based on an estimate of their expected healthcare costs, than those who didn’t pay their January bills.

When healthier people leave a market, insurers project higher average healthcare costs per enrollee and raise their premiums to cover them. That happened this year, when insurers made steep rate increases, but it couldn’t yet be determined if they correctly gauged the pattern—or if they will raise premiums again next year partly as a result of the ever-costlier pool of enrollees."

"some of the HealthCare.gov states saw rapid growth of low-income enrollees after the introduction of enhanced subsidies in 2021, with many on plans that didn’t require any premium payments. That expansion might now be melting away." 

The Growing State Tax and Jobs Divide

On April 15, see how job growth has changed in high- and low-tax states

WSJ editorial. Excerpts:

"progressive states . . . tax their rich and middle classes more. 

"small businesses . . .typically pay tax at their state’s individual rate."

"Eight states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming—have no income tax. On the other end of the spectrum are New York (top state and local individual rate 14.8%), Oregon (13.9%), California (13.3%), Hawaii (11%), Minnesota (10.85%), New Jersey (10.75%), Massachusetts (9%), Washington (9%) and Vermont (8.75%)."

"Private job growth outside of social assistance and healthcare—which rely heavily on government funds—has been paltry in these states since January 2020: Hawaii (-3.8%), Oregon (-3%), Vermont (-1.7%), Massachusetts (-1.4%), New York (-1.3%), California (-1.2%) and Minnesota (-1%)."

"stronger job growth in lower-tax states: Texas (10%), Florida (8.5%), North Carolina (7.9%), Arizona (7.3%), Tennessee (5.7%), Alabama (4.3%) and New Hampshire (1.6%)." 

America’s industrial capacity has continued to grow during a time of free trade agreements and trade deficits

See “As Compared to What?” – Exhibit #3,4593e17 by Don Boudreaux. Excerpt:

"Oren [Cass] laments “our failure to attend to industrialization.” What failure? When Pres. Trump returned to the White House in January 2025 America’s industrial capacity had been on the rise since the pandemic and that month reached an all-time high. This capacity has continued to grow. Today, America’s industrial capacity is 13 percent larger than when China joined the World Trade Organization in December 2001, 66 percent larger than when NAFTA took effect in January 1994, and 148 percent larger than in 1975, the last year the U.S. ran an annual trade surplus.

Oren might respond that the precise kind of capacity that we now have prevents us from producing the most-important stuff. Using the example featured in the piece you sent, Oren would likely point out that because we import many transformers of the sort used in data centers, our reliance on foreign producers for transformers is slowing our completion of data centers and, hence, hampering our development of AI. Perhaps. (Never mind that domestic politics is now the highest obstacle to data-center construction, and also threatens to thwart AI directly.) Oren’s solution is to produce more transformers domestically.

How simple! This conclusion appears to be a no-brainer. But appearances here deceive. Like all protectionists, Oren never asks: What outputs will America therefore produce less of? He supposes that the capital and resources that tariffs or subsidies draw into transformer production will be drawn away only from domestic industries producing goods or services that are less important (according to criteria preferred by Oren) than are transformers. But Oren can’t possibly know just what other domestic industries will shrink as a result of transformer tariffs or subsidies, or by how much they’ll shrink.

We might all agree that an engineered increase in the production of transformers would be worthwhile if the only consequence were reduced American production of deodorant and dog biscuits. But what if increased production of transformers reduces American production of semiconductors or jet engines or software for running AI?

Of course, I have no idea what we Americans would produce less of if the government uses tariffs or subsidies to increase American transformer production. But nor does Oren have any idea. He naively points to something – transformers – that would be good to have more of were that something costless, and then he leaps to the unwarranted conclusion that free trade has failed because we currently don’t have more of that something.

To overcome, for any product, the strong presumption in favor of a policy of free trade – a policy with a proven record not only of raising living standards but also of enhancing national defense – requires compelling argument and solid evidence. But all that Oren gives here, as in his other writings, are half-told tales detached from the important considerations that serious economists habitually take note of."

FAR too restrictive: Time to repeal floor area ratio limits

By Steve Swedberg of CEI.

"In cities across the world, fights over housing affordability come down to a simple question: how much can be built on a single lot? In Chandigarh, India, officials are debating whether to double that limit, while Sydney, Australia has seen public clashes over proposals for increased housing density.

Back in the United States, lawsuits in Virginia suburbs, protests in San Francisco, and contentious hearings in cities such as Baltimore and Austin show that zoning has become a central flashpoint in local politics. One zoning law that has played a role in these disputes either directly or indirectly is the floor area ratio (FAR).

FAR limits how much total building space can be constructed on a lot, and it applies to both residential and commercial structures depending on the zoning district. It is calculated by dividing the total building floor area by the total lot area. For example, a 5,000-square-foot lot with a FAR of 2.0 allows 10,000 square feet of building space. That could take the form of a single large home, several smaller units, or some combination. In all cases, total floor area cannot exceed the FAR limit.

FAR may seem like a technical, math-heavy zoning rule disconnected from everyday life. In practice, it sets a limit on building size that strongly influences what housing gets built and who can afford to live in which neighborhood.

The faulty logic behind the limit

FARs in the US can be traced back to early 20^th-century New York City. The city initially used height limits to prevent skyscrapers from obstructing air and light to the streets. In the mid-20^th century, planners concluded that height restrictions were inadequate and began supplementing them with FAR regulations to control overall building bulk.

For housing, FAR rules effectively acted as a proxy for height limits by setting a maximum total building volume relative to lot size rather than a fixed vertical cap. Other cities followed suit by adopting similar approaches. Decades of development under FAR rules suggest that the logic behind the limit is flawed. FAR sets a maximum on total building volume relative to lot size, but it does not control how that space is used.

A building can fully comply with FAR yet still cast long shadows, crowd neighboring properties, or occupy most of the lot. Two buildings with the same FAR can look entirely different: one tall and slender, another short and bulky, covering most of the lot. Because FAR regulates size instead of form or placement, its impact on sunlight, airflow, and open space is inconsistent at best.

The other rationales do not fare better, especially that of “maintaining neighborhood character.” While often invoked to reflect residents’ preferences about scale and appearance, the concept of “neighborhood character” largely refers to a subjective sense of visual appearance or feel, not a clearly defined metric of public harm. The term is used to express general opposition, as opposed to something that is easily quantified or tied to a specific land-use concern.

Another justification is infrastructure capacity. By limiting building volume, planners aim to prevent overloading streets, utilities, and schools. However, infrastructure demand depends more on the number of units and occupancy patterns than on floor area alone. A large single-family home may place fewer demands on infrastructure than a smaller multi-unit building with the same square footage.

