Can Socialists Support Commerce But Not Capitalism?

By Chris Freiman.

"Socialists often criticize US trade restrictions on Cuba. A recent example is the flotilla organized by activists attempting to deliver aid to the island that aimed to draw attention to the embargo. Participants and commentators often frame Cuba’s poverty as a direct result of US policy: lift the embargo, the argument goes, and Cuba will prosper.

What should we make of this argument? For one, the primary driver of Cuba’s persistent poverty is the Cuban government’s own economic policies, including state control, chronic misallocation, and long-standing restrictions on private enterprise. These institutional mistakes would keep Cuba poor even without the embargo.

That said, there’s little doubt that trade barriers cause economic harm, and socialists are right to recognize this. But here one might wonder: can socialists coherently object to trade restrictions while also opposing free market capitalism more broadly?

Many think the answer is yes. The socialist target isn’t free exchange as such, but private ownership of productive property. Socialists object to an economy where capitalists own the means of production and workers sell their labor for wages or a salary. Socialism, by contrast, would create a kind of “workplace democracy,” where firms are owned and operated by workers themselves. They’d collectively make decisions about production, investment, and distribution rather than take orders from a single boss. This could mean workers directly voting on major business decisions or periodically electing managers to act on their behalf. Suppose, for example, that a worker-owned pizzeria is deciding whether to shift from traditional pizza to a more upscale artisanal menu. In a traditional capitalist firm, the owner would have the final say. In workplace democracy, the cooks, servers, and other employees would collectively decide how to proceed. While there might be some conflicts between growth and equality, writes Mike Beggs at Jacobin, such a model would aim to “harmonize firm-level democracy with macroeconomic expansion and a solidaristic wage.”

Under this style of socialism, markets would still play an important role. Central planners wouldn’t decide how to allocate resources to the pizzeria or determine how many pizzas it has to bake. Instead, the pizzeria would compete with rival restaurants for customers just as it would under capitalism. The goal is to retain the information markets provide in the form of prices, profits, and losses while “socializing” ownership of firms.

At first glance, it seems as though this version of socialism is perfectly compatible with free trade. You could have an economy in which firms are democratically owned and still allow free trade both within and across borders.

That’s fine as far as it goes. But there’s a tension lurking in the background. Consider that a central justification for free trade is that it enables all parties to voluntarily enter into an economic agreement in the expectation of mutual benefit. As Adam Smith puts the point:

Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of.

If I want the apples you have, and you want the oranges I have, we’re both better off as a result of a trade. Trade barriers — tariffs, quotas, embargoes, and the like — block these sorts of exchanges. That’s why critics of the Cuba embargo argue that it makes people worse off: it prevents them from engaging in mutually beneficial exchange, which an abundance of research shows is a source of human prosperity.

Once you see trade in this light, it becomes harder to draw a bright line between the kinds of exchanges socialists want to allow and the kinds they want to prohibit. As I mentioned earlier, to qualify as socialist, an economy must not permit capitalists to own the means of production and hire wage laborers. This means that a socialist economy must prohibit freely agreed-upon, mutually beneficial capitalist labor agreements. For instance, suppose Barry doesn’t want to take on the risks and responsibilities that come with being a co-owner of a coffee shop; he’d rather work for a steady wage as a barista for a corporate giant. Nevertheless, a socialist economy wouldn’t allow him to do so. (Otherwise, it would start drifting toward capitalism.)

It’s not clear why trading barista labor for money is all that different from trading apples for oranges. In both cases, people are making voluntary agreements in the expectation that they’ll be better off as a result. Here, then, is the tension. On the one hand, socialists criticize trade restrictions on the grounds that they block mutually beneficial exchange and thereby make people worse off. On the other hand, they want to restrict or eliminate capitalist employment of wage laborers — even when workers voluntarily choose those arrangements.

So something has to give. You can’t easily say, “Let people trade as they see fit because they expect it to benefit them,” while also saying, “But don’t let them sell their labor as they see fit, even when they expect it to benefit them.”

If mutual benefit justifies freely trading apples for oranges, it’s hard to see why it doesn’t also justify freely trading labor for wages. And if workers may trade their labor freely, they may trade it to capitalists — a conclusion that socialist defenders of free trade are sure to find unwelcome."

Drug Prohibition and the Waterbed Effect

Jeffrey Miron.

"A key rationale for drug prohibition is the belief that outlawing drugs makes them less available and more expensive, thereby shrinking consumption.

Decades of evidence, however, suggest this impact is modest, partly due to the “waterbed effect:” enforcement efforts aimed at shrinking the market mainly causes it to shift, in various ways, without much impact on its overall size. Just as pushing down on one part of a waterbed merely forces the water somewhere else, rather than reducing the overall quantity.

Two recent news stories provide textbook illustrations. From the Washington Post,

The Trump administration’s deadly military strikes on alleged drug trafficking boats have not reduced the amount of cocaine entering the United States, but they’re prompting criminal organizations to develop new strategies and tactics and undermining traditional investigative methods, according to a previously unreported assessment by the Drug Enforcement Administration, a closed-door congressional briefing and interviews with current and former U.S. and foreign officials.

In a recent assessment reviewed by The Washington Post, DEA analysts found the strikes had failed to affect the supply or price of cocaine in the United States and had led traffickers to diversify beyond go-fast boats and to avoid international waters, opting instead for larger boats and hemming close to coastlines, where U.S. forces are less likely to open fire. In a closed-door briefing last month, Pentagon officials told lawmakers the strikes in international waters off South and Central America had not reduced its purity.

And from the Financial Times,

In the battle for the seas, drug traffickers are often coming out on top — making Europe, in the words of the UN, the new “primary destination” for cocaine. The drug, once the preserve of rich European partygoers, has gone mainstream, with street prices falling by an average of 18 per cent between 2014 and 2024 while the products sold became 44 per cent purer, according to the EU’s drugs agency.

…

As authorities have stepped up interceptions at major ports, traffickers have kept ahead through sophisticated drop-offs at sea, enabled by encrypted communications, powerful speedboats, unmanned submersibles and GPS spoofing, which involves vessels faking their locations.

“You always have to stay up-to-date, because there’s always a new modus operandi,” says Jürgen Ebner, acting chief of Europol, the EU’s law enforcement agency. He warns of a “waterbed effect” — when authorities come down hard in one area it can just push problems somewhere else.

Exactly."

The Endangered Species Act Reduces Housing

From Alex Tabarrok.

"Max Tabarrok’s paper on the Endangered Species Act and housing (WP) has just been published in the Journal of Public Economics! It’s a clever paper: Max observed that the moment an animal is put on the endangered species list, developers face enhanced compliance costs and liability risk. But what’s important for an empirical economist is that this increased regulation isn’t national–it binds just where the species lives. Thus, the ESA creates many natural experiments, places where it binds and nearby places where it doesn’t and the list changes over time–there were 82 listings in 1970 and nearly 1500 today–and there are even some de-listings which reduce regulation.

