The 2026 report of the Board of Trustees of the Social Security Administration (SSA) says the retirement system’s official insolvency’s will occur in 2032Q4. This is the time at which the Old Age and Survivors Insurance (OASI) trust fund will be depleted, and it is a year earlier than SSA last projected. The disability income (DI) trust fund will last until 2034. The chart at the top combines the OASI and DI programs, so it shows a slightly later overall insolvency than OASI alone. Likewise, the theoretical benefit cuts shown in the chart are at the time of the combined insolvency, and they differ from mandated reductions in retirement benefits alone (22%).
Of course, the OASI and DI trust funds don’t really hold true “assets” for the federal government. Holdings consist of government bonds, which the SSA redeems with the Treasury Department to meet benefit obligations. In turn, Treasury must sell new bonds (borrow) to cover the SSA’s redemption. So the trust funds really only constitute additional Treasury “borrowing authority” on behalf of SSA.
Do Something!
Again, by law, depletion of the OASI trust fund will trigger an automatic 22% reduction in benefits. Needless to say, no one wants to see that happen, but no one wants to face up to the problem through reforms, either. Still, the issue will have to be confronted soon enough. By then, of course, President Trump will be off the hook. However, it would certainly be better to get the ball rolling sooner rather than later. An earlier fix would probably require somewhat less draconian reforms. It also would avoid a last-minute, heated political debate, the outcome of which is likely to be a bad policy choice.
Here’s a good summary of possible reforms from the CATO Institute. These options could shore-up the social security system. They span raising the retirement age, tax increases, cuts to benefits/spousal benefits, adjusted benefit “bend points”, adjustments to COLA indexing, means testing, and even flat benefit levels. But even CATO doesn’t broach the topic of the deeper reform required by privatization or even self-directed investment choices.
Make Me An Offer
In this section Idiscussthe potential willingness of current and future beneficiaries to accept a lump sum cash offer. I’ll defer discussion of how those cash offers might be funded until a section below. In late 2024, I argued that many future beneficiaries would willingly accept a cash deposit today, all tax-deferred, of less than the actuarial value of their future benefits earned to-date (as calculated by SSA):
“Given that the balance remaining at death would be heritable, some individuals might be willing to accept an initial deposit less than the actuarial PV of the future SS benefits they’ve accumulated to-date (discounted at an internal rate of return equating future benefits “earned” to-date and contributions to-date). I also believe many individuals would willingly accept a lower initial deposit because they would gain some control over investment direction.
There is a long history of economic research investigating the reasons for low demand for annuities (akin to OASI benefits). Control over investment direction brings the opportunity to earn greater returns on “contributions” (FICA payroll taxes). While equity returns have their ups and downs, they generally exceed the returns “earned” by workers on Social Security. It’s pretty much a given that most people investing in 401(k)s would rather have their savings there than governed by SSA benefit formulas!
How can such a discounted cash offer be estimated? The actuarial PV of benefits at an appropriate discount rate geared to equity returns would be straightforward to calculate. Alternatively, trials on sample populations of retirees and active workers could be used to gauge uptake at various discounts. Later, trial participants could be given the option to keep their choice, to opt into whatever structure is finally adopted, or to revert to traditional benefits. The cash offer would almost certainly be worth more to future retirees, who have more time to earn superior returns at lower risk, than to current retirees.
Realistic Offers
A discount averaging 22% is well within the range of possibility in the aggregate, which would match the benefit cuts due in 2032 barring reform. This NBER paper found that many participants would accept a lump-sum at a 25% discount from actuarial value, whilethis paper found that non-retirees value their future benefits at a discount of 30%.
It’s likely that a number of beneficiaries will decline the cash offer out of conservatism, fear, or ignorance. Perhaps some will opt-in over time. But all indications are, from the annuity research, that most future retirees would accept an offer. So too might a significant number of current retirees, perhaps early in their retirement years, or who might highly value a chance to leave a bequest, or who might fear that poor health will limit the value of taking traditional SS benefits.
How To Fund Up-Front Payments
The upshot is that the availability of such a cash option would sharply reduce future benefit outlays. The rub is that the cash must be funded up-front. It would represent a huge addition to the government’s current borrowing needs, which sounds like an insurmountable obstacle to the success of the initiative. The fear is that immediate pressure on capital markets and interest rates could create an economic upheaval the likes of which we’ve never seen. More than anything else, the funding problem has led many to dismiss the possibility of privatization.
There is, however, an alternative view: the very reduction in the flow of future benefit obligations makes the plan more than feasible. That is because, in present value terms, the value of the reduction in future benefits would exceed the immediate borrowing necessary to pay the cash offers.
This reasoning is based on the government’s long-term budget constraint, which forces equality between the real value of government debt outstanding and the real present value of expected future government surpluses. Capital markets must value government debt on that basis, lest the debt’s value must be justified by a fiction.
The long-term budget constraint is central to the fiscal theory of the price level (FTPL). John Cochrane has written extensively on FTPL, and its adherents range from Eric Leeper, Michael Woodford, Sebastian Merkel, Francesco Bianchi, and to some degree David Beckworth.
Under the government budget constraint, a large increase in borrowing unaccompanied by any increase in future surpluses must leave the real value of debt outstanding unchanged. This happens because the real amount of debt is inflated away sufficiently or revalued as interest rates are bid upward.
In the case of a Social Security cash offer at a discount from actuarial present value, immediate borrowing should be more than offset by reductions in future SS benefit obligations. If financial markets find the future benefit reductions credible, there should be no upward pressure on interest rates or the price level. In fact, perhaps the opposite.
Of course, all this assumes that politicians possess fiscal discipline. Assuming they understand the gain in the government’s fiscal position, they cannot rush to commit to new programs, spending initiatives, or tax cuts that would sop up the increase in future surpluses (reduction in future deficits).
Trump Accounts
The Trump Administration has assiduously avoided serious discussion of SS reform. Instead, never missing a chance to stamp the Trump brand everywhere, the president has championed a “new” saving vehicle called TrumpIRA. It allows private workers without an employer-sponsored savings plan to establish an IRA account through the TrumpIRA web site. Qualified savers who establish such an account will be eligible for a $1,000 government matching contribution. So Trump has found another way to commit taxpayer resources that do not exist. Given our ongoing massive fiscal imbalance, you’d think his economic team might clue him in on a key lever that should be employed to increase national savings: deficit reduction! Instead, he’s busy subsidizing TrumpIRAs, Trump Baby Bonds, and plowing billions into government stakes in private companies.
The SS system itself, as it now exists, represents a huge disincentive to save. Privatization would sweep away those bad incentives, especially if the private accounts could be used for additional savings beyond existing FICA “contributions”. And access to those additional amounts saved should be open at any time, subject to a normal tax on withdrawal.
Summary
My earlier post on this topic contains much more detail on a voluntary privatization plan for Social Security, including potential risks. This is the sort of initiative that should be under discussion in policy-making circles. Sadly, the Administration doesn’t see any advantage in addressing SS reform at all, and other parties have dismissed privatization as a fiscal boondoggle. However, a substantial reduction in future benefit obligations would be more than sufficient to offset the short-term borrowing needed to offer cash to fund heritable, self-directed, private accounts at a discount from the actuarial present value of future benefits.
Bad policy ideas are circulating that have been conceived amid hysteria over AI. These are interventionist approaches to the development and deployment of AI models, ranging from direct confiscation of AI capital, taxes on the flow of compute, various forms of regulation, and state and local efforts to forbid the construction of data centers. All of these actions would unnecessarily inhibit achievement of AI’s enormous potential benefits and present unnecessary national security challenges as well.
Land Use and Displacement
Emotionally I’m probably just as NIMBY as the next guy when it comes to developments in my vicinity that might offend my personal aesthetics or intrude on my privacy. But at a more rational level, I object to developments that will inflict external costs on me. I happen to live in a private community that provides some buffer against incursions of those kinds, but I deeply sympathize with anyone who finds their property will soon be next door to a large or obnoxious industrial, commercial or government facility, and I despise the use of eminent domain for almost any purpose.
But let’s step back and consider the case in which an owner of private property receives what they feel is just compensation on the sale of their land to a data center developer. This property might be in your close proximity, but you can’t prevent your neighbor from selling unless it’s by way of a larger political process to revoke his property rights. Of course, you can help organize or join a resistance group in an attempt to stop the development. That’s perfectly reasonable if you fear the prospect of having your property stranded in the middle of a new industrial or commercial development.
Ultimately, such efforts are likely to influence negotiations between communities and developers. In fact, developers of data centers can often be persuaded to work with communities in addressing public concerns, and some developers are eager to do so.
Water and Power Consumption
Aside from land use, potential displacement, and aesthetic issues (including plain-old NIMBYism), other underlying concerns exciting local opposition to data centers have to do with predicted strains on water and power supplies. These are no doubt critical issues in certain localities. However, on the whole these concerns are vastly overblown, as elucidated by Andy Masley at this link. In particular, water use by data centers is on the same order of magnitude as other industrial uses. Contrary to some claims, any water pollution by data centers is usually confined to the construction phase, if at all, and in that respect is very much like any other construction project. And as Masley points out, a data center can generate tax revenue for use in reducing water scarcity.
It should also be noted that data centers house the computational power of the entire internet. As the chart (from Masley) at the top of this post shows, AI represents an incremental need that is still relatively small relative to total data center power use. Incidentally, water cooling rather than air cooling reduces a data center’s power consumption.
