Now, one could debate how soon and how reliably AI will create such bounty. One could also debate whether deflation (falling prices) with steady wages induced by AI-led productivity is a problem at all. Everything would become a lot more “affordable,” of course. There’s also an argument that higher real (after adjusting for inflation) interest rates are needed to induce savings and investment to build AI. Whether the Fed should act in anticipation of a productivity bonanza is another question.

But today the Fed faces essentially the opposite problem, a stagflationary shock that looks eerily like 1979. Inflation never really went away. It is now surging, thanks to tariffs and energy costs via a conflict with Iran. Should the central bank fight that inflation by raising rates, swiftly incurring President Donald Trump’s wrath and risking a weaker economy? Or should the Fed once again look through a price-level rise, hoping that the economy will stabilize at higher prices, and swiftly incurring the wrath of regular people already unhappy about today’s high prices?

Warsh, who was confirmed by the Senate last week as chair, has advocated that the Fed reduce its balance sheet by selling assets. Most economists believe reserves past $2 trillion or so have little long-run effect on the economy. But the Fed may be tempted to reduce reserves until bank operations are squeezed, in order to tighten without raising interest rates, a version of monetarist restraint. The United States tried a similar idea in 1980, imposing credit controls by tightening bank regulation. They produced financial chaos and stagnation.

Warsh wants to reexamine the Fed’s models and overall approach. This is wise. Inflation, peaking at 9 percent in June 2022, was a failure that the Fed has not satisfactorily accounted for. It was not an individual failure. The Fed’s actions were backed by consensus in and outside the central bank. It was a collective, conceptual, institutional failure. The models don’t work. The forecasts don’t work. But there is no off-the-shelf alternative. Nobody really knows how monetary policy works, and certainly not with the complex technocratic expertise that the Fed pretends. Other forecasts do not reliably outperform the Fed’s.

The Fed should instead act with more humility. Recognize the fog in which it is trying to steer the ship. Refrain from acting (again) based on forecasts and what-if analyses that have proved unreliable.

Bigger challenges lie ahead. Because the national debt is beyond 100 percent of gross domestic product, every percentage point that the Fed raises interest rates increases interest costs on the debt and thereby the deficit by 1 percent of GDP. Neither Congress nor the president will be happy about that.

Fiscal pressure on the central bank will mount. Today’s precedent for reduced Fed independence is the era from World War II to 1951, when it was obliged to hold down long-term rates for fiscal reasons, not 1972, when President Richard M. Nixon pressured the Fed for election-year ease.

Countries that run uncontrolled deficits soon face higher borrowing costs. The Fed will feel pressure to hold down those costs. “Moderate long-term interest rates” is, after all, part of the Fed’s legal mandate. With the precedents of massive bond buying in the 2010s and again in 2020, it will be hard to resist. Rising yields will also tempt financial repression. The Fed will be tempted to force banks, insurance companies and other institutions to hold Treasury debt, impose capital controls and so on.

That’s the optimistic scenario. In the next crisis, 2020 will replay at a larger scale. The Treasury will want to borrow trillions for bailouts, stimulus and likely military investment. But bond investors will be skittish, having suffered a substantial loss due to inflation last time they lent to the U.S., and with still no plan for the government to start repaying debts. Inflation expectations are primed to jump, so inflation itself can break out even more quickly. Pressure for the Fed to monetize government debt will be immense.

There is a limit to how much the Fed should resist. If Congress and the president want massive money-printing to finance a crisis response, should the central bank really force the government to borrow at much greater cost, spend differently, sharply raise taxes, restructure debt or withdraw from a confrontation? Tax, spending and foreign policy, even if unwise, are far outside the Fed’s limited mandate.

I would rather see a Congress impose a strong price-stability mandate, with restrictions on bond-buying, but one that Congress suspends in times of crisis, as it did under the Troubled Asset Relief Program in 2008. Meanwhile, the Fed needs to face squarely its role in facilitating the fiscal blowout of 2020 and begin to think about resisting next time.

Many challenges lie ahead. But challenges are opportunities. Great leaders are forged by their wisdom in the face of adversity. And every time the president tweets his disapproval, Warsh’s reputation for independence will grow.

Even so, the summit told us a lot about the bilateral relationship and what to expect in the months ahead. Little of it is good news for the US side.

First, it’s clear that China has weathered President Donald Trump’s multi-term tariff assault and effectively fought the US to a stalemate. The 2020 “Phase One Deal” was tellingly unbalanced: China made a laundry list of promises — grandiose and detailed purchase commitments, greater market access, regulatory reforms, and more — while the US did almost nothing. This time around, the promised purchases are much smaller and vaguer, while possible future tariff reductions are mutual. China arguably isn’t the United States’ economic peer today, but you’d be forgiven for thinking that based on the summit’s deliverables.

China achieved this draw through several channels. The government responded to rounds of US tariffs with not only tit-for-tat levies on America’s exports, but also efforts to expand economic ties — via trade agreements, diplomacy, regulatory approvals and unilateral tariff reductions — with Europe, Asia, Latin America and Africa. Along with longstanding (and questionable) government support for domestic industries, Beijing bolstered its economy’s resiliency by stockpiling energy and food while investing in infrastructure to encourage trade with non-US markets.

Chinese exporters, meanwhile, sought alternative destinations for finished goods such as solar modules and EVs, as well as intermediate inputs incorporated into “Made-in-Not-China” products – often exported to the United States at lower tariff rates. As a result, declining Chinese exports to the US were more than offset by surging sales elsewhere, and China’s trade surplus exceeded $1.2 trillion last year — a new record. At the same time, Brazil, Argentina and other suppliers have displaced US products in China’s agricultural import mix.

Beijing also deployed asymmetric retaliation, most notably by limiting rare earth minerals and related magnets that US manufacturers need. As most economists will tell you (and as we learned a decade ago), export restrictions can be self-defeating in the longer term, but they cause angst and short-term pain for influential companies and defense contractors — angst that clearly got Washington’s attention last fall. Other asymmetric moves included regulatory and investment delays and denials for US exporters and service providers, most recently Beijing’s decision to block Meta Platform Inc.’s $2 billion acquisition of Singapore-based AI startup Manus.

Trump’s tariff onslaught certainly wasn’t costless for China, but last week’s summit shows that the pain has been sufficiently mitigated via a playbook that few other nations, if any, can copy.

The deals announced were also noteworthy and not for their terms, but for the market’s collective shrug. As usual with US-China summitry, the initial reporting was on the Three Bs: Boeings, Beans and Beef, with both sides announcing billions of dollars in new soybean and aircraft purchase commitments and regulatory relief for US beef and chicken exporters. Yet the market was underwhelmed. Boeing Co. shares declined after Trump said China ordered just 200 jets, well below the 500 investors were expecting and the 300 China promised to purchase in 2017, before trade hostilities first inflamed. Crop prices initially sagged before recovering some to levels still below pre-summit highs.

The market’s ambivalence is warranted, given past Chinese noncompliance. Data from the Peterson Institute show that China came nowhere close to meeting its Phase One commitments to purchase hundreds of billions of dollars in US manufactured and agricultural goods — and imported less than pre-trade war trends would predict. China met last year’s agreed upon soybean target, but that was well below levels hit in 2024 and earlier.

Investors also seem to understand that economic realities have, along with geopolitical thorns like Iran and Taiwan, left both capitals uninterested in escalation. In China, a humming export machine and frontier-level achievements in certain advanced industries mask an economy that’s still bogged down by a Japan-esque property bust, stifling public and private debt, depressed household spending, stagnant productivity, high youth unemployment, and serious demographic headwinds.

The US, meanwhile, is riding an AI wave and strong corporate earnings, but is also battling stubbornly high inflation, its own government debt problems, jittery bond markets, Iran-related supply chain disruptions and persistent consumer doldrums. Both sides still have plenty of weight to throw around, but neither is itching for a big fight. In a welcome — albeit narrow and late — change, they’re actively looking for ways to lower barriers to bilateral trade and investment.

This brings us to the summit’s final lesson: scattershot US trade policy has, coupled with an ill-conceived war in Iran, weakened Washington’s hand on China. Blanket tariffs and related bellicosity have alienated allies and pushed neutral countries like Vietnam closer to Beijing for good reason. Indeed, additional tariff reductions for low-value Chinese imports could make them more competitive than goods from alternative exporters like India, which is precisely the opposite of what US tariff policy was intended to accomplish. And the strategic value of tariffs has been undermined by a series of court rulings against the broadest levies – something US “trade deal” partners have surely noticed.

At home, chaotic tariffs have raised prices for food and other consumer goods while, as aluminum shows, increasing supply chain vulnerabilities and dampening investment for manufacturers. Pledged tariff reductions could have grumpy American consumers asking why we have taxes on “non-strategic” items no matter where they come from. The war with Iran has exacerbated the economic pain all while China’s trade surplus and geopolitical influence have expanded.

This doesn’t mean the bilateral relationship is in a good place overall or that, without Trump’s global tariffs, the US would’ve emerged from last week’s summit victorious — whatever that means. But in a wrestling match between two global heavyweights, every bit of leverage helps, and the Trump-Xi summit showed the perils of carelessly squandering it.

Among certificate programs, failures are further concentrated in specific fields, such as culinary services, where all programs are expected to fail, and cosmetology, where 92.5 percent are predicted to fail. Cosmetology schools have responded by launching an intense lobbying campaign to either keep this new rule from being implemented or get new legislation that exempts cosmetology from the rule.

Their lobbying should be ignored for three main reasons.

First, their claims can be quite misleading. Elizabeth Faye and Stacy Wells argue that the “beauty and wellness industry represents one of the last true pathways to middle-class prosperity.” But recall that a program only fails if its graduates earn less than a comparable worker with a high school diploma. As Preston Cooper notes, the typical graduate from a cosmetology program earns $27,000, an income that most would not consider a pathway to prosperity. They also claim that the regulations “threatens to close 92% of beauty and wellness schools.” This is not the case. Programs that fail the earnings test are not forced to close; they simply lose access to the student loan program. Moreover, as Rachel Fishman and Ewaoluwa Obatuase point out, it is possible for these programs to maintain access to Pell grants in some cases.

The second reason to ignore the lobbying by cosmetologists is that many cosmetology schools already forgo participating in the federal aid programs. For example, in Texas, there are 824 cosmetology and barber schools, and only 117 (14 percent) of these participate in the federal aid programs. The existence and persistence of cosmetology schools that do not participate in the federal aid programs provides definitive proof that taking away access to student loans will not mean the end of cosmetology. Indeed, scholars have found that “these institutions can and do survive, and even thrive, alongside their aid-eligible counterparts.”

Third, the main effect of federal aid for cosmetology programs is to increase prices. Research by Stephanie Riegg Cellini and Claudia Goldin compared cosmetology programs that participated in the federal aid program to those that didn’t and found that the programs that utilized federal aid charged more. For example, in Florida, the state with the most comprehensive data, cosmetology programs that were eligible for aid charged 82 percent more than similar programs that did not utilize federal aid, which was roughly equal to the amount of federal aid their students received. In other words, federal aid didn’t make cosmetology programs more affordable for students; it padded the bottom line of cosmetology schools.

The bottom line is that Congress and the Department of Education did the right thing in establishing the Do No Harm rule to limit access to student loans for programs with low earnings outcomes. The accountability this rule imposes is eminently defensible on principle, easy to meet in practice, and yet effective in weeding out many financially predatory programs.

Congress and the Department should ignore any special interests, including cosmetology schools that are seeking to escape meeting even this low accountability threshold.

Those subsequent harsh measures presumably include the Trump administration’s removal of the U.S. Space Command from Colorado to Alabama, the dismantling of Boulder’s National Center for Atmospheric Research, the freezing of hundreds of millions in federal spending on social services, the cancellation of transportation grants to the state, and the veto of federal funding for a Colorado pipeline.

Perhaps Governor Polis understood commuting Peters’s sentence as politically necessary. Perhaps he understood the President as sending a message – namely, compliance with presidential orders is the only way to end the budget pain that the President is inflicting on Colorado.

But the Peters commutation sends a second message – namely, if you break the law to advance the president’s political prospects and get put in prison, the President will turn off the spigot of federal spending in your state until you are released.

The President shouldn’t be in the business of distributing “get out of jail free” cards to election tamperers, and Governor Polis shouldn’t be helping the president hand them out.

The administration is requesting $70.5 billion for the most critical, high-value munitions, representing a 188% increase from last year’s budget.

In the hearings, we heard much concern expressed from members of Congress on both sides of the aisle. Concern about the rapid depletion of munitions for an unauthorized war in Iran. Concern about the fallout of draining our stockpiles to arm Ukraine. Concern about the decrepit state of the defense industrial base and its inability to respond nimbly to strategic demand.

All of these concerns are valid, but none are at the root of the problem. The United States is in a munitions crisis because both the executive and the legislative branches, regardless of which political party is in power, failed to exercise restraint in protecting the U.S. war chest.

As budget discussions heat up over the next few months, Congress shouldn’t blindly grant the gargantuan increase in funding for and production of critical munitions. Doing so would amount to an expensive band-aid. Instead, lawmakers should ensure reforms to protect America’s stockpiles from strategic folly are reflected in an appropriations package considered by Congress.

We must acknowledge where this problem started. Following Russia’s invasion of Ukraine in 2021, Congress and the Biden administration collectively supported the unprecedented use of a tool called Presidential Drawdown Authority (PDA) to expeditiously provide weapons to Ukraine from U.S. weapons stockpiles.