Here, for example, is a picture of the habitat (red) and control areas (blue) for when the Northern Long Eared Bat was put on the endangered species list.

 

The bottom left panel measures annual housing permits per 1000 1980 pop in treatment (red) versus control (blue) areas. The bottom right is the event study coefficients. After the bat was put on the endangered species list, the number of new housing permits declined in areas where bats might live relative to control areas.

Here is what happened when the Peregrine falcon was delisted. Before the delisting, housing permits were lower in regions (red) where the falcon had habitat compared to controls areas but after the delisting the treatment areas caught up to the control areas.

 

Overall:

…this paper provides evidence that an additional endangered species listing reduces annual housing permit flows by 0.5 permits per thousand 1980 residents, about 10% of the average place’s permit flow. Accounting for spillovers and diminishing costs, my estimates suggest the aggregate effect of the ESA has been to reduce the national housing stock by…roughly 6.3 million missing units over 1980–2024, about 4% of the 2025 housing stock.

Now, you might say, ok this shows the ESA has costs. What about the benefits of the ESA? It’s hard to measure the benefits, of course, or even know if the ESA is effective. But Max shows using satellite data that there are quite a few places where the ESA binds on infill development.

…at the intensive margin of housing production, new developments are often replacing existing buildings or are filling in space in a highly developed area that could not host endangered species even if no new construction took place. On the intensive margin, the tradeoff with species protection does not bind, and may even be positive sum as it substitutes for less dense greenfield development. Therefore, whether and how much the ESA constrains development on the extensive vs intensive margin is relevant to the tradeoffs we face between housing production and species protection, and thus is relevant to the aggregate welfare effects of the law.

In this section I extend the main empirical specification of the paper to satellite data on land use from the National Land Cover Database (NLCD) (Multi-Resolution Land Characteristics Consortium, 2025) and to heterogeneity within the Building Permits Survey to assess where the effects of the Endangered Species Act are accruing.

The NLCD is a set of satellite images of the United States compiled and pre-classified by the U.S. Geological Survey. They classify 30-square-meter pixels into one of fifteen land use groups, including four levels of development, three types of forest, and two types of wetland. The NLCD has annual files going back to 1985. I overlap these pixels with the map of permit-issuing places in the BPS using constant 2024 borders, and track the changes to pixels within each place over time. The hazard rate of extensive margin or greenfield development is measured by the flow of non-developed pixels (e.g., forests or wetlands) into any of the four levels of developed land use, divided by the total area of greenfield land use.

He concludes:

The most urbanized 15% of places are responsible for 90% of total permit flows, while the highest-value endangered species habitat is well outside these developed areas. The Endangered Species Act seems to restrict infill development in these dense areas as much as it restricts greenfield development in exurban sprawl (Table 9, Table 10, Table 11). Relaxing the legal mechanism of the Endangered Species Act in already developed areas may increase permit flows in dense, energy- and land-efficient cities in California and on the East Coast at the expense of sprawling suburbs in the Sun Belt, increasing both housing supply and endangered species habitat.

The Trump administration is trying to limit the ESA, multiple lawsuits have already been filed. Max’s paper is thus timely and it points to a fix that might satisfy housing proponents and environmentalists: relax the ESA’s bite on infill and redevelopment in already-built-up areas, where the housing-versus-habitat tradeoff barely binds, rather than across the board.

Addendum: Obviously, I am pleased as punch to see this paper in print. Max began writing the paper before graduate school–he has only just finished his first year. He was fortunate to have had lots of great advice along the way, most notably from a superb pre-doc he did at Dartmouth under the auspices of Heidi Williams."

The Enclosures and the Industrial Revolution

By Don Boudreaux.

"Here’s a letter to someone who (I boast) reports that he’s greatly enjoying reading Phil Gramm’s and my book, The Triumph of Economic Freedom.

Mr. M__:

Thanks for your email and for your kind words about Phil Gramm’s and my book. They’re much-appreciated.

Our book’s chapter on the industrial revolution prompts you, understandably, to write:

A critique may say that one reason why people left rural areas to go to the cities was due to Britain’s enclosure laws that forced rural workers off their traditional land (which they presumably wished to stay on), causing them to have nowhere else to go except the cities and factories. This undermines the argument that rural people voluntarily left rural areas for the cities and factories due to the latter being more appealing than rural life.

Sen. Gramm and I did not explicitly address this particular point, although we should have done so. Had we done so, we’d have simply summarized the work of the eminent economic historian Deirdre McCloskey. In her remarkable 2010 volume, Bourgeois Dignity, McCloskey writes on page 154 that, in attempting to explain the industrial revolution, Karl Marx

instanced enclosure in England during the sixteenth century (which has been overturned by historical findings that such enclosure was economically minor) and in the eighteenth century (which has been overturned by findings that the labor driven off the land by enclosure was a tiny source of the industrial proletariat, and enclosure happened then mainly in the south and east where in fact little of the new sort of industrialization was going on, and where agricultural employment in newly enclosed villages in fact increased).

A few pages later (pages 172-173), McCloskey adds:

By now, though, several generations of agricultural historians have argued (contrary to the Fabian theme first articulated in 1911, which followed Marx) that eighteenth-century enclosures were in many ways equitable and did not drive people out of the villages…. Contrary to the pastoralism of [Oliver Goldsmith’s 1770] poem – which as usual reflects aristocratic traditions in poetry back to Horace and Theocritus more than evidence from the English countryside – the commons was usually purchased rather than stolen from the goose. One can point with sympathy to the damaging of numerous poor holders of traditional rights without also believing what appears to be false – that industrialization depended in any important way on the taking of rights from cottagers to gather firewood on the commons. Industrialization, after all, occurred first in regions to the north and west, mainly enclosed long before, such as Lancashire or Warwickshire, and especially (as Eric Jones pointed out) in areas bad for agriculture, not in the fertile East Midlands or East Anglia or the South – the places where the parliamentary acts of the eighteenth century did transform many villages, though non “deserted.” In such freshly enclosed areas, I repeat, the local populations increased after enclosure."

Who's Paying for the Discounts in Mamdani's City-Run Grocery Stores?

This week, Mamdani announced his city-run grocery stores will sell core goods at a 30 percent discount.

Meagan O'Rourke of Reason. 

"This week, New York City Mayor Zohran Mamdani gave more details about his administration's plan to open five city-owned, city-run grocery stores across all five boroughs. Although Monday's press conference provided some more clarity about the stores' discount rates and inventory, the plan is still no better than before (despite New York magazine's declaration that the stores "Sound Pretty Good").

The Mamdani administration has announced the locations of two stores: The first will open in Hunts Point in the Bronx by the end of next year, and another will open in East Harlem by 2029. In total, the city plans to spend $70 million in capital costs, with $30 million funding the ground-up construction of the East Harlem location. The city will cover the rent and property taxes for the five grocery stores located in each borough, and private operators will run the day-to-day operations of each store. Those operators will be "contractually required" to pass on savings to customers by offering discounts on a core basket of staples.