Nevertheless, the power consumption of data centers is indeed a matter of critical importance and controversy. Referring again to the chart at the top, it’s evident that data center power usage is growing rapidly. However, developers are increasingly planning to produce their own power off-grid, often colocating with their power sources to minimize transmission costs. This includes locating alongside natural gas basins, installing wind and solar collection facilities nearby, and coming soon, incorporating modular nuclear reactors. The latter would provide base-load, dispatchable, zero-carbon power for data centers. Of course, modular reactors will be costly and might eat into returns from developing data centers, but other power sources are costly as well, and it is the one sure dispatchable, zero-carbon, off-grid solution.
Water and energy supplies for data centers are key to enabling broad contributions of AI to consumer welfare, productivity growth, and national security. Local interests should weigh other benefits that construction of data centers will bring to a community. Construction jobs and permanent data center jobs are obviously important considerations, as well as the aforementioned increases in local tax revenue.
State Regulation and Litigation
Of course, AI controversies are playing out at the national and state levels as well. First, there is the issue of AI regulation. AI legislation in all 50 states attempts to regulate various “threatening” aspects of AI. These bills address topics such as fraud prevention (e.g., deep fakes), chatbot safety, and restrictions on automated AI decisioning (e.g., hiring, insurance coverage and claims adjudication).
There is litigation and potential litigation at the state level related to alleged abuses by Open AI’s ChatGPT. These concern the use of customer data and alleged encouragement of self-harm, among other matters. And the New York legislature has passed a bill calling for a one-year moratorium on AI data center development.
These regulatory and legal efforts at the state and local level raise the prospect of fragmented treatment of AI in different jurisdictions that would be disruptive and costly for both AI companies and users. Federalist principles aside, economic efficiency argues for a more uniform approach to many concerns about AI. But whether it’s at the federal, state, or local level, tight regulatory control of AI risks compromising the healthy competitive development of AItechnology and the industry. That’s because politicians and bureaucrats cannot possess the knowledge of evolving competition, scarcity, and market incentives only revealed by free market processes.
Rooting for Regulation
Unfortunately, modern-day Luddites at the national level are calling for a moratorium on AI development. In fact, in 2023, fears of AI misalignment with human interests brought even Elon Musk to call for a six-month “pause” on development. Today, a number of industry insiders call for a “slowdown”, if only other countries go along with it (fat chance!).
Yes, AI is improving… fast, but the most consequential threats have to do with security protocols. Anthropic, in particular, almost begged for government control over its Mythos product, which recently gripped the AI and cybersecurity communities with its advanced ability to identify software vulnerabilities. The Fable version is said to incorporate “guardrails”, but reportedly Fable is vulnerable to “jailbreaks”. In what should not have surprised Anthropic after its own warnings, the federal government imposed export controls, restricting access by foreign nationals. And now, Anthropic has withdrawn availability of the models worldwide..
Be Careful What You Ask For
Perhaps Anthropic got what it deserved, but sadly, the Trump Administration seems to have crossed a threshold from a “light touch” approach to regulating AI to something more severe. Let’s hope the Mythos/Fable affair doesn’t presage a permanent transition from private governance to state control. Thatwouldinhibit development and present risks likely to rattle some of AI’s most important customers, .
The last link cites Timnit Gebru’s critique that AI labs have made a huge miscalculation:
“She argues that AI labs have consistently used ‘dangerous AI’ narratives for marketing, investor appeal, and competitive advantage, only for the narrative to backfire when actual state power intervenes. (on X)”
It’s possible that Anthropic and a few of its competitors have fallen for the same mistaken notion that central planning by government bureaucrats can improve upon market processes. Statists on the right and the left have been eager to join the chorus for regulatory control.
Dean Ball channels Friedrich Hayek in the following tweet on the mistaken impression that government must impose a “strategy” and “plan” AI.
“I think part of it, at least vis a vis US/China competition, is that US and western chattering classes find it hard to believe that the market-driven outcome of frontier AI could possibly be right. They basically believe, in their hearts, that the Chinese system, with its ‘industrial strategy,’ has eclipsed capitalism. So they harbor the same inferiority complex toward the Chinese system that many Americans once harbored toward the EU’s system. Their heuristic is that the industrial strategists of China have grasped the whole picture of the technological competition in a way that US industrialists, with their ‘profit maximizing incentives,’ could not possibly have matched. And so any outcome in the economy that is not the result of ‘strategy’ is therefore prima facie worse than what the ‘strategists’ have concocted. They also believe the Chinese strategists possess awesome powers of foresight and the ability to evade all tendencies of financial and economic gravity, due of course to ‘strategy,’ really it’s almost a kind of orientalism.”
National security is an important consideration, of course, but AI development should not be hamstrung for fear of the ever-present need for improved encryption or by the prospect of threats from autonomous weapons systems. Indeed, AI can and should be put to use defending against all such threats to national security without compromising its promise as a revolutionary technology with a wide range of applications. Again, Trump’s purported intent to encourage U.S. AI development is undercut by his fixations on controlling trade and “taking stakes”. And do foreign customers want to deal with this confusing state of affairs? Or simply go to China?
AI and Capital Redistribution
Another nest of controversies has to do with the widespread presumption that AI will be negative for labor markets. Prescriptions from the populist left and right include various kinds of AI taxation, redistribution, and even nationalization.
Bernie Sanders and Donald Trump both want a sovereign wealth fund, and Sanders wants to fund it with a one-time 50% tax on AI stock. Sanders, the High Prince of Economic Parasites, is sponsoring a bill he claims would allow the American public to take a role in determining the future of AI, whatever that means. What he hopes to create is a mechanism for wealth redistribution, since the fashionable view is that AI will be a catastrophe for labor. While the AI industry is far from profitable at the moment, many AI stocks have soared in value. And Sanders’ target “AI industry” might fairly broad, including chip manufacturers and other producers of AI infrastructure.
If the public wants to kill AI investment in the U.S., tank equity markets, and give politicians an excuse for more profligate spending, then Sander’s bill is a grand idea. It would be an outright expropriation of wealth. The impacts on economic growth, productivity, American competitiveness, and national security would be unambiguously negative. And lest you think such a redistribution is necessary to compensate for job losses caused by AI, that issue is far from settled. In fact, it’s highly likely that the job realignment certain to take place will result in growth from a variety of occupations previously unimagined, just as technological advances have in the past.
The Compute Tax
Others (including Sanders) have also broached the idea of a “compute tax”, or as Brian Albrecht explains:
“… a levy on computational resources. Think GPU hours, processing power, data center electricity, or some similar proxy for AI work.”
Albrecht believes the real intent is to tax the stock of physical AI capital, as opposed to a flow of input services rendered for AI. But consider the number of goods and services whose values are likely to be enhanced by the use of AI as an input. And also consider the innovation and discovery that will be made possible by AI. Albrecht wisely questions the logic of adding to the cost and discouraging this value added via taxation. In the context of killing the golden goose, he cites two rules of optimal taxation: don’t tax intermediate goods and don’t tax capital. When the supply of capital is elastic, he notes, taxing it is more likely to harm workers than to help them. And one can reasonably argue that the external benefits expected to flow from AI would justify a compute subsidy rather than a tax. Finally, Albrecht cautions that a compute tax, unless it is very broad and at a very high rate, won’t raise much revenue.
Trump’s Confusion
Bernie Sanders deserves plenty of condemnation for his infantile, class-warfare rhetoric and interventionist approach to economic policy, including state ownership of the means of production. But in practice Donald Trump isn’t much better. He’s been busy partially nationalizing several different industries, including steel, semiconductors, nuclear energy, rocket motors, quantum computing, and critical mineral supplies, often with direct reins on business decisions (e.g., the “Golden Share” in U.S. Steel). Now, he’s angling to acquire equity stakes in AI companies. The Senate Armed Services Committee is ready to help him out with a bill that would establish a Department of Defense Equity Investment Account at the Treasury.
These are all part of the sovereign wealth fund Trump has decided is in the fiscal and national security interests of the U.S. Again, government ownership stakes in private companies invite cronyism, political interference, and regulatory capture. In the case of AI, it is an invitation to censorship and government surveillance. Moreover, spare government funds would be better spent paying down our burgeoning public debt, reducing government obligations and interest expense at zero risk. In contrast, the value of private equity stakes and their returns are fully at risk, while leaving government debt, interest expenses, and interest rate rollover risks in place.
Trump is now inveigling the likes of Sam Altman (OpenAI), Dario Amodei (Anthropic), Sundar Pichai (Google), and even Elon Musk (xAI) to accept his vision of public ownership of AI stock. It’s effectively a trap and a prescription for competitive failure, but Trump doesn’t get it.
Superabundance?
Many AI industry leaders have indeed bought into some version of an AI wealth transfer, primarily because they accept the notion of superabundance along with heavy losses of remunerative work for humans. But in fact they don’t understand the economics of capital deepening and the contradictions implied by their position.
First, savings and funds available for capex are scarce, and any given project for AI buildout must compete with many other valued uses. The working world will not be monopolized by AI robots any time soon, even given dramatic cost reductions. AI may well increase the productivity of human workers (along with their wages) in greater proportion than other forms of physical capital. But some forms of labor are likely to be in surplus, and that will cause the wages in those occupations to become more competitive relative to the cost of potential AI-augmented substitutes. In fact, occupations in which humans are more competitive than machines will persist. Here is Albrecht on this point:
“And comparative advantage always pops up fighting against [human job losses]. When automation makes some things cheap, the things that remain expensive tend to be the things that are hard to automate. And the things that are hard to automate are, almost by definition, the things where humans still have comparative advantage. The saved dollar drifts toward where humans are still worth paying. That’s not optimism. That’s what comparative advantage means.“
A second contradiction of the superabundance job-loss narrative is, as I’ve said, that there will be many inventive new occupations available for humans. At worst, job losses will be a transitional phenomenon. Third, superabundance itself implies drastically lower prices, which would ultimately benefit wage earners and consumers, obviating the need for government intervention on their behalf.