But PDA, by law, was intended to be used narrowly in cases of “unforeseen emergency” to provide support to a foreign country in order to protect the U.S. national interest. Even in such circumstances, the law does not allow unfettered access or a blank check to U.S. weapons. Prior to 2021, Congress maintained an annual cap on the authority at $100 million worth of weapons. Congress, in a series of decisions that reflected a severe lack of judgement, authorized three separate increases to the cap in supplemental appropriations bills for Ukraine. This dramatically expanded the authority, allowing up to $14.5 billion in drawdowns for Ukraine.

Congress and the Biden administration together dug a huge hole in the U.S. weapons arsenal by providing weapons support to Ukraine in this manner. And they did so with little regard for the long-term consequences, namely, how such rapid depletion without rapid replenishment would limit America’s readiness and ability to respond to conflict elsewhere in the world.

The Trump administration inherited U.S. weapons stockpiles at a deficit. The president himself acknowledged the significance of Biden’s massive strategic error. But he committed a serious error of his own in starting a war with Iran despite knowing the demand it would place on U.S. weapons stocks while still being in the hole from Ukraine.

The numbers from the Iran war thus far are staggering. A recent report from the Center for Strategic and International Studies (CSIS) estimates the expenditure of some of our most high-value weapons — like Tomahawk, JASSM, and Patriot missiles — to be in the thousands. The report notes this is likely a depletion of “more than half of pre-war inventory” for some of these weapons.

Such estimates help explain why the Trump administration’s budget includes such massive increases in quantities requested. Take Tomahawk missiles, for example. Last year the Navy procured a mere 55 Tomahawks. This year, the new target for procurement is 785, an increase of more than 1,000%. (It is worth noting that, even if the Trump administration were granted its budget request in full, it would take at least three to five years for these high-value munitions to be delivered.)

Pulling the thread on how we got into this munitions crisis tells us that we have a foresight problem. American leaders are happy to arm a foreign nation in need or to jump into a war, but they fail to see around the corner and consider what the United States is trading off or how we are limiting ourselves strategically.

Congress has the opportunity this budget cycle to learn from past mistakes. Congress can condition munitions funding on receiving a strategy and timeline from the administration on the war in Iran; impose limits on how many high-value munitions must be maintained and preserved for U.S. readiness at all times; and even proactively reform PDA to prevent it from ever again being used at a reckless scale, as it was in Ukraine.

The unfortunate reality is that political appetite for such needed reforms is extremely low in Congress. Despite the growing influence of America First foreign policy, it is still anathema in Washington to put sound defense strategy above political risk, defense lobbyists, and foreign influence.

This apathy could prove disastrous. Amid a munitions shortfall, the U.S. is balancing a hot war in Iran, a military campaign in the Western Hemisphere, a proxy war in Ukraine, and the looming threat of a war with China in the Indo-Pacific.

The United States is not invincible, and it cannot fight nor manage multiple conflicts at a time successfully. There is no quick fix that can make the U.S. munitions arsenal immune from scarcity, tradeoffs, and mathematical reality.

The budget request no doubt prioritizes critical munitions in quantity and dollars. However, unless Congress can reckon with the strategic failures that created and worsened the stockpile deficit and pass the necessary reforms to protect the war chest going forward, we will circle back to the same problem on the same balance sheet again soon.

Republicans have long portrayed themselves as defenders of free enterprise against government encroachment. To vote for Democrats would be to vote for socialism, they said. But the second Trump administration is going well beyond the Biden administration’s industrial-planning schemes by inserting the federal government directly into the corporate bedroom.

Many of the issues that Trump-style economic nationalism seeks to address are not trivial matters. China is a serious strategic competitor. Supply chains for semiconductors, critical minerals, and weapons systems are important to national security and economic resilience. And conservatives are right to be frustrated by a federal government that cannot permit projects quickly, buy weapons efficiently, or maintain a serious industrial base without drowning it in red tape.

But identifying a legitimate problem does not mean heavy-handed government intervention is the solution, regardless of which political party controls the White House. Having Washington become investor, creditor, regulator, customer, and corporate overseer — a situation that conservatives would have rightly considered anathema until Trump took over the Republican Party — is a recipe for cronyism and economic sclerosis, not security.

The Biden administration’s industrial policy was bad enough. Through the CHIPS and Science Act and the Inflation Reduction Act, subsidies, tax credits, loans, and mandates were employed to push capital toward politically favored industries. Many Republicans criticized that approach as industrial planning, and they were right. Industrial policy can sound good on paper, but as corporate America is finding out, making business decisions based on government incentives subject to change from one administration to the next can easily backfire.

But instead of merely rolling back Biden administration interventions, the Trump administration has built on them by having the federal government take ad hoc ownership in a slate of American companies. It has done so randomly, in an opaque manner, and without regard for congressional input or constitutional concerns.

The administration and its supporters also apparently don’t care that a future Democratic administration can use the precedents being set and the equity stakes it inherits to engage in mischief. Indeed, were it a Democratic administration trying to concoct a pseudo-government investment fund for the president to play with, the outcry from self-described conservatives and congressional Republicans would be deafening.

The Biden model was Washington telling companies where it wanted capital to go. The Trump model has Washington supplying the capital in exchange for the power, leverage, and control that come with government ownership. So, while subsidies distort investment, federal ownership creates a deeper problem by forcing firms to make decisions based on political rather than market considerations. 

Once the federal government owns part of a company, every regulatory, procurement, tax, trade, antitrust, and permitting decision involving that company or its rivals becomes suspect. Is Washington enforcing neutral rules, or protecting its investment? Is a competitor being treated fairly, or punished for lacking the right political sponsor? Is the taxpayer being protected, or is a favored firm being propped up because officials do not want their deal to fail?

A government that owns the players cannot be trusted to call the game fairly.

While a government investment can initially boost a company’s immediate prospects, taking a bite of the proverbial apple comes with consequences. Broadly speaking, firms may come to see the path to capital as running through Washington. As we almost witnessed with Spirit Airlines, ordinary commercial problems will be sold as a national security emergency. Bad investments will be packaged as strategic necessities. And executives (and their lobbyists) will discover that the right sales pitch is more important than the right business plan.

Traditional conservatives know this. But the Trump-rebranded right should understand that if the solution to every economic problem is tariffs, subsidies, loans, targeting tax breaks, and federal equity stakes, then it becomes impossible to critique the left’s interventions credibly.

They’ll just have a rival industrial policy.

Republicans can’t denounce the government “picking winners and losers” when Democrats do it and then call it “deal-making” when Trump does it. They can’t warn that Democratic industrial policy is socialism while claiming that Trump’s industrial policy represents “America First.” And they certainly cannot credibly defend free enterprise while cheering federal ownership of private firms.

Markets discipline error while politics rewards influence. And once the federal government starts owning companies it regulates, subsidizes, and contracts with, that discipline begins to disappear. Conservatives used to make this argument when criticizing the left — and some still do.

But those self-described conservatives who jettisoned whatever principles they had for political fealty, and the money and influence that can come with it, will have zero credibility when the other team gets the chance to open the gifts the Trump administration left for them.

The pardon power is different from other constitutional powers. It is unchecked and absolute: There is no other branch of government that can interfere with a president’s pardons. The Constitution was created in the shadow of absolute royal power; it was designed to resist the corruption of such power. The division of government into three separate branches is meant to ensure a system of checks and balances on government power. From this perspective, the pardon power stands out: The unilateral pardon power looks like the last remaining remnant of royalism in the Constitution.

State governments can also issue pardons. Historically, the governor of each state had the power to pardon state crimes. But over time, that has changed. In many states, the power to pardon criminal offenders is no longer concentrated solely in the governor’s office. In some states, that power is split between a governor and a group of appointees. Why the change? Some people thought that a governor with absolute pardon powers didn’t have the time to make thoughtful, well-considered decisions. Others feared that a governor might hand out pardons to political supporters — or might be tempted to take a payment in exchange for a pardon. That is why the law of many states has moved away from a solo, absolute pardon power.

Today, however, the way the president exercises his pardon power is disturbing and unprecedented. The current resident of the Oval Office grants pardons much more often than previous presidents. He has pardoned disgraced politicians, many of his campaign supporters and even business associates of his own family.

Do Donald Trump’s pardons give us good reason to change the rules of the Constitution? Is it time to put the brakes on solo pardon power? I think there are lessons to be learned from the president’s abuse of office. The Constitution encourages cross-branch consensus in almost every other realm of federal power, so that different parts of government must work together to make important decisions. It’s time to change the rules on pardons and remove the last trace of absolute, unaccountable royal power from the Constitution.

Economic nationalism is not just an alternative to free-market conservatism. It is its opposite. Saving the nation from change requires a more active role for government — tariffs, deportations, and more. In that sense, economic nationalism mirrors the big-government Left and is harming the Americans its leaders hoped to help.

The shift in conservatism began with a worthwhile impulse: giving overlooked grassroots elements a voice. Under free trade, America was thriving. The net worth of American households has risen 40% since the North American Free Trade Agreement came into effect in 1994, and has risen 70% since 2001, when China joined the World Trade Organization. But prosperity is not distributed evenly — how could it be, given the differences between people and places? In some communities, unemployment persists. Traditionalists were perplexed by the academy’s ideas about families, race, and gender. COVID-19 bred distrust of authority.

And some politicians listened: alienation is opportunity. The disaffected disagreed with progressives on key issues and tended to nostalgia. Thus, their views were, at least nominally, “conservative.”

But what these conservatives sought to conserve had changed. The free-market conservative backs rules and institutions that support dynamic growth — that is, liberty. Firms would be free to hire the best candidates, to choose the best inputs, and to serve customers worldwide. These firms then grow, ultimately hiring, buying from, and selling more to Americans down the road. The pie of prosperity grew. One person might take a piece, but plenty remained for others. 

By contrast, the economic nationalists are loyal to favored inhabitants of America, not to liberty. And the favored inhabitants are seen to need material resources: steel mills, airlines, rare minerals, and streams of wealth like good jobs. The economic nationalist’s vision of the economy is static. When a firm hires an immigrant, an American loses a job; when a customer buys overseas, an American seller loses out — and that’s the end of the story. The pie stays the same size, so if one person takes a piece, another must go without, a zero-sum game.

Many on the Left share this fixed-pie outlook and a fascination with the distribution — or redistribution — of existing wealth and material resources. The economic nationalist, as do many on the left, seeks direct control of wealth. The state is an enticing instrument of direct control. Thus, the economic nationalist embraces antitrust, regulation of speech, and price controls.

The economic nationalist venerates business, but in a way that divides them further from free-market conservatives. Under economic nationalism, everything has a corporate flavor: The president is the CEO, relishing the art of the deal. The government is a player, not a referee. Even basic ground rules are subject to renegotiation. This is conservatism without certainty, featuring abrupt changes of direction on regulation, trade, and foreign policy.

Pro-business is not pro-market, though. Markets are founded on stable rules that delineate clear rights — a rule of law, not of men.

Over time, the economic nationalist’s choice of favored groups reinforced anti-market drift. The immigrants scorned by the nationalist often cherish economic freedom, free speech, and democracy. Instead of people who fell in love with liberty from Cuba, France, or China, economic nationalism draws xenophobes.

Furthermore, the exclusion of conservatives from the universities now bears a bitter fruit. Reciprocating the ivory tower’s disdain, the economic nationalist rejects not only destructive progressive ideas like the theory that speech is violence, but also scholars’ defenses of toleration and free trade. Scorning those who have dealt firsthand with the grim realities of authoritarian states or who dig up real data, economic nationalism threatens to become an intellectual ant mill.

Steve Davies describes the rise of economic nationalism as a realignment: The focus of political discourse has shifted from capitalism versus socialism to nationalism versus globalism. But this is not a neutral shift from one considered perspective to another.

Not all ideas are equal. The prosperity generated by trade is real. Interfering with trade slows growth and is causing harm now. Farmers and small businesses are struggling. Consumers face rising prices. Many Americans despise the cruelty now associated with the anti-immigration agenda. Authorities cutting deals like entrepreneurs looks like corruption. Unsurprisingly, economic nationalism is in trouble with voters.

A few slender threads might draw economic nationalists back to free-market conservatism. Most conservatives support deregulation and tax reform. Deregulation, especially labor market deregulation, would strengthen our comparative advantage in trade by reducing the cost of doing business in the United States. Deregulation would preserve job opportunities, as minimum wage laws and other regulations make it cheaper to use machines than humans. Tax reform would help, too. Deregulation has strong Republican grassroots support and potential for wider support. But deregulation under economic nationalism has been sporadic.

Listening to the grassroots was not an error. The economic nationalist’s error was to adopt the tools of the Left — managed trade, choosing winners, a stronger state — to benefit a different constituency. The truth of markets and the rule of law will endure, and they will be waiting for conservatives’ return.

To be sure, GDP is an imperfect metric that fails to capture everything we value, but it remains a pretty darn good baseline for evaluating living standards here and abroad—one that mirrors many of the nonmonetary things we do really care about. Overall, GDP turns out to be one of the most reliable indicators of human well-being that economists have ever devised, and dismissing it is more a sign of motivated reasoning than economic enlightenment. New research shows, in fact, that GDP’s biggest flaw is probably that it underestimates just how much things have improved over the last century—by a significant amount.