Many cities can address these challenges more directly through market-based alternatives such as user fees, impact fees, or private investment, which allow growth while ensuring that those who consume or benefit from infrastructure help cover its costs without resorting to distortive zoning regulations.

Fewer buildings, pricier homes

Beyond faulty rationales, FARs produce unintended consequences. To quote the Cato Institute, FARs “restrict the number of developable square feet of residential space for a given lot size, and thereby limit the density of co-living buildings.” By capping total buildable volume, FARs force developers to make trade-offs about how much to build and how to allocate space among units. This reduces the number of housing units, discourages mid-sized projects, and contributes to higher prices.

Direct studies of FARs are limited because they are usually bundled with other zoning rules, which makes their independent effects hard to isolate. Nevertheless, there are some FAR-specific case studies.

Zurich pursued a policy of upzoning, which is a change in zoning rules that allows more building space on a lot. By increasing the allowable FAR, Zurich boosted the number of housing units by 9 percent over a decade. A 17 percent increase of allowable FAR in Mumbai, India, resulted in a 58 percent increase in housing supply, as well as a 24 percent decrease in housing prices in affected areas.

Broader research on density limits reinforces these findings. Allowing more building space increases housing supply and takes pressure off of housing prices, while restrictive land-use regulations limit housing construction and drive up housing prices. An estimate from a Cato Institute policy paper attributes about 20 percent of housing growth variation to density regulations, including FARs.

Scrap the cap

FARs act as an invisible barrier to housing. They do not reliably protect sunlight, air, neighborhood character, or infrastructure capacity. Meanwhile, FARs constrain how many units can be built and raise costs for renters and buyers alike. Moreover, the decision about how much floor space to build and how to distribute it should be determined by those with the most at stake: the property owners, the lenders, and the residents.

While some cities might consider partially relaxing FAR limits as a short-term measure, the most effective solution is full repeal. Repeal would free developers to respond to demand, allow more housing units to be built where people want to live, and make housing more affordable without relying on burdensome regulations like FARs. It is time to stop letting this flawed formula dictate who can live where."

America’s Productivity Pop Has a Startup Backstory

By James Pethokoukis. Excerpt:

"There is, however, a less obviously tech-centric explanation for the recent productivity uptick: a rebound in business formation. After decades of declining dynamism, new-business applications have surged since the pandemic and remain well above pre-2020 levels, according to the new short note “Application Accepted: Business Formation Boom Continues” by John O’Trakoun of the Federal Reserve Bank of Richmond, analyzing US Census Bureau data. Because applications tend to translate into actual firm creation, the recent pickup points to continued startup activity. And importantly, much of that activity is showing up in sectors that have historically added jobs at a faster pace—hinting at a “tailwind for future job creation.” 

Added growth, too. Startups function as the economy’s trial-and-error engine: Most don’t last, but the ones that do introduce new ideas, challenge incumbents, and shift workers and capital toward more productive uses.

The relationship between business dynamism and productivity growth is both well understood and underappreciated, at least by non-economists. In the 2024 Aspen Institute analysis “The Recent Rise in US Labor Productivity,” economist Luke Pardue points to the post-pandemic surge in new-business creation as a likely key driver of recent productivity gain. He also notes that earlier declines in startup activity imposed a measurable drag on productivity—suggesting that the recent rebound could provide a meaningful continuing boost if it proves durable.

And by the way, there may be an AI kicker to this dynamism story in how the technology can help entrepreneurs do their thing. “The surge in new US business formation is being fueled by AI and large language models that are dramatically reducing the cost and complexity of launching a company,” says Torsten Slok, chief economist at investment firm Apollo. “As these firms scale, they will create jobs, underscoring that AI is likely to strengthen, not disrupt, the US labor market.”"

State Affordability Policies Leave a Lot to Be Desired

By Ryan Bourne and Nathan Miller of Cato.

"Affordability has become the defining issue of the 2026 election cycle, and state governments have churned out bills and executive actions aimed at easing the cost of living. Two philosophies have emerged across the proposals. One asks the government to push out-of-pocket prices down; the other asks the government to roll back its own cost-raising policies. Only one can deliver durable results.

The year opened with a wave of State of the State addresses emphasizing affordability concerns. Most proposals layered new government interventions over existing ones. At least nine governors pledged new or expanded childcare programs, from tax credits backed by Rhode Island’s Democratic governor and New Hampshire’s Republican one, to direct subsidies in Virginia and workforce funding in California and Pennsylvania. Energy rebates were also common: Arizona and Kentucky proposed funds to help residents cover utility bills, and Connecticut and Washington promised one-time household credits of $400 and $200, respectively. Illinois’s governor asked for $2 billion for the state’s medical debt forgiveness program.

Other governors went beyond subsidies into price controls. New Jersey’s Mikie Sherrill declared a state of emergency on utility costs and imposed a rate freeze. Pennsylvania extended a price collar on the state’s electricity market, Rhode Island capped health insurance costs, and Massachusetts’s governor demanded utility providers justify every fee on household bills. Indiana’s governor supported a bill requiring utilities to demonstrate affordability before raising profit margins. Lawmakers introduced more than 40 bills across 24 state legislatures in 2026 to ban algorithmic pricing, already outpacing all of 2025. New York’s attorney general would ban the practice across virtually all industries and prohibit electronic price tags in grocery stores. Illinois recently moved to ban junk fees.

These proposals repeat mistakes common at the federal level. Price controls, subsidies, and mandates all aim to ameliorate the reality of high market prices, rather than taking affirmative steps to bring them down sustainably. Rebate checks and rate freezes for utilities don’t make energy more widely available; they merely obscure the mismatch between the quantities supplied and demanded. Worse, they inflict real economic harm. Government-paid rebates diffuse their costs among taxpayers while sending more dollars chasing the same constrained power supply. A rate freeze disincentivizes the new generation, compounding the supply problem.

Genuine supply-side reforms work because they change underlying conditions rather than mask them. Zoning reform and relaxing urban growth boundaries expand the effective supply of land available to housing developers, lowering rents in the long run. Allowing private power plants to sell excess power onto the state grid makes electricity more available to consumers throughout the state. Trimming regulatory burdens, more generally, lowers the cost of doing business and so encourages more production.

In that sense, improving affordability through policy change, at least in aggregate, is necessarily a supply-side project. It means building more homes, producing more energy, and stripping away the regulatory burdens that drive costs up. Some governors are embracing this way of thinking, but their camp is much smaller.

Nebraska’s governor wants to allow large power users to build their own power generators and sell surplus onto the state grid, and Utah’s governor promised to “pull every lever” to expand housing supply.

