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." 

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."

Dead people received internet subsidies

See FCC Overhauls $2.9 Billion Lifeline Subsidy Program to Curb Improper Payments: Regulators vote to tighten vetting for phone and internet subsidy after investigation found millions went to dead subscribers by Patience Haggin of The WSJ. Excerpts:

"The Federal Communications Commission voted Wednesday to advance sweeping reforms to its Lifeline program, tightening eligibility requirements and procedures for the nearly $3 billion phone and internet subsidy for low-income households."

"A government review, released by the FCC Office of Inspector General last month, found that over a nearly five-year period about 117,000 deceased individuals across California, Texas and Oregon received Lifeline benefits totaling $5 million. Thousands of these subscribers were already deceased at the time they were purportedly enrolled in the program. Another nearly $5.5 million was claimed for duplicate enrollments, in which more than one monthly benefit was claimed for a single individual, according to the report." 

Congress should short-circuit the nation’s electric vehicle charging program

By Steve Swedberg of CEI. Excerpt:

"how many EV charging stations has NEVI installed? After all, the NEVI program was enacted in November 2021. The Biden administration was hoping to have 500,000 charging ports installed by 2030. With $5 billion allocated over a five-year period, one would think that NEVI would have established a well-functioning network of EV chargers by now. Here are some estimates as to how many EV chargers have been installed under NEVI:

·      The EV States Clearinghouse, which is co-maintained by the National Association of State Energy Officials and the American Association of State Highway and Transportation Officials, has the estimate at 532 charging ports currently open.

·      An industry analysis reported that EV charging data analytics company Paren puts the estimate at 725 ports.

·      The Government Accountability Office calculated that as of April 2025, there were 384 EV charging ports installed under federal government programs. Notably, this figure includes ports from NEVI and another program called the Charging and Fueling Infrastructure Grant Program.

Regardless of the estimate used, the number of charging ports installed by the federal government is less than 1,000 and accounts for much less than one percent of the 235,428 charging ports available as of January 2026 and the 500,000 charging ports promised by the Biden administration by 2030. More than four years after enactment, and with billions appropriated, this level of deployment suggests more than ordinary implementation lag. Even a backloaded program would show clearer signs of growth by this point. Instead, NEVI’s output indicates structural bottlenecks embedded in its design rather than temporary startup delays.

Paperwork over power

Even before the Trump administration decided to rescind the existing NEVI Formula Program Guidance and suspend state approvals of deployment plans, NEVI was already floundering in red tape. As of February 6, 2025, which was a few days after USDOT Secretary Sean Duffy was sworn into office, $2.7 billion of the $3.3 billion available in NEVI funds were unobligated. In plain terms, most of the money Congress set aside had not been committed to projects.

According to the center-left think tank Third Way, NEVI’s slow progress is not due to lack of need or funding, but to bureaucratic hurdles. Complex requirements and delayed federal guidance left states navigating red tape instead of building charging stations, highlighting inefficiencies in the program’s design.

The Environmental Law Institute further breaks down these hurdles mentioned by Third Way by showing that NEVI’s deployment delays are baked into the program’s structure. States and contractors must navigate local building approvals, utility interconnection studies, and environmental reviews for each proposed site, which often stalls projects for months before a single charger goes live.

In addition, federal “Buy America” requirements add supply-chain constraints that create additional bottlenecks and increases production costs. Industry groups and state Departments of Transportation have warned that “Buy America” requirements could delay federal EV infrastructure projects due to limited domestic suppliers and complex compliance processes. These intertwined requirements illustrate how well-intentioned federal oversight can transform a supposedly fast-moving infrastructure program into a slow-moving bureaucratic behemoth.

Private sector vs. NEVI deployment timelines

An interesting point of comparison is the project timelines between the private sector and NEVI installations. Industry analysis indicates that regulatory and utility interconnection processes alone commonly add a year to 18 months to the timeline for NEVI‑funded charging projects, well before construction begins. Although all 50 states have submitted and received approval for NEVI EV charging deployment plans, the plans do not include uniform benchmarks for how long it takes from award to station operation. Arizona expected it to take a year to install once approved, whereas California provides a range of one to two years.

By contrast, the private sector reports shorter timelines. EV charging financing company Sustainable Capital Finance (SCF) estimates that it can take 3 to 16 months to install an EV charger, whereas EV charging company EVgo puts the figure at 18 months. EV charging stations take time to install, irrespective of red tape. At the same time, these diverging timelines illustrate why the private sector is able to generate tens of thousands of ports in the time that NEVI has installed fewer than 1,000 ports. 

Daren Bakst, director of CEI’s Center for Energy and Environment, has noted this discrepancy reflects a broader principle: states and private actors ultimately determine where and when chargers are built, and government mandates cannot substitute for market-driven deployment. In fact, Bakst highlighted that even with billions allocated to NEVI, no chargers had yet been installed at the time of his analysis in December 2023. This insight reinforces the idea that federal intervention cannot reliably accelerate infrastructure deployment.

Beyond regulatory red tape, NEVI has been hampered by predictable governance failures that exacerbate the timeline issues. For example, a federal court recently ruled that the US Department of Transportation unlawfully froze congressionally appropriated NEVI funds, which forced states to litigate simply to access money already authorized by law. Such administrative paralysis is not an anomaly. It is a predictable outcome when a program centralizes decision-making in federal agencies subject to shifting priorities, complex compliance rules, and political interference.

NEVI spending fails the traveler

Despite a $5 billion commitment made in 2021 to build a nationwide EV charging network, there are fewer than 1,000 operational charging ports. This amount represents a miniscule fraction of the ports already available nationwide, and more importantly, the amount promised by the Biden administration. The Government Accountability Office highlights how NEVI lacks clear performance goals or benchmarks, meaning policymakers cannot even track whether NEVI is meeting its intended outcomes. Combined with bureaucratic hurdles, slow deployment, and small scale of charging ports at this stage, it becomes difficult to argue that NEVI is doing anything of substance to positively contribute to transportation infrastructure.

At the same time, private companies continue to expand the EV charging network across the US and often complete projects in a matter of months instead of years. History has shown that building a nationwide network of fueling infrastructure does not require subsidies. Gas stations achieved this growth organically in the 20th century without subsidies. Those same market forces can drive and already have been driving EV charger deployment."