What GDP Is (and Isn’t)
As I’ve written before, GDP has real methodological quirks. It’s basically a clunky aggregation of several economic indicators—private consumption, gross private investment, government spending, and net exports—that, even in normal times, can produce misleading snapshots of national economies. Import surges and collapses driven by recent U.S. tariffs, for example, distorted quarterly GDP prints last year—to the upside and down—in ways that had little connection to the country’s underlying economic health. Furthermore, the metric fails to account for important activities like leisure and unpaid household work; it doesn’t consider inequality; and it has difficulty properly valuing environmental goods, government expenditures, and new innovations. As we’ve discussed, GDP can be gamed by authoritarian governments with a strong incentive to fudge the numbers. And it can be particularly distorted in a handful of economies that are driven by one type of economic activity (e.g., petrostates or tax havens).

Populist critiques of GDP, however, go much further than these common methodological concerns. On the right, economic nationalists routinely sneer at “libertarian” policies that “merely” boost GDP at the expense of—in their view—more important measures of well-being: native-born wages, mortality, family formation, culture, national security, and so on. On the left, meanwhile, “degrowth” theorists see GDP growth as an outright bad thing because it necessarily means environmental destruction and mistakes economic activity for human welfare. A truly rich society, they argue, maximizes health, happiness, and sustainability over the monetary value of production.

In theory, these critiques make some sense: An economy that grows only by embracing pollution or selling vice doesn’t make people better off in the long term. In reality, however, the anti-GDP coalition goes much further by mechanistically rejecting policies they don’t like because they “only” boost GDP. This gets things badly wrong in several ways.

What GDP Shows—and Predicts
For starters, humans do value the stuff that GDP measures, so the metric alone—usually adjusted for inflation and divided by a nation’s population (aka, real GDP per capita, or “RGDPpc”)—is a good starting point for measuring well-being. As Cato’s Jeff Miron explained a few years ago in my book on American workers:

RGDP is also useful because the calculation is widely used and standardized, easing comparisons over time and across countries. Typically, economists use real GDP to compare nations’ economic power and real GDP per capita—adjusted for purchasing power—to compare living standards (but the two tend to track each other). Disagreements surely still arise—like this current one involving Paul Krugman’s defense of European living standards—but GDP is still the standard baseline.

Humans, of course, are not merely consumers and producers and thus have lives beyond GDP. Yet a trove of international data shows that RDGDpc strongly correlates with a wide range of economic and non-economic things humans care deeply about: incomes, employment, life expectancy, caloric intake, infant mortality rates, educational attainment, environmental improvement, technological advancement, leisure time, reported life satisfaction (aka happiness), and more. Here’s one example:

RGDPpc also aligns with alternative measures of well-being, including ones meant to replace GDP.

Contra the degrowth narrative, moreover, GDP growth is good for the poor—incomes at the bottom historically rise in proportion to average (per capita) incomes—and global income inequality falls as previously poor countries (China, India, Vietnam, South Korea) experience strong increases in GDP. In short, the countries lifting most people out of extreme poverty have embraced markets and growth, not degrowth.

The connection between GDP and well-being holds at the subnational level, as well. For example, a recent study tracking European regions between 2008 and 2019 found that higher RGDPpc was linked with longer life expectancy. Economist Adam Ozimek did something similar for the United States last year, finding that metro areas with a higher cost-of-living adjusted GDP per capita enjoyed higher real incomes, more plentiful jobs, and fewer single-parent households:

Other careful research has found strong connections between per capita incomes in U.S. cities and both residents’ lifespans and local crime rates.

The relationship between GDP growth and well-being shows up consistently, across dozens of countries with wildly different politics and cultures. The linkage is so strong, in fact, that it’s become a nerdy joke among economists online:

The relationship also isn’t mere coincidence. Some of it is simply math—the things GDP measures also factor into other metrics—but it’s also common sense: As we’ve discussed, richer, more productive societies can afford more leisure and education, better hospitals, cleaner water, better food, and many other things that GDP doesn’t directly measure. Ozimek’s bottom line sums it up well: “GDP is an undeniably important and helpful indicator. It may not include everything that matters, but it is strongly related to many things that do.” Or, put another, more provocative way, money really does buy happiness—at least at the national level.

But GDP Does Err … to the Downside
In one sense, however, the anti-growthers are right that GDP doesn’t fully capture trends in actual human flourishing over time. The only problem is that they’re correcting in the wrong direction: Instead of overstating modern well-being, research increasingly finds that the GDP calculation does the exact opposite.

Cato’s Miron, for example, cites work by economist William Nordhaus showing that artificial light—measured by the number of work hours required to produce a given quantity of lumens—was approximately 300,000 times more expensive in early Babylonia than it is today. Nordhaus found that the same trend applies for computation: Between 1850 and 2006, the cost of performing a calculation, like adding or multiplying, fell by a factor of 73 trillion. The standard price indices on which GDP is based fail to capture cost reductions of this magnitude, which—as our AI moment indicates—continue today.

The modern U.S. economy’s digitization and servicification raise similar issues. The GDP calculation was designed to measure a world dominated by physical goods (crops, energy, manufactures, etc.), so it has difficulty capturing the true value of “free” and continually updated services. Economists have thus estimated that traditional GDP statistics might miss hundreds of billions of dollars in consumer surplus generated by the digital economy each year—real improvements in modern living standards that are especially important for lower-income households (and mostly missed by GDP).

A new working paper from Stanford economists Philip Trammell and Charles Jones goes even further. They start by noting a fundamental problem with how GDP measures actual living standards over time: It essentially values stuff that’s been around for a long time (corn, bicycles, whatever) the same as life-changing new things (antibiotics, the internet, smartphones, etc.). They open with the classic example of this measurement problem: Nathan Rothschild, the richest person in the world in the 1830s, died at age 58 from an infection that $10 of antibiotics would cure today. No amount of extra consumption in 1836—more candles, horses, food, etc.—could have saved him, even if doing so increased GDP. Thus, progress in human living standards comes mostly from the invention of new or higher-quality goods and services, not simply from consuming more of the old things. Yet GDP can’t really distinguish between the two and thus misses the real value of a new good or service that even billionaires find to be valuable, if not priceless.

To get around this and related issues with GDP, the economists propose a clever solution: measuring actual improvements in U.S. living standards over time by looking at the “value of a statistical life” (VSL), i.e., the price people place on their remaining years, as revealed through everyday risk-taking. The trade-off humans routinely make between money and the risk of dying (e.g., from working a more dangerous job), when aggregated across millions of decisions, implicitly quantifies how much we value our expected future life. Standard and widely used VSL figures, therefore, capture almost everything a person would want to stay alive to experience: better foods, new technologies, cleaner air, more freedom, etc. And the growth of VSL over time can provide a better proxy for how much living standards have actually improved, as compared to RGDPpc. Applying this alternative methodology, the economists’ results are striking: While GDP-based living standards in the United States have merely doubled since 1940 (still good!), the VSL-based measure has increased by five to seven times over the same period—and possibly even more.

The implication for the anti-GDP crowd is clear and uncomfortable: Far from overstating how well off we’ve become, GDP may be seriously undercounting it.

Summing It All Up
Despite some flaws, GDP remains a valuable way to measure economic activity and living standards, especially across countries and long periods of time. A century of evidence shows that societies growing richer, as measured by GDP, live longer, healthier, better-educated, and freer lives. And, contra the degrowth narrative, the people best positioned to pursue nonmaterial things—community, leisure, religion, environmental quality—are those wealthy enough to afford them. If anything, GDP probably understates the gains we’ve made, but that’s not a reason to abandon it.

Indeed, since GDP tracks material well-being and other, non-economic measures of human flourishing, policymakers can and should continue to give weight to the metric when evaluating whether certain economic policies have made (or will make) most Americans better off. Policies that improve growth deserve preferential treatment for this reason, not out of allegedly mindless fealty to “line go up.” None of this means that the government should only consider GDP. There are certainly policies that would raise GDP in the short run and are still morally objectionable or economically wrong-headed. And the measure is incomplete in important ways that demand scrutiny whenever a new data point is published (especially with U.S. trade policy right now). But there’s a huge chasm between “GDP is imperfect and should be considered alongside other indicators of human flourishing” and “GDP is meaningless” or “growth is actually bad.” The first position is sensible economics. The second is a surefire recipe for making Americans poorer and calling it a policy win.

That contradiction lies at the center of the One Big Beautiful Bill Act. It also reveals a deeper question facing the American Right: Does it still believe tax reform is possible, or has it instead turned to using the tax code for social engineering, once the primary province of the Left?

For decades, Republican tax policy had a clear North Star. From the Hall-Rabushka flat-tax plan in the 1980s to Herman Cain’s 9–9‑9 plan and reform proposals from then-presidential hopefuls Marco Rubio and Ted Cruz, the debate was usually about how best to move toward a flatter, simpler, more neutral tax system. The logic was so infectious that even Democrat Jerry Brown’s 1992 second-place finish to Bill Clinton included a 13% flat tax. Details differed, but low rates on a broad base were the shared goal of tax reform.

The basic insight across all these proposals was straightforward. The tax system should raise the necessary revenue to fund a limited government while causing the least possible damage to economic growth, work, and investment. To do this: keep tax rates low, treat similar people similarly, and limit the carve-outs that turn the tax code into Swiss cheese.

Much of the 2025 tax law still reflects the older philosophy. It preserves lower marginal tax rates from the first Trump term’s tax reform, maintains a larger standard deduction, improves incentives for business investment through permanent expensing, and extends some limits on itemized deductions. These are significant achievements but mostly extensions of the 2017 reforms.

The most economically important components are the lower rates and investment tax cuts. But they are not the political selling point.

The big campaign banners and TV ads highlight “no tax on tips,” “no tax on overtime,” “no tax on Social Security,” “no tax on American-made car loan interest,” and government-funded child investment accounts. In total, the law adds or expands almost two dozen targeted preferences aimed at sympathetic constituencies.

That may be smart short-term politics. But it is poor fiscal policy and will become increasingly unpopular over time.

A broad tax base with low rates treats everyone the same. But every new carve-out moves in the opposite direction. A teacher and a waiter who make similar incomes now face very different tax burdens. Up to $25,000 of the waiter’s income isn’t taxed. The teacher pays full freight. 

Vice President JD Vance’s now-infamous, miserable “childless cat ladies” comment and his related suggestion that they should pay higher taxes are a perfect illustration of how perverse the tax code already is. Thanks to the child tax credit and half a dozen other child-related tax subsidies, the childless cat lady already faces a tax penalty for choosing not to have children.

Complexity breeds unfairness, and unfairness fuels lobbying for new carve-outs. Temporary breaks get extended, excluded groups demand special treatment, and industries fight to keep existing favors.

This is how tax systems decay: one exception at a time. It’s not a new problem. It’s precisely the dynamic that earlier generations of tax reformers sought to solve.

It should worry fiscal conservatives for another reason. As more income is exempted, pressure grows to raise rates on those still paying or create new taxes elsewhere.

This dynamic is already visible on the Left. Sens. Cory Booker (D‑NJ) and Chris Van Hollen (D‑MD) have both proposed exempting large amounts of income from tax, paired with higher taxes on high-income earners and family-owned businesses. On the Right, a similar impulse has driven many previously anti-tax crusaders to embrace century-high tariff rates and celebrate the billions in revenue they generate.

As more and more income is carved out of the tax base, the remaining taxpayers must bear a larger share of the burden. When current taxes fall short, lawmakers will add new ones: a carbon tax, a value-added tax, or new taxes on wealth and assets. 

These preferences endure because their true cost is easy to disguise. Supporters campaign for them as tax relief for ordinary workers, but someone must pay. If the goal is to help workers, simple, transparent systems are better than complex, opaque subsidies embedded in the tax code.

The fundamental question facing Republicans is philosophical. Is the tax code supposed to fund a constitutionally limited government with as little economic harm as possible? Or is it simply another political tool to direct rewards and punishments? Those are very different views of what the fiscal system is for.

When the temporary “no tax on [fill in the blank]” policies expire at the end of 2028, Republicans will need to confront these two conflicting views of reform, which are really two philosophies of the role of the state in private affairs.

The old Republican consensus isn’t dead yet — far from it. Its core principles shaped most of what ended up in the One Big Beautiful Bill Act. But it now also shares space with a more populist instinct that sees every grievance, industry, or voting bloc as a candidate for special treatment.

The good news is that the older path remains open. Republicans can still return to the broad-base, low-rate, flat-tax North Star.

China policy has been a relative success of Trump’s second term record, but it needs sustained attention. And in this administration—especially now—that is the rarest and most-fleeting of commodities. The shakiness of the Iran ceasefire and the lack of progress in negotiations mean that U.S. forces will be mired in combat conditions when the president lands in Beijing. Iran is not a central topic of U.S.–China relations and the war does not make it so. Its biggest impact on this week’s summit will be as a drag on the U.S. side’s already limited willingness to discuss the difficult political-military differences at the root of U.S.–China tensions.

Trump defied expectations that he would resume the hardline approach to China begun in his first term and continued by the Biden administration. Since stepping back from his “Liberation Day” tariffs, Trump’s dealmaking instincts have been in the driver’s seat. Last October in Busan, South Korea, he and the Chinese President Xi Jinping agreed a one-year trade “truce” in which China resumed exports of rare earth products to U.S. firms and purchases of U.S. agricultural products, the U.S. suspended an expansion of the list of Chinese firms subject to American export controls, and both sides suspended their most punitive tariffs.