During the 2026 legislative sessions, zoning reform to expand the supply of housing showed strong momentum, with reform bills passing in at least eight states. Indiana made duplexes and accessory dwelling units legal by right throughout the state, capped parking requirements, and limited impact fees. Washington enacted permitting reform, and Idaho moved to allow manufactured homes in any residential zone. But there’s clearly a lot more that can be done around permitting, urban growth boundaries, and building codes.

In our new Handbook on Affordability, we detail 37 state policies that could help lower living costs across markets as diverse as health care and consumer financial services. Eliminating clinician licensing and freeing clinicians to practice to the full extent of their training would grow the supply of medical professionals, driving down prices. Authorizing privately financed, contract-based electricity systems would end incumbent utilities’ government-granted monopoly and open energy markets to greater price competition. Ending childcare credential mandates and making home-based childcare legal by right would grow the range of childcare options, including more affordable alternatives.

The proposals there have one thing in common: They lower costs by removing government-created barriers rather than layering new mandates on top of them. That is the approach that can really move the needle on prices."

The Housing Crisis Is a Supply Problem

Rising prices make us look for someone to blame, but the broken market has a simple cause: it’s illegal to build enough homes. 

By Christopher Freiman. Excerpts:

"Most notably, institutional investors simply do not account for most home purchases; they account for  between one and two percent of the nation’s single-family housing stock and roughly three percent of single-family rental properties. In most markets, the overwhelming majority of homes are still bought by individuals. Even in dense metropolitan areas where corporate ownership has grown, institutional investors represent no more than three percent of homes in any housing market.

Plus, there are material advantages to renting compared to buying a home. When you rent, you have the flexibility to move for a better job without worrying about selling into a bad market, avoiding the costs of a massive down payment and ongoing repairs. You also don’t have to tie up a lot of wealth in a single asset whose value depends on one neighborhood and one local market."

"Suppose demand for bread suddenly surges. Maybe a city’s population grows quickly, or a new gluten-heavy diet sweeps the nation. Whatever the reason, people are buying more bread than before. As a result, the price of bread rises. In turn, profit-driven bakers realize that there’s a lot of money to be made by baking more. So they produce more bread, pushing its price back down.

Rising prices encourage producers to produce more of a good, eventually making it more affordable. This is well-known. So why aren’t we seeing this play out in the housing market? If lots of people want to live in a particular city — say, because the jobs pay well or the schools are good — housing prices will initially rise. But you’d expect those higher prices to incentivize developers to build more housing, just as higher bread prices incentivize bakers to bake more bread. As more housing is built, the increase in supply should bring prices back down.

The reason why we don’t see developers building more housing in response to higher prices isn’t because they’re not interested in making more money. Rather, it’s because their ability to build is heavily restricted in much of the United States. For instance, large portions of many cities are zoned exclusively for single-family homes. Apartment buildings are prohibited in areas where developers might want to build them. Even when building is permitted, lengthy approval processes can delay projects for years. In San Francisco, it takes an average of 523 days to secure permits for a housing project. In New York, a lawsuit challenging the 2018 Inwood rezoning — intended to allow roughly 1,800 new housing units — held up the first project in the area for approximately three years before it was able to secure final approvals. And height limits, parking requirements, and other regulations can also make construction prohibitively expensive. Recent analysis estimates compliance and fees comprise 24 percent of new home prices.

In short, the root of the problem isn’t primarily increased demand for housing, though demand pressure is present. Rather, the problem is government-imposed restrictions that make it difficult, if not impossible, to adequately increase supply in response. Consequently, prices rise and stay high. Even if every institutional investor disappeared tomorrow, the housing shortage would remain."

"the solution is clear enough: make it easier to build more housing. Government officials should relax zoning restrictions that prohibit high-density housing and simplify approval processes that can delay projects for years. If these reforms were to happen, the same basic mechanism that works to reduce prices in countless other markets will work in housing as well." 

Rescind Davis Bacon

By Alex Tabarrok. 

"The Davis-Bacon Act requires that workers on federally funded construction projects be paid at least the “prevailing wage” for their trade in the local area.

Mike Schmidt, Director of the CHIPS Program Office, has an excellent piece on how Davis-Bacon impacted the CHIPS program. My initial understanding was that it simply required paying construction workers more—an unnecessary transfer from taxpayers to a politically favored group, but not one that would impede efficiency. I was wrong.

Start with the complexity. Davis-Bacon’s prevailing wage isn’t a simple minimum wage: plumbers are not electricians are not fitters, and the required rate varies by locale. The Department of Labor maintains a list of more than 130,000 (!) wage rates to implement it.

That’s complicated enough. But it gets worse. Some firms building fabs used their own employees rather than contractors—and Davis-Bacon applies regardless but it covers only the portion of time an employee spends on “construction” work:

[A]pplying Davis-Bacon to company employees rather than contractors proved to be a big hurdle. Davis-Bacon required tracking every hour each employee spent on covered construction activities — by trade classification, with a different prevailing wage applying to each — and paying a wage differential for that portion of their work as distinct from fab operations work or non-Davis-Bacon construction work. The company also relied heavily on profit-sharing (where a portion of employees’ pay was tied to the firm’s profits) and Davis-Bacon’s guaranteed wage floor was difficult to reconcile with a pay structure that was inherently variable. Moreover, Davis-Bacon has a statutory requirement to pay wages weekly, meaning the company would need to change its payroll systems for a portion of the pay for a portion of its workforce.

Thus, DB required that two salaried employee with equal salaries and profit-sharing plans be paid differentially depending on whether one of them did “construction” work. This created internal strife.

Davis-Bacon was passed in 1931, when a carpenter was a carpenter. How does it apply to building a semiconductor factory?

The construction tasks involved in building and modernizing semiconductor fabs don’t always map cleanly onto DOL’s Davis-Bacon classifications, so applicants must go through a construction plan line-by-line to determine which rate applies to which activity. In traditional Davis-Bacon contexts this is less burdensome because contractors know the system and have processes in place. But semiconductor construction was a novel application, and all of our applicants — and most of their contractors — were navigating Davis-Bacon for the first time.

For large recipients, the administrative cost of this work was real but manageable relative to project scale: they could hire consultants, procure software systems, and build internal compliance capacity….

Perhaps the biggest fiasco involved timing. The government wanted firms to move quickly and encouraged them to break ground before the Act’s rules were finalized. But when Davis-Bacon was added to the Act it required that the firms pay the prevailing wage *retroactively*:

The financial and operational implications of retroactive application were significant. A leading-edge project might have 10,000–12,000 construction workers on site at peak, with a rotating workforce totaling perhaps 30,000 individuals over the project’s life. Working through 300-plus subcontractors across multiple tiers, retroactive application could require identifying wages paid to 20,000 workers who had already cycled off the project, determining what each worker should have been paid under Davis-Bacon, and paying the difference — resulting in hundreds of millions of dollars in additional cost.