Why Unemployment is Rising Among Young College Grads

Their skills, experience and ability to function are increasingly out of step with employers’ needs

By Allysia Finley. Excerpts:

"last . . . unemployment among college grads age 22 to 27 rose to 5.6% in December, roughly what it was in February 2009 during the financial panic." 

"Artificial intelligence isn’t taking their jobs. Young grads’ struggles started before AI went mainstream. Between 1990 and 2014, unemployment for young college grads was generally 1 to 3 percentage points lower than for all workers. The gap started to tighten around 2014 and reversed in late 2018. Unemployment for young college grads is now about 1.4 points higher than for all workers."

"Government subsidies and public schools have funneled too many young people to credential mills, which churn out grads who lack the skills that employers demand."

"More than half of high-school grads matriculate to college, even though only 35% of 12th graders score proficient in reading and 22% in math on the National Assessment of Educational Progress."

"U.S. colleges awarded 2.2 million bachelor’s degrees last year, about twice as many as in 1990. That’s also double the number of associate’s degrees. Another 860,000 Americans last year received a master’s degree, nearly triple the 1990 figure. Nearly 40% of Americans with a bachelor’s now have an advanced degree."

"Colleges have added graduate programs in fields like urban planning, sustainability and fine arts to rake in more federal dollars."

"market that is saturated with heavily credentialed workers."

"Many skated through college by relying on AI to do their work."

"Some also struggle with executive functioning because of disability accommodations in high school and college that allowed them extra time to complete tests and assignments. More than 20% of undergrads at Harvard and Brown and 38% at Stanford have registered disabilities."

"31% of small-business owners had job openings they couldn’t fill, compared with a historical average of 24%." 

Government Won’t Help the AI Job Transition

By Phil Gramm and Michael Solon. Excerpts:

"our ability to generate and sustain higher living standards, has come in part from developing new technology and benefiting from being the first to implement it, and in part from our ability to move labor and capital dislocated by the wave of creative destruction efficiently into higher and better uses."

"On average, every month since 2000 some 5.1 million American workers were separated from their jobs or were laid off and more than 5.2 million new jobs were created. In 2025, three times as many Americans changed jobs as did workers in the European Union."

"most industrial subsidies in China are used to sustain noncompetitive businesses."

 "The 1962 Trade Adjustment Assistance program, which provided training, job-search and income support to workers harmed by foreign trade, has provided benefits to more than five million people. Numerous public and private studies have highlighted TAA’s failure by comparing the transition of TAA beneficiaries with workers who lost their jobs during the same period but didn’t receive TAA."

"TAA is insufficient in supporting dislocated workers to re-enter the labor market. It didn’t improve earnings. Benefits were used mostly as income support, and nonparticipants were re-employed faster than those who participated in TAA."

"for every week of extra benefits [of unemployment insurance], the covered worker was unemployed for as much as an extra day."

"many workers find jobs in the weeks immediately before and after their benefits run out."

"on average the longer unemployment insurance is provided, the longer the worker will remain unemployed."

"as the annual federal welfare spending surged to more than $70,000 per poverty family, labor-force participation among able-bodied persons in the lowest income quintile collapsed to 36%, from 68% in 1967." 

We’re Planning for the Wrong AI Job Disruption

If artificial intelligence takes over some of your tasks, that doesn’t render you unemployable

By Stephen Lewarne. He is a professor of economics and finance at Franciscan University of Steubenville, Ohio. Excerpts:

"Task automation typically reorganizes work well before it destroys jobs, if it does the latter at all."

"Many politicians and commentators assume that if AI can perform some of a job’s tasks, the role will disappear."

"the distinction between task repricing—when technology can take over all or part of a task—and job destruction isn’t semantic, it is economic. When technology lowers the cost of performing specific tasks by lifting some of the load, firms reorganize production. Workers specialize differently. Demand expands in ways that task-based rankings don’t capture."

"software has automated large portions of bookkeeping and tax preparation without eliminating accountants, who have moved up the value chain toward advisory, forensic and judgment-intensive work."

"A job that scores as 40% “exposed” to AI in these rankings doesn’t have a 40% chance of vanishing. It is more likely to be reorganized."

"As technology accelerates tasks and reduces costs, companies also create roles that task-based rankings like those from Goldman Sachs and the OECD cannot see. Law firms increasingly rely on litigation-support managers and AI-review specialists who oversee automated document analysis rather than review the papers manually."

"Large-scale retraining programs have a mixed record, even when displacement is real. When displacement is overstated, such programs risk doing harm. They pull workers out of productive roles, subsidize credentials with little demonstrated labor-market value"  

Georgia’s Film Tax Incentive Bombs at the Box Office

‘The Hollywood of the South’ was built on an absurd credit system that has proved unsustainable.

By Cole Murphy. He is a Joseph Rago Memorial Fellow at The WSJ. Excerpts:

"Studios started moving productions overseas when unions hiked the cost of labor and other cities and countries countered with even more generous offers. Now, millions of square feet of production facilities sit empty."

"The Georgia General Assembly expanded the state’s film tax incentive in 2008. Studios can receive credits equal to 20% of production costs incurred in-state, plus an extra 10% if they promote Georgia by putting its peach logo in the movie’s credits."

"every dollar the state awarded studios—$5.2 billion between 2015 and 2022—returned only 19 cents in tax revenue, an 81% loss."

"Film-related spending in Georgia peaked in fiscal 2022 at $4.4 billion across 412 productions. By 2025, however, the figure had plummeted to $2.3 billion across 245 productions. Marvel shot instead in the U.K."

"The subsidy-fueled gold rush emboldened unions to squeeze producers, warding off studios looking for inexpensive film locations. The 2024 agreement for the International Alliance of Theatrical Stage Employees raises standard crew rates more than 20% in Georgia, and the bigger problem is the Teamsters."

"Many producers interviewed spoke of shoots where Teamsters jobs swallowed as much as 10% of the budget. One described the highest-paid transportation worker as making “the same amount of money as the director of photography.”"

"Over the past 20 years, Michigan and Louisiana both implemented film tax credits, only to lose their industries to more generous incentives elsewhere." 