I had to laugh when I read this quote of Rebecca Lowe, who has an amusing and sensible reaction to the “AI will take all the jobs” narrative:
“I think a large part of this is you don’t really get experts in their particular domains writing about AI. Instead, you get ‘the AI expert’, and they want to reinvent the wheel. You see this when they write about economics, or when they write about philosophy. You talk to an AI person and suddenly they’re like, ‘I’ve just discovered this thing!’ And it turns out they’re talking about, like, supply and demand. And you’re like, oh my God.”
CCP Interference
I’ll briefly touch on one other controversy: whether the anti-AI/data center furor is being instigated by the Chinese in an attempt to undermine U.S. leadership in AI. The House Energy and Commerce Committee claims to have evidence that strongly suggests the CCPs involvement in attempts to hamstring substantial U.S. leadership in AI. Apparently no details on that evidence have been made public, however. It would not be surprising or uncharacteristic of the CCP, and if true would constitute another tension in the attempt to safeguard national security while avoiding government obstruction in AI development.
Summary
Artificial intelligence is animating economic controversies at the local, state and federal levels. Like other forms of industrial development, opponents are roused by claims of strains on local resources as well as displacement of property owners. Some of these claims are exaggerated or can be resolved via negotiation or technological solutions.
There are also fears that AI can be used in a variety of nefarious ways. There may be legitimate dangers, and AI companies themselves are actively working to address so called “alignment” issues. Nevertheless, there are increasing calls for state and/or federal regulation of AI. These proposals must be approached cautiously or they could easily derail U.S. progress on perhaps the most promising technologies to ever come down the line. That would indeed represent an economic and national security failure.
Finally, fear that AI will lead to large-scale job losses and widening inequality has prompted calls for taxes on AI capital, or even partial nationalization, with redistribution of future profits to the public. This would be a colossal mistake. Nothing could stanch AI development more effectively than such a policy. Unfortunately, even Donald Trump has called for the government to take equity stakes in AI companies pursuant to “national priorities” and supposedly for the benefit of American taxpayers. In fact, this partial nationalization has already begun. This is a prescription for destructive regulation, planning failures, and corruption.
The key lesson in all this is that we’ll all be better off if government stays out of the way of AI development.
I voted for Trump because I considered him to be far preferable to Kamala Harris across a range of issues. I still feel that way, but I’m appalled at a number of actions he’s taken and/or proposed in the 14 months since he took office. As a candidate, I gave Trump a “grade point average” of about 2.68, a solid C+. Here, I’ll grade him on most of the same categories, but I’ve made a few changes to the categories based on developments since his inauguration. My perspective here is generally domestic non-intervention and small government.
Yes, I realize this is tldr; I’m sure I elaborated more than necessary, but you can skip around and scroll to sections in which you might have greater interest. Here’s a list of topics:
Role of Government
Regulation
Border Policy
Antitrust
Foreign Policy
Trade
Taxes
Inflation
Federal Reserve Independence
Federal Spending and the Deficit
Entitlement Reform
Government Waste
Health and Health Care
Abortion
Housing
Energy
First Amendment Rights
Second Amendment Rights
DEI and Its Evil Financial Twin, ESG
Technology
Voting Rights
Education
Role of Government: It’s probably unfair to treat this as a separate category because it might double count specifics mentioned later, but Trump has demonstrated an unfortunate proclivity for wielding government power over private affairs when it suits him politically. On this point, “The Conspicuous Fist of Trump’s State Corporatism”, is a good read. Trump’s actions demonstrate the awful ways in which populism is often a close cousin to socialism. An example is Trump’s economic micro-management and abrogation of property rights in attacking share buybacks. Trump boasts of his efforts to strengthen the American economy by committing public resources to investments in private enterprises, and by “doing deals” with foreign governments to invest in the U.S. When it comes to limited government, candidate Trump’s C is now President Trump’s D.
Regulation: Despite the kinds of intrusions cited above, the Trump Administration has, at the same time, aggressively pursued deregulation of private activity. The goal is to achieve a 10-to-1 ratio of rule rollbacks to new regulatory rules. One can and should assess regulatory measures one-by-one, but there are plenty of rules that wouldn’t pass a reasonable cost-benefit test. On the whole the regulatory state has grown unwieldy and imposes significant costs on producers, and ultimately taxpayers and consumers, often with little compensatory benefit. I applaud the effort to untangle the regulatory state. My grade for Trump here remains an A.
Border Policy: Despite my preference for non-intervention, I support strong border enforcement along with expanded legal immigration.
Illegal entry has plummeted under Trump, a welcome development. Uncontrolled immigration entails a loss of sovereignty and is a poor fiscal proposition. Those with deeper criminal records, from either before or after entry, deserve no concessions. Strict vetting is also necessary to prevent incursions by potential terror threats.
While illegal entry is a crime, otherwise innocent illegals should be treated kindly. For example, rewards can be offered for voluntary deportation, an approach used extensively by the Trump Administration. There are difficult issues such as birthright citizenship, the constitutionality of which has been questioned on textual grounds, and the practicality of which can be shaky, even for children of parents who enter the U.S. legally. Either way, it seems clear that the promise of birthright citizenship should not serve as an incentive for illegal entry.
The Administration has certainly fumbled immigration enforcement in some instances, with cases of improperly detained individuals. Furthermore, very little has been done to advance the cause of increased legal immigration. On this topic I give Trump an overall B-.
Antitrust: This is a case of excessive government meddling with a big dose of favoritism thrown in. Early on, the Trump Administration chose to follow in the footsteps of Biden-era antitrust enforcement with a bias toward penalizing successful businesses on the pretext of “protecting” consumers.
Even worse, the Trump Administration has used the threat of antitrust as a cudgel in pursuit of a variety of objectives that are purely political. For example, in a recent executive order (EO), Trump threatened antitrust action against companies who invest in *too many* single-family homes, a counterproductive prohibition with hoped-for appeal to populist instincts. Then, under Trump, there have been missives from the FTC to tech companies about their failure to provide “balanced” news coverage, a prerogative protected by the First Amendment.
Trump has also interfered with Netflix’s now aborted acquisition of Warner Bros., in favor of a rival offer from Paramount. Trump also engineered the coercive extraction of a U.S. government “Golden Share” in approving the merger of U.S. Steel and Nippon Steel, which Trump claims gives him “total control”, in part by controlling the number of board seats. And he basically extorted a 15% cut for the government for approving a deal allowing Nvidea and AMD to sell the older H20 chip to China.
Trump’s approach to antitrust is very much entangled with the Administration’s uninhibited embrace of industrial policy and public control over private activity. He shares a fantasy common to interventionists that he can leverage the coercive power of government to create just the outcomes he would like.
The grade here is a D, which I think is generous.
Foreign Policy: I’ll try to keep this category separate from trade and tariff issues, though they are intertwined. Trump’s approach to foreign policy is nothing if not bold, and it’s been a mixed bag in terms of success. In the western hemisphere we have the so-called “Donroe Doctrine”, Trump’s effort to establish U.S. hemispheric leadership. So far: we gained a more effective partnership with Panama over the canal and diminished China’s control; decapitated the Maduro regime in Venezuela, asserting control over its oil shipments and undercutting the flow of narcotics through the country; brought the Cuban communist regime to near collapse by choking off its oil imports (but at the cost of greater human suffering in Cuba); partnered with Mexico in eliminating the head of a major drug cartel; and developed closer ties with several conservative regimes in Central and South America.
I’m troubled by the deadly force used against vessels said to be transporting drugs. We might have great intelligence on smuggling operations, but there must be less deadly ways to interdict.
For better or worse, Trump has trolled Canadian leadership in an effort to provoke dissent and gain influence there with respect to trade and security issues. His provocative stance on Greenland is primarily motivated by concerns over security in the Arctic.
Trump’s action against the repressive Iranian theocracy, its support of terror, and its nuclear ambitions has been a military success. Unfortunately, it has come at the cost of some American lives, at least a few civilian casualties in Iran, and a considerable economic cost. We can only hope for quick resolution and a transition to a more liberal regime for the people of Iran. However, Trump was patient to a fault with the mullahs, offering them an off-ramp during repeated rounds of negotiations. They refused to take it.
Of course, Trump is also pro-Israel and has rallied a coalition of nations who might contribute to a revitalized Gaza. I give Trump huge props for his support of Israel and his disgust with anti-Semitism in general.
Trump’s involvement in negotiations between Ukraine and Russia have been unsuccessful. It’s fair to wonder whether he’s cutting Putin way too much slack, as Putin has no intention of relenting. China remains a major threat to U.S. interests and our allies, but many of Trump’s foreign policy initiatives have served to undermine CCP interests.
Trump unique approach has alienated some of our traditional European allies, though he has had success in influencing policy abroad. In Venezuela, it’s worrisome that Trump acts as if he’s cultivating a relationship with Maduro’s replacements, who are probably no better than Maduro except for their eagerness to cowtow to Trump. Well, maybe, maybe not! Also troubling is the collateral damage suffered by the people of Cuba. There are signs of a willingness among Cuban leaders to negotiate with Trump, though hopes for a friendly successor regime might be foolish.