The retroactive pay exposes the law’s true nature. Firms and workers had already struck voluntary agreements; the work was done, the wages paid. No one can pretend this has anything to do with incentives. Workers received a pure windfall (“DB Christmas!”) for one reason only: “construction workers” are a politically favored class. Janitors and scientists got nothing extra.

Moreover, a large fraction of the cost wasn’t the higher wages at all—it was compliance. Firms likely spent as much reworking payroll systems and hunting down thousands of former workers in this Byzantine classification system as they spent on the wage premiums themselves. Every dollar transferred to workers may have cost firms—and ultimately taxpayers—two dollars or more. A very leaky bucket indeed.

If the Trump administration is serious about cutting regulatory costs and reviving industrial competitiveness, Davis-Bacon is an obvious target. It delivers little to workers, plenty to lawyers and consultants, and a bill to taxpayers for both. Rescind it."

The False Promise of Gleneagles

Misguided Priorities at the Heart of the New Push for African Development

By Marian L. Tupy of Cato. 

"Executive Summary 

"In response to persisting poverty in Africa, representatives from the world’s eight leading industrialized nations—Germany, Canada, the United States, France, Italy, Japan, the United Kingdom, and Russia—met in Glen- eagles, Scotland, in 2005 and agreed on a three-pronged approach to help Africa. They would increase foreign aid to the continent, reduce Africa’s debt, and open their markets to African exports. Unfortunately, aid has harmed rather than helped Africa. It has failed to stimulate growth or reform, and encouraged waste and corruption. For example, aid has financed 40 percent of military spending in Africa. Similarly, debt relief has failed to prevent African countries from falling into debt again. Trade liberalization has the greatest potential to help Africa emerge from poverty. Yet that is where the least amount of progress has been made. Negotiations on trade liberalization have ground to a halt, and the threat of protectionism looms large as the current global economic slow- down worsens. The Gleneagles Summit, for all its good intentions, gave rise to unrealistic expectations. The heavy emphasis on aid and debt relief made Western actions appear to be chiefly responsible for poverty alleviation in Africa. In reality, the main obstacles to economic growth in Africa rest with Africa’s policies and institutions, such as onerous business regulations and weak protection of property rights. Africa remains the poorest and least economically free region on earth. The West should do all it can to help Africa integrate with the rest of the world. It should eliminate remaining restrictions on African exports and end Western farm subsidies. Africans, however, will have to make most of the changes needed to tackle African poverty."

Rent Control: Do Economists Agree?

By Blair Jenkins. From Econ Journal Watch in 2009.

"Abstract 

Rent control is usually introduced to economics students as a price ceiling and an unambiguous source of inefficiency. Early rent controls mirrored price ceilings, but by the late 20th century the majority of controls had developed into complex systems. This paper organizes the judgments of economists regarding the impact of rent controls in the American context. Research is limited to jour- nal articles listed by the american economic association’s electronic bibliogra- phy, econlit, under the subject search “Rent control” performed February 18th, 2008. Articles must also meet the following criteria: the article focuses on rent control policies; data come from U.S. cities; and at least one author must be an economist. An economist is defined as any individual who holds a degree in the field of economics. I focus on the articles generated by the search in EconLit, but also include articles not in the EconLit search, but referenced by articles that are. i have been scrupulous to include any such once-removed articles that go against the main tendency of the literature, and hence assure the reader that my efforts have not accommodated a “picking and choosing” bias on my part. I find that the preponderance of the literature points toward the conclusion that rent con- trol introduces inefficiencies in housing markets. Moreover, the literature on the whole does not sustain any plausible redemption in terms of redistribution. The literature on the whole may be fairly said to show that rent control is bad, yet as of 2001, about 140 jurisdictions persist in some form of the intervention."

New England Considers the Nuclear Option

The region’s governors acknowledge the limits of ‘renewable’ energy

By Andrew Fowler. He is a communications specialist at the Yankee Institute. Excerpts:

"meeting the region’s energy needs with nuclear power would cost roughly $415 billion, about half the cost of a renewable-heavy system, while reducing emissions by 92% by 2050"

"France generates about 70% of its electricity from nuclear power, maintaining low emissions while exporting energy to neighboring nations. By contrast, European systems that rely heavily on intermittent renewables have faced higher costs and reliability challenges." 

The Truth About Medicare Advantage

About half of seniors use a program that is under Democratic assault

WSJ editorial. Excerpts:

"Congress created Medicare Advantage in 1997 with the goal of using market competition to improve care for seniors and restrain spending. CMS makes payments to insurers based on what it estimates the traditional fee-for-service would spend to cover the same seniors.

Payments are adjusted for medical risk factors, so insurers are paid more to cover sicker beneficiaries. This is intended to prevent plans that discourage seniors with costly medical conditions from enrolling. Insurers use savings from reducing waste to lower patient costs and offer supplemental benefits like dental and vision care. Democrats claim insurers are reaping outsize profits, but their margins are capped by law. Insurers increase profits by offering better benefits and lower costs and expanding market share."

"Advantage plans also have out-of-pocket spending caps."

"Advantage’s share of spending is commensurate with its share of beneficiaries"

"Advantage enrollees are less likely to report themselves as in “excellent” or “very good” health than those in fee-for-service."

"much more likely to be low-income"

"the plans are able to provide more benefits at less cost than traditional Medicare . . . because insurers do a better job of managing costs" 

"CMS has also flagged fraud in traditional Medicare hospice care and purchases of medical equipment"

"Only 7% of Advantage medical claims require prior authorization, and 98% of them are approved"

"the far bigger problem is overbilling by providers"

"a 10 percentage-point increase in Advantage enrollment in a county is associated with $146 to $194 less in Medicare spending per capita"

"overall Medicare spending last decade totalled $431 billion less than the Congressional Budget Office projected in 2010, even as the share of beneficiaries in Advantage increased by half" 

Banks, Regulators and ‘Reputational Risk’

A new Trump rule would bar debanking for political reasons

WSJ editorial. Excerpts:

"Regulators are supposed to supervise banks for safety and soundness. That means their management of financial risks. But Congressional investigations dating to the Obama years have found cases of examiners jaw-boning banks to deny services to customers that allegedly pose a “reputational risk,” such as payday lenders, gun retailers and crypto."

"What is a reputational risk? Regulators have never clearly defined the term"

It has "proven nearly impossible to assess or quantify with accuracy"

"Banks say . . . they have felt pressure by regulators to close accounts tagged as reputational risks." 

The Farm Labor Shortfall Bites

U.S. workers applied for only 182 of 415,000 jobs advertised last year

WSJ editorial. Excerpts:

"the Administration is quietly conceding that too few Americans want to work these grueling jobs, and that its policies risk driving up food prices."