Addressing a Few Common Arguments for the Work Opportunity Tax Credit (in practice, it costs taxpayers billions of dollars and doesn’t deliver the results it promises)

By Jack Salmon of Mercatus.

"At the end of last year, the Work Opportunity Tax Credit (WOTC) finally expired, having been renewed 13 times since 1996. Even so, business groups and policymakers have continued to press for its reauthorization, both before and after its expiration.

The WOTC was originally justified as a way to help disadvantaged workers gain a foothold in the labor market, but in practice, it costs taxpayers billions of dollars and doesn’t deliver the results it promises.

The groups of disadvantaged workers that the credit targets typically include recipients of state assistance, veterans, SNAP recipients, formerly incarcerated individuals and those experiencing long-term unemployment.

The program allows employers to claim a credit of up to $2,400 per worker for most targeted groups if the employee works at least 400 hours in the first year. For some groups, such as disabled veterans or the long-term unemployed, the credit can reach as high as $9,600 per hire.

It’s easy to see why, from a high level, some believe the WOTC has an important role to play in helping disadvantaged workers. In practice, it has become yet another narrow corporate tax break that costs taxpayers billions while delivering negligible results. Below I will respond to some of the most common claims about this credit, offering empirically grounded reasons why the credit has repeatedly failed and should not be revived a fourteenth time.

Claim 1: Before WOTC, disadvantaged workers struggled to find stable jobs, and the credit was created to fix that failure.

Even before the creation of the WOTC in 1996, there was a predecessor program with many of the same goals, the Targeted Jobs Tax Credit (TJTC).

Evaluations of TJTC consistently found that it failed for the same reason WOTC fails today. General Accounting Office (GAO) reports from the early 1990s found that the majority of employers using the credit “made no special effort to identify, hire, or retain TJTC-eligible workers. … If employers’ normal employment practices happen to result in the hiring of an eligible worker, they may claim the tax credit even though they have made no specific effort to recruit, hire, or retain workers targeted by the program.”

An audit report published by the Department of Labor in 1994 similarly found that “92 percent of those individuals for whom employers could have claimed a credit would have been hired regardless of the tax subsidy.” The audit report concluded that “the program largely subsidizes the wages of those who are hired irrespective of their eligibility and the availability of a tax credit.”

For these reasons, TJTC was allowed to expire in 1994, but in 1996 it was revived and rebranded as the WOTC. A new name didn’t get rid of the same problems that the TJTC had previously faced, however.

Claim 2: Without the WOTC, businesses won’t hire disadvantaged workers.

The Department of Labor undertook a case study in 1999 that included interviews with 16 firms that used WOTC across five states. The results included the finding that “the tax credits play little or no role in [the 16 employers’] recruitment policies,” suggesting that employers would have hired members of the target groups even if the programs were not available. The report’s authors concluded: “These observations do raise a question about the extent to which the tax credit is serving the purpose for which it is intended — to serve as an economic incentive to encourage employers to hire individuals from specified target groups whom they would not have hired in the absence of the credit.”

Economist Sarah Hamersma used a combination of Wisconsin administrative data and survey data in a 2008 paper that uses panel estimates to determine if WOTC creates incentives that improve employment outcomes for targeted workers. According to her analysis:

Firms do not appear to be using the opportunity to claim tax credits for disadvantaged workers to deliberately increase the hiring of disadvantaged workers. In general, they do not have information about individuals’ status as qualifying (or not) for the tax credits at the time of hire, and even after hiring decisions are made, information about employees who are claimed is kept confidential. As one firm related in the telephone survey: “The information is sent to our corporate office, a third party processes the forms, and the tax credits come back to us like a bonus.” In effect, the firms get “bonuses” for simply putting a form in their hiring packets and sending them off to be processed.

The Inspector General of the Department of Labor has published studies on the effectiveness of WOTC in hiring disadvantaged workers. Focused specifically on veterans with disabilities, a 2012 study implies that only about 13% of WOTC benefits actually lead to new employment, meaning about 87% of benefits accrue to hires that would have occurred in the absence of the credit.

This isn’t a unique finding for WOTC but tends to be a common feature among hiring tax credits broadly speaking. Economist Timothy Bartik reviewed the effect of Michigan’s MEGA tax credit program aimed at hiring or retaining workers, especially in the manufacturing sector. He found the tax credit incentive decisive in only 8% of cases, meaning 92% of credits subsidized jobs that would have existed regardless of whether the credit was offered. Bartik’s earlier work found even larger windfall rates, up to 96%.

The most recent and perhaps most comprehensive analysis of the windfall rate for WOTC comes from a 2025 NBER study. The meticulous analysis of 13 million workers over two decades suggests that the windfall rate is around 97.1%, and the authors could not rule out the statistical possibility that 100% of the hires would have occurred in the absence of the credit.

In sum, the claim that businesses won’t hire disadvantaged workers without the WOTC doesn’t hold up to the empirical evidence. Between 90% and 100% of WOTC claims are for job hires that would have occurred whether or not the credit existed.

Claim 3: The WOTC provides workers with stable jobs and good pay. Without the credit, workers would instead be more likely to rely on public assistance or turn to crime.

For at least two decades, economists have been exploring whether the WOTC improves long-term labor market outcomes for targeted workers. Using propensity score matching estimations, economist Sarah Hamersma of Syracuse University found that WOTC led to no measurable effect over the long term.

While Hamersma found small improvements in employment after two quarters, when she extended the analysis to four and six quarters, WOTC had no impact. She also found that less than 10% of eligible workers get certified for WOTC. When estimating the effect of WOTC on workers’ tenure in a given position, Hamersma found it to be near zero and statistically insignificant.

Using a similar approach, Hamersma and economist Carolyn Heinrich examined how temporary help agencies use WOTC. The authors do not find evidence that WOTC certification brings about improvements in worker job outcomes, earnings, or labor market attachment.

For worker tenure specifically, they find that workers are employed for just 26 weeks on average if hired by temporary help service firms and 40 weeks if hired by end-user firms. This finding is hardly a strong signal of a job subsidy that provides stable jobs and long-term labor market attachment.

Similarly, the 2025 NBER research paper compiled summary statistics from more than 426,000 WOTC certifications and found an average job tenure of about 10 months. Using administrative micro-data on all WOTC applications in Wisconsin between 2005 and 2020, the study found that certified WOTC hires had jobs lasting longer than 9 months only 23% of the time.