Until Monday's press conference, it was unclear which goods would be discounted and by how much. The core set of goods, Mamdani revealed, will include produce, meat, and seafood, along with 20 other items such as milk and bread. These items will be discounted by 30 percent compared to "typical retail prices" with "no exceptions, no gimmicks." Mamdani told reporters he arrived at the 30 percent figure because food prices have risen roughly 30 percent since 2019.

When asked whether the city-run grocery stores would threaten surrounding businesses, Mamdani told reporters that the city's stores would not pose a threat to bodegas and other grocery stores because they would not sell hot food or cigarettes, items he says drive revenue for existing bodegas and stores.

Even if the public stores do not threaten privately run businesses, there are few clear upsides to the plan. As philosophy and economics professor Daniel Muñoz noted on his Substack, if the goal of Mamdani's stores is progressive redistribution, a government-owned grocery store is an inefficient and "negative sum" solution.

"Notice that anyone can shop there—there is no means testing," Muñoz wrote. "By contrast, food stamps are designed to help the poor, and they don't cause long lines or put more efficient grocers out of business."

Mamdani has said that government intervention for food distribution is nothing new. On Monday, he explained that former New York City Mayor Fiorello La Guardia was inspired to create municipally owned markets after witnessing food riots several years earlier.

"He did so because he believed in a simple definition of the task of government to make people's lives better," Mamdani said.

La Guardia may have been partially motivated to create municipally owned markets to make goods affordable, but Mamdani conveniently left out another part of the story. La Guardia wanted to create municipal markets (like Essex Market in the Lower East Side) to get pushcarts off the streets.

According to a New York Times article from 1938, La Guardia wrote in a letter to commercial associations: "It is my policy, where a market is necessary, to build a proper covered market so that these same peddlers may be permanently placed in such market under proper and wholesome sanitary conditions." While municipal markets, like Essex Market, are still in use today, they are not proof of concept for city-run grocery stores. The vendors at Essex Market pay below-market rent, but the vendors are still private businesses subject to market fluctuations.

Even if the city-run stores push other grocers out of business, create resale markets, or produce other unintended consequences, the city will have little incentive to shut them down because taxpayers will always be there to foot the bill. Plus, the city can take credit for making life more "affordable" for New Yorkers."

2026 is the quietest year for wild fires in Europe by some distance

From Matt Ridley.

 

 

 

 

The Apples and Oranges Tribunal

By Alex Tabarrok.

"Suppose that apples sell for more than oranges and Parliament in it’s wisdom decides that, at last, apples and oranges must be compared. Not by shoppers — shoppers are biased, they merely reveal what they are willing to pay — but by a tribunal, which will determine whether apples and oranges are of truly equal value and thus must sell at the same price.

What would the tribunal need to know?

Start with land. Orange groves sit on Florida real estate with one set of alternative uses; apple orchards occupy Washington hillsides with another. The opportunity cost of an orange includes the housing development, the solar farm, the tourist attraction not built on that grove. How is the tribunal to value what was never built? Perhaps you answer: look at land prices. Brilliant suggestion, I reply. Keep going.

Next, capital. Orchards take years to mature, so today’s fruit embodies investments made under yesterday’s expectations about today, financed at interest rates the tribunal must somehow incorporate. Then storage: apples keep, oranges rot, so an apple and an orange in April are different goods than the “same” fruits in October. Add transportation, refrigeration, frost, pests, crop insurance, the option to divert fruit into juice, cider, marmalade, or pie, substitution with every other item in the produce aisle, and the shifting preferences of millions of consumers, each of whom knows things about his own breakfast that he could not articulate to a tribunal. It all matters.

To determine the “just” price of apples and oranges, the tribunal would need the entire general-equilibrium system.

Market prices are necessary to compare alternative uses of resources, as Mises taught us in 1920. In 1945, Hayek added the knowledge problem: the relevant knowledge is dispersed, local, tacit, and fleeting. Free markets are the only institution that aggregates that knowledge, articulates it in prices and gives people a reason to listen and respond. A price is a signal wrapped up in an incentive. Apples and oranges can be compared but only by the incomparably complex operations of the price system. There is a reason we call it the super-market.

Britain is now running this experiment in the labor market–A retail worker equal to a warehouse worker? A canteen worker equal to a coal miner? A dinner lady equal to a gravedigger?

Under the Equality Act’s “equal value” provisions, tribunals compare jobs by scoring their intrinsic properties — effort, skill, responsibility, working conditions — the labor theory of value applied to labor. How is it going? The Tesco litigation began in 2018; the tribunal’s fact-finding hearing ran 36 days, its judgments run to more than 900 pages resting on some 19,000 pages of training manuals, and the independent experts have yet to begin the report that will actually say whether a shelf-stacker’s job equals a warehouse worker’s. Eight years, and the calculation has not started. Apples and oranges, adjudicated but not, as Orwell or Marx or Stafford Beer might have imagined, by a industrial bureaucracy or by an all-knowing artificial intelligence but by lawyers and commissions and tribunals. The worst of all worlds.

And having discovered that the tribunal cannot price two jobs in a decade, the government now proposes to add race and disability comparisons and an enforcement unit to publish official guidance on which reasons for a wage difference are permissible. A bureau of allowable scarcities.

Moreover, let us say that one day the tribunal reaches its conclusion and finds the truly just apple to orange price. At last, nirvana. The next day the public learns that vitamin C really does combat cancer–the demand for orange juice skyrockets. To encourage more orange juice production we need a higher price but wait…nothing about oranges or apples or the labor required to produce them has changed. We need to attract more labor to the orange juice industry but the effort, skill, responsibility and working conditions of orange juice workers has not changed. How can we justly pay them more than their apple juice brethren? Blank out.

The market compares apples and oranges every day. It is the only institution that can. But there is a deeper error here than computation. Suppose the tribunal succeeded. Suppose that after another decade it delivered the true and final score, shelf-stacker versus warehouseman. What would it have found? Not justice. A wage is not a grade on your character or a measure of your worth as a human being. A wage is a price — a report on how scarce your skills are relative to the desires of people you will never meet. Nurses are not morally less worthy than plumbers should they earn less than plumbers or vice-versa, and no one thinks otherwise except the tribunals.

Hayek nailed it in The Mirage of Social Justice: justice is about conduct — how one person treats another. An employer who defrauds his workers, an employee who steals from the till, a product sold under false pretenses — condemn them, take them to court. But the pattern of prices that emerges from millions of voluntary trades is nobody’s conduct. No one chose it, no one designed it, no one can be guilty of it. The constellation of prices is, in Ferguson’s phrase, the result of human action but not of human design. Demanding that prices be just is a category error, like suing the weather. Prices don’t grade our merit; they guide our actions. Ask them to do the first and they can no longer do the second.

Judge Anthony Kennedy said it well in the Ninth Circuit ruling that (mostly) killed comparable worth in the US: “neither law nor logic deems the free market system a suspect enterprise.”"

Rent control reduces housing supply

From Cafe Hayek.

