Another Trump Tariff Retreat

This time it’s a delay for a year on higher taxes on upholstered furniture and kitchen cabinets

WSJ editorial. Excerpts:

"His planned 30% to 50% levies will now be delayed a year, maintaining a still damaging 25% border tax."

"Prices for living-room furnishings rose 4.6% in November from a year earlier"

"The retreat is another in a string of policy reversals to mute the tariff harm to American consumers."

"You’d think the tariff cheerleaders would be embarrassed by these walkbacks, but they ignore them as they promise that the tariff golden age will soon arrive."

Gavin Newsom Has a Wealth Tax Dilemma

The left is pushing a referendum that will force him to choose as he runs for President

WSJ editorial. Excerpts:

"The tax would be assessed on the shares in public companies at their market value as of Dec. 31, 2026. If share prices later decline, tough. Billionaires would have to pay tax on the “fair market value” of illiquid and intangible assets—e.g., private equity stakes, patents, artwork—based on a certified appraisal.

The only asset exceptions would be real estate, pensions and retirement accounts. Billionaires would likely have to liquidate stock holdings—and pay 13.3% state income tax on their capital gains—or borrow against assets to pay the wealth tax."

"The top 1% pay half of the state’s income tax." 

Mississippi’s Capitalist Awakening

An Englishman moves to Jackson to become the leader of a free-market think tank

By William McGurn. Excerpts:

"In 2024, according to the Commerce Department’s Bureau of Economic Analysis, the state registered 4.2% growth in real gross domestic product—making it the second-fastest-growing state in the U.S."

"some of the ingredients for Mississippi’s growth these past five years: a huge income-tax cut, with a 4% flat tax going into effect in 2026; deregulation that opens up occupational licensing to competition; a government that spends within its means, yielding budget surpluses; and low-cost energy, mainly a result of avoiding the renewable energy subsidies so popular in blue states." 

Tax Reformers, Get Out of the Wealthy’s Way

Private business owners are more generous than the most progressive of tax schedules

Letter to The WSJ. 

"Your editorial “By All Means Raise Mitt Romney’s Taxes” (Dec. 22) correctly stresses that the rich pay a disproportionate share of taxes. Mr. Romney still argues that people like him should pony up even more. This view is central to socialism and frequent among economists, such as Thomas Piketty, who seem confused about how markets work. They assume government has a monopoly on service, neglecting that private business owners are more generous than the most progressive of tax schedules.

In the private sector you can only sell things if you help others—that is, if customers benefit more than they pay. If you’d cough up $100 for being able to brush your teeth but a toothbrush costs $5, you benefit 20 times as much as the sticker price. That sum, what economists call “consumer surplus,” averaged across industries is about 95% of the social value created by a business. 

But this is only part of how company owners help others. On average 60% of sales are wages, the best welfare program invented. Put differently, 98% of the value of starting a risky business benefits others, presumably more than the “fair share” of the rich’s labor than even communists dare propose.

Many politicians nevertheless act as if the only help that matters is given through the public sector, with them as middlemen. Never mind that help to the poor is often reduced by taxing the rich—money that would have been administered more effectively via private donations. The 250 billionaires of the Giving Pledge, launched by Bill Gates and Warren Buffett, are donating half their fortunes—surely more helpful than a 50% wealth tax.

If reformers understood markets, they would get out of the way of the superrich who are benefiting the public and resist any disincentives to their generosity. Their contributions to others are reflected proportionally in their accumulated wealth.

Tomas J. Philipson

Chicago

Mr. Philipson was a member of the White House Council of Economic Advisers, 2017-20, and its acting chairman, 2019-20."

The Medical Case for Rescheduling Cannabis

Dr. Peter Grinspoon replies to the editorial board

Letter to The WSJ. 

"Your editorial “Trump Goes for the Stoner Vote” (Dec. 20) misses some important aspects of cannabis use in the U.S. Among them: There is no evidence that teenage use has risen with legalization. Dispensaries are extremely careful in checking identification, and smoking simply isn’t as cool when grandma is a taking a puff or two for her arthritis.