The average starting wage of WOTC-certified workers was just $9 an hour. Among successful certifications who were SNAP beneficiaries, the median quarterly earnings were about $1,800, or less than $140 a week.

The authors of this 2025 study also construct measures of social assistance and indicators of criminal activity to determine whether WOTC reduces welfare dependence or criminal conviction. WOTC is found to have null effects on both outcomes, suggesting that these wage subsidies are unlikely to generate any savings for the government.

Claim 4: Small businesses depend on WOTC and will struggle to hire workers without it.

Despite WOTC’s populist branding, the vast majority of benefits accrue to large corporations, not small businesses or mom-and-pop employers.

A report by the U.S. General Accounting Office analyzed data from agencies in California and Texas on the number of WOTC-certified employees hired by each employer. The report found that just 3% of participating firms accounted for 83% of all WOTC certifications, and that the top 5% of firms (measured by gross receipts) claimed two-thirds of all WOTC dollars.

Hiring credits like the WOTC are less about encouraging new employment and more about subsidizing companies that have the administrative savvy to claim the credits.

That pattern persists today: NBER research found that among WOTC certifications in Wisconsin, 52% were hired by temporary hiring staff agencies, 24% were hired by publicly traded firms with a median market cap of over $30 billion, and 16% were large fast-food franchises.

The same research found that half of all WOTC subsidies in Wisconsin went to just 48 firms, even though they only accounted for 9% of hires. The authors note: “Our results imply that hiring subsidies through WOTC operate as a pure transfer to firms” and “that these transfers are heavily concentrated.” What’s more, even when the program made it easier and more salient to claim the credit, there was no increase in hiring, employment or earnings.

The claim that small businesses will struggle to hire without the WOTC is inconsistent with the empirical findings that hiring does not respond to WOTC eligibility, expansions, or reductions in application costs. Firms hire the same workers regardless of the subsidy, and more than 90% of subsidized hires would have occurred anyway. The program functions as a transfer to a small set of large firms, not as hiring support for marginal employers.

Claim 5: WOTC is an important subsidy for hiring veterans.

Supporters often defend the Work Opportunity Tax Credit by invoking veterans. Senator Cassidy (R-La.), for example, argues that WOTC must be extended because “veterans and military spouses deserve every opportunity to build stable, rewarding careers.” That sentiment is laudable, but it does not describe what WOTC does.

First, veterans are a small share of certified WOTC workers. Even in recent years, veterans account for only 6-7% of WOTC certifications, compared with roughly 70% for SNAP recipients. In earlier years, the veteran share was closer to 1–2%. Whatever WOTC is, empirically, it is not primarily a veterans’ policy.

Second, and more importantly, the best evidence shows that WOTC does not meaningfully affect hiring outcomes at all, regardless of targeted group type. Employers hire the same workers with or without the credit, and most of the certified hires are for low-paid jobs with short tenures.

Even studies focused specifically on veterans find similar windfall rates: A 2012 Department of Labor Inspector General report concluded that roughly 87% of WOTC benefits subsidized veteran hires that would have occurred anyway.

The institutional reasons WOTC fails—lack of screening, legal risk concerns and siloed HR processes—apply equally to veterans.

Conclusion

Across every claim used to justify its renewal—hiring, job quality, small business support and veteran employment—the Work Opportunity Tax Credit consistently fails empirical scrutiny. Decades of evidence show that it does not change hiring behavior, does not improve worker outcomes and overwhelmingly subsidizes jobs that would have existed anyway. Reauthorizing WOTC yet again would not be a bold commitment to disadvantaged workers or veterans. It would be an admission that policymakers prefer symbolic tax credits to policies that actually work."

Obesity Economics: How Subsidies Distort the American Diet

Federal subsidies drive food production, consumption, and — unintentionally — chronic disease. Now we’re being asked to subsidize weight loss drugs to fight what farm policy broke. 

By Laura Williams of AIER. 

"Let me introduce you to Sam. Sam has obesity, Type 2 diabetes, heart disease, and high blood pressure. His diet consists mostly of refined grains and trans fats. He’s got cabinets full of dirt-cheap junk food and sky-high healthcare costs to address its effects. He takes home $27,000 a year, but spends $36,000. He’s in debt up to his jaundiced eyeballs, and he wants his niece to foot the bill for weight-loss medication.

As a real-life niece of my Uncle Sam, I’m concerned about his diet. Some 56.2 percent of the daily calories consumed by US adults come from federally subsidized food commodities: corn, soybeans, wheat, rice, sorghum, dairy, and livestock. While these calorie-dense foods once made sense for a government preparing for famine or total war, in recent decades they’ve instead helped make us fatter and sicker. 

Obesity is a top driver of healthcare costs. One study compared the health of people who eat mostly foods the federal government subsidizes to those who eat fewer. Those who follow the revealed preferences of what the government subsidizes (rather than the diet it consciously recommends) are almost 40 percent more likely to be obese and face significant diet-related health issues. Those with the highest consumption of federally subsidized foods also have significantly higher rates of belly fat, abnormal cholesterol, high levels of blood sugar, and more markers of chronic inflammation. All these are increasing contributors to the most common causes of death in the developed world.

The negative impact of subsidized crop consumption on health — while it can’t be called causal — persists even after controlling for age, sex, and socioeconomic factors. But life does not control for those factors.

The Great Grain Giveaway

The federal government recommends one diet to Americans, and subsidizes another. The Dietary Guidelines for Americans from the USDA and HHS promote eating fruits, vegetables, whole grains, protein, and moderate dairy, while limiting saturated fats, sugars, salt, and refined grains. According to data compiled for Meatonomics, American agribusiness receives about $38 billion annually in federal funding, with only 0.4 percent ($17 million) going to fruits and vegetables. Just three percent of cropland is devoted to fruits and vegetables, despite USDA guidelines’ insistence that they should cover half of your dinner plate. Just 10 percent of Americans consume the recommended amount of fresh produce, and the poor consume the least. (Fruit and vegetable producers’ exclusion from the federal direct payments program provides a valuable example of a food industry thriving without significant subsidies. They do, however, rely heavily on migrant labor to lower costs.)