On the whole, I’ll give Trump a B on foreign policy. It’s bold, but he’s had some real successes.
Trade: I gave Trump an F on trade policy as a candidate. He’s more than justified that grade as president. He is a complete dolt when it comes to the benefits of foreign trade, the meaning of a trade deficit, the costs inflicted by tariffs, their complete inadequacy as a replacement for the income tax, and their counterproductive effect on foreign investment in the U.S. His “emergency” tariffs constituted a huge tax increase on the American people, but those were ruled unconstitutional by the Supreme Court. His latest ploy is to impose punitive tariffs under the guise of a balance of payments emergency, but the balance of payments is zero! This too will be struck down in the courts.
Some might argue that Trump’s other foreign policy achievements would not have been possible without the threat of tariffs, but the fact is Trump imposed the tariffs anyway. Yup, it’s an F.
Taxes: In terms of budget effects, the increased tariff revenue (which might not last at present levels) is much more than offset by tax provisions in the One Big Beautiful Bill Act (OBBBA) passed into law last summer. It makes permanent many of the reductions in the Tax Cuts and Jobs Act of 2017 that had been ready to expire. The standard deduction is increased and more limits are placed on itemization. The Act also creates targeted (and temporary) deductions for tips, overtime, auto loans, and seniors, which is inefficient because it treats various forms of income differently, leading to incentives for unproductive reallocations. Those changes also smack of political pandering.
The OBBBA makes permanent some tax incentives for business, such as immediate expensing of short-term asset purchases and domestic R&D investment. It also provides a temporary 100 percent deduction for certain structures and phases out tax credits for green energy production (bravo!).
To the extent that the tax package includes some pro-growth elements, I applaud it. Tax reductions generally are a good thing because they reduce distortions, but Trump has managed to introduce several distortionary elements just the same. I won’t dock Trump for deficit effects here because the deficit is fundamentally a spending problem, not a tax problem. I gave him a C+ on taxes as a candidate, but I’ll boost him to a B- for his first year.
Inflation: Trump doesn’t have real control over inflation as economists define it, but he’s managed to aggravate some price increases just the same. Unfortunately, he makes repeated claims that “prices have fallen” under his leadership, which of course is false. Egg prices perhaps, and oil prices (er… not this month). Of course, in general prices are up, including import prices. Inflation measures have been fairly steady over the past year, but remain stubbornly higher than the Federal Reserve’s target. I give Trump a grade on this topic only because he deserves a penalty for his false boasts. It’s a C, the same as candidate Trump.
Federal Reserve Independence: Trump has relentlessly badgered Jerome Powell and the Fed to somehow engineer lower interest rates. Of course, many key interest rates are market driven and outside the Fed’s direct control. Trump has gone so far as to bring lawfare to bear against Powell, accusing him of misleading Congress regarding cost overruns on the renovation of the Fed’s offices in DC. Of course, it’s not unusual for a president to jawbone the Fed, but Trump has been absurdly aggressive at a time when reducing the Fed’s rate targets would quite possibly backfire. At least Trump’s selection of the next Fed Chairman, Kevin Warsh, was more reasonable than another top candidate who would probably have been a mere punching bag. For this, I’ll lift his grade slightly, from an F to a D-.
Federal Spending and the Deficit: I discuss a few components of spending under other headings below. Beyond those points, Trump has taken every opportunity to find creative uses for taxpayer money. He has proposed a “tariff dividend” for all households funded by the revenue from import taxes. (Refunds of tariff revenue to “payers” are still in question.) At this point, the better alternative is to put extra revenue toward paying down the federal debt. The same goes for any revenue earned from the many “deals” Trump is counting on. Pay down the debt and earn an immediate, certain, and lasting return, rather than installing the government as part owner of otherwise private enterprises having uncertain returns.
Apart from that and the folly of establishing a sovereign wealth fund while the public debt is burgeoning, Trump has made no progress whatsoever on deficit reduction. Granted, he can’t count on strong legislative support despite slight majorities in both chambers of Congress.
The tax cuts in the OBBBA obviously don’t help the cause of deficit reduction. In fairness, rebuilding the military is a major priority. However, interests costs on the debt will keep rising as will discretionary non-defense outlays. At least the East-Wing Ballroom, the Arc de Trump (!), and the Kennedy Center renovation all appear to be privately funded.
Trump deserves a D here. Some of his priorities are terrible, and I can’t cut him any slack based on trends in discretionary spending.
Entitlement Reform: Trump has been silent on reforms to Social Security’s “Old Age and Survivors” programs and Medicare, except to promise no cuts in benefits under his watch. Kick the can! However, the administration has considered cuts in other entitlements, such as Social Security Disability Insurance, Medicaid and Supplemental Nutrition Assistance (SNAP). These programs have been riddled with fraud, so I applaud steps to clean them up. Nevertheless, any progress made here will still be dwarfed by the insolvency of the Retirement and Medicare programs, which Trump considers a third rail for potential reformers. I gave him an F as a candidate, but his anti-fraud efforts help him salvage a C-.
Government Waste: DOGE was short-lived as originally constituted, its execution was clumsy, and the blow-up in Trump’s relationship with Elon Musk was an embarrassment. However, DOGE was a force for stanching the flow of taxpayer dollars through politicized NGOs. The budget savings were relatively small, but the defunded programs were often egregious varieties of government waste. Subsequently, DOGE personnel had an outsized influence on downsizing the federal bureaucracy and targeting waste across various agencies. In addition, the efforts of one-time DOGE workers were put to good use in identifying entitlement fraud, which could and should result in budget savings. Trump gets a B+ on this one.
Health and Health Care: I’ll give Trump credit here for pursuing a more consumer-oriented approach to health care reform, though at least one of his initiatives is counterproductive.
His initial steps took the form of EOs reducing subsidies paid on ACA marketplace policies, ending remaining penalties for violating the ACA’s individual mandate, approving short-term coverages free of certain ACA restrictions, cutting Medicaid expansion funding, and granting more flexibility for states in defining “essential” healthcare benefits. All of these are basically good steps.
Trump issued an ill-conceived EO calling for “Most-Favored Nation” (MFN) prescription drug pricing, which should reduce Americans’ prescription costs but will dramatically undercut life-saving drug research. Hate the pharmaceutical companies all you want, but they must earn a reasonable profit to risk the massive development costs of new miracle drugs, of which they’ve brought many to market. Price controls always create more problems than they solve.
In early 2026 Trump introduced his “Great Healthcare Plan” (GHP). It would codify MFN drug pricing, fund cost-sharing reductions for ACA plans, encourage price transparency, and redirect payments to consumers and away from insurers to facilitate choice and competition. Also launched was the TrumpRx.gov platform featuring MFN pricing. Ironically, the goal here is to improve access to prescription drugs. Good luck!
Under Robert F. Kennedy, Jr., Trump’s HHS Secretary, the “Make America Healthy Again” agenda has emphasized a healthy diet and exercise, including noteworthy changes in the famous food triangle hierarchy. I can’t argue with those. However, RFK Jr. has upended research under HHS, and those actions were rash in a number cases. He wants to address chronic diseases but I’m skeptical of some of his causal claims. I also have mixed reactions to his changed guidance on vaccines. There are reports that the White House has not been comfortable with all of RFK’s pronouncements and is eager to inject more oversight.
I have varied reactions to Trump’s efforts in the health care arena. MFN price capping is a good way to destroy the advantages Americans enjoy in terms of access to innovative drugs, even if they come at a steep cost. RFK Jr. is a wild card, to be fair. Otherwise, while the GHP should help to improve healthcare affordability, it neglects other critical reforms such as ending the disparate tax treatment of health care premiums and deregulating providers. Still, Trump’s grade improved here, from a D+ as a candidate to a B- thus far in his term.
Abortion: No change here. Trump has consistently supported the right to life. He gets an A.
Housing: Build Baby Build! But aside from harping on the Fed to lower interest rates, Trump hasn’t done much to encourage housing supply.
His EO banning institutional investors from owning “too many” single-family homes won’t help affordability because so few homes are owned by large investors. But to the extent that they are, the EO will increase rents and discourage new housing supply. This is another misguided foray into central economic planning.
While I think a 50-year mortgage should be legal, it’s something I believe potential homebuyers should avoid unless they want to risk stubbornly low equity in their homes stretching into retirement. Trump shouldn’t talk this up too much.
Trump has supported the “ROAD to Housing” bill, which has garnered bipartisan support. It would codify the restrictions on ownership of single-family housing by institutional investors and restrict construction of “rent-to-own” housing by such investors. One couldn’t invent a less effective way to encourage supply and promote “affordability”. But the bill would also subsidize demand, which will increase pressure on housing prices even as the bill aims to assist particular groups (e.g., tax credits for first-time homebuyers). Despite all those downsides, the bill actually includes a few steps to boost housing supply, such as making some federal lands available for development, regulatory reform, and tax incentives for builders.
Trump has also discussed changes to government sponsored enterprises (GSEs, Fannie Mae and Freddie Mac), which purchase new mortgages from lenders, including possible privatization. He might be licking his chops for the $300 billion the GSEs owe the federal government, which could be put toward various “deals” he might like to cut. If privatization were to end the explicit government guarantee for mortgage-backed securities issued by the GSEs, mortgage interest rates would rise and it could be quite disruptive for banks.