The likeliest outcome (and lowest bar for success) of the Beijing visit is a deal to renew and formalize this truce. Preparatory meetings led by Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng reportedly discussed agricultural, energy, and aircraft purchases by China, rare earth supplies to the U.S., export controls, AI, and the establishment of permanent “boards” to manage bilateral trade and investment. Rescheduling the summit afforded more time to expand these discussions, which—even before the U.S. attacked Iran—were reportedly hamstrung by lack of preparation on the U.S. side.

The administration should aim higher. It has become fashionable in Washington to analyze U.S.–China relations as a series of techno-economic races. The de facto outsourcing of China policy to Bessent reflects this perspective. Yet the primary causes of the rivalry are political: mutual paranoia about the status and fate of Taiwan; China’s evaluation that the U.S.-led regional order is designed to “comprehensively contain, encircle, and suppress” China; and American concerns that China seeks to overwhelm its military and push the U.S. out of Asia. Neglecting them leaves the relationship vulnerable to crises and a steadily worsening spiral of suspicion and strategic confrontation.

China’s role in coaxing Iran into the April 7 ceasefire was welcome and the American side’s desire for further Chinese help in pressuring Iran into a peace deal gesture at the opportunities that may open if the underlying relationship were to improve. Conversely, reports that China gave satellite surveillance capabilities to Iran and considered sending it portable air-defense systems preview a more confrontational one.

U.S. strategy requires engagement on first-order questions. The new National Defense Strategy states that the U.S. seeks a balance of power in the Indo-Pacific and “a decent peace” acceptable to China. These are prudent goals and a vast improvement on the complacent primacy that has defined post-war U.S. policy in Asia. Achieving them depends in part on a mature political track with China, not only to communicate redlines, but also to explore formulas to narrow the underlying disagreements.

Xi has made clear that he wants to discuss these disagreements—especially Taiwan, which he accurately calls “the most important issue” in U.S.–China relations. Taiwan policy was reportedly absent from the Trump–Xi discussions in late October. But days later it flared when Japan’s Prime Minister Sanae Takaichi told a Diet hearing that a Chinese use of force to blockade Taiwan could constitute “a survival-threatening situation” for Japan, a legal requirement that could allow Japan to intervene militarily with the U.S.

Although the possibility that a Taiwan conflict could meet this threshold has been accepted in Japanese policy circles for a decade, this was the first time a sitting prime minister said it out loud. China accused Takaichi of departing from Japan’s One China Policy and demanded she retract the comments. Takaichi refused and since November the relationship has been in a deep freeze. China has throttled tourism to Japan and imports of Japanese seafood, and put export controls on major Japanese firms. Chinese readouts hint that Xi raised the Japan issue with Trump in phone calls in November and February. And, according to one report, Trump asked Takaichi to pump the brakes.

This fits the pattern of previous bouts of Sino-Japanese tension, such as in 2010–2012 over the Senkaku Islands, but—crucially—it is the first since their 1972 diplomatic normalization that is specifically about Taiwan. The Taiwan question has now reached a level of such unmanageability that it is roiling ties between China and Japan, perhaps the United States’ most important ally. China is not poised to use force against Taiwan, and the Iran War probably has little influence on its calculations, which are overwhelmingly related to the specific cross-strait political situation. Nevertheless, Taiwan is not just a difficult side issue. It is becoming a long-term wild card that in the extreme could threaten the stability of the American security system in Asia—partly because the U.S. has tried hard to link its alliances to the defense of Taiwan.

Most of Washington’s China-watchers would prefer to marginalize cross-strait politics as an issue in U.S.–China relations. The expectation that Xi will ask Trump to verbally “oppose,” rather than “not support” Taiwan independence and Trump’s February 16 remark that he intends to talk to Xi about American arms sales to Taiwan have raised fears that the U.S. will betray Taiwan’s interests for a short-term trade deal. But the reverse danger should also weigh in U.S. policymakers’ calculations. Merely repeating the traditional talking points does nothing but paper over a widening divergence between each side’s actions and their central commitments under the “One China” framework: that China will strive for peaceful reunification and the U.S. will not pursue a policy of “one China” and “one Taiwan.”

This deteriorating understanding is the foundation of the U.S.–China relationship. Rather than shunting it to the side, the White House should be open to measures for sustaining it. Whether these are rhetorical moves such as “opposing” Taiwan independence or limits on U.S.–Taiwan relations, they should be tied to corresponding Chinese measures favorable to American and Taiwanese interests. These might include qualified renunciations of the use of force against Taiwan or limits on Chinese military activity near the island.

This week’s meeting is not make or break. Trump and Xi may meet up to three additional times in 2026. But the ongoing Iran War will constrain the American side’s perception of its freedom of action. No U.S. president—not even Donald Trump—wants to go out on a political limb for a great power deal while also flailing through an unpopular war. White House officials have already told journalists in pre-trip briefings not to expect summit deliverables about Taiwan or arms control. The administration plainly wants to sustain what Secretary of State Marco Rubio called “strategic stability” across the U.S.–China relationship. They may achieve that as a product of leader-level preference and the evident desire of both countries’ systems for an interregnum to patch techno-industrial vulnerabilities.

When Trump asks Xi to help pressure Iran into signing a deal to end the war, however, he may learn that “strategic stability” does not imply cooperation. The war harms China’s interests, yet the adversarial logic of the relationship means Xi is unlikely to help bail the U.S. out of a situation that harms American interests more. More broadly, “strategic stability” will remain vulnerable to crises caused by unplanned military encounters and the declining credibility of the “One China” framework. U.S.–China relations are structurally competitive, but they do not have to be purely so, nor so prone to accident and force. Going beyond a truce requires both sides to deal with difficult political questions, including Taiwan. Hopefully this week’s summit will convince them to take the risk.

April’s U.S. inflation data has come in hot. According to the Bureau of Labor Statistics, the Consumer Price Index rose 3.8% on a year-over-year basis, the highest reading since May 2023 and well above the Federal Reserve’s 2% inflation target. Energy prices have played a central role in the higher inflation reading.

The most immediate economic fallout from the conflict has come through oil markets. In early February, front-month WTI crude oil futures were trading around $65 a barrel. As of May 12, crude is trading just over $100 a barrel, a roughly 54% increase since early February.

Higher crude prices are reflected at the gas pump. Average U.S. gasoline prices were around $2.80 per gallon just prior to the conflict and now top $4.50 per gallon. Oil and gas also feed into the cost of food production, manufacturing, freight, aviation and electricity. Anything that gets grown, moved or processed carries an energy input. When crude and gasoline jump by more than 50% in three months, those costs work their way through the entire consumer economy. That’s part of why energy shocks can push core inflation higher and stretch household budgets beyond just the cost of gas.

Higher energy prices are only the most immediate economic consequence of the conflict. The longer-term fiscal costs could prove even more consequential.

The Pentagon currently estimates the fiscal cost of the war so far at around $29 billion, mostly reflecting expended munitions. The true fiscal cost could end up being much higher.

In March, the Pentagon asked Congress for $200 billion in supplemental war spending. Factor in the borrowing costs associated with a new deficit-financed spending package and the cumulative fiscal cost of the war could easily sail past $300 billion. Separately, the administration has proposed a $1.5 trillion defense budget for fiscal year 2027, a roughly $440 billion increase year over year.

The Trump administration says some of this new defense spending is needed for munitions replacement. Since the war on Iran started, the U.S. has burned through roughly half of its THAAD and Patriot interceptor stockpile. These multimillion-dollar missiles are expensive and slow to produce. Replacing what’s been spent will take years, and the pressure to replenish the stockpile could grow if the administration chooses to extend the conflict.

These costs land on an already strained federal balance sheet. Federal debt held by the public has exceeded the nation’s entire annual economic output and is on track to exceed the World War II peak by the end of this decade. Net interest payments crossed $1 trillion last fiscal year and now exceed the base defense budget. The nonpartisan Congressional Budget Office projects $2 trillion deficits and rising, driven primarily by automatic entitlement spending on Social Security and Medicare. This outlook assumes neither a prolonged Middle East conflict nor the large defense spending increase the administration is proposing.

Higher deficit spending matters because of how it transmits to prices and interest rates. When debt grows faster than the economy, investors anticipate one of three outcomes: higher taxes, spending cuts or inflation that erodes the value of government debt. Inflation is the path of least political resistance, and the one Washington has historically taken.

The COVID-19 inflation episode is the most recent example. The pandemic, and the government’s response to it, disrupted supply chains and the labor market. Congress ran an unprecedented deficit-financed spending surge, paired with loose monetary policy from the Federal Reserve. Consumer demand surged past what the economy could supply, and prices and interest rates surged.

Persistent deficit spending isn’t the only way fiscal irresponsibility reaches family budgets. Treasury yields climb to absorb new federal borrowing, and those higher rates flow through to mortgages, business loans, auto loans and credit-card balances.

Weakening wage growth

Public debt also crowds out private investment once it tops roughly 80% of GDP, slowing the wage gains households depend on. Weaker wage growth combined with persistently higher prices squeezes real household income from both directions.

Both the Trump administration and Congress can take steps now to bring down energy costs and make Americans’ lives more affordable. Most immediately, the U.S. should work to speedily reopen the Strait of Hormuz, which of course would be immediately accomplished if the U.S. opted to de-escalate the Iran conflict.

Longer term, Congress needs to restore fiscal discipline and sound money. That means adopting statutory caps on spending, rejecting unwarranted spending surges, and reforming Social Security and Medicare, which drive nearly the entire long-term deficit.

The cumulative cost of the conflict depends entirely on its length and severity. The existing cease-fire could hold, energy prices could come down and Congress could reject a significant increase in defense spending.

Yet Washington’s track record on similar matters warrants caution. The post‑9/​11 wars in the Middle East, for example, produced a total fiscal burden in excess of $8 trillion, by some estimates.

If the war drags on and escalates, the fiscal and financial costs will grow too, with downstream effects on Americans’ budgets. Cost-conscious Americans, beware.

April’s Consumer Price Index release shows that these affordability concerns are only getting worse. The headline year-over-year figure came in at 3.8% — the highest since May 2023 and nearly double the Federal Reserve’s 2% target. But year-over-year measures lag; they blend today’s momentum with price changes from 12 months ago, obscuring whether inflation is accelerating right now.

A sharper gauge is the annualized three-month rate: the pace of price increases over the most recent quarter, scaled to a full year. On that measure, headline inflation is running at 7.1% — the highest since the peak of the post-pandemic surge in late 2022. Core inflation, which strips out food and energy, is 3.2% annualized, more than one-and-a-half times the Fed’s target. Neither figure is consistent with price stability.

The immediate driver is the Iran war. Gasoline posted a 21% surge in March — the largest monthly gain on record — and rose another 5% in April as the Iran conflict deepened. But energy costs don’t stay contained; they propagate because they are a key input for many goods and services.

This is what economists call a cost-push shock: Rising input costs work through the supply chain, lifting intermediary material costs and overheads. Increased costs of production are eventually passed through to consumers at retail. April’s report made this visible in real time, with the core reading accelerating to its highest pace since early 2024. The supply shock has already started to bleed into broader price trends.

So far this year, the Federal Reserve’s response has been keeping rates steady. Supply shocks are notoriously hard for a central bank; if the Fed tightens incorrectly consumers could end up with fewer products because of the shock and less credit because of the Fed. The standard defense of Fed inaction (“seeing-through” supply shocks) in such situations invokes the dual mandate: Supply shocks inflict pain on both inflation and employment, leaving the central bank without a clean directional signal.

But there are often many shocks affecting the economy at once. Whether the balance of risks shifts toward inflation or employment can only be answered by looking at the data. April’s unemployment rate held steady at 4.3%. Employment did not fall in any measure commensurate with the price increases. The balance of risks, on the Fed’s own terms, tilts decisively toward inflation.

The Iran war is the fourth significant supply shock in five years. Each time, the Fed chose the same posture: assess; equivocate, delay. Post-pandemic inflation was famously called “transitory.” The Ukraine war’s energy spike was treated as temporary. The tariff-driven price pressures of 2025 prompted the Fed to keep signaling rate cuts, even as inflation data argued against them.

No one can predict how the current conflict evolves or how persistent the energy shock proves. But that is precisely the danger of a central bank that reserves the right to discretionarily ignore economic data; each new one becomes another reason to delay, and the accumulated cost is a price level substantially above where it would have been under a more disciplined framework.

The best objective standard for where rates should be is a policy rule. Commonly used monetary policy rules such as the Taylor rule would advocate a federal funds rate target over 5% based on headline inflation. The current target is between 3.5% and 3.75%. Even the conservative core CPI inflation reading would correspond to at least a 25-basis-point increase to the Fed’s current target range.

To be clear, tightening is not costless. Higher rates raise borrowing costs for households and businesses, strain credit markets and increase the federal government’s already burdensome interest expenses. This will all be compounded because the Fed has consistently used forward guidance to signal that conditions will eventually ease — an issue that led to four historic dissents at the most recent FOMC meeting.

Fed inaction carries far worse costs: Inflation expectations can drift and entrench this high inflation, making the eventual correction sharper. Moreover, as the recent past has shown, bond markets won’t wait for the Fed and new Chair Kevin Warsh. If private actors see worrying signs they will demand higher compensation on assets, raising yields. Both prices and borrowing costs can rise together, leaving households with the worst of both worlds.

The best way for the Fed to ease Americans’ affordability concerns is not to play fortune teller with each crisis and hope for the best. It is to stop treating discretion as a viable monetary policy strategy and return to letting data guide rate decisions in an objective manner.