Instead, the US spends tens of billions annually to subsidize seven major commodities. The three largest farm subsidy programs contribute 70 percent of funds to producers of just three crops — corn, soybeans, and wheat. Approximately 30-40 percent of US corn, over half of soybeans, and nearly all sorghum feed livestock, heavily discounting high-fat, lower-nutrition meat and dairy (especially compared to grass-fed options). The prevalence of grain-fed livestock generates demand for commodities used to feed them, completing the circle. 

Subsidies also contribute to our consumption of refined grains, sugary drinks, and processed foods. About five percent of corn becomes artificially cheap high-fructose corn syrup (which allows it to compete with tariffed natural sugars), and half of soybeans are processed into oils, which also contribute to obesity.

My Uncle Sam is sick because he eats the food the government makes artificially more affordable. Those foods are poorer in quality and more harmful to health than their unsubsidized alternatives. We are paying to make ourselves sicker.

Diet-Related Health Issues Fuel Healthcare Costs

For more than 20 years, the FDA has known that trans fats and refined grains harm health, damage metabolism, and cause disease. Diet-related illnesses like obesity, Type 2 diabetes, and high blood pressure are increasing, while heart disease remains the leading cause of death. These epidemics are intertwined at the artery level, and both contribute hugely to rising US health care costs.

In an economic order awash with subsidies and regulation, agricultural policy is health policy. Government subsidies for agricultural products have shaped the current American nutritional environment, and they are exacerbating obesity trends.

An article in the American Journal of Preventive Medicine confirms: “Current agricultural policy remains largely uninformed by public health discourse.”

Johns Hopkins physician (and current Commissioner of the US Food and Drug Administration) Marty Makary called out the disconnect clearly. “Half of all federal spending is going to health care in its many hidden forms,” he told an interviewer in October, but Americans continue “getting sicker and sicker… Chronic diseases are on the rise. Cancers are on the rise. And we have the most medicated generation in human history.”

We’re getting more medicated every day — and more of it is at taxpayer expense. 

A Better Answer Than Ozempic?

Government spending on healthcare now exceeds the entire discretionary budget. Excess weight is a significant risk for older Americans, who are also the most likely to both have high healthcare costs and to rely on government health care. Forty percent of Americans over 60 are classified as having obesity, which is a contributing or complicating factor in diseases that kill older Americans: cancers, heart disease, infection, stroke, and cirrhosis.

Late last year, the Food and Drug Administration approved the weight-loss drug Wegovy as a treatment for people at risk of heart attack or stroke. Medicare is forbidden by statute from covering prescription drugs for weight loss alone, but in 2021 regulators approved Wegovy for reducing weight-related risks in patients with diabetes. Medicare Part D plans spent $2.6 billion last year on related compound Ozempic to keep 500,000 patients with diabetes stable. Wegovy’s list price is around $1,300 per month, but that’s still small compared to the $1.4 trillion Americans spend on direct and indirect costs from obesity.

It has a certain economic logic. Instead of waiting for a patient to develop a cascade of expensive comorbidities like heart failure or diabetes, we could consider asking Medicare to pay for anti-obesity meds on the front end. That wouldn’t work as well as lifestyle changes, but all our health and activity messaging over the past several years doesn’t seem to have moved that needle, and significant evidence suggests our efforts are counterproductive. 

The Tangled Web of Farm Subsidies

To understand the insanity of American agricultural and health policy, it’s hard to do better than comedian-illusionists Penn & Teller, who in characteristically salty style (really — you’ll want headphones and a sense of humor to watch the video) explained it this way 15 years ago: 

High fructose corn syrup is a dirt-cheap way to add sweetener and extend shelf life. And why is it so cheap? Because we subsidize corn farmers! Our government gives about 10 billion of our tax dollars to corn farmers every year so they can produce more corn than we need. They then sell the corn at artificially low prices. They spend our money to make corn syrup cheap, and now the same government that uses our tax money to keep soft drinks cheap wants more of our tax money to make soft drinks more expensive. Does anyone else think this is incredibly f—d up?

Yes, Penn. We do. And since that clip aired, obesity rates have worsened 50 percent, and rose 78 percent in children. Medical spending on the consequences of obesity doubled. Over the same period, subsidies to corn growers (which includes disaster aid and insurance) have tripled. 

Rather than cut back on his terrible diet, Uncle Sam wants us to pony up for weight loss drugs — to undo what our food policy has done."

Obamacare’s subsidy cliff: How many enrollees are actually affected?

By Jeremy Nighohossian of CEI.

"Democrats in Congress have put Obamacare front and center in their opposition to the Republicans’ temporary budget. One provision of the American Rescue Plan Act of 2021 intended to provide relief during the pandemic expanded the health insurance premium subsidies created by the Affordable Care Act (ACA or Obamacare) for two years. The goal was to make subsidies more generous for existing recipients and available to those above the original income limit. The Inflation Reduction Act of 2022 extended those subsidies beyond the original expiration date, setting a new expiration date at the end of 2025.

With that deadline looming, Democrats in Congress are seeking another extension and are using the broader budget debate as leverage to win a full or partial renewal of those subsidies.

Because this expiration date is approaching, Americans enrolled in Obamacare and receiving subsidies face a reduced contribution to their premiums from taxpayers. Those below the income cutoff will continue to receive the original level of subsidies set by the ACA, while those above the income threshold will no longer receive subsidies at all. In both cases, the subsidies will revert to pre-pandemic levels.

Because many Americans will see reductions in subsidies, the number of affected individuals has become politically relevant. According to the Centers for Medicare and Medicaid Services (CMS), the agency that administers much of the Affordable Care Act, 24.3 million people signed up for ACA plans in 2025, and 22.4 million were eligible for subsidies.

News reports on the ACA and the shutdown have claimed repeatedly that 22.4 million people would be affected by the expiration of expanded subsidies, but there are many compelling reasons to doubt the accuracy of this figure.

Foremost among these reasons is that both CMS and the Kaiser Family Foundation have clarified that the 22.4 million figure refers to the number of people who signed up during the annual open enrollment period, rather than the number who are actually enrolled at any given time.