Housing policy is another mixed bag for Trump, but I’ll give him a B on the strength of his deregulatory effort.
Energy: Drill baby drill! Despite the current disruption to oil shipments through the straight of Hormuz and the spike in oil prices, I deem Trump’s energy policies a success thus far. Largely through deregulation, Trump has opened up the spigots on domestic oil production. He has also realigned energy priorities, eliminating subsidies and mandates for intermittent renewable energy sources in favor of encouraging fossil fuels, hydroelectric, and especially a new emphasis on nuclear power. Some of these steps represent unabashed central planning, so I can’t give Trump an A on energy policy,. However, the preceding green-energy regime was central planning on steroids with the unintended consequence of instability in the power grid. I would greatly prefer a policy of complete neutrality with respect to energy sources, but at least Trump is not cowed by global warming hysteria.
And Trump is considering a temporary suspension of the Jones Act due to the energy crunch brought on by the war in Iran. That would be great except that the waiver should be permanent. The move would lower energy (and other) costs to U.S. consumers and minimize supply disruptions by allowing energy (and other goods) to flow more freely between U.S. ports.
His grade on energy policy is a B.
First Amendment Rights: Trump has not been the defender of free speech that I had hoped. On this, I gave him an A- as a candidate, but his Administration has been belligerent in attacking speech. He (and his FCC Chairman) threaten media outlets with license revocation, his Attorney General says “we will target you” for anything DOJ attorneys might define as hate speech, and Trump has called certain speech he dislikes “illegal”. I also have qualms about an EO issued last year by Trump targeting “campaigns of … radicalization”, which might, in practice, bring any sort of opposition speech under scrutiny. And there are other potentially troublesome provisions for protected speech. Trump’s pure intent might be to stop violent radicalism, which is fine in spirit but hard to bring off without mass surveillance and violations of rights. I therefore downgrade Trump to a C on free speech.
Second Amendment Rights: Trump has not been quite as consistent on gun rights as he was as a candidate. He took a number of actions to reduce burdens and restrictions on gun rights, but in other cases he let restrictions stand, including arrests for gun possession in Washington DC by federal agents and a possible proposal to restrict the gun rights of transgendered individuals. All-in-all, I’ll reduce Trump’s A on gun rights to a B+.
DEI and Its Evil Financial Twin, ESG: There is no question that Trump has done much to cut through the stranglehold that DEI doctrine had imposed on social and economic life. He issued EOs to end DEI practices in the federal government. He also threatened major universities with funding freezes and anti-discrimation actions, an approach that has met with some success. Trump’s words and actions on DEI have reverberated through the private sector as well. He has encouraged individuals who believe they’ve suffered discrimination based on DEI to file lawsuits. The thrust of the Administration’s agenda on DEI and regulatory changes has served to undermine the use of ESG measures. These are intended to draw investors to companies purporting to foster environmental and social goals, which can be at odds with creating value for shareholders. Trump has earned his A in this category.
Technology: As in other policy domains, the record here is marred by misguided industrial policies. That includes the recent snafu over the Department of Defense’s allegation of “supply chain risk” posed by Anthropic. DoD wants carte blanche access to all aspects of any AI model it adopts, including uses in autonomous weapons systems and mass public surveillance. Anthropic said it would not accept that without guardrails, so an apparently infuriated Pete Hegseth moved to designate the company a supply chain risk, an outright punishment that would obviously damage Anthropic’s economic prospects. Yet almost immediately, DoD agreed to an arrangement with OpenAI with guardrails similar to those desired by Anthropic. Now, Trump, who seems to have Hegseth’s back, is readying an EO on the topic… so we shall see. But it’s a mess. Anthropic has filed suit.
And yet Trump has generally been supportive of AI development, signing an order to prevent states from imposing a patchwork of varying, complex regulations. The White House has issued an ”AI Action Plan” to encourage AI exports, minimizing federal regulatory burdens, and “upholding free speech” on “unbiased” frontier models. Let’s hope “unbiased” has a truly neutral definition in this case. Trump has signed a series of EOs related to AI research and deployment, which are linked here.
Post-inauguration, Trump dove right into another socialist joint venture known as Stargate to build data center infrastructure. The rationale for the government’s direct involvement is national security. Of course, that’s the Administration’s rough and ready excuse for almost any kind of intervention.
Trump has helped promote the crypto industry, supporting legislation (the CLARITY Act and the GENIUS Act) enabling more widespread use of stablecoins. He even supports the payment of returns on stablecoins, a development that is unpopular with banks. Trump has also acted to promote cybersecurity and harden infrastructure against malicious actors. More recently, he initiated a program to test eVTOL technologies (electronic vertical takeoff and landing), which are expected to revolutionize local and regional transportation in coming years.
The best I can give Trump on technology is a B-, given his penchant for government control. The Anthropic controversy is a real black eye.
Voting Rights: The Trump-backed SAVE America Act would require an ID proving citizenship to vote in federal elections. It’s stalled in the Senate, seven votes short of the 60 needed to send it to Trump’s desk. GOP senators are unwilling to force a talking filibuster, let alone to use the so-called “nuclear option” to force a simple-majority vote. There is still a possibility of including a voter ID requirement in a budget reconciliation bill if anyone can convince the Senate Parliamentarian that it would have budget impacts. For his part, Trump says he’ll refuse to sign any other legislation until the SAVE Act crosses his desk, though he’s also threatened to issue an EO mandating voter ID should the Senate fail to pass the bill. The constitutionality of such an order would be challenged, of course, but for his determination on the issue, I’ll give him an A+.
Education: This is a quick addition to the list. After inserting the photo of Trump at the top, I realized that I’d completely forgotten to add education as a performance category. Trump’s effort to dismantle the wasteful and unproductive Department of Education is to be applauded. He’s also been an unwavering supporter of school choice. I’ll give him an A here.
I have to stop! That’s 22 categories and a “grade point average” of 2.55 if the categories are equally weighted. It’s a little worse than Trump’s GPA as a candidate (2.67). He could have improved his grades dramatically without his bent for economic intervention, but I’d have to vote for him again given the alternative.
I’ll try to keep this one short. I was starting a post on another topic when Donald Trump distracted me… again. This time it was the $2,000 per person “tariff dividend” he’s proposed. This would be paid to all low- and middle-income Americans starting in mid-2026. As if the federal government was a profitable enterprise. Obviously that’s the wrong model! This is either sheer stupidity or willful government failure. Sure, the Fed can just print money, so why not? Who knew Trump was a closet modern monetary theorist?
It’s such a bad idea…. Tariffs themselves are bad enough. They are taxes, of course, a truth about which Trump and his central trade planners have denied since the beginning of the escapade. Tariffs hurt consumers and businesses who import inputs. Tariffs retard growth by increasing input costs, disrupting supply chains, and raising the prices of not only imports, but also domestically-produced goods that compete with imports. Surely Trump knows all this and the implications for his political capital: he’s already backtracking on tariffs for certain food items.
The tariff dividend is a transparent attempt to compensate consumers for the harms of taxation. It’s also a transparent attempt to buy or keep votes, much as he’s already sought to buy-off farmers harmed by tariffs. The income limit for the dividend hasn’t been announced, but make no mistake: this represents another form of redistribution.
It’s also striking that the tariffs won’t generate nearly as much revenue as will be required to begin paying the dividend by mid-2026. In fact, it could be short by as much as $300 million! Will the Treasury borrow the rest? More pressure on the bond market and interest rates.
Furthermore, the so-called dividend would be inflationary if the Federal Reserve fails to neutralize it. It would amount to another “helicopter drop” of cash, similar to the cash dump from Covid relief payments: money printing under the guise of fiscal policy.
To the extent that tariff revenue flows, it should be used to reduce the federal deficit or to pay down the gigantic government debt already outstanding ($38 trillion today not including the impending cost of funding entitlement programs). Instead, Trump is proudly following in the footsteps of generations of spendthrift politicians.
Keep in mind that the dividend is a promise Trump might not be able to keep. The Supreme Court will soon announce its decision on presidential power to impose tariffs. This decision will bear on the president’s authority under the International Emergency Economic Powers Act (IEEPA) — if and when an actual emergency is at hand, which it clearly is not. More broadly, the decision hinges on whether a “foreign facing” tax falls within the president’s Article II powers under the Constitution.
The proposed tariff dividend undermines the Administration’s argument before the Court that tariffs are primarily regulatory tools, and that any revenue from tariffs is merely incidental. Thank God the dividend would have to be authorized by Congress! I truly hope there are enough sensible legislators on the Hill to beat back this idiocy.
Inflation leveled off below 3% in 2024 and has drifted around the 3% level in 2025. The rate of increase in the core PCE (Personal Consumption Deflator) is the inflation measure of most interest to the Federal Reserve as a policy reference, but advances in the core CPI (Consumer Price Index) have settled at about the same level. The core inflation rates exclude food and energy prices due to the volatility of those components, but even with food and energy, inflation in the PCE and the CPI have been running near 3%.
It’s a 2% Target… Or Is It?
The Fed continues to maintain that its “official” inflation target is 2% for the core PCE. However, the central bank is now easing policy despite inflation running a full percentage point faster than the target. The rationale turns on the Fed’s dual mandate to maintain both “price stability” and full employment, goals that are not always compatible.
Currently, the labor market is showing signs of weakness, so the Fed has elected to ease policy by guiding the federal funds rate downward, and by putting a stop to run-off in its balance sheet holdings of securities. The latter ends a brief period of so-called quantitative tightening.