The diagnostic category itself has been steadily widened by the institutions that define it and the financial structure that rewards every participant for applying the ADHD label. As we have argued in our Cato Institute analysis of how the American healthcare system rewards psychiatric overdiagnosis, subjective diagnostic criteria interact with a payment system that rewards diagnosis to produce predictable inflation across psychiatric categories. The result is labeling ordinary behavior as pathological. ADHD is among the cleanest case studies of that pattern.

Foraging minds in an industrial classroom.

Human cognition was shaped over hundreds of thousands of years in small foraging bands, where attentional flexibility was an asset rather than a liability. A child who scanned the horizon, registered novel stimuli, and shifted focus rapidly between threats and opportunities was a child more likely to survive. Sustained, narrowly channeled attention to a single abstract task for hours at a time was simply not part of the ancestral environment, and the cognitive machinery to produce such concentration on demand was never uniformly selected for. What we now call distractibility is, in another light, vigilance. Most animals, including ancestral humans, evolved to be constantly on the lookout for novelty and threat.

Mass schooling, which emerged in the 19^th century in part to prepare children for industrial labor, asks something quite different. It asks 6- and 7‑year-olds to sit still in rows, suppress physical movement, attend to a single voice for extended stretches, and produce written output on a fixed schedule. Most children adapt. The variance in how easily they do so is enormous, and the children at the lower tail of conformity to that demand have come to define the diagnostic category.

Boys end up there more often than girls, for reasons that are not mysterious. Boys, on average, are more physically active, take longer to develop self-control, and are more drawn to rough play. The same pattern shows up in other mammals and tracks the effects of testosterone on brain development. Put boys in a room and tell them to sit still for six hours, and a predictable share of them will fail, not because they are mentally ill but because they are boys. The youngest children in any classroom are also more likely to be diagnosed with ADHD than their older peers, a finding so robust across studies and countries that it points to ordinary developmental variation rather than disease.

The evolutionary frame also provides a more nuanced understanding of the fear that screen time in childhood harms brain development and attention span. The brain is plastic, especially in childhood, and it adapts to the environment it is given. That plasticity is precisely what allowed generations raised under modern industrialized education systems to develop the sustained attention style that schools reward, despite it being so far from our environment of evolutionary adaptedness. But a generation that grows up navigating fast-moving feeds, switching between applications, and processing rapid streams of visual information will predictably develop a different attentional profile than one raised on books and chalkboards.

That does not mean the learning or attention span of youth raised on digital technology is impaired. Heavy media multitaskers and habitual users of touchscreen devices do tend to perform worse on tasks that demand sustained, narrowly focused attention and inhibitory control. But they also tend to perform better on tasks that demand rapid visual search, parallel processing of multiple objects, and flexible reallocation of attention. Action video game play, in particular, has been shown to enhance visual selective attention, processing speed, and the spatial resolution of vision. These effects transfer beyond the trained task, improving general abilities to track several moving things at once, spot relevant objects in a crowded scene, and pick out a target faster when surrounded by distractions.

These cognitive trade-offs elucidate how neural plasticity gives rise to different forms of intelligence. The brain has a finite budget of computational and metabolic resources, and the cortex reallocates them in response to the demands placed on it. The clearest demonstrations come from sensory deprivation: In people who lose their sight, the visual cortex does not simply lie fallow but is recruited for auditory and tactile processing, including Braille reading, with measurable gains in those domains. Congenitally deaf individuals show analogous repurposing of the auditory cortex for vision and smell. Every brain is continuously specializing toward whatever it does most, and different cognitive skillsets have different trade-offs.

A brain trained on rapid feeds and parallel streams gets better at rapid visual search, switching, and parallel processing while getting worse at slow, serial, endogenous focus. A brain trained on long books and chalkboards makes the opposite trade. The picture is not simply that screens damage children’s brains or lower their intelligence. Claims of generalized cognitive harm typically rest on measures of a single attentional style, the one schools happen to demand, and ignore the capacities that grow on the other side of the ledger. Calling the resulting attentional profile ADHD, treating it as a chronic illness, and medicating it accordingly is a category error. The trade-offs are real, but the diagnostic system measures only the deficits because only the deficits are reimbursable.

From hyperkinetic boys to inattentive adults.

The diagnostic category we now call ADHD has been progressively widened almost from the moment it entered the Diagnostic and Statistical Manual of Mental Disorders, the reference text published by the American Psychiatric Association that defines the criteria for every recognized psychiatric condition in the United States. The DSM-II, published in 1968, listed the condition as “hyperkinetic reaction of childhood” and described it in a single sentence, focused on the restless, disruptive child, almost always identified as a boy, who would supposedly grow out of the condition by adolescence. The DSM-III, in 1980, renamed it attention deficit disorder, with or without hyperactivity, and for the first time treated inattention as a stand-alone presentation rather than a symptom of restlessness. That single revision opened the category to a far larger population of children, especially girls, whose attentional patterns had previously been invisible to the diagnostic system.

The DSM-III‑R, in 1987, folded the subtypes back together and introduced the current acronym, ADHD. The DSM-IV, in 1994, separated the disorder again into three presentations—predominantly inattentive, predominantly hyperactive-impulsive, and combined—and explicitly extended the diagnosis into social, academic, and vocational contexts beyond childhood. Studies comparing the DSM-III‑R and DSM-IV criteria directly found that prevalence rose from 9.6 to 17.8 percent under one set of comparisons and from 7.3 to 11.4 percent under another, almost entirely on the strength of newly identified inattentive cases. The DSM‑5, in 2013, raised the age-of-onset requirement from 7 to 12 and lowered the symptom threshold for adults.

Each revision expanded the population eligible for diagnosis, and, with it, the population eligible for stimulant prescriptions, academic accommodations, and disability protections. The trajectory runs in one direction. There is no edition of the DSM in which the criteria for ADHD became more restrictive.

The incentive problem.

Layered atop the definitional and developmental story is a set of economic incentives that quietly lower the threshold for diagnosis. A growing share of these diagnoses now comes from primary care clinicians rather than specialists, reflecting how rapidly ADHD treatment has migrated into routine primary care, and how the expansion of telehealth lowered the friction of obtaining a prescription.

One of the clearest examples of incentives for overdiagnosis comes from how we finance education. When special-education funding is tied to specific diagnoses, schools have a built-in reason to identify more students with ADHD, because the label unlocks additional resources. Researchers have documented systematic differences in diagnosis and treatment that align with funding formulas rather than with underlying disease rates, a pattern consistent with third-party financial incentives shaping who gets labeled. Clinicians do not work in isolation; they respond to expectations from schools, families, and the broader system. Once stakeholders recognize that a diagnosis unlocks services, pressure to apply the label tends to grow.

Primary care clinicians typically practice in fee-for-service systems, where assigning a diagnosis makes the encounter billable and enables reimbursement for follow-up visits and medication management. Patients have their own incentives to seek the diagnosis, including academic accommodations, workplace protections, and access to performance-enhancing stimulants such as Adderall. In an environment where the condition is defined by subjective criteria rather than objective tests, it is unsurprising that some individuals exaggerate or feign symptoms to obtain those benefits.

The pattern is by now familiar. As we documented in our analysis of Medicaid-funded autism therapy, the broadening of autism criteria, combined with open-ended reimbursement, produced an explosion in spending on applied behavior analysis that far outpaced any plausible change in the prevalence of disabling autism. The broadening of ADHD criteria has produced a parallel surge in stimulant prescriptions, and our recent piece against the campaign to formalize “social media addiction” anticipates the same trajectory if that diagnosis is formalized. In each case, subjective diagnosis and financial incentives that reward diagnosis push the boundaries of illness outward.

What this should teach us.

The growth in diagnoses is best understood as the cumulative output of several systems, each behaving in a way its incentives reward. Definitions expand because there is little institutional pressure to keep them tight. Clinicians diagnose because diagnosis is what the system pays for. Schools refer because referrals bring resources. Patients seek labels because labels bring access to special accommodations. The aggregate effect is a steady erosion of the line between ordinary human variation and clinical disease.

That erosion has costs. Children whose ordinary inattentiveness is medicated as a chronic condition, adults who organize their identities around a label, and patients with severely impairing ADHD whose treatment resources are diluted across an ever-larger pool all bear those costs. The path to more reliable diagnoses runs through more reliable incentives: tighter criteria, independent assessments, and payment structures that do not reward expanding the definition of illness. Policymakers should stop structuring schools, insurers, and healthcare systems so that people must acquire a medical diagnosis to receive help, accommodations, or reimbursement.

Children today have greater safety, resource availability, and tools for education than any cohort in human history. It is the schoolroom that asks kids to sit still for hours and the diagnostic system that pathologizes the ones who cannot that are the more unusual and pathological features of modernity. A more honest accounting would distinguish severely impairing attentional disorders from the wider band of ordinary human variation. It would recognize that the temperaments now most likely to be medicalized are, in a different setting, the temperaments that helped aid survival and human progress.

Last month, the agency issued a “complete response letter” declining to approve the therapy, citing insufficient evidence of effectiveness and concerns about the trial’s design.

Oncologists and researchers have pushed back, arguing that the FDA dismissed encouraging response data and applied standards that may not fit patients with few remaining options. For patients with advanced melanoma who have exhausted standard treatments, that decision is not an abstract regulatory judgment—it can mean the difference between having one more option and having none.

The case raises an obvious question: Whatever happened to “Right to Try,” the policy enacted during the first Trump administration? It was intended for precisely this situation. Yet even when patients are told they have a right to try, that right often exists more on paper than in practice.

Congress passed the federal Right to Try Act in 2018 with a straightforward idea: Terminally ill patients with limited options should be able to access investigational therapies without waiting years for full FDA approval. Lawmakers sought to remove bureaucratic barriers and give patients, their doctors, and drug developers greater flexibility.

Critics warned at the time that the law would do less than its supporters claimed. They argued that the real barriers were not just FDA oversight, but manufacturer reluctance, institutional review requirements, and liability concerns.

In that respect, they were right.

The sales pitch was sweeping. When President Donald Trump signed Right to Try in 2018, surrounded by patients, he promised a “fundamental freedom” that would give dying patients hope.

Eight years later, the record is far thinner than the rhetoric. The FDA reports only a handful of uses each year—12 drugs from 2018 to 2022, and just a few more annually since. It wasn’t a new pathway so much as a permission slip that rarely translates into access.

The gap was evident almost immediately. In 2019, STAT News reported that an ALS patient—whose name appears in the law—still couldn’t obtain treatment, as companies declined to provide it.

That wasn’t a fluke. The law doesn’t require manufacturers, physicians, or hospitals to participate. In practice, the “right” to try ends where others’ willingness begins.

The law does not require drug manufacturers to provide investigational products—and it shouldn’t. Companies often decline because of cost, liability concerns, and the risk that adverse outcomes could complicate approval. Physicians and hospitals face similar pressures, including professional risk and institutional oversight, and they, too, must be free to exercise their judgment or decline involvement. Meanwhile, because the FDA still controls final approval, companies have strong incentives to avoid anything that might jeopardize it.

The RP1 case illustrates this gap. Patients with advanced melanoma—many of whom have exhausted standard therapies—may be willing to accept uncertainty in exchange for a chance at benefit. But the current system does not primarily ask what risks patients are willing to accept. It asks what risks regulators are willing to tolerate on their behalf.

That approach may be understandable when dealing with routine conditions or widely used medications. But it is far harder to justify when applied to patients with terminal illnesses, for whom delay is not a neutral outcome but often the worst possible one.

Supporters of the status quo argue that lowering evidentiary standards would open the door to ineffective or unsafe treatments. That concern is legitimate. But it overlooks an equally important point: The current system already rations access, just in a different way. Instead of allowing patients to weigh risks and benefits with input from their physicians, it assigns that judgment to regulators, who make it on everyone’s behalf through a process that is necessarily slow, cautious, and one-size-fits-all.

More fundamentally, we should reconsider the assumption that a single federal agency must decide when patients may access experimental care.

One alternative would be to shift from centralized control to independent certification. Rather than giving the FDA the power to block access, independent organizations—public or private—could evaluate investigational therapies and provide clear, competing assessments of their safety and effectiveness.

That approach would preserve rigorous evaluation while restoring patient choice. Patients and physicians would still have access to expert guidance, but the final decision would not rest with regulators acting on behalf of everyone. It would rest with the individuals who bear the risk. We rely on independent certification in many other areas of life without giving those organizations the power to ban access altogether. Medicine should be no different.

Right to Try fails because it leaves the existing gatekeeping structure intact. Independent certification would take a different approach: inform patients rather than decide for them.

Independent certification would not guarantee access to every investigational therapy, nor should it. Patients, physicians, and manufacturers each have their own rights and responsibilities, and no system can—or should—override them. But we can do far better than a framework that defaults to delay and denial.

For patients facing life-threatening illness, uncertainty is not the enemy. Delay is. The current system asks them to wait for proof that they may never live long enough to see. A right to try that cannot be exercised is no right at all.

Much of his party, at least in rhetoric if not always in conviction, has gone along with him. Today, tariffs are no longer a temporary experiment but a defining feature of Republican economic policy. Whether that remains the case, or the GOP rediscovers its long-standing affinity for free markets, is one of the most consequential questions facing the party today.

Let’s first reflect on how we arrived here. Riding a wave of voter anger over the Washington status quo — and, it must be said, weak Democratic opposition — Trump was elected in 2016 and 2024 on promises that included confronting China, revitalizing manufacturing, and correcting alleged abuses by U.S. trading partners. This, we were told, was how America would be made great again.