Open enrollment numbers can differ from actual participation for several reasons. Some may sign up believing they need coverage but later choose not to use it, and there have also been accusations of improper or fraudulent enrollment. Bloomberg investigated the ACA broker market in Florida and found numerous examples of unscrupulous brokers and other participants exploiting the ACA subsidy system by signing people up without their full consent in order to collect commissions. The system was vulnerable to such abuse because it combined fully subsidized, zero-cost enrollment with minimal oversight.

Under the Trump administration, CMS Director Mehmet Oz has made weeding out abuse one of his priorities, announcing efforts to address 3 million multiple enrollments.

Additionally, Paragon Health Institute has conducted several studies on ACA enrollment. In one study, it found that for certain income groups and states, ACA enrollment exceeded the number of people in those categories. A follow-up study found that the number of ACA enrollees with no claims has surged, which is an indicator, though not conclusive proof, of fraudulent enrollments. Paragon estimates that there are 6.4 million fraudulent enrollments in ACA in 2025.

How these fraudulent enrollments manifest is still an unanswered question. One possibility is that individuals sign up despite being ineligible for subsidies, misrepresenting their circumstances to secure the subsidies. Another possibility, as the Bloomberg article noted, is that brokers sign people up without their full knowledge. As with many government programs, there are strong incentives to exploit vulnerabilities to receive government funding, and the president has motivations that conflict with ensuring program integrity.

Another valuable source of information in this discussion is survey data. While CMS relies on applications from enrollees and brokers, several surveys ask Americans whether they’re insured and where they obtain coverage. The Current Population Survey (CPS), used to calculate the official uninsured rate, also asks respondents annually if they are enrolled in an ACA plan, and even if they receive a subsidy. Survey data cannot always capture the full picture, however, as an individual who lied to qualify may or may not tell a surveyor that they have ACA coverage.

From 2018 to 2021, CMS enrollment numbers tracked with the number of people in CPS’s survey who claimed they were covered by ACA plans, demonstrating the reliability of CPS’s methods.

However, in 2022, the first year CMS’s data would include enrollments based on the expanded subsidies, that alignment broke down. From 2018 to 2020, the two sources differed by only 2-3 million. In 2022, CMS reported 5 million more enrollees than CPS; in 2023, it was 5.3 million; and by 2024, it jumped to 9.6 million. CPS hasn’t released its 2025 survey yet, but the trend suggests an even larger discrepancy. Based on the difference from 2024, the CMS enrollment totals may be overstated by 10.9 million. This means the true number affected by the subsidy expiration would be 11 million, roughly half of the commonly cited number.

Of course, whether the true number is 22 million or 11 million doesn’t affect the broader discussion of who should receive subsidies and how large they should be. Yet the correct number is relevant to the program’s overall cost and significance to the economy and government. In the interest of accurate public debate, the 22 million estimate is highly doubtful and should carry a bold asterisk, if it’s to be used at all."

EU solar rollout is slowing due to subsidy cuts

Tweet from Bjorn Lomborg.

"Turns out solar runs less on sun, more on subsidies 

EU solar rollout is slowing due to subsidy cuts 

So much for "cheap power", "exponential growth," and "taking over the world" claims for renewables

https://reuters.com/sustainability/climate-energy/eu-solar-energy-rollout-slows-first-time-decade-subsidies-cut-2025-07-24/  

https://archive.is/hlD3S  

https://solarpowereurope.org/press-releases/new-analysis-reveals-that-eu-solar-stalls-2025-projected-to-mark-first-year-of-market-decline-in-a-decade 

Threads&refs: https://x.com/BjornLomborg/s "

 

Canadian aluminum subsidies allow us to increase production in other domestic industries while foreigners pick up part of our bill for its consumption

By Donald J. Boudreaux.

"Here’s a letter to the Wall Street Journal.

Editor:

Mark Duffy asserts that America has been harmed by Canadian aluminum subsidies – a harm that allegedly justifies higher U.S. tariffs on aluminum (Letters, July 28). But although as common as pigeons in Central Park, arguments that foreign subsidies justify domestic protection crumble upon inspection.

It’s true that subsidized imports reduce outputs and employment in the U.S. industries that compete with these imports, but this effect helps, not hurts, the U.S. economy. Capital, workers, and resources released from these domestic industries become available to increase the production and employment of other domestic industries. America gets more output and jobs from these expanded industries, while foreigners pick up part of our bill for the consumption of the subsidized imports.

Given the Trump administration’s determination to “Put America First!,” it should – instead of ungratefully taxing Americans’ receipt of these Canadian gifts – send notes to our northern neighbors thanking them for joining in Mr. Trump’s effort to Make America Great Again.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030"

German Business Is Tangled in Red Tape

Companies in Germany complain that the demands of bureaucracy are costing them time and money that would be better spent building their businesses.

By Melissa Eddy of The NY Times. Excerpts:

"Last year, four new laws and 14 amendments to existing ones governing energy use took effect, each bringing fresh demands for data to be reported and forms to be submitted — in many cases to prove the same standards that the company has already been certified as reaching since 2012, Mr. Wingens said [Markus Wingens who runs a metal heat-treatment company].

“We have the Renewable Energy Act, we have the Energy Efficiency Act, we have the Energy Financing Act, and each comes with an administrative burden,” he said. “It’s madness.”"

"In a report last month, the International Monetary Fund called “too much red tape” one of the major impediments to reviving the German economy.

For example, it takes 120 days to obtain a business license in Germany — more than double the average in other Western economies. Germany also lags behind the rest of the European Union in the digitization of government services, still requiring written forms for certain tax refunds and building permits."

"German companies spend 64 million hours every year filling out forms to feed the country’s 375 official databases, according to industry estimates. When the Stuttgart chamber of commerce asked its 175,000 members to name their biggest challenges, red tape topped the list.

Even Germany’s chancellor, Olaf Scholz, has publicly acknowledged that the demands have become too much. “We have reached a situation where, in many places, no one can carry out all of the laws that we have created,” Mr. Scholz said last month."

"The red tape drain on time and resources is felt especially by small and midsize firms — those with fewer than 500 employees and annual revenue below €50 million (about $54 million) — that are the backbone of the German economy.

