Federal Spending Is a Leaky Bucket

by Chris Edwards, Cato at Liberty, March 24, 2025.

Excerpt:

There are two sides to the inefficiency of federal spending. Spending is funded by taxes, which distort the working, investing, and entrepreneurial choices of individuals and businesses. Each additional dollar in income taxes causes about 40 to 50 cents of damage to the private sector beyond the tax amount itself. That damage is called deadweight loss. Republicans seem to understand this side of the fiscal equation, and they push to cut taxes.

However, many Republicans do not seem to understand that the spending itself causes distortions and deadweight losses. Government bureaucracies waste resources, and the subsidy programs they run induce unproductive responses by individuals and businesses. Most federal programs are not worth the cost, as discussed in this study.

Interesting Times

by David Friedman, David Friedman’s Substack, March 25, 2025.

Excerpts:

What I am currently worried about is the potential for the present political situation to make America a much worse place, in any of several different directions. The obvious is the one that the left has been crying wolf on for a long time, development of a right wing dictatorship. The present administration claims the right to deport people into a foreign prison with no need to demonstrate that they are guilty of anything, even illegal immigration, based on a very stretched interpretation of an 18th century law. They are, sensibly, starting with the most unsympathetic victims they could find, but nothing in their interpretation of the law would prevent them from doing it to anyone else — at no point, in their view, are they required to demonstrate that their claims about the victims are true.

I expect the courts to rule against them, the Supreme Court by a sizable majority. But there are faint murmurs among their supporters of the idea of ignoring the courts, sympathetic references to Andrew Jackson’s (probably apocryphal) “John Marshall has made his decision, now let him enforce it.” Continued electoral success could move them farther in that direction and, even if it does not, would eventually change the makeup of the judiciary.

And:

The less obvious danger is in the opposite direction, a risk discussed in an earlier post. Suppose Trump’s administration goes badly, serious economic problems driven by rapid change, increased uncertainty, an increase rather than decrease in the deficit, serious foreign policy reversals, perhaps disasters. The Democrats end up with the presidency, both houses of Congress, a lot of angry supporters. They have already demonstrated their willingness to engage in lawfare against their enemies. The claim that everyone commits three felonies a day is doubtless an exaggeration, but a sufficiently committed prosecutor drawing jurors from a sufficiently biased local population can, as already demonstrated, get multiple felony convictions for a misdemeanor on which the statute of limitations has already run. Even without a biased jury to convict, prosecution alone can impose very large costs — and anyone can be prosecuted for something, a problem I discussed in an earlier post.

 

Naturalized Immigrants Probably Voted Republican in 2024

by Alex Nowrasteh and Krit Chanwong, Cato at Liberty, March 25, 2025.

Ezra Klein recently interviewed David Shor, a data scientist at the Democratic consulting firm Blue Rose Research. Shor made two important immigrant-related points. First, the foreign-born share of the population in a county was highly correlated with a shift toward Trump. Second, Trump likely won the immigrant vote. Naturalized immigrants went from favoring Biden in 2020 by 27 points to favoring Trump by one point.

This abrupt change destroys the common immigration-restrictionist argument that more open immigration policies will tilt the country leftward, an argument commonly made by Elon Musk that explains why he decided to support Trump in the 2024 election.

 

Why Economic Sanctions Against Iran Are Backfiring

by Matthew Petti, Reason, April 2025.

Excerpt:

Although the United States has the power to seriously disrupt economic life in other countries, the book argues, the consequences don’t always serve American interests. Sanctions hurt the prosperity and political standing of Iran’s pro-American middle class the most. They also make the government more paranoid and remove important incentives to play nice. Everyone seems worse off.

The U.S. has tried to wash its hands of the policy’s consequences for ordinary Iranians, blaming their poverty on domestic “corruption and economic mismanagement” rather than on sanctions. But the data are clear. The Iranian economy was booming from 1988, the end of the country’s war with Iraq, to 2011, the beginning of former President Barack Obama’s intensified sanctions campaign.

DRH note: The article “Sanctions” in David R. Henderson, ed., The Concise Encyclopedia of Economics is excellent.