After more than five years in office, and with a trade policy largely left in place by former President Joe Biden (which should give Republicans pause), it’s worth taking stock. The results are not encouraging.

On the China front, no one can credibly argue that heavy and sustained tariffs have prompted the country to change its ways. Even the U.S. government has acknowledged as much. Instead of producing reform in Beijing, the administration has often focused on trade battles with longtime allies rather than building a coordinated response to China.

If the goal is to compete with China, the answer isn’t to wall off the United States but to link arms with its allies. Deeper trade ties in the Indo-Pacific would strengthen supply chains and ensure that global rules are shaped by the U.S. and its partners, not Beijing.

But the administration opted for conflict rather than cooperation, engaging in skirmishes with allies that became the preamble to numerous trade deals widely described as liberating the U.S. from years of abuse. The deals signed in the president’s second term, however, have proved ill-conceived. Concluded under the threat of tariffs, the agreements secured modest foreign tariff reductions while locking in significantly higher U.S. tariffs under the guise of reciprocity.

On net, these deals have made trade more difficult and more costly for Americans. Their result has been a sapping of American economic strength.

Perhaps the clearest example is manufacturing. Far from revitalizing the sector, tariffs have proven an unwelcome headwind by raising the cost of key inputs. Manufacturing depends on access to equipment, components, and raw materials at competitive prices, but tariffs make them costlier.

Consider the administration’s tariffs on steel and aluminum. Imposed during the president’s first term, a 2023 government study found that the tariffs increased output in those industries by $2.8 billion annually. The industries that use those metals, however, saw their output decrease by $3.4 billion — a net loss of $600 million.

That should have prompted a rethink. Instead, the tariffs were increased.

Manufacturers haven’t been the only victims. Farmers have faced higher costs on inputs ranging from fertilizer to fencing, while also bearing the brunt of foreign retaliation. Soybean sales to China collapsed during the early years of the trade war and, despite periodic rebounds, remain below recent historical averages.

Such was the damage that the Trump administration provided farmers with billions in bailout payments in 2019, and last year they did it again.

Americans aren’t blind to any of this. Polling shows the administration’s broad use of tariffs has been negatively received by the public. Protectionism isn’t just an economic loser but also a political one. A key factor behind Trump’s 2024 victory was voter anger over rising costs. Higher tariffs, and the higher prices they create, cut directly against that concern.

The protectionist experiment has been run, and the results are in. For the sake of the economy — and their own political future — Republicans need a new trade policy. Or, more accurately, a return to their old one.

After all, Republicans have not always seen trade this way. Urging Congress to renew the Trade Agreements Act to enable tariff reductions, Dwight D. Eisenhower made the often overlooked point that if the U.S. wished to sell its goods abroad, it also had to buy from abroad. Ronald Reagan was even more direct. Protectionism, he argued, was “destructionism” that destroys jobs and weakens industries.

Beyond economics, Republican philosophy offers its own case against tariffs. Tariffs are taxes, and their imposition by executive decree represents a significant expansion of presidential power. For decades, both tariffs and expansive executive power have been — with good reason — anathema to Republicans. Yet earlier this year, the Supreme Court held that the president overstepped his authority by imposing tariffs under the International Emergency Economic Powers Act.

Notably, Trump himself has even at times implicitly recognized the limits of trade barriers. His administration has issued a historically long waiver of the protectionist Jones Act when restrictions proved too costly and rolled back tariffs when they threatened key industries. When the stakes are highest, even proponents of tariffs turn to flexibility.

The choice facing Republicans is not between being pro-America and pro-trade. It is between symbolic protectionism and actual competitiveness. America’s strength has never come from walling itself off. It has come from engaging with the world on its own terms with confidence in Americans’ ability to compete and win.

Re-embracing that tradition would mark an overdue return to the policies that built American prosperity.

It’s a tidy narrative but mostly wrong.

There is no standard measure of the “labor share” — worker compensation as a fraction of gross domestic product — and commonly cited figures are inaccurate. They often omit important sources of employee compensation or distort “corporate” income by failing to account for asset depreciation or by including income from noncorporate or foreign sources. When economists correct these errors, the purported labor-share decline becomes more modest or reverts to historical norms.

Just as important, a rising share of corporate income benefits the 62 percent of American workers who own equities, padding their 401(k)s, IRAs, pension funds and education and health savings plans. With “Trump accounts” for millions of children now coming online, that figure should soon increase, further undermining the zero-sum characterization of a declining labor share as “capitalists” taking from “workers.”

Finally, inasmuch as the decline remains concerning, government policy shoulders much of the blame. In a paper published last month, economists Byunghee Choi and Choongryul Yang find that 45 percent of the declining labor share between the late 1990s and 2019 owed to a reduction in U.S. companies’ hiring and firing. This “rise of inaction” was driven by the increasing costs that firms incurred for worker-related regulatory compliance and employer-provided health insurance.

Consider the latter dynamic. As Elizabeth J. Fowler and Michael F. Cannon recently observed in The Post, exempting employer-sponsored insurance from payroll and income taxes ensures that most workers get their coverage through their employers. That provision, they add, “encourages more comprehensive plans than many workers might otherwise choose, which reduces price sensitivity.” Per-worker insurance costs thus keep climbing. Regulatory mandates in the Affordable Care Act can add to the price tag by eliminating the lowest-cost policies and requiring remaining ones to cover workers’ adult-age children.

Both regulatory and health care costs are typically incurred when a company hires — or, in the case of labor regulation, fires — an employee. When the burdens rise, employers have a greater financial incentive to avoid changing headcounts. The result is less hiring and firing, less labor reallocation across firms, weaker competition for workers, lower wages and ultimately a lower labor share. Choi and Yang estimate that health care alone accounted for about a third of the increase in labor frictions over roughly 20 years.

That is consistent with other research. Economist Niklas Engbom examined 23 OECD economies between 1991 and 2015 and found that nations with more dynamic labor markets enjoyed faster wage growth. Policies that raised hiring costs — business regulations, labor taxes, employment-protection laws — also reduced labor-market fluidity. Research from Columbia University has found similar effects, which recent events bear out: Immediately after the pandemic, the United States — Engbom’s base case for a “typical high-fluidity country” — experienced lower unemployment and faster wage growth than Europe, where governments discouraged employers from changing headcounts.

Policy can create similar costs and sclerosis for workers. Employer-sponsored health care reduces voluntary job turnover because quitting creates burdens for workers and their families, a phenomenon economists call “job lock.” Other tax-advantaged benefits tied to employment — for retirement, dependent care or transit — do the same.

Occupational licensing can likewise discourage incumbent workers from changing professions or locations, as well as block those who lack the requisite credentials. Decades-old criminal records can bar workers from licensed trades or keep them from applying for new jobs to avoid scrutiny of their past mistakes. These and other barriers suppress the job-switching through which American workers have historically accumulated skills, built bargaining power and negotiated higher wages.

Pace populist critics, then, it isn’t greedy corporations that are to blame. It’s mainly government policy, which has discouraged American employers from adjusting their headcounts and American workers from quitting for greener pastures. The resulting stagnation has meant lower wage growth and a lower share of the economic pie going to workers. With today’s U.S. labor market having been stuck in a “low-hire, low-fire” environment for a year, there’s little reason to think this will change anytime soon.

Yet for those truly concerned about the labor share, there are obvious solutions. Fix the policies that make it harder for American workers to move, switch, quit and bargain. Ensure that workers aren’t increasingly costly to employers. That might include eliminating the health care tax exclusion, consolidating workers’ tax-advantaged benefits into a single, portable savings account or letting onerous new rules for overtime and tips expire in 2028. Among the states, it could mean allowing licensed workers to operate across state lines.

Intentional or not, the government has waged a multidecade war on U.S. labor dynamism. The results are clear. What isn’t is whether anyone, on the left or right, is willing to take on the policies that got us here.

While Warsh’s views received some attention at his nomination hearing before a U.S. Senate committee last month, they have not been sufficiently scrutinized as a basis for monetary policy.

There is a great deal worth supporting in Warsh’s reform agenda. He is right that the Fed’s balance sheet, expanded for crises long past, should be reduced. He is right that forward guidance has corroded the central bank’s discipline rather than sharpened it. He is right that the Fed has strayed well beyond its purview and should revert its focus to price stability and full employment. I have argued versions of each of these points elsewhere. The AI productivity argument is different. It points the wrong way.

What Warsh is offering is a forecast dressed as a framework. He claims that AI will raise productivity, that such productivity gains will be disinflationary, and that the Fed should cut rates accordingly. The framework question — how the Fed should respond if productivity rises — is one thing. The forecast question — will it, when, and by how much — is something else. Warsh acknowledges little uncertainty on the second question. Professional estimates acknowledge a great deal.

The range of credible estimates on AI’s productivity impact span roughly an order of magnitude. Economist Daron Acemoglu puts the total factor productivity gain at no more than 0.66% over a decade, or about 7 basis points per year. In their research, economists Philippe Aghion and Simon Bunel, drawing on prior general-purpose technology waves, estimate somewhere between 0.8 and 1.3 percentage points annually. Goldman Sachs has projected 1.5 percentage points annually, while AI insiders themselves project considerably more.

The net inflation effect is even less settled. Fed Vice Chair Philip Jefferson noted in a November speech that AI’s near-term effect on prices is not unambiguously downward — the technology is currently a positive demand shock, with capital expenditure on data centers, electricity infrastructure and equipment running well above trend, before it becomes a positive supply shock to consumer goods and services. Even granting Warsh’s productivity story, the timing matters.

To be clear, there is a version of the productivity-and-prices argument that holds up. If AI represents a permanent positive supply shock, the right response is not to cut rates today on a forecast but to revisit whether a 2% inflation target makes sense at all in a higher-productivity economy.

A monetary framework that lets falling production costs show up as lower prices for consumers, rather than offsetting them with compensating stimulus, has intellectual support and is worth discussing. But it is a long-run framework reform. It is not a case for cutting the federal-funds rate target in the near future. The version that justifies near-term cuts, presumably the one Warsh is making, is the weaker one.

Even if Warsh holds these views as chair, his individual judgment is unlikely to drive overall rate decisions much. Stephen Miran’s appointment to the Federal Open Market Committee last September was widely seen as a way to operationalize the president’s call for sharp cuts. Indeed, Miran has been the lone dissenter (always dovish) at every meeting since his appointment. But these dissents have never mirrored Trump’s desire for a massive, 200- to 300-basis-point decline in the Fed’s target rate. And the other 11 members never followed Miran. Instead, Miran is now softening his stance. Appointees adapt to the committee’s norms, and the committee’s norms dampen the influence of any one voice.

The problem is not the substance of Warsh’s AI view. It is the method. Anchoring a policy stance on a single-point estimate from a wide distribution of credible forecasts is an exercise in discretion. The AI-productivity thesis stands out as the one piece of Warsh’s broader agenda that points discretionary. The rest — balance-sheet discipline, less forward guidance, a narrower mandate — pulls in the other direction. That asymmetry will invite scrutiny on its own, especially under the broader political context of the president’s desire for sharp, immediate rate cuts.

If productivity gains do not arrive on the timeline the argument assumes, the cost is not just to the argument but to the Fed’s credibility. The 2021 “transitory” episode is a relevant cautionary tale. The FOMC set the target rate wrong because it adopted a forecast — that pandemic price pressures would prove temporary — and built policy around it.

Ordinary Americans are still dealing with the fallout from that policy choice, and the Fed’s reputation has suffered serious damage. Its credibility will be harmed further if the chair offers policy prescriptions based on a subjective assessment of economic conditions that don’t materialize.

Fortunately, there’s a simpler way to deal with evolving economic conditions, especially under uncertainty. A rules-based framework accommodates a productivity boom automatically.

Under such a system, the FOMC publishes an arithmetic formula linking the interest-rate target to key macroeconomic variables such as inflation and employment. If AI delivers, the reaction function adjusts and rates come down without anyone having to correctly forecast OpenAI’s or Anthropic’s product roadmap. If it underdelivers, rates hold. The committee does not have to bet. This is the reform Warsh’s broader agenda points toward — but that his AI argument cuts against.

Discretion is the enemy here — not Warsh, and not the AI thesis. The Fed should commit to a policy rule and let the data on AI productivity speak for itself.

But some large U.S. companies — most notably Amazon — are declining to claim their refunds. This is not, presumably, because these companies don’t want the billion-plus dollars they’re owed; they are apparently calculating that requesting their money back might provoke the president’s disfavor, which could cost more than the abandoned refund.

Trump confirmed those concerns in April, telling CNBC’s “Squawk Box” that it will be “brilliant” if companies decline to seek refunds. “If they don’t do that, I’ll remember them,” said the president, chuckling — as he often does when floating something that should probably be cause for alarm. But the president generally gets high marks for candor and the first year of Trump’s second term provides good reason to assume he’s serious.

Take, for example, the president’s executive orders directing federal agencies to cancel government contracts and suspend security clearances for law firms that employed or represented the president’s adversaries. Or the FCC’s politically charged investigations of networks receiving Trump’s ire and its approval of Paramount’s Skydance merger after the company agreed to a $16 million settlement with Trump. Or the Treasury Department’s interest-laden imposition and lifting of sanctions.

And, of course, the president’s “carrot-and-stick approach” in exercising his pardon power. These and other similar actions show that the president, with the help of executive officers around him, is willing to use the powers of his office to reward his allies and target his foes.