It has "taken steps to make it easier and less costly for farmers to hire seasonal guest workers on H-2A visas. Last fall the department relaxed a Biden wage mandate that required farmers to pay guest workers on average $17.74 an hour—and as much as $19.97 an hour in California—in addition to providing housing and transportation."

"A Labor attorney told a federal judge last month at a hearing on the UFW lawsuit that “there aren’t enough Americans to take these jobs,”"

"High wage mandates have “not resulted in a meaningful increase in new entrants of U.S. workers to temporary or seasonal agricultural jobs.”"

The ObamaCare Crisis That Isn’t

The large coverage losses and premium hikes haven’t happened

WSJ editorial. Excerpts:

"Remember when Democrats claimed that Congress’s failure to extend the pandemic ObamaCare subsidies would cause masses of Americans to lose insurance and premiums to skyrocket? It hasn’t happened, as new data from the Centers for Medicare and Medicaid Services (CMS) show.

Some 23.1 million consumers signed up during this year’s open-enrollment period. That’s 1.2 million fewer than last year, but still 6.8 million more than in 2023 and nearly twice as many as in 2021. Many who dropped out of ObamaCare had previously been improperly enrolled or received subsidies they didn’t qualify for."

"CMS says it cancelled subsidies for “nearly 1.5 million people found to be ineligible”"

"The pandemic-era subsidies encouraged people to understate income to qualify for bigger subsidies" 

The Democrats’ ObamaCare Quagmire

Their solution to the law’s disastrous effects is simply more of the same

By Chris Jacobs. Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm. Excerpts:

"To “make health care simpler for families,” the lawmakers would “make sure people can get the insurance they are eligible for through a one-stop shop,” and “simplify and standardize plans and benefits.” ObamaCare already created government-run exchanges to shop for coverage—years after private companies had created comparison-shopping tools online. The law also standardized benefits, imposing new coverage requirements that more than doubled individual insurance premiums in ObamaCare’s first four years. Why are Democrats suggesting policies they enacted in 2010?"

"Democratic lawmakers appear to want to regulate ObamaCare off-ramps like short-term limited-duration plans and catastrophic insurance out of existence."

"Democrats want to enact stronger so-called consumer protections that eliminate any exit from the ObamaCare morass."

"insurers have bought up pharmaceutical benefit managers and other healthcare entities to shift revenue from insurance products—where ObamaCare’s medical loss ratio caps their profits—to business areas where profits remain uncapped."

"In 2008, Barack Obama pledged that his healthcare plan would lower premiums by $2,500 a year for the typical family. But Sen. Peter Welch, who signed the Wyden letter, conceded last fall that “we did fail to bring down the cost of healthcare.”" 

When solar tax incentives overheated, the residential solar market became scorched

By Steve Swedberg of CEI.

"Residential solar has long been sold as a win-win for consumers and the environment. It was marketed as an affordable way for homeowners to reduce energy costs and support clean energy goals. What’s not to like? Yet the latest Solar Market Insight Report shows US residential solar installations slowed by 2 percent in 2025, which reveals that the market is not immune to economic and policy pressures.

At the same time, some Republican lawmakers are now pushing to reinstate federal clean energy tax credits. This sign of political uncertainty underscores how reliant the residential solar market has been on government incentives.

In a previous piece, I covered how the Residential Clean Energy Credit (RCEC) and related financing structures spurred rapid market growth alongside unintended consequences. Introduced under the Inflation Reduction Act, the RCEC was intended to jumpstart the residential solar market with a substantial federal tax credit for installing panels. By lowering upfront costs for homeowners, it created a strong financial incentive for consumers and developers to invest in residential solar at an unprecedented pace.

While the credit expanded solar panel adoption, it also accelerated bankruptcies, contributed to at least one alleged fraud case, cost taxpayers millions, distorted energy markets, and funneled investment into subsidy-driven projects rather than economically efficient ones. Because residential solar economics have been tied more to federal incentives than to market fundamentals, these vulnerabilities are now impossible for policymakers and investors to ignore.

Why residential solar is vulnerable without subsidies

Incentives to maximize the fair market value and favor certain financial instruments over others shape how residential solar companies operate, as recent solar industry bankruptcies illustrate.

Sunnova and Mosaic, for instance, grew rapidly using heavily leveraged financing structures. Sunnova carried over $10 billion in debt at the time of its bankruptcy, while Mosaic built its business on long-term loans for residential solar installations. Similarly, SunPower was structured on a loan-based business model, whereas PosiGen focused on no‑upfront-cost leases or loan‑based financing.

These strategies reveal a pattern of overvaluation and aggressive expansion. By structuring operations to maximize RCEC benefits, companies were incentivized to overvalue systems, take on excessive debt, and chase growth divorced from economic reality. Such models leave residential solar particularly vulnerable when interest rates rise, consumer credit tightens, or the RCEC expires and the easy money disappears.

The RCEC’s influence on upfront costs and financing structures means the residential market likely would not have reached its current size without this federal incentive. Its expiration is therefore expected to have significantly adverse effects on the US residential solar sector.

Residential solar is less economically efficient than advertised

Financial advisory firm Lazard’s 2024 report shows that rooftop residential solar has a higher levelized cost of electricity (LCOE) than utility-scale solar and many conventional generation options. LCOE averages total costs over a system’s lifetime electricity output. While a higher LCOE does not automatically mean higher consumer prices, it signals that rooftop solar is less economically efficient per unit of electricity produced.

As my colleague Paige Lambermont pointed out, the RCEC rewards upfront capital investment over efficient or economically sound energy production. Lazard’s findings illustrate how subsidies can distort investment incentives and encourage deployment that may not follow the lowest-cost or most efficient path to meeting US electricity demand.

How the RCEC reshapes capital markets

The RCEC affects more than electricity costs; it also distorts energy finance. As a large, upfront, non-refundable tax credit, it incentivizes solar developers to prioritize projects that maximize tax benefits.

Because developers and homeowners cannot use the RCEC directly, projects rely on tax equity investors, which are large corporations or banks with substantial tax liabilities, to provide the upfront capital in exchange for credit. These investors use financing structures such as partnership-flips, sale-leasebacks, and inverted leases to convert future tax benefits into immediate funding.

Without the RCEC, tax-equity investors would likely have directed capital to other tax-advantaged opportunities or conventional energy projects. The RCEC therefore does more than subsidize residential solar. It channels investment toward projects that maximize subsidy capture, illustrating how federal incentives can reshape financial markets and capital allocation in ways that do not necessarily produce economic efficiency.

Time to test residential solar’s viability

In summation, the RCEC has highlighted the financial vulnerabilities and structural challenges within the residential solar sector. From overleveraged companies to misaligned investment incentives, the program illustrates how federal subsidies can reshape markets in ways that do not always promote economic efficiency.