These businesses often lack in-house legal departments dedicated to filing audits, recording statistics and deciphering which information is wanted by which authorities"

[at one store] "deli workers would take cold cuts that were nearing their expiration dates and use them in sandwiches for quick sale, until a regulation that required detailed lists of all ingredients in all items sold took effect. Now, instead of making new sandwiches — and lists — every day based on what is about to expire, they have a more limited sandwich offering and throw away more meat."

"At the seafood counter, fishmongers must now ensure that each variety of fish is labeled in both German and Latin. They also must take the temperature of every fish or fillet, as well as the overall temperature inside refrigerator cases, twice a day."

"To set up an online registration system for 20 school districts, his firm needed the approval of five regional data protection officers. Each had a separate interpretation of the European Union’s data security regulations; one told Mr. Wirkner [Michael Wirkner, who founded an advertising agency in Göppingen nearly two decades ago.] that he could use a Google tool, while another insisted it was not allowed." 

He noted that German regulators had imposed the European Union’s sweeping data privacy law on rules governing even professional etiquette. “In Germany, we have regulations about handing over business cards at business meetings and whether it’s still allowed,” he said. [said Andreas Kiontke, a lawyer who works with the chamber of commerce.]

Related posts:

The Soul-Sapping Grind of Doing Business in Bureaucratic Germany (2025) 

EU Aims to Cut Red Tape, Boost Funding to Lure Tech Startups: Officials want to simplify labor and tax laws so startups can launch rapidly in Europe (2025)

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small: A risk-averse business culture and complex regulations have stifled innovation on the continent, weighing on its future  (2025)

The Soul-Sapping Grind of Doing Business in Bureaucratic Germany

Entrepreneurs warn that the country’s thicket of red tape has grown so dense it could choke a planned $1.1 trillion stimulus package

By Bertrand Benoit of The WSJ. Excerpts:

"Germany’s economy has barely grown for the past five years. The new government wants to change that by spending one trillion euros on defense and infrastructure in the next decade. But economists warn the stimulus could be wasted without a crucial step that costs nothing: Rid the economy of the red tape that is smothering growth and discouraging investment.

“We urgently need to decide where obstructive, paralyzing rules should be abolished and which need amending,” said Veronika Grimm, one of five economists who advise the government on economic policy. The group flagged bureaucracy as a key hindrance to growth in their yearly report in May."

"A well-run state can make life predictable and provide services to companies. Yet too much state can gum up the system. Excessive bureaucracy exists everywhere, but Europe is particularly affected because governments there tend to follow the precautionary principle."

[It says] "the state should seek to prevent risks before they arise. Initially limited to environmental legislation, the principle is now increasingly applied to other areas"

"the burden has increased over time—despite parliament passing several anti-bureaucracy laws. Employees in Germany spent 1.02 billion work hours fulfilling state-mandated bureaucratic tasks last year"

"Bureaucracy . . . costs German businesses €146 billion a year"

"the volume of economic, financial and tax legislation had roughly doubled in Germany since 2009"

"Only 10% [of German executives] said Germany was welcoming for business"

Related posts:

EU Aims to Cut Red Tape, Boost Funding to Lure Tech Startups: Officials want to simplify labor and tax laws so startups can launch rapidly in Europe (2025)

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small: A risk-averse business culture and complex regulations have stifled innovation on the continent, weighing on its future  (2025)

The Tech Industry Is Huge—and Europe’s Share of It Is Very Small

A risk-averse business culture and complex regulations have stifled innovation on the continent, weighing on its future

By Tom Fairless and David Luhnow of The WSJ. Excerpts:

"The world’s technology revolution is leaving Europe behind. 

Europe lacks any homegrown alternatives to the likes of Google, Amazon or Meta. Apple’s market value is bigger than the entire German stock market. The continent’s inability to create more big technology firms is seen as one of its biggest challenges and is a major reason why its economies are stagnating."

"Investors and entrepreneurs say obstacles to tech growth are deeply entrenched: a timid and risk-averse business culture, strict labor laws, suffocating regulations, a smaller pool of venture capital and lackluster economic and demographic growth."

one entrepreneur 'hoped he could help build a European tech giant to compete with the Americans. He was shocked by what he saw. Colleagues lacked engineering skills. None of his team had stock options, reducing their incentive to succeed. Everything moved slowly."

"Having largely missed out on the first digital revolution, Europe seems poised to miss out on the next wave, too."

"In Europe, venture capital tech investment is a fifth of U.S. levels."

"“This is an existential challenge,” wrote Mario Draghi, the former European Central Bank president who was tasked by the European Union’s top official to help diagnose why Europe’s economy is stagnating. In a report published last September, Draghi pinpointed the lack of a thriving tech sector as a key factor. “The EU is weak in the emerging technologies that will drive future growth,” he wrote. 

Only four of the world’s top 50 tech companies are European, despite Europe having a larger population and similar education levels to the U.S. and accounting for 21% of global economic output. None of the top 10 companies investing in quantum computing are in Europe."

"It isn’t creating its share of new, disruptive companies that shake up markets and spur innovation.'

"Over the past 50 years, the U.S. has created, from scratch, 241 companies with a market capitalization of more than $10 billion, while Europe has created just 14"

"Europe is dominated by old-school industries like autos and banks that extracted productivity gains long ago. The typical company in the top 10 publicly traded U.S. firms was founded in 1985, while in Europe, it was in 1911"

"By the late 1990s, when the digital revolution got under way, the average EU worker produced 95% of what their American counterparts made per hour. Now, the Europeans produce less than 80%. 

The EU economy is now one-third smaller than the U.S.’s and is stuck in low gear, growing at a third of the U.S. pace over the past two years."

"Entrepreneurs complain that everything takes longer in Europe: raising money, complying with local regulations, and hiring and firing workers."

"“What is different in America is the speed of almost everything,” said Fabrizio Capobianco, an early tech entrepreneur from Italy who lived for decades in Silicon Valley. “Americans make decisions very fast. Europeans need to talk to everybody—it takes months.”"

"In Europe, most business financing still comes from banks, which generally require physical collateral—a building, perhaps—in the event of losses. Other forms of financing include risk-averse public-pension funds. Early venture capital investors also demanded terms that left founders hamstrung, say entrepreneurs."

"while Europe has dozens of countries with their own language, laws and taxes. Labor laws slow down worker mobility by making it harder to hire and fire workers."