That companies are responding strategically is lamentable, if not surprising. To be sure, companies have rarely made campaign donations out of public-spirited commitment to the airing of political debate. Rewarding political or financial allies has almost certainly been a part of every human society. The same goes for punishing perceived opponents: the Adams administration used the infamous Sedition Act to prosecute its critics and President Nixon’s White House counsel proposed using “the available federal machinery to screw our political enemies.” There are excessive examples of each.

But the anger at politically motivated enforcement of the law, when it comes to light, suggests most Americans expect and receive largely impartial — albeit inefficient — government. And if President Calvin Coolidge was right that “the chief business of the American people is business,” the possibility that Amazon and others are making rational business decisions in letting the government keep their money, despite an acknowledged obligation to return it, reflects a troubling shift in our political and legal culture.

While complaints about American litigiousness abound, we rightly champion the rule of law over the rule of men. The U.S. economy’s success is due in significant part to the fact that the country provides a relatively stable, fair, and predictable system in which to do business. Foreign investment, contract enforcement, and entrepreneurial risk-taking all depend on the belief that outcomes are determined by law and market forces rather than political relationships. When that assumption erodes, the damage is civic, as well as economic.

The president was no doubt correct, however, in musing that if companies don’t file for tariff refunds, “they’ve got to know [him] very well.” When knowing the man becomes more valuable than knowing the market, the chief business of America is the cultivation of government favor. And when businesses profit more from pleasing the ruler than serving their customers, we all end up with the ruler’s preferences — on our shelves and on our screens.

Clearly Utah families want more educational options than the system currently provides. That reality matters as the Utah Supreme Court considers whether to eliminate UFA, and as lawmakers weigh what comes next.

UFA, passed in 2023, enables parents to use a portion of state education funding for a wide range of educational options: private schools, microschools, tutoring, special-needs services and homeschool resources.

Since then, a diverse ecosystem of learning options has blossomed across the state. The same thing is happening in other states with similar programs. Lower-income families are prioritized in the application process, so UFA is helping students who need it most. School heads are also reporting a diversifying student body as children from a wider range of backgrounds find their way to schools that fit them.

Families aren’t exiting public schools out of spite — they just need something different. Perhaps they have a child with a learning disability whose assigned school wasn’t equipped to help, one who was bullied and needed a fresh start or a student who succeeds in a smaller setting that a conventional classroom can’t provide. UFA gave them a lifeline. For many, it’s the only reason their child is thriving today.

That program is now under threat.

The teachers’ union sued to kill UFA shortly after the first application window closed. Last year, a district judge sided with the union, ruling that Utah’s constitutional mandate to establish public schools means the legislature cannot create other educational programs. In other words, the ruling held that the mandate is a ceiling and not a floor. The Utah Supreme Court is now reviewing that decision.

Consider what the “ceiling” interpretation would actually mean. If the constitution truly prohibits the legislature from going beyond that minimum and prevents public funds from supporting private educational choices, Utah would need to halt programs that have operated for decades without controversy. For example, Utah’s public preschool programs — which are not universal, free or guaranteed — go well beyond the constitutional mandate to provide K‑12 schooling.

Similarly, Opportunity Scholarships, which award college scholarships to high school students who complete advanced coursework, could be disallowed if the ceiling interpretation prevails. These programs are not facing legal challenges because the education clause has long been understood to set a floor for educating children, not a ceiling.

Specifically in the K‑12 space, it’s worth noting that Utah’s long-standing programs supporting students with special needs at private schools have also not been subject to lawsuits despite going beyond what the constitution mandates. It’s further evidence that the constitution’s education provision has not been treated as a ceiling.

The Idaho Supreme Court recently confronted a similar question and came to the opposite conclusion of the Utah district judge. Ruling against a challenge to Idaho’s education tax credit program, the Idaho court held that the public school mandate doesn’t bar the legislature from going further. “When a constitutional provision mandates the legislature do something,” the court wrote, “it is not reasonable to read that mandate as restricting the legislature’s broader power to do something more.”

The union’s second argument — that the program diverts funding from public schools to private schools — fares no better. Scholarships go to individual children, not private schools, and can be used for far more than tuition, including tutoring, therapy, curriculum and other learning expenses. Crucially, a scholarship only exists because a family chose not to use a public school, so public schools are not losing funding for students they are actually educating.

The numbers also undermine the “defunding” argument since public schools retain significant funding even when students choose other options. Utah public schools spent more than $10.6 billion last year — over $16,000 per student. The maximum UFA scholarship is $8,000.

School districts retain all local funding and some state funding even when students go elsewhere. Total UFA funding amounts to roughly 1% of public school spending. Allowing parents more choices about how to educate their children does not threaten the public school system.

For more than a century, establishing and maintaining public schools has been the bare minimum Utah’s constitution required. UFA finally goes further. It gives children who need something other than their assigned public school access to different learning environments.

Whatever the court decides, the legislature should be clear-eyed about what’s at stake: a program with more demand than supply that is already changing lives and costs a fraction of what public schools spend.

Section 27 of the Merchant Marine Act of 1920, as it’s formally known, requires that goods shipped between US ports travel on vessels that are US-built, US-flagged, US-owned, and crewed predominantly by US citizens. Because of this legally-enforced domestic shipping monopoly, building and operating ships in America today costs far more than doing so abroad, and domestic coastwise shipping is effectively non-existent outside the few places that have no choice, such as Alaska, Hawaii and Puerto Rico.

Rather than bolstering US commercial shipping capacity and the merchant marine, the Jones Act has presided over the steady degradation of both.

Supporters of the law claim it’s essential for national security and has negligible economic costs. They’ve also vigorously opposed waivers of the law, which are permitted in the “interest of national defense,” arguing that exemptions undermine economic and national security and are unnecessary due to sufficient domestic capacity. Their efforts to narrow the waiver conditions have, along with vigorous lobbying, successfully ensured they’re rarely met.

President Donald Trump’s most recent waiver of the law has substantially undermined the pro-Jones Act case. Issued for 60 days on March 17, 2026 – right after the Strait of Hormuz effectively closed – and subsequently extended for another 90, the waiver covers all US territories and more than 659 product categories. That makes it the longest and broadest waiver since 1950. The law also requires that any operator using the waiver file a compliance report on their activities. Here’s what the data thru May 6 show – and what they don’t.

First, the waiver exposes flaws in the law’s national security rationale. The Jones Act ostensibly exists to ensure the US isn’t dependent on adversaries to move critical supplies in times of crisis. Yet, even leaving aside that this “national security” law keeps getting waived when a genuine security emergency arrives, the waiver data tell a benign story. None of the foreign vessels moving millions of barrels of gasoline, diesel, crude oil, and fertilizer between American ports have been owned or operated by Chinese firms or have flown the flag of China. Russia is similarly absent.

The White House has called these vessels’ availability “incredibly effective” for stabilizing US energy markets. Thus, when a real crisis hit, allies and neutral registrants, not adversaries, filled the gap – a gap created by a withering Jones Act fleet of just 93 oceangoing vessels (only 55 tankers) and a moribund commercial shipbuilding industry that recently got bailed out by the South Koreans.

So much for “national security.”

Second, the waiver reveals some of the domestic shipping demand that the Jones Act has suppressed, thus hinting at the law’s substantial economic costs. As industry publication TradeWinds reports, foreign vessels utilizing the waiver have supplemented a fully-booked Jones Act fleet instead of displacing it. This implies the existence of latent demand for coastwise shipping that the law has thwarted – additional transactions between US companies and US ports that would occur daily but for the Jones Act’s costs. In non-waiver times, this activity goes to foreign suppliers, along overland US routes, or via ridiculous workarounds such as sending Gulf Coast fuel to the Bahamas for blending before delivering it to California. For the next few months, it doesn’t.

The waiver data also show the potential for both US long- and short-haul shipping markets – sometimes between a single American company’s US facilities. Distant voyages include diesel from Louisiana to Puerto Rico (due to “non-Availability of US flag vessels”); crude oil from Texas to Pennsylvania; gasoline from Houston to Long Beach; and renewable diesel from New Orleans to Portland. Jones Act critics have long claimed that the law forces supply-constrained US areas to use imports instead of preferable American-made goods; under the waiver, Phillips 66 is shipping domestic oil from Texas to an East Coast refiner, instead of the foreign crude it usually sends.

The short-haul voyages are just as noteworthy. They include gasoline and diesel from Washington to California and Oregon; same-state shipments of fertilizer, ethanol, and refined products in Louisiana, Texas, and California. These are natural trade lanes that have been blocked for decades, all but ensuring more traffic on US interstates and rail lines instead of goods traveling more efficiently on the water.

A robust coastwise shipping sector could exist in the United States, but the Jones Act simply prevents it. That’s “demand destruction” in action, and the waiver lets us see it.

That visibility is another benefit: Unlike a tariff, which raises costs but still allows trade during high-stress periods, the Jones Act’s prohibition on foreign coastwise shipping created a century-long dearth of the information needed to model a more competitive shipping environment. Now, the law’s unseen effects are no longer theoretical; they’re real – and documented in federal records. Economic analyses and public discourse should be better for it.

That said, the waiver won’t show everything Jones Act critics might want. Although 150 days is a relatively long period, it’s still fundamentally different from permanent reform, which would give market actors the consistency and predictability they need to make large, long-term investments. As the administration’s 90-day extension acknowledges, it takes time for shippers to commit to routes, reorganize freight networks, establish new supply chains, and otherwise reveal the potential of unrestricted American maritime trade.

Twenty-three movements are useful datapoints, but they’re not permanent policy change. The waiver will reveal some of what’s possible without the Jones Act, but surely not all, or even most, of it – especially the new companies, services, and even entire markets that might eventually emerge in the absence of the law’s restrictions and distortions.

The waiver also won’t show a major change in fuel, fertilizer, or other prices — something Jones Act defenders have unfairly seized upon. Even a peacetime repeal of the law would likely reduce the price of a gallon of gas by 10 cents at most. A temporary waiver will provide smaller benefits – ones swamped by the seismic forces of a generational energy crisis. The Jones Act is a small, chronic tax on the American economy, not a deathblow. Temporarily lifting that tax will help at the margins; it won’t fundamentally transform the economy.

Nevertheless, the Jones Act waiver has given us something the law’s defenders have spent a century trying to prevent: evidence of what we’ve been missing. Dozens of ships. Millions of barrels. Natural trade lanes. It’s a good start.

Predictably, Washington’s Europe-Firsters snapped for their fainting couches. Sen. Roger Wicker and Rep. Mike Rogers, the Republican chairs of the Senate and House Armed Services Committees, respectively, pronounced themselves “very concerned” by the move, fretting that it “risks undermining deterrence and sending the wrong signal to Vladimir Putin.”

President Trump is right to withdraw troops from Germany and from Europe. Neocon Republicans and Democrats are wrong. There is already a template for a rapid withdrawal from Europe: the one that took place after the end of the Cold War — incidentally, also the last era when the U.S. had a balanced budget. Our only criticism is that Trump’s current withdrawal numbers don’t go far enough. (In fairness, the president promised on Saturday that he is “going to cut way down. And we’re cutting a lot further than 5,000.”)

There is one argument for maintaining U.S. dominance of European security that could hold water: the idea that doing so prevents World War III. As the German scholar Josef Joffe posed it, the U.S. presence serves as a “pacifier” for Europe, which without it would otherwise drift back to security competition or war.

This view is dated and fails to recognize how profoundly Europe has changed. The United Kingdom and France have nuclear weapons, which they would use to defend themselves if needed. The Bundeswehr does not have anywhere near the size to expand into its wealthy neighbors. And a Russia that cannot defeat Ukraine cannot expand into Europe.

Beyond the realist argument above, there are two other arguments for trying to sustain U.S. military dominance in Europe. The first is for continuous forward presence and primacy to deter any plausible threat to any NATO member-state. The second is for “civilizational” allies, and advocates moving troops into the “healthier” countries of Central and Eastern Europe. Both are flawed, and President Trump should reject them.

As the 2025 National Security Strategy correctly states, “Our elites badly miscalculated America’s willingness to shoulder forever global burdens to which the American people saw no connection to the national interest. … The days of the United States propping up the entire world order like Atlas are over.” The NSS accordingly calls for enabling and encouraging Europe to stand on its own feet, ending the perception and practice of a growing NATO, and ensuring fair trade from European partners. None of that necessitates a constant American forward presence.

There is also an argument to move troops out of Germany and closer to the Russian border, to be placed in “civilizational” allies and countries. That would also be counterproductive. To incentivize Germany and other rich Western European states to take more of the burden of European defense, Trump should pull American troops out of the continent. Moving them further toward their main threat will do little to create a sense of urgency.

The core interests of the United States in Europe are limited. Washington’s chief strategic aim for more than 100 years has been to ensure a disunited Europe. The United States did not want a single power bloc led by Imperial Germany, Nazi Germany, or the Soviet Union to dominate Europe politically and economically. As Hans Morgenthau explained in 1950: “We have conceived the two wars which we fought essentially as two holy crusades, engaged in by a good people against an evil one. It so happened, that what was really at stake in those crusades was not at all the extirpation of evil of its own sake, but the restoration of the balance of power in Europe.” There is no hegemonic threat to Europe on the horizon today. The European Union is an economic rival, at most.

What this means is that keeping European power divided entails keeping the major European states, such as Russia, France, Germany, and the United Kingdom, divided. A U.S. absence will incentivize a natural equilibrium and regional blocs coalescing within Europe. Stronger sovereigntist and centrifugal forces within Europe will also likely emerge.