Whether it is residential solar or the Trump administration recently giving a $625 million subsidy to the struggling coal industry, the RCEC is a fine reminder that the government should not pick winners and losers.

If solar power can succeed in the residential sector, it should be able to do so on its own merits and without government assistance. If subsidies are the only thing keeping residential solar market solvent, then the RCEC is less a bridge for a clean energy revolution than a taxpayer-funded crutch. It is time to see if residential solar can survive without a government handout."

A Look at Our Material Progress

Modern life is more affordable and abundant than nostalgic claims suggest

By Alex Tokarev. He grew up in Bulgaria. He teaches Economics and Classical Liberal Philosophy at Northwood University. Excerpt:

"Imagine having to sweat on an assembly line or in a dangerous mine for three or four hours every day just to cover your grocery bills. Not excited about this prospect? Sorry, but that’s probably what you’d be doing if you were born a century ago. Today? The typical jobs are not only better, but you can earn the same amount of calories in just 30 minutes. Affordability, baby!

For most of humanity, the historical pattern was daily malnourishment interrupted by periods of starvation. Today, we have an epidemic of obesity. A hundred years ago, Americans fared better than most. Yet, compared to you, they were appallingly poor. In 1925, meat was expensive. The produce was seasonal. There was no refrigeration, no global supply chain, no high-yield farming.

Despite our government’s “food pyramid” propaganda, diets are now much healthier. Despite our government’s theft of 99% of the purchasing power of the U.S. dollar (through unconstitutional Fed policies that cause inflation), I can now grab a pint of fresh blueberries from Chile at our Michigan Kroger store for just $1.99, even though my backyard is already frozen. Unaffordable?

Capitalist competition, free enterprise, profit maximization. These pursuits led to the age of plenty that you enjoy. CATO’s scholar M. Tupy and BYUH professor G. Pooley have estimated (read their 2022 book Superabundance) that even the unskilled American workers can afford dozens of common food items by working 10 times less today than a century ago. Some crisis!

My son loves Universal Orlando’s parks. As a student, he works as a lifeguard, a minimum wage job. Even that pays enough to cover his round-trip to Florida by working just 8 hours. A hundred years ago, that travel would have taken three days and cost a weekly salary. Today, he leaves home after breakfast and eats dinner at the Islands of Adventure after swimming at Volcano Bay.

Our cars are faster, safer, more comfortable, last longer, pollute less, need less maintenance, and cost less in real terms. An unskilled employee needs to work only half as much today as 50 years ago to buy a pickup truck. Most vehicles on the road today come with safety features, entertainment options, and navigation controls that were science fiction to drivers in the 1920s.

Average Americans take vacations that their grandparents couldn’t have dreamed of. Alternatives to hotels have multiplied. Competition has lowered travel costs for everyone. Climate control, clean water, countless restaurants serving exotic foods from around the world, and limitless recreational options. These are no longer luxuries. I still marvel while my kids take those things for granted.

Debt? When your parents were your age during the fall of the Berlin Wall, the average, inflation-adjusted net wealth (assets minus liabilities) per household in the bottom 50% was $33,000. Today, it’s almost double: $60,000. Homes too expensive? Today—perhaps. Blame government restrictions on the supply. Price per square foot between 1975 and 2015? Almost no change.

College tuition rising faster than inflation? Blame the government for messing with that market. When taxpayer money is channeled to consumers of goods or services, higher demand means higher prices. Econ 101. Do you need two salaries to raise two children? We saved enough on one modest salary in 7 years to buy a house in Midland, MI. We paid it all with cold, hard cash.

The world isn’t getting worse. Your spending habits might be. In every measurable way, life is getting better. No previous generation has had more physical comfort and such amazing chances to develop productively and prosper. Study some history. If you stop moaning about decline and start noticing the progress, you might even enjoy your lives as Gen X is enjoying ours."

The Washington consensus works: Causal effects of reform, 1970-2015

By Kevin B. Grier & Robin M. Grier. From Journal of Comparative Economics.

"Abstract

Traditional policy reforms of the type embodied in the Washington Consensus have been out of academic fashion for decades. However, we are not aware of a paper that convincingly rejects the efficacy of these reforms. In this paper, we define generalized reform as a discrete, sustained jump in an index of economic freedom, whose components map well onto the points of the old consensus. We identify 49 cases of generalized reform in our dataset that spans 141 countries from 1970 to 2015. The average treatment effect associated with these reforms is positive, sizeable, and significant over 5- and 10- year windows. The result is robust to different thresholds for defining reform and different estimation methods. We argue that the policy reform baby was prematurely thrown out with the neoliberal bathwater." 

Highlights

         Sustained economic reform significantly raises real GDP per capita over a 5- to 10-year horizon.

         Countries that had sustained reform were 16% richer 10 years later.  

        Despite the unpopularity of the Washington Consensus, its policies reliably raise average incomes."

Also see What is the “Washington Consensus?” by Douglas A. Irwin and Oliver Ward. Excerpt:

"The main Washington Consensus policies include maintaining fiscal discipline, reordering public spending priorities (from subsidies to health and education expenditures), reforming tax policy, allowing the market to determine interest rates, maintaining a competitive exchange rate, liberalizing trade, permitting inward foreign investment, privatizing state enterprises, deregulating barriers to entry and exit, and securing property rights."

Liberalising reforms have more often than not delivered medium-term growth improvements

See Big reforms, big returns? Evidence from structural reform shocks by Alessio Terzi & Marco Pasquale Marrazzo. From the journal Economic Modelling.

"Abstract

Following a series of disappointing outcomes in Latin America and Sub-Saharan Africa, traditional structural reform shocks, of the type advocated under the ‘Washington Consensus’, came to be widely viewed as unsuccessful. This paper revisits that conclusion by applying a novel generalised use of the non-parametric Synthetic Control Method with multiple treated units to estimate the impact of 23 policy reform shocks (spanning both real and financial sector measures) implemented globally between 1961 and 2000. Our results suggest that, notwithstanding a muted short-term impact, wide-reaching reforms on average raised GDP per capita by around 6 percentage points over a decade. These findings are robust across alternative specifications, placebo and falsification tests, and different reform indicators. While outcomes were heterogeneous, the results indicate that broad liberalising reforms have more often than not delivered medium-term growth improvements, underscoring the importance of understanding the conditions under which they succeed." 

Also see What is the “Washington Consensus?” by Douglas A. Irwin and Oliver Ward. Excerpt:

"The main Washington Consensus policies include maintaining fiscal discipline, reordering public spending priorities (from subsidies to health and education expenditures), reforming tax policy, allowing the market to determine interest rates, maintaining a competitive exchange rate, liberalizing trade, permitting inward foreign investment, privatizing state enterprises, deregulating barriers to entry and exit, and securing property rights."