"The Editorial Board of the Washington Post makes the case that Comrade Mamdani’s rent-control policy violates the takings clause of the Fifth Amendment.

A group of landlords has filed suit, arguing that the mayor’s office improperly interfered in what should be an independent regulatory decision. The board is also required to conduct an independent economic analysis before a vote, but the plaintiffs say the board had already made up its mind.

After her resignation in protest ahead of the vote, the board’s former landlord representative, Christina Smyth, said the members crossed a “legal line” because their vote wasn’t based on evidence.

A court overturning the rent freeze would be an economic gift for the democratic socialist, even if he doesn’t realize it.

New York’s rent-stabilized housing market is near its breaking point. Before the new policy, landlords were only allowed to raise rents 3 percent per year, which often did not cover maintenance costs. Nearly 60,000 rent-stabilized apartments in the city were vacant last year. That’s an increase of 8,000 from the year before.

Expect more vacancies when the freeze goes into effect in October. When San Francisco implemented rent controls in the 1990s, housing supply dropped by 15 percent."

Trump’s New Tariffs Aren’t About Forced Labor—They’re About Restoring the Tariff Wall

By Scott Lincicome and Chad Smitson of Cato.

"The “Section 122” tariffs, imposed after February’s Supreme Court ruling against President Trump’s “emergency” tariffs, expired last night and were immediately replaced by “Section 301” tariffs of roughly the same amount. The new duties range from 10 to 12.5 percent, cover goods from 60 economies, and are justified as a crackdown on “forced labor.” 

In my new column at The Dispatch, I show why these tariffs have almost nothing to do with forced labor and instead are just “a ham-fisted way to reinstall Trump’s tariff wall and protect it from another IEEPA-like defeat in federal court.” Five issues stand out:

1. The administration said the tariffs were coming before the investigation ended. President Trump, Treasury Secretary Bessent, and US Trade Representative Greer all publicly and explicitly promised that the tariffs and their revenue would replace the struck-down IEEPA regime before the investigations even started.
2. The requisite report on “forced labor” is remarkably thin. USTR’s investigation only took 82 days and generated a 98-page report to cover 60 economies, devoting little more than half a page to each, much of it the exact same empty passages copied and pasted 60 times—far short of the rigor demanded of such a consequential and far-reaching trade action. The report also contained no evidence or analysis – none – of targeted economies’ forced labor policies causing actual harm to US companies or commerce. It’s all just assumed. Nor did the USTR explain why it applied the same punitive 12.5 percent tariff rate to Angola, Libya, Russia, Venezuela, and Kazakhstan—developing countries that rank low on the Walk Free forced labor index (and have other issues!)—as it did to developed, “good actor” countries like Norway, Japan, Switzerland, and Australia.
3. The United States is hardly a forced labor angel. Section 307 of the Tariff Act of 1930 has prohibited imports made with forced labor, but was lightly enforced for over 80 years due to wide exceptions, and the Trump administration’s enforcement of the law has been much more lenient than the Biden administration’s efforts. Furthermore, the US ranks 19th among the 60 economies for the prevalence of forced labor. 
4. The tariff cure dramatically overshoots the forced labor disease. Some back-of-envelope math puts a proportionate tariff at 0.5 to 0.84 percent; Peterson Institute economist William Cline, using a different model, gets 0.23 to 0.25 percent. USTR is proposing 10 to 12.5 percent, a rate and resulting revenue (see figure below) that far exceed what could be considered a proportional response to the problem.
5. There’s no off-ramp. Section 301’s statutory goal is the removal of the offending foreign policy, yet USTR offers no benchmarks for compliance that would remove the tariffs. Indeed, a country with the United States’ exact forced-labor framework could still get slapped with duties.

As I explain, the Section 301 tariffs on Chinese imports that Trump imposed during his first term provide a telling contrast: 

Trump’s case against Chinese intellectual-property and industrial policy wasn’t without fault, but it still required an eight-month investigation and produced a nearly 200-page report on a single country. And the recommended tariffs—initially set at $50 billion to match/​offset the alleged harm from the targeted Chinese policies—came only after U.S.-China negotiations collapsed.

Forced labor is a real and complicated problem, but disingenuously dressing tariff revenue recovery in human rights language discredits the tools that might actually address it, setting a precedent for Section 301 to be an all-purpose tariff generator that any future president can invoke for any reason. Congress should fix the law before President Trump—or his successor—does even more damage.

Read the full column here.

Note: On July 24, the Liberty Justice Center filed a lawsuit in the US Court of International Trade challenging the administration’s replacement tariffs imposed under Section 301 of the Trade Act of 1974."

 

The Myth of the Free-Riding Billionaire: Ray Madoff’s ‘The Second Estate’

In her new book, Ray Madoff argues that America’s wealthiest exploit the tax code at the public’s expense. But her critique understates both what the rich pay and what they produce.

By Paul Mueller of AIER. 

"Wealthy professionals can be strident egalitarians or naive optimists about the benefits of government spending — or so it would seem after reading law professor Ray Madoff’s book The Second Estate: How the Tax Code Made an American Aristocracy. 

Madoff clearly has an axe to grind against America’s wealthiest citizens, and she is deeply critical of the legal mechanisms they use to protect and transfer their assets. Her argument often seems to boil down to this: Why should wealthy Americans keep so much of their wealth for personal use rather than allow the public — or, more specifically, Congress — to decide how those resources should be spent?

Yet The Second Estate is no low-brow polemic. Professor Madoff knows federal tax policy well, and her explanations of the tax code and the ways wealthy individuals use it are often insightful. My disagreement is not with her description of the mechanics of taxation, but with her underlying assumption — at times explicit, at times implied — that concentrated wealth is inherently harmful because it deprives the federal government of resources.

The wealthiest Americans pay hundreds, thousands, or even millions of times more in taxes than the average taxpayer. More importantly, the companies they create and build make the country more prosperous and generate enormous tax revenues in the process.

This should be obvious upon reflection. The businesses created, owned, or led by members of the Forbes 400 employ millions of people and generate tens of billions of dollars in federal tax revenue each year.

Yet The Second Estate presents a very different picture: a special class of Americans who exist above the reach of the tax code and avoid contributing their fair share to government revenue. We can set aside the questionable assumption that more federal revenue is automatically beneficial for most Americans. The deeper flaws in Madoff’s argument stem less from what she says than from what she leaves out about the super-wealthy.

Myths About the Rich and Taxes

Professor Madoff is correct to distinguish between different types of federal taxes. Income from dividends, interest, and the sale of assets (capital gains) is generally taxed differently — and often at a lower rate — than income earned through wages.

Long-term capital gains and qualified dividends are typically taxed at rates of 0, 15, or 20 percent, depending on income level, while wages are subject to both income taxes and payroll taxes. Employees pay 7.65 percent in Social Security and Medicare taxes through FICA, and employers pay another 7.65 percent. Capital gains, by contrast, are not subject to payroll taxes.

As a result, a billionaire’s effective federal income tax rate can be lower than that of an employee earning a middle-class salary. Madoff correctly explains how these differences affect taxpayers who receive income through wages versus those who receive income through investments.