Just a couple of months ago, the central bank announced a new emphasis on targeting 2% inflation in the long run, with notable differences from the “flexible average inflation targeting” (FAIT) that it claimed to have adopted in 2020. In some respects, the Fed appeared to be giving more primacy to the “2%” definition of price stability than to the full employment mandate. Yet the “new approach” still allows plenty of wiggle room and might not differ much from the approach followed prior to FAIT.
“… an asymmetric approach to the dual mandate: It would implement makeup policy on misses below the inflation target, and it would respond to shortfalls from maximum employment. These asymmetries, while well- intended, created an inflationary bias that caused FAIT to fail the ‘stress test’ of the 2021–22 inflation surge. This failure caused the Fed to effectively abandon FAIT in early 2022 and become a single-mandate central bank focused on price stability.“
Scott Sumner says the Fed never really really practiced FAIT to begin with. It should have been a symmetric policy, but it wasn’t. During 2021-22, the Fed did not attempt to correct for rising inflation. Instead, it focused on the recessionary effects of Covid and the impingements of Covid-era restrictions on employment.
Clearly, Covid was a shock that monetary policy was ill-suited to address without reinforcing inflation. Furthermore, the pandemic inflation was thought by the Fed to be transitory, but easing policy was a critical error. Stimulating demand via monetary accommodation gave inflation more permanence than the Fed apparently expected.
Lost In the Tea Leaves Again
While a strong commitment to price stability is welcome, it’s not clear that is what’s guiding the Fed’s decisions at the moment. Again, the Fed’s preferred inflation gauge has flattened out at around 3%. However, with uncertainty about tariffs and tariff pass throughs in 2026, the weak dollar, and unrelenting Treasury borrowing, easier monetary conditions could well set the stage for persistent inflation above 3%, despite the official 2% target. That might help explain the failure of longer-term interest rates to decline in the wake of the Fed’s latest quarter-point cut in the federal funds target in October.
Suspicious Minds
Speculation that the Fed is allowing its true inflation target to creep upward is hardly new. Back in June, former New York Fed economist Robert Brusca noted the following:
“A Cleveland Fed survey already has the business community thinking that the REAL target for inflation is 2.5%.”
More recently, Mark Sobel of the Official Monetary and Fiscal Institutions Forum stated that the real target, for now, is probably 3%:
“But could the Fed stealthily and unintentionally end up near 3%? Even apart from above-target inflation in recent years, short- and longer-term structural forces are at play that could usher in slightly higher inflation, notwithstanding Fed speeches on the sanctity of the 2% inflation target.“
Chewing On Data
It’s pretty clear that the Fed has become a skittish about the pace of the real economy, lending more weight to the full employment part of its dual mandate. Employment growth slowed over the past year, partly due to government employee buy-outs and separations of illegal immigrants from their employers. The last official employment report was in early September, however, so the nonfarm payroll data is two months out-of-date:
Private payroll growth from ADP over the past two months has not looked especially encouraging:
Tariffs and weakened profit margins have likely had a contractionary effect, and the six-week government shutdown just ended will shave 0.5% or more off fourth quarter GDP growth. Furthermore, while money (M2) growth has accelerated over the past year, it remains fairly restrained.
And the monetary base has been pretty flat for most of 2025:
We’ll see where these aggregates go from here. The extended “restraint” might now be of some concern to the Fed, given recent doubts about employment and economic growth. Still, in October, Fed Chairman Jerome Powell said that another quarter-point cut in the federal funds rate target in December was not a foregone conclusion. That statement seems to have worried equity investors while offering little solace to bond investors.
Aborted Landing
If (and as long as) the Fed gives primacy or greater weight in its policy deliberations to employment than inflation, it might as well have adopted an inflation target of 3% or more. The additional erosion in purchasing power wrought by that leniency is bad enough, but the effect of monetary policy on the real side of the economy is more poorly understood than its effect on nominal variables. The Fed’s shift in priorities is both unreliable on the real side and dangerous in terms of price stability. These concerns are even more salient given the upcoming appointment (in May) of a new Fed Chairman by President Trump, who seems eager for easy money.
The world doesn’t ordinarily revolve around tariffs, but so much has happened to make tariffs into an economic and political linchpin of the moment. Donald Trump put them in the spotlight, of course, and while he’s still seeing roses, things won’t turn out entirely the way he hopes. At the tariff levels he’s instituted, this shouldn’t be too surprising.
While tariff revenue is helping to shave the federal budget deficit, the tax falls largely on the backs of American consumers and businesses with all the attending distortions that entails. Sadly, the extra revenue also seems to have offered a handy excuse to put spending cuts on the back burner. Tariffs and tariff uncertainty have businesses attempting to compromise between reduced margins and price hikes. Thinning margins due to tariffs have played a role in the weak employment numbers we’ve seen over the past few months. And tariffs, at least until now, have quite rightly reinforced the Federal Reserve’s cautious stance toward easing policy. However, the weak labor market has likely convinced the Fed to cut its short-term interest rate target, despite inflation stubbornly remaining well above the Fed’s 2% objective. That upward price pressure will remain.
Now, the legal battle over Trump’s tariff authority is about to reach a climax. That’s what I’ll focus on here. The Supreme Court has agreed to fast track the challenge to the President’s discretion to impose retaliatory tariffs unilaterally. There are two cases at hand: V.O.S. Selections, Inc. v. Trump, and Learning Resources, Inc., et al. v. Donald Trump et al. In both cases, small business plaintiffs contend that Trump’s invocation of the International Emergency Economic Powers Act (IEEPA) is unwarranted, and that “most” of the tariff actions taken by Trump have usurped Congress’ power of the purse under Article I of the Constitution. Here’s Ilya Somin, who is a Volokh Conspiracy regular and one of the attorneys representing the plaintiffs:
“… IEEPA doesn’t even mention tariffs and has never previously been used to impose them, that there is no ‘unusual and extraordinary threat’ of the kind required to invoke IEEPA, the major questions doctrine, the constitutional nondelegation doctrine, and more.“
This isn’t the first time a U.S. president has imposed tariffs unilaterally, but it is easily the most drastic such action. Historically, nearly all tariffs were levied by acts of Congress. Prior to Trump II, perhaps the broadest tariff imposed by a President was Richard Nixon’s brief 10% surcharge on all imports, but that was lifted quickly. Presidents Johnson and Obama imposed some selective tariffs. All of these episodes seem piddling compared to Trump’s tariffs, which are both sweeping and in many cases painfully selective.
Eric Boehm notes that when it comes to major constitutional questions, the Court has taken the position that
“… executive power should be construed narrowly, not broadly …. Rather than tying itself into knots to affirm nearly unlimited executive powers over commerce, the Supreme Court should tell the Trump administration to get permission from Congress before imposing new tariffs.“
I believe that will be the general shape of the outcome here. Maybe there’s a way for the Court to allow the tariffs to stand until Congress decides to “man up”, acting one way or the other. SCOTUS would probably like to do just that! Or maybe the Court could stay the lower court’s injunction until the case is heard by the Court in full on the regular docket, or until Congress acts.
There’s a decent chance, however, that Trump’s tariffs will be struck down, leaving it up to tariff supporters in Congress to lay down statutory rules rather than put up with the impulsive craziness we’ve witnessed thus far. If the Court lets the tariffs stand, it leaves the door open for new tests on the limits of executive discretion. Here is Greg Ip at the link:
“There would also be no end to uncertainty. ‘Unlike most other tariff authorities, these tariffs are not enshrined in statute, there’s no process to change them, and they can change very rapidly, in a day, without much notice, as we’ve seen,’ said Greta Peisch, a trade attorney at Wiley Rein and former general counsel for the U.S. trade representative.“
We’ve already seen strong hints that the Administration would like to force businesses to eat the cost of the tariffs rather than pass them along to consumers in higher prices. There hasn’t been any formal action of this kind by the Administration, at least not yet. Still, one can hardly blame businesses who might perceive an implicit threat if they fail to comply. That kind of bullying represents an a massive abuse of power. The Court could do everyone a big favor by clarifying that the authority to impose tariffs rests with Congress.
Since his inauguration, Donald Trump has been busy finding ways for the government to extort payments and ownership shares from private companies. This has taken a variety of forms. Tad DeHaven summarizes the major pieces of booty extracted thus far in the following bullet points (skipping the quote marks here):
June 13: Trump issues an executive order allowing the Nippon Steel-US Steel deal contingent on giving the government a “golden share” that enables the president to exert extensive control over US Steel’s operations.
July 10: The Department of Defense (DoD) unveils a multi-part package with convertible preferred stock, warrants, and loan guarantees, making it the top shareholder of rare earth metals producer MP Materials.
July 23: The White House claims an agreement with Japan to reduce the president’s so-called reciprocal tariff rate on Japanese imports comes with a $550 billion Japanese “investment fund” that Trump will control.
July 31: Trump claims an agreement with South Korea to reduce the so-called reciprocal tariff on South Korean imports comes with a $350 billion South Korean-financed investment in projects “owned and controlled by the United States” that he will select.
August 12: In a Fox Business interview, Bessent points to the alleged investments from Japan, South Korea, and the EU “to some extent” and says, “Other countries, in essence, are providing us with a sovereign wealth fund.”
August 22: Fifteen days after calling for Intel CEO Lip-Bu Tan to resign, Trump announces that the US will take a 10 percent equity stake in Intel using the CHIPS Act and DoD funds, becoming Intel’s largest single shareholder.