The medical review you cite, which claims “no medical benefit” to use, is one study among thousands. It was performed by researchers who, to my understanding, haven’t treated a single medical cannabis patient to alleviate symptoms. The doctors who directly help patients use cannabis have a different vantage. There is abundant evidence for the efficacy of medical cannabis for most, if not all, of the claims patients make. The 2017 report by the National Academies of Science, Engineering and Medicine concluded there was “conclusive” evidence of effectiveness in treating chronic pain and other conditions.

Cannabis doubtless has several potential harms, and certain people should stay away from it—e.g., teens, pregnant women, those with a history of psychosis. We don’t want an unregulated industry running amok, either, as we experienced with tobacco and alcohol. Yet cannabis is less dangerous than both substances—both of which are excluded from the Controlled Substance Act and contribute to hundreds of thousands of deaths per year. We shouldn’t treat cannabis any different.

As a physician, I suggest we primarily look at how we can reduce patients’ suffering. With education and careful regulation we can avoid or minimize many of the harms associated with cannabis use, which is already helping Americans with intractable chronic pain, nausea, anxiety and insomnia. A majority of Americans support legal access to medical cannabis—so a baby step in this direction, rescheduling cannabis into a less restrictive category, is a step in the right direction.

Dr. Peter Grinspoon

Harvard Medical School"

 

 

Everyone Got Tariffs Wrong? Not Economists

We’ve long acknowledged that their effect on prices is complicated

Letter to The WSJ. 

Economists never claimed that tariffs immediately or inevitably cause inflation (“Why Everyone Got Trump's Tariffs Wrong,” Page One, Dec. 16). We’ve long acknowledged that their effect on prices is complicated.

The first reason for that is the substitution effect: When tariffs raise the relative price of imports, consumers often shift their spending toward other goods. Some import prices may even fall, particularly if demand dries up. The net effect, then, is ambiguous.

The second factor is the income effect. Higher import costs give consumers less bang for their buck. If iPhone prices double because of tariffs, for instance, consumers enjoy less real income. Tighter budgets mean consumers have less to spend on other goods.

Moral of the story: If you’re looking solely at the inflation rate to see the effects of tariffs, you likely won’t find it. In a vacuum, the levies cause a one-time jump in an economy’s price level but not a continuous rise in its growth rate. What happens after that depends on how policymakers respond. In any case, tariffs’ most predictable and immediate effects are sputtering growth and declining consumer welfare.

Ask yourself: Doesn’t that resonate with your experience over the past nine months?

Scott Burns

Southeastern Louisiana University

Baton Rouge, La.

Caleb S. Fuller

Grove City College

Grove City, Pa."

 

 

 

A Tale of Two Medicaid States: Minnesota Fraud vs. Indiana Reform

More indictments in Tim Walz’s state, while Mike Braun’s reforms save hundreds of millions of dollars

WSJ editorial. Excerpts:

"fraud losses since 2018 could top $9 billion."

"two men in Philadelphia . . . registered as housing providers despite no connections in the state. Minnesota was the first state to let Medicaid funds be used for housing services for the disabled and recovering addicts. The defendants billed Medicaid for fake services."

"This is a pattern in the charges: Defendants set up sham companies, then submitted false claims."

"the home-care program “has been vulnerable to fraud,” as providers can bill the state for providing care up to 24 hours a day. Minnesota Medicaid spending on this in-home program surged to $170 million in 2024 from $4.6 million in 2021"

"The state’s Medicaid spending has increased by nearly two-thirds in six years."

"Medicaid spending nationwide has increased by some $380 billion since the beginning of the pandemic"

This "spurred Indiana Republicans this spring to impose reforms, including more rigorous eligibility checks and guardrails to prevent excessive billing."

"the state said it expects to save $466 million on Medicaid over the next two years compared to its spring projections. Medicaid enrollment has declined by some 11% thanks to eligibility checks."

"the 340B program, which lets hospitals and pharmacies they contract with buy drugs as steep discounts. They then charge insurers large markups when they administer the drugs to patients."