Suppose Adam is self-employed while Betty receives all of her income from dividends and long-term capital gains. The following table illustrates how their federal tax burdens would differ at income levels of $80,000, $160,000, and $320,000.

 

Madoff explains how wealthy individuals often borrow against their assets rather than sell them. They don’t pay taxes on those loans (though they do pay interest). This is true. Sometimes individuals with a net worth of tens or hundreds of billions of dollars will report little or no income in a year because their “salaries” or wages are very small and they didn’t realize any capital gains.

But the fact that the ultra-wealthy can avoid paying federal income taxes some years does not mean they avoid them altogether. They have to pay down their loans and lines of credit periodically. And if they want to make exceptionally large purchases or investments, loans from banks are not enough. Then they must sell shares, realize gains, and pay taxes. The super-wealthy undoubtedly pay far more dollars in taxes than any middle-class or upper-middle-class individual.

Elon Musk, for example, famously paid about $11 billion in income taxes in 2021. This particular tax bill was anomalous both for its size and because the IRS taxed much of it as ordinary income at a high tax rate. Musk had a huge block of his stock options that he had to exercise or lose. Yet even if those were the only income taxes he ever paid over the course of 50 years, that would still come out to ~$200 million in taxes annually — far more than any but the very wealthiest Americans earn over their lifetimes, let alone what they pay in income taxes. 

Most of the super-wealthy find ways to pay lower rates on their income. Still, many wealthy individuals pay vast sums, in the tens or hundreds of millions of dollars, annually on dividend income (Steve Ballmer pays approximately $250 million every year). There are also large one-time tax payments from capital gains. Ken Griffin paid roughly $4 billion in 2021, Jeff Bezos paid about $2 billion in 2020 and 2021, Jensen Huang paid more than $100 million in 2024 and 2025, and Tim Cook paid roughly $300 million in 2021. 

Even accounting for the payroll taxes paid by ordinary wage earners, these tax payments represent the equivalent of thousands upon thousands of “Adams” paying federal income taxes. And this is where the shortcomings of Professor Madoff’s argument become clear.

Her account gives the impression that the ultra-wealthy largely avoid taxes because their effective tax rates are often lower relative to their income or wealth. While wealthy individuals certainly have ways to reduce their tax liabilities and structure their assets efficiently, it is inaccurate to suggest that they simply avoid paying federal taxes. 

It is also misleading to ignore the many other taxes the super-wealthy pay. 

They pay property taxes on their land and houses every year. In places like Los Angeles and New York City, those tax bills can reach hundreds of thousands or even millions of dollars. They pay taxes when they shop, dine, or travel. They pay transfer taxes, building fees, development fees, and a host of other taxes and charges. 

That is hardly “free-riding” on the tax system — especially when they pay many times (10, 100, or even 1,000 times more) than the average taxpayer while consuming nowhere near that proportion of government services. 

The Wealth Creation the Tax Debate Ignores

Even this oversight, however, misses the most important contribution of the super-wealthy to society: wealth. Focusing on how much Elon Musk or Jeff Bezos or the Mars family pays in personal income or other federal taxes in a specific year is a red herring. It is a rounding error compared to how much wealth their companies have generated for shareholders and how much tax revenue they have generated. Focusing on the corporate income taxes paid (or not) by individual companies makes similar mistakes. 

Consider Tesla. Over the past five years, the company has reported relatively little federal income tax liability (about $48 million in 2023) despite nearly $20 billion in net income. This is largely because Tesla has carried forward previous losses, invested heavily in new capital, and benefited from certain green energy and research-and-development tax credits. Yet Tesla employs roughly 134,000 people. If the average wage for those employees is $100,000, the company would pay more than $1 billion annually in employer-side FICA taxes alone. Employees would pay another $1 billion-plus through their share of payroll taxes — not including the income taxes they pay.

Those figures are small compared to what Amazon (1,100,000 employees), Apple (90,000 employees), Meta (45,000 employees), and Alphabet (115,000 employees) pay in FICA taxes — over $10 billion annually for the employer share alone.

Madoff’s quixotic crusade against dynastic or family wealth is just that — tilting at windmills. Only a quarter or so of people on the Forbes 400 list inherited the majority of their wealth. And that number gets smaller as you move to the top 100 and then the top 50. Inherited wealth can only last if it remains invested in companies rather than cashed out or spent. For every example of inherited wealth growing, there are more examples of inherited wealth becoming depleted.

Who Owns Wealth?

All of this raises a basic question: Why should we care that families such as the Mars, Walton, or Koch families possess wealth they can pass on to future generations?

Madoff argues that the wealthy “free-ride” on the tax system. But this assumes their money somehow already belongs to the government or the public.

It does not. 

Madoff also suggests that the super-wealthy exercise undue political influence from the shadows. In this, she leaves the solid ground of analyzing existing tax rules and mechanisms to the ideological concerns and disapproval she has for large concentrations of wealth in general.

Could the tax code be fairer and better than it is? Certainly. Will her specific recommendations make it so? I’m not sure. But will politicians implement her “ideal” policies? Assuredly not. 

Besides raising revenue, the tax code should distort and discourage economic activity as little as possible. While everyone benefits from clear rules of the game that promote competition and responsibility, it’s far from clear that they would all benefit from more “tweaks” to the tax code to close loopholes. Revenue with minimal distortion, not leveling the fortunes of the super-wealthy or making sure they pay their “fair share,” should guide tax policy.

Lobbyists, insiders, and wealthy individuals have certainly influenced the tax code for their own benefit. But so have middle-class homeowners through mortgage deductions, residents of high-tax states through state and local tax (SALT) deductions, and lower-income Americans through welfare programs and tax credits. This is how the political game is played. 

Rather than criticizing the super-wealthy for minimizing their tax liabilities as best they can, policymakers should focus on reducing government spending so that everyone else’s taxes can be reduced too. Reducing political power, limiting the coercive reach of the state, and allowing individuals to keep more of what they earn would do far more to improve Americans’ lives than taking more money from the wealthy and giving it to politicians.

Such broad-based reforms would also be more just."

Yes, Americans Probably Are About 46 (or Maybe 65) Times Richer Than in 1776

By Jeremy Horpedahl.

"My post and chart from last week showed the phenomenal growth of average income in the US since the Founding. Using GDP per capita historical estimates and adjusting for inflation, this figure is about 46 times greater today than right around the time we declared independence.

It will probably not surprise you that some folks were skeptical. Could this really be true? Two major objections were raised to using GDP per capita. First, wouldn’t it be better to use a median income value rather than a mean (simple average)? Second, wouldn’t a measure of wages be better than GDP per capita?

I really would like to show you an annual series of median income data back to 1776, but unfortunately it just doesn’t exist. Good median income data are hard to find much before the 1950s, much less the 1770s. However, while median values are often better for showing levels, the growth rates of median wages and mean wages aren’t that different for periods when we have comparable data. Consider the following chart, which compares median wages (as calculated by EPI using CPS data) and mean wages (from BLS’s series for non-supervisory workers) since 1973. I have stated these in nominal terms, so don’t take this as real growth rates, but rather it is a raw comparison of two series (we could apply the same inflation adjustment to both, but that won’t change the picture, only the numbers).