"Taxes are higher, and regulations designed to corral big business become a costly and time-consuming headache for startups."

"Europe’s love of regulation is one reason why Han Xiao started to think about moving his Berlin-based AI startup to the U.S."

"“When Germans talk about AI, the first topic is ethics and regulation,” whereas investors in the U.S. and China focus on innovation, Xiao said."

"Xiao’s attempts to fire underperforming workers have landed in court."

"European businesses spend 40% of their IT budgets on complying with regulations"

"European cities crowd the top spots on quality of life rankings, far ahead of their American counterparts. That lifestyle might contribute to less appetite for risk, along with a culture of equality that frowns on naked ambition."

"The Draghi report, said McAfee at MIT [Andrew McAfee, a principal research scientist at the MIT Sloan School of Management], did a great job diagnosing Europe’s lagging tech sector, but then urged governments to spend more public money spurring the sector, missing the point that it was private money that was absent—most likely due to regulation and other problems. 

Said McAfee: “That’s when I went from nodding my head in agreement to banging it on the table.”"

The problems with the New York City transit system

See New York, the Supplicant State: Albany begs the GOP to rescue the state’s failing subways—again. WSJ editorial. Excerpts:

"New York City region’s compact geography makes mass transit an efficient alternative to driving. Or at least it did until the subway lines began breaking down with greater frequency from years of neglect, and crime spiked owing to progressive policing. As a result, daily subway and bus ridership remains about 1.6 million lower than before the pandemic.

Democrats say ridership is increasing thanks to their new $9 congestion tax on drivers entering Manhattan’s business district, but the MTA’s data doesn’t show it. By our calculations, the decline in ridership means some $1.5 billion annually in less fare revenue—three times as much revenue as the congestion tax is expected to raise this year."

"MTA’s costs are exploding owing to expensive labor contracts and repairs because the state’s Democratic leaders prioritized paying off their public union friends over system upgrades."

Repealing Only Two Biden-Era Tax Credits Could Cement Permanent Pro-Growth Tax Cuts

By Adam N. Michel and Joshua Loucks of Cato.

"When Congress passed the Inflation Reduction Act (IRA), it was told the new energy tax credits would cost about $270 billion over a decade. Revised official estimates put the cost at multiple times that amount, as much as $786 billion. But congressional scorekeepers may still be getting the long-term cost of the IRA energy subsidies wrong, and fixing this mistake is key to unlocking permanent pro-growth tax cuts.

A new Cato report by Travis Fisher and Joshua Loucks (one of the authors here) argues that two of the most expensive IRA tax credits could be functionally unlimited subsidies, costing as much as $180 billion annually by 2050. With no expiration in sight, the total cost of the IRA green energy subsidies could accumulate to as much as $4.7 trillion by the middle of the century.

These infinite tax credits can offset permanent extensions to the most pro-growth features of the Tax Cuts and Jobs Act of 2017, which largely expires at the end of the year. Without bending long-standing budget rules, Congress must ensure that any permanent tax cuts outside the 10-year budget window are offset with spending cuts or higher revenue. This rule is why tax cuts are often temporary.

Repealing two of the IRA’s open-ended tax credits could more than offset the revenue loss from cutting the corporate tax rate to 15 percent, restoring R&D expensing, fixing the interest deduction limit, and enacting full expensing.

Budget Scorekeepers Blew It; Fixing Their Mistake Is Critical

The Joint Committee on Taxation (JCT) badly underestimated the cost of the IRA energy tax subsidies. It has since revised many of the original estimates to more accurately reflect the consensus estimates that put the 10-year cost of the IRA at roughly $1 trillion. Government scorekeepers are very likely still not fully incorporating the long-run, uncapped costs of the production tax credit (PTC) and the investment tax credit (ITC). 

As Fisher has repeatedly pointed out, the ITC and PTC are functionally uncapped because they are not time-limited, like most other temporary tax credits. The ITC and PTC only phase down when the level of greenhouse gas (GHG) emissions from the electricity sector is reduced by 75 percent of the 2022 baseline. 

Figure 1 is adapted from Fisher and Loucks’ recent report. It shows GHG projections from the Energy Information Administration, which show that electricity-sector emissions will remain far above the IRA’s target of a 75 percent reduction in the 2022 level through 2050. The GHG phasedown trigger is not met even in the scenario with a high uptake of IRA subsidies.

The Treasury Department’s most recent tax expenditure estimates explicitly state they assume the subsidies will begin to phase out as early as 2034. The JCT could have made a similar mistake in its original score of the IRA. Had the cost estimates appropriately accounted for both the magnitude and the open-ended credits, the bill could not have passed using the budget reconciliation process, which requires that legislation not increase the deficit beyond a 10-year window.

A Golden Opportunity for Pro-Growth Reform

As Republicans work to repeal or revise the IRA credits in reconciliation, it is critical that the JCT properly accounts for the full cost of the credits outside the budget window. By 2034, the ITC and PTC alone will cost about $130 billion per year—enough to permanently finance four of the most pro-growth tax cuts under consideration. 

Figure 2 compares Cato’s $130 billion cost estimate for the uncapped energy credits with the Tax Foundation’s static estimates of four pro-growth tax cuts that reduce revenue by approximately $113 billion in 2034. The four changes are (1) cutting the corporate tax rate from 21 percent to 15 percent, (2) renewing full investment expensing, (3) returning the interest limitation to its less restrictive definition, and (4) allowing full research spending deductions.

The PTC and ITC are projected to continue to expand past 2034. In 2050, the two credits will cost as much as $180 billion annually.

Other pro-growth reforms, such as neutral cost recovery, have increasing static fiscal costs outside the budget window. Although neutral cost recovery is not included in our estimates, the escalating open-ended cost of the PTC, ITC, and other IRA provisions, such as the advanced manufacturing credit sub-provisions for critical minerals, would more than pay for neutral cost recovery even in the years beyond the budget window.

The IRA’s unlimited tax credits are a fiscal time bomb, costing between $2.04 trillion and $4.67 trillion by 2050. They represent an unchecked expansion of government spending with no clear end date. Policymakers have a rare opportunity to repeal these costly provisions and use the savings to fund permanent, pro-growth tax reform that benefits the entire economy—not just politically favored industries. Getting the scoring right is critical."