AI, Unemployment and Work

By Alex Tabarrok.

"Imagine I told you that AI was going to create a 40% unemployment rate. Sounds bad, right? Catastrophic even. Now imagine I told you that AI was going to create a 3-day working week. Sounds great, right? Wonderful even. Yet to a first approximation these are the same thing. 60% of people employed and 40% unemployed is the same number of working hours as 100% employed at 60% of the hours.

So even if you think AI is going to have a tremendous effect on work, the difference between catastrophe and wonderland boils down to distribution. It’s not impossible that AI renders some people unemployable, but that proposition is harder to defend than the idea that AI will be broadly productive. AI is a very general purpose technology, one likely to make many people more productive, including many people with fewer skills. Moreover, we have more policy control over the distribution of work than over the pure AI effect on work. Declare an AI dividend and create some more holidays, for example.

Nor is this argument purely theoretical. Between 1870 and today, hours of work in the United States fell by about 40% — from nearly 3,000 hours per year to about 1,800. Hours fells but unemployment did not increase. Moreover, not only did work hours fall, but childhood, retirement, and life expectancy all increased. In fact in 1870, about 30% of a person’s entire life was spent working — people worked, slept, and died. Today it’s closer to 10%. Thus in the past 100+ years or so the amount of work in a person’s lifetime has fallen by about 2/3rds and the amount of leisure, including retirement has increased. We have already sustained a massive increase in leisure. There’s no reason we cannot do it again."

Shellfish, Typhoid, and Private Control of Disease

By Jeffrey Miron.

"According to a recent study, early 20^th c. London fishmongers provided a creative solution for the problem of foodborne typhoid transmission (the study says "Industry-led efforts to mitigate contaminated shellfish reduced typhoid deaths in London from about 1.5 to 0.1 per 10,000 people between 1900 and 1920").

The issue was that shellfish

acted as vectors for waterborne diseases … Once the connection was understood, consumers alone could have substantially reduced typhoid deaths by consuming far fewer shellfish.

Instead, a prominent fishmonger company

used the Billingsgate [fish] market to help high-quality sellers signal the quality of their products by sampling and testing harvest sites, banning sales from known contaminated areas, and requiring vendors to purchase shellfish cleaning services.

This strategy meant that

consumers who were willing to risk their own quality control could purchase shellfish for a lower price from traders who did not transit through Billingsgate, while those willing to pay a premium for third-party quality control purchased shellfish through Billingsgate.

Profit-motivated companies can create public goods." 

The Rise and Decline of General Laws of Capitalism

By Daron Acemoglu & James A. Robinson. 

"Thomas Piketty's (2013) book, Capital in the 21st Century, follows in the tradition of the great classical economists, like Marx and Ricardo, in formulating general laws of capitalism to diagnose and predict the dynamics of inequality. We argue that general economic laws are unhelpful as a guide to understanding the past or predicting the future because they ignore the central role of political and economic institutions, as well as the endogenous evolution of technology, in shaping the distribution of resources in society. We use regression evidence to show that the main economic force emphasized in Piketty's book, the gap between the interest rate and the growth rate, does not appear to explain historical patterns of inequality (especially, the share of income accruing to the upper tail of the distribution). We then use the histories of inequality of South Africa and Sweden to illustrate that inequality dynamics cannot be understood without embedding economic factors in the context of economic and political institutions, and also that the focus on the share of top incomes can give a misleading characterization of the true nature of inequality." 

Allowing Housing Near Jobs Can Unlock Housing Options in Maryland

HB 1137 can expand residential development on underused commercial land

Salim Furth of Mercatus.

"Maryland House Economic Matters Committee

HB 1137: Land Use - Multifamily Developments and Mixed-Use Developments - Authorization (Bring Back Main Street Act)

Chair Valderrama, Vice Chair Charkoudian, and Members of the Committee:

Thank you for providing me with the opportunity to testify on HB 1137, the Bring Back Main Street Act. I am an economist at the Mercatus Center and a resident of Takoma Park, Maryland. The Mercatus Center is a nonprofit, nonpartisan policy research institution at George Mason University.

Two years ago, the General Assembly considered, and passed, a bill that attempted to enable housing growth on underused commercial land (HB 538, 2024). At the time, I cautioned a Senate committee that the bill was weakened by incorporating a false choice between abundance and affordability.¹Although it allowed builders to provide homes on some commercial land, this option was, practically speaking, available only to projects already using dedicated affordable-housing funding, such as the Low-Income Housing Tax Credit.

Today, the committee can advance HB 1137, which would build on that small beginning by opening up more underutilized commercial land for housing and welcoming any builder to the opportunity. Homes built under HB 1137 must still abide by affordable housing set-asides. But, as I noted in 2024, recently built apartments in Maryland are generally affordable to working-class households anyway. Increasing the supply of market-affordable apartments, condos, and—in other legislation—starter homes will allow Maryland and her counties to focus housing assistance on those with the lowest incomes.

Many Maryland cities and counties have already embraced, at least in concept, allowing homes on most commercially zoned land. Not all have done so, however, and in many cases there are additional barriers to housing that make it more difficult to build on those sites. And most jurisdictions simply have other priorities. Rather than proactively making land available for housing, they wait for a developer proposal or a small area plan. For example, Howard County does not allow residential uses in its B-2 Office Commercial zone, which is frequently employed in areas directly abutting homes.

With colleagues, I have studied the adoption of residential-in-commercial-zone (RICZ) laws like HB 1137. To date, 11 other states have such laws, which I summarize below.²

• Arizona: Allows residential redevelopment of commercial properties with high vacancy rates.
• California: Allows RICZ subject to affordability and labor requirements.
• Florida: The Live Local Act allows RICZ up to the zoned limit in other residential zones.
• Hawaii: HB 2090 (2024) allows RICZ, but it may be limited to upper stories.
• Maine: LD 997 (2025) allows RICZ, but it may be limited to upper stories.
• Montana: Allows homes in RICZ with limits on local parking and height regulation.
• Nevada: AB 241 (2025) requires all localities to rezone for RICZ.
• New Hampshire: HB 631 (2025) allows RICZ, but it may be limited to upper stories.
• Oregon: HB 3395 (2023) allows deed-restricted affordable housing in commercial zones.
• Rhode Island: Statutes 45, 24, 33, and 37 each allow residential uses in some commercial zones, under differing parameters.
• Texas: SB 840 (2025) legalized RICZ in major cities under clear parameters.