 

Median wages increased by 667% and mean wages increased by 657%, almost identical. Again, these aren’t inflation adjusted, but that’s not the point of this exercise. The point is that whether you use mean or median wages, at least since 1973, the growth rates are the same. Was this true if we went back another 200 years? We can’t say for sure. But many people have this same skepticism about mean wages in recent decades. I think it is better to use median values when you have them, but we shouldn’t throw up our hands and claim we know nothing if all we have is mean wages.

Next, consider the following chart. It begins in 1790, but instead of using GDP per capita, as I did last week, it uses a measure of average wages from economic historian Lawrence Officer. This measure is for “production workers in manufacturing,” and it is a total compensation measure, meaning that it will include the value of fringe benefits as well — though these aren’t noticeable in the data until the 1930s. This is still an average value, but because it is for manufacturing laborers, it won’t be distorted by the wages of managers and owners in that industry, and it won’t be affected by the growth of new industries that might require more years of education (indeed, manufacturing wages are lowering than overall average wages today, so this is taking the hard case). I have also included a second line, which only includes manufacturing wages (not benefits) that I have blended with Officer’s compensation series starting in the 1930s, in case you think including benefits is somehow “cheating.” (Note the log scale again, as in last week’s chart.)

 

The trends here are very much in the ballpark from the GDP per capita chart I created last week. Using total compensation, wages are 65 times higher than in 1790. Using only wages, they are 49 times higher. Notice that these are both better than the 46 times multiplier using GDP per capita. How is that possible, since I am using the same price deflator in both cases? First, average hours of work have fallen significantly since the 18th century, so incomes haven’t risen quite as much as wages. Second, there was a bit of a decline in GDP per capita during the Revolutionary War, and if we use 1790 as the baseline for GDP per capita, the multiplier is 63. But again, these numbers are all in the ballpark: whether the true figure for a typical American is 46x, 49x, 63x, or 65x, this is a tremendous amount of economic growth.

If you want to look at that chart pessimistically, you will see that there is some reduction in growth rates in the past few decades. That’s true whether we use wages or compensation. This is a well known issue, and has been discussed endlessly in academic papers and on social media. I don’t want to glaze over it here, but I mostly will: the long-run trend of growth in the US is amazing. That’s true whether you use GDP per capita, or wages or compensation for production workers.

So once again, Happy 250th Birthday to the USA and all of you living in the wake of that amazing 250 years of economic growth!"

Decriminalization versus Legalization

By Jeffrey Miron.

"A new study argues that recent drug de-criminalizations in Oregon and Washington caused substantial increases in drug overdoses.

Is this plausible? And does it imply that prohibition is better than legalization?

Yes, and no.

Decriminalization means elimination of criminal penalties for drug possession. Legalization means elimination of criminal penalties for production and sale.

Standard economics suggests that decriminalization, by reducing the full price of purchasing drugs, shifts demand outward, implying greater use.

This causes, since production and sale are still illegal, a larger underground market and therefore more of the associated negatives. These include increased violence, because black market participants cannot resolve disputes with courts and lawyers; and additional overdoses, because quality control is difficult in black markets.

Thus the study’s result makes sense. But rather than supporting prohibition, it shows that full legalization – rather than decrim – is the right path. Indeed, if policy legalizes only one side of the market, it should be supply rather than demand. A related point is that legalization must not include too much regulation and taxation; that just re-creates the black market.

A possible qualification is that some decrims seem to have avoided increased violence or overdoses. The likely explanation is that in these instances, policy de-escalated supply side enforcement along with decriminalizing."

The China dish industry claimed it was a militarily strategic good in 1951

Tweet from Daniel J. Smith.

"A representative from the fine China dish industry lobbying for protectionism as a militarily strategic good during congressional testimony in 1951"

  

After decades of warnings, new data suggest the Atlantic’s vital circulation may withstand climate warming better than feared

See Shifting currents by Paul Voosen in Science. Excerpts:

"Climate models have long warned that global warming could weaken “deep-water formation”—the density-driven sinking that is the engine of the AMOC. The logic is straightforward: As Greenland’s ice sheets melt and sea ice formation declines, North Atlantic waters will freshen. Combined with warmer sea temperatures, the freshening makes surface waters more buoyant. The AMOC was thought to have shut down abruptly during past climate warmings, and a handful of researchers now argue such a tipping point could occur this century. A sputtering AMOC could trigger a sharp cooldown in northwestern Europe, rising seas along the U.S. east coast, and shifts in tropical rainfall."

"most climate researchers think the AMOC is more resilient than these worst case scenarios make it seem. Emerging evidence suggests the AMOC may not have actually collapsed in the warm climates following ice ages. More detailed climate models suggest it could weaken but not collapse in the current surge of warming. And studies of the AMOC’s present behavior do not yet show any clear signs of trouble. They’re also exposing new facets of the circulation that could buffer any eventual weakening."

"That stately flow actually swings wildly year to year, masking any long-term trend, the first RAPID measurements showed. Swings between apparent decline and recovery have since become a hallmark of AMOC monitoring, and a recurring source of alarm and reassessment."

"Gerard McCarthy remembers well the first time he saw an AMOC decline. It was 2011, and McCarthy, now a climate scientist at Maynooth University, had just joined the RAPID team. His first task was calculating AMOC’s strength. Beginning in 2009, it plunged. “Everyone was like, ‘The new guy made a mistake,’” he recalls. Others checked the numbers. The drop held. “We all realized that something dramatic had happened.”

What happened was not caused by climate change, but rather the weather. That winter, unusual swings in air pressure weakened the jet stream and shifted wind patterns, disrupting the AMOC’s flow. The decline likely contributed to a frigid European winter in 2009 and, by leaving more heat in tropical basins, also led to an active Atlantic hurricane season the following summer."

 "It seems the AMOC is not a single conveyor belt, but a belt of belts, each part operating semiautonomously."

"OSNAP has changed the picture in other ways, including by showing that overturning occurs not so much in the Labrador Sea, as models suggested, as it does farther north, in the Irminger and Iceland basins. Additional data suggest deep-water formation is migrating even farther north, into the Arctic Ocean, following the retreat of sea ice, Årthun says. “You’re expanding the reach of this cooling machine.” The northward migration could make the AMOC more resilient to warming"

"New climate model runs that capture more realistic melt from the Greenland Ice Sheet are less dire. In two preprints posted online in the past year—one led by Chuncheng Guo, a climate scientist at the Danish Meteorological Institute (DMI), the other led by Oliver Mehling, an ocean modeler at UU—researchers created multiple simulations where carbon emissions continued until 2250 and temperatures rose by up to 7°C. In both studies the AMOC weakened, losing about 40% of its strength. But it never collapsed. Both studies also suggest the weakening is reversible"

"that resilience persisted even in the face of catastrophic warming."