Each of these “deals” has a slightly different back story, but national security is a common theme. And Trump says they’ll all make America great again. They are touted as a way for American taxpayers to benefit from the investment he claims his policies are attracting to the U.S. However, all of these are ill-advised for several reasons, some of which are common to all. That includes the extortionary nature of each and every one of them.
Short Background On “Deals”
The June 13 deal (Nippon/US Steel), the July 10 deal (MP Materials), and the August 22 deal (Intel) all involve U.S. government equity stakes in private companies. The August 11 deal (NVIDIA/AMD) diverts a stream of private revenue to the government. The July 23 and July 31 deals (Japan and South Korea) both involve “investment funds” that Trump will control to one extent or another.
The August 12 entry adds “expected” EU investments with some qualification, but that bullet quotes Treasury Secretary Bessent referring to these investments as part of a sovereign wealth fund (SWF). Secretary of Commerce Lutnick now denies that an SWF will exist. My objections might be tempered slightly (but only slightly) by an SWF because it would probably need to place constraints on an Administation’s control. That might give you a hint as to why Lutnick is now downplaying the creation of an SWF.
I object to the Nippon/US Steel “deal” in part (and only in part) because it was extortion on its face. There is no valid anti-trust argument against the deal (US Steel is the nation’s third largest steelmaker and is broke), and the national security concerns that were voiced (Japan! for one thing) were completely bogus. Even worse, the “Golden Share” would give the federal government authority, if it chose to exercise it, over a variety of the company’s decisions.
The Intel “deal” is another highly questionable transaction. Intel was to receive $11 billion under the CHIPS Act, a fine example of corporate welfare, as Veronique de Rugy once described the law. However, Intel was to receive its grants only if it stood up four fabrication facilities. But it did not. Now, instead of demanding reimbursement of amounts already paid, the government offered to pay the remainder in exchange for a 9.9% stake in the company. And there is no apparent requirement that Intel meet the original committment! This could turn out a bust!
The MP Materials transaction with the Department of Defense has also been rationalized on national security grounds. This excuse comes a little closer to passing the smell test, but the equity stake is objectionable for other reasons (to follow).
The Nvidia/AMD deal has been justified as compensation for allowing the companies to sell chips to China, which is competing with the U.S. to lead the world in AI development. This is another form of selective treatment, here applied to an export license. The chips in question do not have the same advanced specifications as those sold by the companies in the U.S., but let’s not let that get in the way of a revenue opportunity.
While nothing about TikTok appears on the list above, I fear that a resolution of its operational status in the U.S. presents another opportunity for extortion by the Trump Administration. I’m sure there will be many other cases.
Root Cause: Protectionism
The so-called investment funds described in the timeline above are nearly all the result of trade terms negotiated by a dominant and belligerent trading partner: the U.S. My objections to tariffs are one thing, but here we are extorting investment pledges for reductions in the taxes we’ll impose on our own citizens! Additionally, the belief that these investments will somehow prevent a general withdrawal of foreign investment in the U.S. is misguided. In fact, a smaller trade deficit dictates less foreign investment. The difference here is that the government will wrest ownership control over a greater share of less foreign investment.
Trump the Socialist?
Needless to say, I don’t favor government ownership of the means of production. That’s socialism, but do matters of national security offer a rationale for public ownership? For example, rare earth minerals are important to national defense. Therefore, it’s said that we must ensure a domestic supply of those minerals. I’m not convinced that’s true, but in any case, fat defense contracts should create fat profit opportunities in mining rare earths (enter MP Materials). None of that means public ownership is necessary or a good idea.
All of these federal investments are construed, to one extent or another, as matters of national security, but that argument for market intervention is much too malleable. Must we ensure a domestic supply of semiconductors for national security reasons? And public ownership? Is the same true of steel? Is the same true of our “manufacturing security”? It can go on and on. The next thing you know, someone will argue that grocery stores should be owned by the government in the name of “food security”! Oh, wait…
Trump the Central Planner
Government ownership takes the notion of industrial planning a huge step beyond the usual conception of that term. Ordinarily, when government takes the role of encouraging or discouraging activity in particular industries or technologies, it attempts to select winners and losers. The very idea presumes that the market is not allocating resources in an optimal way, as if the government is in any position to gainsay the decisions of private market participants who have skin in the game. This is a foolhardy position with predictably negative consequences. (For some examples, see the first, second, and fourth articles linked here by Don Boudreaux.) The fundamental flaw in central planning always comes down to the inability of planners to collect, process, and act on the information that the market handles with marvelous efficiency.
When government invests taxpayer funds in exchange for ownership positions in private concerns, the potential levers of control are multiplied. One danger is that political guidance will replace normal market incentives. And as de Rugy points out, the government’s potential role as a regulator creates a clear conflict of interest. In a strong sense, a government ownership stake is worse for private owners than a mere dilution of their interests. It looms as a possible taking, as private owners and managers surrender to creeping government extortion.
Financial Malfeasance
In addition to the objections above, I maintain that these investments represent poor stewardship of public funds. The U.S. public debt currently stands at $37 trillion with an entitlement disaster still to come. In fact, according to one estimate, the federal government’s total unfunded obligations amount to additional $121 trillion! Putting aside the extortion we’re witnessing, any spare dollar should be put toward retiring debt, rather than allowing its upward progression.
As I’ve noted before, paying off a dollar of debt entails a risk-free “return” in the form of interest cost avoidance, let’s say 3.5% for the sake of argument. If instead the dollar is “invested” in risk assets by the government, the interest cost is still incurred. To earn a net return as high as the that foregone from interest avoidance, the government must consistently earn at least 7% on its invested dollar. But of course that return is not risk-free!
A continuing failure to pay down the public debt will ultimately poison the debt market’s assessment of the government’s will to stay within its long-run budget constraint. That would ultimately manifest in an inflation, shrinking the real value of the public debt even as it undermines the living standards of many Americans.
One final thought: Though few MAGA enthusiasts would admit it even if they understood, we’re witnessing a bridging of two ends of the idealogical “horseshoe”. Right-wing populism and protectionism meet the left-wing ideal of central planning and public ownership. There is a name for this particular form of corporatist state, and it is fascism.
The dismissal of the Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer by President Trump was regrettable and a dumb move besides. It was undeserved, and its timing made Trump look like the authoritarian buffoon of his enemies’ worst nightmares.
Trump believed the weak employment report for July made him “look bad”. He was particularly enraged by the downward revisions in nonfarm payrolls for the months of May and June (see chart above). Of course, he would not have liked the estimates to begin with, had they been in line the ultimate revisions — he just doesn’t like “bad” numbers on his watch. Trump stated his conviction that the weak report was “politically motivated”, and even “rigged” by McEntarfer, which is absurd. To anyone who knows anything about how these numbers are produced, this makes Trump look like a guy who is willing to manipulate economic data to his advantage. Only good numbers, please!
As I’ve said before, the mere availability of aggregate economic statistics seems to encourage activist policy. This is made worse by the unreliability and mis-measurement of these aggregates, which compounds policy failures. Like other parts of the federal statistical system, BLS reporting has shortcomings, some of them severe and getting worse. But that’s not McEntarfer’s doing. The numbers, for all their faults, are generated by a highly standardized process. Reforming that process will not be cheap.
One compelling take on the negative revisions is that they are really Trump’s very own fault. In an excellent post describing some of the technicalities that drive revisions, Claudia Sahm says:
“This is a policy problem, not a measurement problem. … Large, unpredictable shifts in economic policy are placing unusual strains on our measurement apparatus because they are causing large, unpredictable changes in the behavior of consumers and businesses. These changes are difficult to measure in real time. The GDP statistics this year have struggled to isolate massive swings in imported goods around the start of tariffs from its measure of domestic production. The initial estimates of payrolls didn’t capture the slowdown in employment, but that’s more a reflection of how sharp the jobs slowdown is, rather than a limitation of the surveys.“
The key lesson here is that shifts in the policy landscape can make economic activity more difficult to measure. And of course, policy uncertainty has contractionary effects on top of the stagflationary effects of higher taxes (i.e., tariffs). But I’m not holding out hope that Trump will engage in any introspection on the point.
As Sahm explains, the sharp slowing of job growth serves to highlight one of the difficulties inherent in survey-based measures of economic performance: not all responses are timely, and that is likely aggravated when underlying changes in activity are dramatic. In fact, she says, the June revision was driven largely by late reporting. Furthermore, the May and June revisions to payrolls were also partly driven by a change in seasonal adjustment factors based on new data (BLS uses a concurrent seasonal adjustment methodology).
In terms of industries, half of the June revision to payrolls came from state and local education, erasing an initial estimate showing that public education jobs had increased in June, which perplexed analysts at the time. The other half of the revision was spread broadly across the private sector.
In addition to the changeable nature of survey data and seasonal variability, BLS reports suffer because they often involve shaky assumptions made necessary by the limits of survey coverage. Perhaps the most controversial of these comes from the so-called birth/death (b/d) model of business formation/closure. This model is used by the BLS to estimate the net jobs created by new businesses that cannot be covered by the monthly Establishment Survey. Month-to-month, that can be a large gap to fill. Unfortunately, the b/d model can be extremely inaccurate, especially at turning points. In July 2025, the b/d model added about 257,000 jobs to total new jobs (prior to seasonal adjustment). Thus, the b/d assumption was 3.5 times the seasonally adjusted total gain of 73,000!
“It is inexcusable for the BLS to not incorporate QCEW data as soon as possible.
“Instead, it relies on poor sampling of a small subset. On that poor sample, the response rate is pathetic.