Under the current policy, the United States acts as an unnatural glue that keeps the European Union protected beneath massive American defense subsidies. As history shows, the threat of even partial U.S. withdrawal either pushes European states to rearm rapidly, as in the cases of Germany and Poland at present, or produces local balancing coalitions, such as the German brigade in Lithuania or the Greco-French military alliance. As a Politico Europe headline blared in December, “Trump’s attacks force Europe to speed up post-America defense plans.” Wonderful. Trump should keep going.

Critics of withdrawing U.S. troops from Germany further argue that the U.S. presence there makes U.S. intervention in the Middle East easier, so Americans should want to keep it. For example, the statement of the Senate and House Armed Services Committee chairmen protests that U.S. bases in Germany provide “seamless access, basing, and overflight for U.S. forces” conducting the current U.S. war in Iran. But the United States should not be lubricating power projection into the Middle East. If starting U.S. wars in the Middle East became a bit harder as a result of having fewer troops in Germany, this should be viewed as a feature, not a bug.

German and broader European security do not require American power in theater by the division. According to Europeans, the main threat they face is from Moscow. But a Russia that cannot defeat Ukraine cannot threaten Germany, much less conquer and pacify a continent with four times its population. Russian GDP is only three times Poland’s, or slightly less than Italy and Portugal’s combined. Russia is not a plausible European hegemon and will not be one in the policy-relevant future. Accordingly, keeping Germany free from Russian aggression does not require U.S. troops inside its borders. Encouraging Germany to rapidly rearm and balance Russia, as President Trump is currently doing, is the right approach.

Trump has worried about allied burden-shifting for decades. In a 1987 ad in The New York Times, he admonished American politicians to “stop paying to defend countries that can afford to defend themselves.” His instinct was right then, and he is still right. Removing U.S. forces from Germany is a move that truly puts America first. The president should ignore his critics and follow through on his promise.

So, any politician who wants to help Americans save more deserves at least a hearing. What should such a politician propose?

The first thing to do is remove all government-made barriers to savings. This includes a Social Security design that disincentivizes saving, and a tax code that hits much of our savings twice, as both income and investment returns. Addressing our massive debt—which threatens to bring inflation back and literally destroy the value of the savings we already have—would help too.

Alas, this isn’t what Trump has in mind with his new executive order directing the Treasury to launch “Trum​pI​RA​.gov,” a portal where workers without employer-sponsored retirement plans can shop for private accounts. And some of them will be able to claim a federal Saver’s Match of up to $1,000 a year.

The plans are vague, but we can get an idea from a bipartisan bill currently before Congress. The Retirement Savings for Americans Act would automatically enroll workers earning below the national median income in new retirement accounts and provide government matching contributions. According to RAND Corporation research, roughly 63 million workers would be eligible for these accounts, and 42 million would qualify for the match.

Bipartisan support for the idea is growing. Wall Street firms see new customers. Progressives see expanded government involvement in retirement. Some conservatives see a backdoor route to Social Security privatization. I urge skepticism.

Start with the core of the proposal. The Saver’s Match is not a Trump innovation. It was created by the 2022 SECURE 2.0 Act under former President Joe Biden. Trump’s executive order merely accelerates its rollout and expands its visibility. It will be very expensive.

Romina Bocca at the Cato Institute writes in The Washington Post that if modeled after the bill mentioned above, then “starting in 2027, low-income workers with existing retirement accounts are set to receive up to $1,000 in matching funds, at a cost to federal taxpayers of $9.3 billion through 2032. Expanding eligibility and automatically enrolling workers without existing accounts, as proposed by the bipartisan Retirement Savings for Americans Act, would be far more costly. Some projections put the price tag at $285 billion over the first decade alone.”

That’s real money being added to a federal balance sheet already groaning under the weight of a Social Security system facing roughly $28 trillion in long-term shortfalls.

But the fiscal objection, while serious, is not the deepest one. The deeper problem is that the proposal’s backers misread the savings behavior of the households they claim to help.

Decades of economic research tell a consistent story: Low-income households are not failing to save because they lack tax-advantaged ways to do it. They fail to save because when you live paycheck to paycheck, locking money in an account you cannot access without incurring penalties, such as IRAs, 401(k)s and 529s, is risky.

Vanguard data show that households at the lowest income levels have the highest early withdrawal rates from existing retirement accounts, with penalties accounting for a disproportionate share of their tax burden. According to Boccia, penalties account for 43 percent of all taxes paid by individuals with adjusted gross incomes below $5,000.

Automatic enrollment, which animates much of the enthusiasm for expanded accounts, does not change this calculus for everyone. Research using Danish pension data found that some workers simply offset mandatory contributions by reducing voluntary saving. A large-scale United Kingdom study found that 18–21 cents of every dollar saved through auto-enrollment is offset by taking on debt. A recent study shows that the benefits of auto-enrollment are much smaller than original estimates assumed.

The better path is genuine simplification: a universal savings account that shields its owner from the tax bias against saving, allows contributions from any after-tax income, imposes no restrictions on withdrawals, and requires no government match and no new federal spending. Canada and the United Kingdom have run this experiment. Accounts were used enthusiastically across all income levels, including by moderate- and lower-income households who value flexibility above all else.

Finally, if politicians truly care about securing Americans’ retirement income, they should have the courage both to reform Social Security (to stop lower-income seniors from being hit with an automatic 23 percent benefit cut while preventing massive increase of the debt) and to reform a tax code that creates silly disincentives to save.

After Birmingham council and Next comes Tesco. About 62,000 current and former store workers, mostly women, claim they should have been paid the rate for male-dominated warehouse jobs, because their work was of “equal value”.

Tesco says distribution centre workers were paid up to £5.50 an hour more than store workers because that was the market rate required to recruit and retain them. Warehouse jobs are often in colder conditions, more physical and generally less agreeable. In other words, Tesco paid more because it had to.

Yet UK equality law gives the claimants an opening. After a European court ruling, Tesco conceded that store workers could compare themselves with distribution centre workers. The current hearing tasks Tesco with proving the pay gap reflected non-discriminatory factors. Unfortunately for Tesco, pointing to “market rates” is often insufficient if a pay structure disadvantages women. If Tesco loses this and a later “equal value” assessment, it faces providing billions in back pay.

“Hold on,” I hear you say. “These are plainly different jobs. Wasn’t equal pay about avoiding women being paid less simply because they are women?” Not in Britain. Section 65 of the Equality Act 2010 extends “equal work” to include work “rated as equivalent” or of “equal value”. This is not about paying female store staff less than male store staff, or a pay gap by sex for warehouse workers. It is about whether an occupation dominated by men pays better than one with relatively more women, at least if employment bureaucrats deem both roles have equal value.

How is value determined here? Not by observing what workers accept. An independent expert appointed by the Employment Tribunal instead assesses the jobs, scoring them numerically under headings such as knowledge, responsibility, training, mental strain, physical effort and working conditions. Different jobs can score similar totals by summing the numbers despite them being utterly different in practice. It’s an arbitrary exercise divorced from economic decisions, using what The Economist’s Archie Hall describes as “hand-waving pseudo-rigour.”

Truly, it’s awful economics. Wages are market prices that reflect a multitude of factors, including scarcity, location, outside options, unsocial hours, urgency and bargaining power. A warehouse in a tight labour market may need higher pay than a shop floor. A night-shift depot may need premiums a daytime store does not.

The Next case illustrated this perfectly. The company even offered some store workers the chance to transfer to warehouses. Very few wanted to, with one claimant admitting they would need much higher pay to consider it. That is what the wage differential was screaming. Equalise rates by legal fiat and you can expect surplus workers for stores or shortages for warehouses.

If Tesco loses, it’s not just the back pay bill it will face. Its pay ladder risks getting compressed. Supervisors will demand responsibility premiums survive. And given the company operates in a tight-margin sector, raising store pay inevitably means some combination of higher prices, fewer jobs, or squeezing workers harder.

Across the economy, more employers will then expend resources second-guessing possible future claims, commissioning costly job evaluations, or outsourcing functions to avoid liability. Is this really what our slow growth economy needs? Companies building litigation defences instead of better products?

Obviously not. But what party will say so? Labour would extend this framework to other minorities. The Conservatives talk big about meritocracy and Reform says it would scrap the Equality Act. But would either commit to the full abolition of “equal value” provisions and endure the charge of attacking women’s rights? So far, nobody has dared.

President Trump will be the first living American to be featured on the document. These special-edition passports will only be available at the Washington, D.C., passport agency, but they are part of a broader program: They embody the Trump administration’s latest attempt to put the president at the center of the nation’s 250^th anniversary. Indeed, as compared to any other presidency, the Trump administration has been inordinately focused on plastering the president’s name and likeness on all manner of government buildings, projects, and documents.

If you think there’s something unappetizing about this practice, you’re not alone. I grew up in Arkansas, where it was common practice for politicians to engineer the naming of buildings and other public structures after themselves—a practice I felt was more than a little unseemly. Twenty years ago, just after I was elected to the Arkansas House of Representatives, I proposed my first bill: a ban on naming state government buildings after living, elected politicians.

Many of my fellow legislators did not like this bill. Perhaps some of them didn’t like it because it was subtly critical of them. (Perhaps the criticism was not so subtle.) Perhaps some of them didn’t like the title of the first draft of my bill, “The Edifice Complex Prevention Act.” And perhaps some of them harbored dreams of a namesake building for themselves.

One of my legislative colleagues, Daryl Pace, evidently found my proposal puzzling. Shortly after I filed the bill, he approached me and began to speak to me sorrowfully, as one might address a slower-than-average child. “Wouldn’t you like to have a building named after yourself?” he asked me. It was as if he thought I had overlooked a crucial perquisite of elected office.

Government officials’ desire to use public facilities as billboards for themselves has a long pedigree. The practice of placing public officials’ names and likenesses on Treasury securities hit a high point during the Civil War: Images of Abraham Lincoln and Treasury Secretary Salmon P. Chase frequently appeared on U.S. government money and bonds.

Other Civil War personalities also appeared on these notes—including the less well-known Spencer M. Clark, who headed the federal office that would become the Bureau of Engraving and Printing. In 1864, when Clark emblazoned his own portrait on a 5‑cent fractional currency note, Congress apparently decided that the practice of featuring government officials on U.S. currency and securities had gone far enough. In 1866, Congress declared it illegal for any living person to appear on government money or bonds of any kind.

The man in the Oval Office today does not share those 19^th-century scruples. The Trump administration has already brought us the Trump Kennedy Center; the Donald J. Trump Institute of Peace; gigantic banners with the president’s visage hung on the exterior of the Department of Labor and the Department of Justice; smaller Trump portraits on national park passes and White House press passes; tax-advantaged children’s savings plans, designated in the tax code as Trump Accounts; the TrumpRx website; Trump’s name printed on millions of stimulus checks issued during the COVID pandemic; and (pending) Trump’s personal signature on the nation’s paper currency alongside that of the Secretary of the Treasury.

The magnitude of this cosmetic exploitation of government programs by a sitting president is unprecedented. And the list above will no doubt grow longer, as the administration and its allies craft yet more proposals to further publicize Trump’s name and likeness with public resources and thus curry favor with the president. It is reasonable to assume that the 24-karat gold commemorative coin that celebrates the nation’s 250^th birthday—and features Trump’s image—is only the beginning.

With respect to Arkansas, it took a few years, but the state legislature finally wrote my bill into law. A few other southern states enacted similar prohibitions. It seems awfully unlikely that the current Congress will follow suit.

That is a pity. Of course, the spectacle of politicians maneuvering to get their names and images inscribed in all manner of public places and entities is grotesque. But the sheer ugliness of the practice should not overshadow our awareness of its very real moral and political dangers. Those include the encouragement of self-dealing, the problem of taxpayer funding of buildings that double as political advertisements, and the difficulties that arise when honorees later become embroiled in scandal.

Consider the Robert W. Ney Center, an Ohio University building named after state lawmaker Robert Ney in 1997. Ney secured $7 million in funding for the state-of-the-art facility while he was planning to run for Congress. A decade later, Rep. Ney became entangled in the Jack Abramoff lobbying scandal, ultimately pleading guilty to several bribery-related felonies and resigning his congressional seat. And 10 years after that, Ohio University finally succeeded in changing the building’s name.

Ultimately, however, the real problem is not so much one of public choice theory than it is one of the health of small‑r republican culture. Public service, like virtue, is supposed to be its own reward rather than a path to self-glorification. Stamping a politician’s name on some government enterprise is a kind of synthetic, taxpayer-funded manufacture of honor that is more associated with monarchies and autocracies, where public works are understood as personal gifts from a ruler to his subjects. In our republic, the use of government resources is supposed to serve a public purpose. These resources belong to the people; they aren’t supposed to convey personal ownership or credit.

When I was a public official, I came to know a good number of politicians who were a bit mystified by the Edifice Complex Prevention Act. (Perhaps they only pretended to be mystified.) But, for the most part, when I talked about my bill with people who weren’t elected officials, they got it immediately. Indeed, there are even a few politicians today who recognize that matters in this realm have gone too far.

American culture, at its best, rejects badges of royalism. Mixing politicians’ names and likenesses into government enterprises debases public service and the public trust. When we wash our hands of that mixture, it underscores the distinction between the rule of law and the rule of men. Perhaps someday a future Congress and a future administration will appreciate that.