 "even if atmospheric carbon dioxide levels quadrupled, driving extreme warming, the AMOC would decline by 40% after 20 or so years—but once again, it would rebound."

"Evidence from past ice ages seemed to suggest the AMOC switched off entirely when massive pulses of freshwater from the melting of the North American ice sheet poured into the Atlantic. But new work, also presented at Ocean Sciences, suggests the AMOC may not have collapsed at all during these periods." 

New York’s Data Center Self-Sabotage Gov. Kathy Hochul finds another way to hurt economic development in the state.

WSJ editorial.

The article discusses how it is regulation and not data centers that are driving up costs. 

Medicaid Spending Keeps Soaring So much for Democratic claims of onerous cuts. It’s up 10% so far this fiscal year.

WSJ editorial.

China’s Economy Is in Worse Shape Than You Think

The estimate of 4.3% GDP growth is below Beijing’s lowest projection—and it’s probably far too high

By Joseph C. Sternberg. Excerpts:

"Beijing’s statisticians on Wednesday said the gross domestic product grew 4.3% year-on-year in inflation-adjusted terms in the April through June quarter. China’s economic data are notoriously prone to fiddling for political purposes. And only this March, the Communist Party set a GDP growth target range of 4.5% to 5% for the year, its most pessimistic since the 1990s."

"Meanwhile there’s accumulating evidence that the country’s true GDP growth rate may be zero, or that the economy is in outright recession. Retail sales were a bright spot in the latest data, increasing 1% year-on-year in June, but looking across recent months this measure of domestic household consumption may be stuck in neutral. Measures of investment are in free fall: Fixed-asset investment has declined 5.7% year-to-date and real-estate investment is down 18%."

"Crude imports in July hit their lowest level in roughly a decade."

"refinery output also is declining"

"demand for energy within China . . . is dropping rapidly."

"it’s hard to find anyone who thinks any of this (more economic “stimulus”) would launch a durable economic recovery. One reason domestic consumption is dipping is that previous iterations of the consumption subsidy (a trade-in scheme, akin to the Obama-era “cash for clunkers” in the U.S., that rewards replacement of old items) pulled forward in time purchases that households would have made anyway, without setting in motion a Keynesian virtuous circle of new corporate investment to meet higher demand. As for public works, China has enough and Beijing’s more important fiscal priority remains bailing out heavily indebted local governments." 

"Domestic consumption is unlikely to revive until the real-estate market has found its bottom." 

Evicting Wall Street From the Housing Market Will Be Messy

Law restricting activities of big investors in residential real estate could mean less cash to build new supply

By Carol Ryan of The WSJ. Excerpts:

"Under the 21st Century ROAD to Housing Act . . . investors who already own more than 350 family homes can’t buy any more from the existing housing stock."

"Any landlords that don’t already have scale will find it hard to expand their portfolios through the exemptions."

"Big landlords are being nudged to pour cash into the build-to-rent sector instead. This means taking on development risk and constructing entire rental neighborhoods from scratch. The benefit of constructing whole rental communities in one area is that they are much cheaper to maintain than homes that are scattered across dispersed neighborhoods."

"Build-to-rent is exempt from restrictions under the new law. Like multifamily apartment buildings, it is an area of the housing market in which large investors can continue to operate freely."

"Anyone considering putting money into the housing market . . . must now weigh the risk that future administrations could tighten the rules further."

"Returns on build-to-rent investments don’t look high enough to compensate for the risk."

"Build-to-rent communities are hard—or impossible under some zoning rules—to sell off individually to consumers"

"Eight large institutional investors were net sellers of more than 3,000 homes in the second quarter of this year, a fivefold increase in net-selling activity from the same period of last year"

"some smaller investors plan to cash out permanently by selling homes to individual home buyers over time" 

Why the black market for marijuana is still flourishing in California

Letter to The WSJ. 

"It’s hardly a surprise that the black market for marijuana is still flourishing in California. The majority of the state’s crop has always been exported out of state, where sales remain illegal. So long as there remains a substantial out-of-state market where marijuana is illegal, black-market sales will persist.

Nevertheless, California Gov. Newsom was right to support legalization as a necessary first step to rolling back prohibition. Legalization has substantially reduced the scale of California’s illegal crop, which used to be measured in millions of plants eradicated per year.

Meanwhile, marijuana felonies have drastically dropped since legalization, more than 80,000 legal jobs have been created, and the state is raking in billions in tax revenue per year. It took decades to stamp out moonshining after alcohol prohibition was repealed, and the same will likely be true for marijuana.

Dale Gieringer

Director, California National Organization for Reform of Marijuana Laws" 

School Choice Succeeds in Arkansas

Education Freedom Accounts show results both academically and financially

By Tommy Schultz. He is CEO of the American Federation for Children. Excerpts:

"In the program’s second year, its students outperformed nearly 60% of students nationwide in math and English on standardized assessments."

"Education Freedom Accounts give priority to the core costs of a K-12 education—tuition, which accounts for 81% of spending, plus curriculum, supplies and testing—with sensible caps limiting transportation and extracurricular expenses to no more than 25% each of a single account. Parents know exactly what they can and can’t buy" 

The New York Times supports the use of standardized tests (like the ACT and SAT) in undergraduate admissions

See A Great University Undermines Its Mission. Excerpts:

"The committee concluded that scores on the SAT and ACT, the main standardized tests for college admissions, did a better job measuring student readiness for college than high school grades. High test scores were particularly good at finding talented students from low-income families and underrepresented minority groups. For these reasons, the committee recommended the system continue to require applicants to submit SAT or ACT scores.

The university’s leaders disregarded the report."

"the University of California began refusing to accept SAT or ACT scores, even from students who wanted to submit them"

"University leaders wrongly claimed that it would make admissions fairer and more equitable."

"The results have been terrible. At the University of California, San Diego, a faculty group last year reported “a steep decline in the academic preparation” among entering students. Last fall, for example, nearly 12 percent of first-year U.C.S.D. undergraduates were not qualified to take precalculus, a low-level class — up from only 0.5 percent in 2020." 

"Reading and writing skills have also deteriorated, and professors say they must spend time teaching elementary skills."

"the declines in preparedness among University of California students are larger than the regression elsewhere"

"[they] have essentially randomized aspects of the admissions process, admitting unprepared students while rejecting many who could thrive there."

"Even Janet Napolitano, who was the university president in 2020 and recommended a test-blind policy then, now favors its reversal."

"The critics claim that the two tests are biased and therefore a cause of inequities. The evidence indicates otherwise. Raj Chetty, a Harvard University economist, points out that other tests show similarly large economic and racial gaps. One example is the NAEP, a test of elementary and middle-school students for which almost nobody studies. This pattern suggests that SAT tutoring, which critics often blame for score gaps, plays only a limited role, perhaps because free tutoring is available from Khan Academy and elsewhere."

"The SAT and ACT . . . do appear to measure preparedness for highly selective colleges better than almost any other indicator, research shows." 