“In addition, there is survival bias. In recognition of survival bias, the BLS concocted its absurd birth-death model.
“And on top that that, struggling businesses have no incentive to respond. In contrast, large corporations likely have someone dedicated to filling out government surveys.”
I’ve been critical of large BLS revisions in the past, as well as glaring inconsistencies between estimates of payroll jobs from the Establishment Survey and total civilian employment from the BLS Household Survey. Of course, they are different surveys designed to estimate different things with different samples, different coverage, geared toward counting jobs in one case and people employed and unemployed in the other. The two are benchmarked differently and at different frequencies. Still, it’s unsettling to see the two surveys diverge sharply in terms of monthly changes or trends, or to see consistently one-directional revisions. John Podhoretz states that the number of new nonfarm payroll jobs has been revised down in 25 of the past 30 months!
As Veronique de Rugy says, flaws are not the same as bad faith. Surely improvements can be made to both BLS surveys, their benchmarking, and to other adjustments and assumptions made for reporting. However, it’s pretty clear that BLS has not had the staffing and resources necessary to address these shortcomings. Over the ten years ending in 2024, inflation-adjusted BLS funding declined by more than 20%. At the same time, response rates on the Household survey have declined from 89% to less than 70%. The Establishment Survey of nonfarm businesses has also been plagued by deteriorating response rates, which fell from 61% to less than 43% over the past 10 years. And now, the Trump Administration has proposed an additional budget cut for the BLS of 8% in 2026.
Trump would have done better to ask the BLS commissioner what resources were needed to revamp its processes. Instead, his approach was to create a public spectacle by firing the head of the agency. One has to wonder how Trump might find a well-trained economist or statistician who will take the job if the numbers must always reflect well on the boss.
The federal government ran a budget surplus of $27 billion in June, much to the surprise of nearly everyone. The Trump Administration and MAGA-friendly media were eager to credit a big revenue boost from higher tariffs, which… ahem … they have assured us are notreally taxes. In any case, to attribute the June surplus to tariffs is flatly ridiculous. The truth is these “non-tax” magic revenue generators made a relatively small contribution to the apparent shift in the government’s fiscal position in June. And I say “apparent” because the surplus itself was something of a mirage.
Yes, tariffs brought in a total of almost $27B during June, which is about the same as the surplus recorded, but that was purely coincidental. It does not imply that tariffs “created” a surplus. Nor does it suggest that tariffs might just be able to balance the federal budget. Not a chance!
Here is one of two other sides of the story: the Treasury reported that the budget balance this June improved from a year ago by a total of $89 billion, from a deficit of $72B in June of 2024 to the aforementioned surplus of $27B in June 2025. Outlays were lower by about $38B this June, accounting for almost 43% of the improvement. Receipts were about $59B higher, with tariffs increasing by $20B relative to June 2024. So tariffs contributed just over a third of the boost in receipts. Altogether then, tariffs accounted for 22.5% of the improvement in the June budget balance between 2024 and 2025. That version of the story, as far as it goes, does not support the contention that tariffs “caused” the budget surplus in June, only that tariff revenue was a contributing factor.
Let’s dig a little deeper, however. Were it not for so-called “calendar adjustments” made by the Treasury, it would have reported a deficit of $70B in June. The reason? The first day of June fell on a Sunday this year, socertain payments were shifted to the last prior business day: Friday, May 30. That reduced June outlays substantially. Moreover, an extra business day in June 2025 added revenue. So the surplus in June was, in essence, an artifact of the calendar and had little to do with tariff revenue.
Incidentally, no one should be surprised by the growth of tariff revenue collected in June. When a tax rate more than triples (from a pre-Trump average of about 3% to 10% plus in June — net of tariff exclusions), one should expect revenue from that tax to increase substantially (and it was probably exaggerated by the extra business day).
Oh wait! Did I say tax?
With time, buyers will adjust and scale back their import purchases, reducing the revenue impact of the tariff hikes. However, we still don’t know how high tariffs will go. That means we could see substantially higher tariff revenue, though the demand response and a likely negative impact on incomes will cut into those gains. Either way, the revenue potential of tariffs is limited. Some estimates put the revenue impact of Trump’s tariffs at less than $250B annually. That seems conservative, but it’s significant revenue if it holds up. Still, it won’t come close to balancing a federal budget that’s almost $2 trillion in the hole. It certainly doesn’t justify a headlong dive into protectionism, which amounts to taking a crap on the economic freedom and prosperity of the American public.
Donald Trump’s latest volley against the Federal Reserve accuses the central bank of fixing interest rates at artificially high levels compared to rates in other developed countries. He repeatedly demands that the Fed make a large cut to its federal funds rate target, in the apparent belief that other rates will immediately fall with it. While a highly imperfect analogy, that’s a bit like saying that long-term parking in New York City would be cheaper if only hourly rates were cut to what’s charged in Omaha, and with only favorable consequences. Don’t tell Mamdani!
Trump believes the Fed’s restrictive monetary policy is preventing the economy from achieving its potential under his policies. He also argues that the Fed’s “high-rate” policy is costing the federal government and taxpayers hundreds of billions in excessive interest on federal debt. High rates can certainly impede growth and raise the cost of debt service. The question is whether there is a policy that can facilitate growth and reduce borrowing costs without risking other objectives, most notably price stability.
Delusions of Control
The financial community understands that the Fed does not directly control rates paid by the Treasury on federal debt. The Fed has its most influence on rates at the short end of the maturity spectrum. Rates on longer-term Treasury notes and bonds are subject to a variety of market forces, including expected inflation, the expected future path of federal deficits, and the perceived direction of the economy, to name a few. The Fed simply cannot dictate investor sentiments and expectations, and the ongoing flood of new Treasury debt complicates matters.
Another fundamental lesson for Trump is that cross-country comparisons of interest rates are meaningless outside the context of differing economic conditions. Market interest rates are driven by things that vary from one country to another, such as expected inflation rates, economic policies, currency values, and the strength of the home economy. Differences in rates are always the result of combinations of circumstances and expectations, which can be highly varied.
A Few Comparisons
A few examples will help reinforce this point. Below, I compare the U.S. to a few other countries in terms of recent short-term central bank rate targets and long-term market interest rates. Then we can ask what conditions explain these divergencies. For reference, the current fed funds rate target range is 4.25 – 4.5%, while 10-year Treasury bonds have traded recently at yields in the same range. Current U.S. inflation is roughly 2.5%.
It’s important to remember that markets attempt to price bonds to compensate buyers for expected future inflation. Currently, the10-year “breakeven” inflation implied by indexed Treasury bonds is about 2.35% (but it is closer to 3% at short durations). That means unindexed Treasury bonds yielding 4.4% offer an expected real yield just above 2%. Accounting for expected inflation often narrows the gap between U.S. interest rates and foreign rates, but not always.
Switzerland: The Swiss National Bank maintains a policy rate of 0%; the rate on 10-year Swiss government bonds has been in the 0.5 – 0.7% range. Why can’t we have Swiss-like interest rates in the U.S.? Is it merely intransigence on the part of the Fed, as Trump would have us believe?
No. Inflation in Switzerland is near zero, so in terms of real yields, the gap between U.S. and Swiss rates is closer to 1.4%, rather than 3.8%. But what of the remaining difference? Swiss government debt, even more than U.S. Treasury debt, attracts investors due to the nation’s “safe-haven” status. Also, U.S. yields are elevated by our ballooning federal debt and uncertainties related to trade policy. Economic growth is also somewhat stronger in the U.S., which tends to elevate yields.
These factors give the Fed reason to be cautious about cutting its target rate. It needs evidence that inflation will continue to trend down, and that policy uncertainties can be resolved without reigniting inflation.
Euro Area: The European Central Bank’s (ECB) refinancing rate is now 2.15%. Meanwhile, the 10-year German Bund is yielding around 2.6%, so both short-term and long-term rates in the Euro area are lower than in the U.S. In this case, the difference relative to U.S. rates is not large, nor is it likely attributable to lower expected inflation. Instead, sluggish growth in the EU helps explain the gap. Federal deficits and the ongoing issuance of new Treasury debt also keep U.S. yields higher. Treasury yields may also reflect a premium for volatility due to heavier reliance on foreign investors and private funds, who tend to be price sensitive.
Japan: The Bank of Japan’s (BOJ) policy rate is currently 0.5%. Yields on Japanese 10-year government bonds have recently traded just below 1.5%. Expected inflation in Japan has been around 2.5% this year, which means that real yields are sharply negative. The BOJ has tightened policy to bring inflation down. The nearly 3% gap between U.S. and Japanese bond yields reflects very weak economic growth in Japan. In addition, despite a very high debt to GDP ratio, the depressed value of the yen discourages investment abroad, helping to sustain heavy domestic holdings of government debt.
Blame and Backfire
Trump might well understand the limits of the Fed’s control over interest rates, but if he does, then this is exclusively a case of scapegoating. Cross-country differences in interest rates represent equilibria that balance an array of complex conditions. These range from disparate rates of inflation, the strength of economic growth, currency values, fiscal imbalances, and the character of the investor base. .
Investor expectations obviously play a huge role in all this. A central bank like the Fed cannot dictate long-term yields, and it can do much more harm than good by attempting to push the market where it does not want to go. That type of aggressiveness can spark changes in expectations that undermine policy objectives. It’s childish and destructive to insist that interest rates can and should be as low in the U.S. as in countries facing much different circumstances.
In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun
Sacred Cow Chips 