From observing other RICZ laws, I have two technical critiques of HB 1137:

• The bill sets a standard for allowed density based on the county’s highest-density zone. This approach was pioneered in Florida, and it works there. However, Florida has a law against downzoning. Without that protection, counties would likely respond by reducing the density allowed in their densest zones, since that density would implicitly be the countywide density for residential projects in commercial zones. A better approach, which I laid out in a 2024 policy brief, is to set an absolute base standard and allow contextual deviations where the existing regulations or built pattern are more permissive.³
• The bill allows counties to require first-floor retail uses in a highly prescriptive way. That element should be either dropped or given more flexibility on the space that nonresidential uses will occupy and the nonresidential uses that a county can allow, beyond just retail.

Maryland’s housing challenges did not emerge overnight, and they will not be solved by a single bill. But allowing residential uses in commercial districts statewide would be a meaningful step toward attainability, predictability, and market responsiveness.

Thank you, and I welcome your questions.

Notes

[1]Salim Furth, “Market-Rate Rents Can Serve Moderate-Income Marylanders” (Testimony before the Maryland Senate Education, Business, and Administration Subcommittee, Mercatus Center at George Mason University, March 1, 2024).

[2] Mercatus Center at George Mason University, “Housing Policies Highlight: Five Housing Supply Reforms Across the 50 States,” accessed February 27, 2026, https://www.mercatus.org/housing-policies-highlight.

[3]Salim Furth and Eli Kahn, “Office Overhauls and ‘God’s Backyard’: Reforms for Housing in Commercial Zones and Faith Land” (Mercatus Policy Brief, Mercatus Center at George Mason University, May 2024)."

Costliest Autism-Therapy Firm—Which Was Barred From Medicaid—Is Closing

A rival provider, which recently settled civil allegations of fraudulent Medicaid billing, to take over operations at Piece by Piece Autism Centers

By Christopher Weaver of The WSJ. Excerpts:

"The nation’s costliest autism therapy provider will shut down by mid-May"

"the state of Indiana said it would bar the firm from billing Medicaid."

"The autism-therapy provider, Piece by Piece Autism Centers, received $340,000 in Medicaid payments per patient in 2023, the highest level in the country"

"Once Piece by Piece—which state officials have said abused the taxpayer-funded program for low-income people—closes, its centers will be operated by a rival autism-therapy provider"

"Piece by Piece extracted its high payments in part by boosting list prices to levels that allowed it to collect as much as $640 an hour from the state"

"From 2019 to 2023, Indiana directly paid Piece by Piece $58 million"

"State Medicaid programs’ direct payments for the therapy grew to $2.2 billion in 2023, from $660 million just four years earlier"

"At first, owner Meghann Mitchell, who purchased a $2.5 million Sanibel Island vacation home, a $600,000 riverfront Indiana getaway and other properties as Piece by Piece’s billings soared, was defiant. She wrote to employees that “Piece by Piece has done nothing wrong and intended to fight this decision,”"

"Mitchell also owns, through a limited liability company, real estate used by the centers—meaning she could remain a landlord for her former business."

"Indiana is undertaking a wider overhaul of how it covers autism therapy. For years, Indiana had paid autism-therapy providers 40% of whatever list prices they charged, leading to ultrahigh payments for some providers. The state set a flat rate in 2024."

"Indiana also plans to seek federal approval for a moratorium on new autism-therapy providers this month"

Related posts:

The Boom in Autism Therapy Is Medicaid’s Fastest-Growing Jackpot: Some companies have found lucrative opportunities to capitalize on a growing need, billing long hours and extracting payments as high as $800 an hour (2026)

Autism-Therapy Firm That Was Paid $340,000 per Patient Is Barred From Medicaid: Indiana officials move to terminate Piece by Piece Autism Centers, cite federal pressure for crackdown after a Journal investigation (2026) 

The Medicaid Autism Racket: Behavioral therapy payments are an easy target for fraud (2026)

A German Official Talks Like Jimmy Carter—and That’s Good

By Joseph C. Sternberg. Excerpts:

"Mr. Klingbeil [German Finance Minister Lars Klingbeil, co-leader of the center-left Social Democratic Party] last week delivered an agenda-setting speech titled “Reforms for a Strong Germany”"

"His central observation is that Berlin must break its habit of responding to serial crises by doling out subsidies and amping up regulations. Resilience is born of strong labor and capital markets, and building that strength requires better incentives to work and invest."

He "would encourage Germans to work longer into their lives. This would entail a combination of tax reforms to allow older workers to retain more of their earnings and benefits and reforms that improve incentives to work longer before claiming Germany’s equivalent of American Social Security."

"Nearly half of working women in Germany work only part-time"

"A sharply progressive tax code coupled with the withdrawal of generous means-tested benefits as incomes rise creates steep cliff-edges in household budgets."

"Mr. Klingbeil wants to make it easier for companies to hire. One of his more intriguing ideas is to allow companies greater flexibility to hire new employees on contracts that make them easier to fire."

"His better ideas [business investment] on concern deregulation and streamlining bureaucracy" 

"Jimmy Carter started deregulation in the U.S., and Gerhard Schröder overhauled German labor law 20 years ago. Mr. Klingbeil now is signaling that he’s willing to try, too." 

Blue states spend 51.4% more money per public/government school student than red states, with no difference in academic outcomes

From Mark Perry.

"Wow, blue states spend 51.4% more money per public/government school student than red states, with no difference in academic outcomes.

Related: Mississippi (red state) is spending between $10-$13k per pupil and has gone from 49th in education to 9th in the nation in 13 years, and they did that by switching to a pre-1990s phonics reading curriculum."

  

Beijing’s Big Problem: An Incredible Shrinking Economy

By Jon Emont of The WSJ. Excerpts:

"In dollar terms, China’s gross domestic product, as a share of the global economy, peaked in 2021 at around 18.5%, when it grew to be around three quarters of the size of the U.S. economy."

"Instead China’s share of the pie has decreased, ending 2025 at around 16.5% of the global economy. It is now less than two-thirds the size of the U.S. economy"

The problem is "deflation, which reduces the value of goods in the economy, and a weak yuan has zapped the relative size of China’s economy as measured in dollar terms. So even though China’s economy has been producing more goods than ever, the dollar value of what it makes has been stagnant" 

"Another method, purchasing power parity, shows how much Chinese can purchase at home. According to this yardstick, China’s economy now far exceeds the U.S."

"A different measure is to compare economies using dollars from a fixed point in time, thus eliminating the effects of inflation. By that gauge, China is growing consistently.

But economists often compare the size of economies using present-day dollars because the greenback is the currency of international trade and a measure of actual buying power globally. That makes China’s shrinking share of the global economy worrying for global businesses, whose investments in China bring home less in dollar terms now."

"China’s challenged economic situation echoes the economic trajectory of Japan, which grew to be nearly three-quarters of the U.S. economy in 1995, but has since fallen to less than 15% of the U.S., as a weak yen and deflation eroded the country’s buying power."