"Some other parts of applications — like student essays, extracurricular activities and teacher recommendations — are, in fact, biased toward affluent students."

"In 1970 only 7 percent of college freshmen nationwide had a high-school grade average of A or higher; today the share is roughly 40 percent."

"Any fair, reliable test would have results resembling those of the SAT and ACT."

"the test scores are especially useful at identifying strong students from low-income communities. When such a student receives even a pretty good score, it can be a sign of high potential." 

Lifting the SS payroll tax cap would close only about 30% of the long-term cash-flow deficit while raising some top marginal labor income tax rates to over 60%

Letter to The New York Times.

"Senators Bernie Moreno and Elizabeth Warren present lifting the payroll tax cap as a “common-sense” solution to Social Security’s financing challenges. But eliminating the cap would close only about 30 percent of the program’s long-term cash-flow deficit.

It would also sharply raise top marginal labor income tax rates to punitive levels, pushing top rates across many states over 60 percent (58 percent in Ohio and 62 percent in Massachusetts, the senators’ home states). Social Security was created to prevent poverty in old age, not to guarantee affluent retiree households six-figure annual benefits.

Rather than continually raising taxes to sustain ever-larger promises, policymakers should rethink the program’s purpose. A flatter benefit focused on basic retirement security, combined with greater reliance on private savings, would be more cost-effective and sustainable.

Romina Boccia
Washington
The writer is the director of budget and entitlement policy at the Cato Institute."

Fewer employers are screening job candidates for marijuana because it would make it tougher to find qualified candidates

See More U.S. Workers Are Testing Positive for Marijuana. Fewer Employers Are Concerned. As cannabis use grows, employers are rethinking pre-hire screens to avoid recruiting challenges by Celia Bernhardt of The WSJ. Excerpts:

"And fewer employers are screening job candidates for marijuana use at all, in part because it would make it tougher to find enough qualified candidates, said Todd Logsdon, a partner at employment law firm Fisher Phillips. 

“I’ve had other employers tell me, ‘If I test for that, I’m not gonna have any applicants,’” Logsdon said. “They’re being very choosy about which role they test for.”

In a 2024 survey of nearly 1,000 employers, the law firm found about half didn’t test for cannabis in the pre-hire process, often for that reason. Among those that did test, 44% said they faced recruiting challenges and nearly a quarter said they were considering loosening the policy.     

Citigroup and many of its Wall Street peers dropped the pre-hire test over the past decade. Retailers like AutoNation and Home Depot have done away with it for most positions as well. Amazon stopped testing for marijuana for most applicants in 2021." 

This article shows how competitive labor markets are. If employers had the power they could keep screening for marijuana use. 

Food Stamps Don’t Help National Wellbeing

No matter how much the government might give poor families, the official measure of poverty would remain unchanged

Letter to The WSJ. 

"Crystal FitzSimons’s letter “Fewer People on Food Stamps Isn’t Good News” (June 23) claims that SNAP lifts 3.6 million out of poverty. That is impossible because the Census Bureau refuses to count $1.6 trillion in government subsidies, including SNAP, as income. No matter how much the government might give poor families, the official measure of poverty would remain unchanged.

Ms. FitzSimons’s claim uses an experimental poverty measure that counts SNAP as income while omitting $1 trillion in other welfare, arbitrarily subtracts some spending, and capriciously raises the income defining poverty thresholds.

The $100 billion spent on SNAP in 2024 added nothing to national well-being. It merely redistributed it. If left with the original earners, it would either be consumed with the same effects, or it would be saved and invested, creating additional well-being, which it wouldn’t with SNAP.

While decrying the minimal adjustments to SNAP to prevent abuse, Ms. FitzSimons ignores the 60% of food stamp recipients who aren’t poor, even by the overstated Census metric.

John Early

Adjunct scholar, Cato Institute" 

Who Should Control Education?

By Alex Tokarev, Kristin Tokarev, Mitchell Ashley. From The Independent Institute.

"President Jimmy Carter wanted the support of the government teachers’ unions. So, during his reelection campaign, he created the U.S. Department of Education, promising it would improve America’s schools.

Has it?

After more than 45 years, billions of taxpayer dollars, and endless regulations under a bloated and ever-growing education bureaucracy, American students are falling behind many of their peers around the world. Reading scores have declined. Math scores are down. Parents are frustrated. Teachers complain they’re drowning in paperwork.

If the Department of Education hasn’t solved these problems after nearly half a century, why assume giving it more power will?

President Donald Trump says it won’t. His proposal to eliminate the department and return authority to states and ultimately to parents triggered predictable outrage. Critics warn it would “destroy public education.”

That’s nonsense.

The Department of Education doesn’t run America’s schools. States and local districts already do. Closing the department wouldn’t close schools. It would simply reduce Washington’s role. Education Secretary Linda McMahon recently spoke on the necessity to return control to parents and local public servants so that they can better serve the children. And that’s how it should be. Parents know their children better than bureaucrats in Washington ever will. Local communities understand their own needs. A rural district in Wyoming faces different challenges than schools in Chicago. Yet federal rules often treat them as if they’re the same. One-size-fits-all rarely fits anyone well.

Supporters of federal oversight say Washington provides accountability. Accountability to whom? Parents can vote out ineffective school board members. They can attend meetings. They can confront local officials. They can’t fire federal bureaucrats. The farther decisions move from families, the less influence families have.

Then there’s competition. Economist Milton Friedman argued that taxpayers can fund education without having the government manage it. Instead of subsidizing school systems, fund students. Let parents choose among public, charter, private, or other options. Competition changes behavior.

Restaurants compete for patrons. Stores try their best to satisfy shoppers. Businesses that disappoint customers lose them. Most public schools don’t face that pressure. Students are assigned largely by ZIP code. If the local school performs poorly, many parents have only two options: pay private tuition or move.

That’s not much of a choice.

School choice creates incentives that bureaucracy can’t. When families can leave, schools have stronger reasons to improve. Charter schools, education savings accounts, tax-credit scholarships, and vouchers all give parents leverage they otherwise lack.

None of this guarantees success. Eliminating the Department of Education won’t magically improve schools, and states are perfectly capable of making bad decisions. The real reform isn’t simply moving power from Washington to state capitals. It’s moving power to families. Critics raise a fair concern: poorer states and communities may struggle to fund education at the same level as wealthier ones.

But Washington hasn’t solved that problem either. Despite decades of federal involvement, achievement gaps remain stubbornly wide. More bureaucracy has not produced equal outcomes. A better approach is to expand opportunity. Wealthy families already exercise school choice by buying homes in better districts or paying private tuition. Friedman’s ideas and Trump’s policies extend that freedom to families with fewer resources.

The real question isn’t whether we’re “for” or “against” public education. It’s who education is supposed to serve. If a public school offers the best service, parents will choose it. If another institution better meets a child’s needs, parents should be free to choose that instead. Students should not be assigned to schools. Schools should compete for students.

For decades, Washington promised better results. The results are in. It’s time to trust the American parents."