The gold standard was a monetary system that defined a unit of a nation’s currency as a fixed weight of gold and made the two mutually exchangeable. For much of modern history, several versions of this pairing served as the foundation of global trade and finance. Under the gold standard, governments promised to redeem paper money for a defined amount of gold on demand, which made the value of currencies stable and predictable. That stability fueled unprecedented global integration, linking the prosperity of many nations through the shared economic logic of gold.
The gold standard was largely abandoned during the twentieth century, but debate over its virtues and flaws endures. Supporters see it as a bulwark against inflation and government overspending; critics call it too rigid for modern economies. Understanding what the gold standard was, how it worked, and why it fell out of favor helps to clarify not only a pivotal era in economic history but also recurring arguments about money, fiscal discipline, and currency stability.
What Is the Gold Standard?
Under an active gold standard, a country defines its currency as equivalent toa specific weight of gold. Governments or central banks advertise willingness to buy or sell gold at that fixed price, ensuring that paper money is “as good as gold.” When the United States adopted the classical gold standard, one dollar equaled about one-twentieth of an ounce of gold. Anyone could, in theory, exchange paper currency for that amount of metal.
This convertibility linked every participating currency to gold, and to one another, creating a system of fixed exchange rates. A dollar, a pound, or a franc all represented certain weights of gold, making international trade and investment far more predictable. Because the supply of gold changed only slowly, the total amount of money governments could print was naturally limited. That constraint is what advocates of the gold standard consider its greatest strength: it restricted governments from printing money without real value behind it.
Over time, the gold standard evolved in several forms. The gold specie standard, dominant in the nineteenth century, involved coins made of gold circulating alongside paper notes that were fully redeemable for gold. After World War I, many nations moved to a gold bullion standard, in which paper money could be exchanged for large bars of gold held by central banks, but gold coins disappeared from daily use. Later, the gold exchange standard — most notably the Bretton Woods system after 1944 — linked national currencies indirectly to gold through reserve currencies such as the US dollar. Each version reflected an attempt to preserve gold’s stability while adapting to changing political and economic conditions.
How the Gold Standard Worked
The gold standard operated through a simple but powerful mechanism: every unit of currency was a claim on a fixed quantity of gold held by the issuing authority. Central banks or treasuries maintained gold reserves to back that commitment. When a country ran a trade surplus, gold flowed in; when it ran a deficit, gold flowed out. These movements automatically regulated domestic money supplies and prices.
This dynamic was captured in the price-specie flow mechanism, first described by the nineteenth-century economist David Hume. If a nation imported more than it exported, gold left the country to pay for those goods. The resulting contraction of the money supply reduced prices and wages, making exports cheaper and imports dearer until balance was restored. Conversely, gold inflows expanded the money supply and lifted prices, damping exports and stimulating imports. In theory, this automatic adjustment kept the global economy in equilibrium without the need for government manipulation.
The gold standard’s self-correcting nature was both a discipline and a constraint. Governments could not simply expand credit or pursue inflationary spending without risking a drain of gold reserves. At the same time, this rigidity left little room for active responses to recession, war, or financial panic.
By the late nineteenth century, the major industrial nations — Britain, Germany, France, Japan, and the United States — had adopted this system. Their currencies were convertible into gold at fixed rates, creating what historians call the classical gold standard (1870s–1914). The resulting predictability underpinned an era of extraordinary growth in trade, capital flows, and industrialization.
Advantages of the Gold Standard
A number of benefits distinguished the gold standard from later fiat-money systems.
Price Stability
Because gold production increases only slowly, the total supply of money expands at a slow and generally steady pace. This natural limitation kept long-term inflation low. Over decades, average prices under the classical gold standard remained remarkably stable, especially when compared to the persistent inflation of the fiat-currency era.
Predictability and Confidence
The promise that paper money could be converted into gold made currencies credible. Businesses could plan investments and trade agreements without fearing sudden currency devaluations. Fixed exchange rates reduced uncertainty in international commerce and encouraged the flow of capital across borders.
Fiscal and Monetary Discipline
Linking money creation to gold restrained governments from overspending or financing deficits by printing currency. Monetary policy was effectively automatic: a nation could not expand its money supply unless it acquired more gold. For this reason, advocates view the gold standard as a guardrail against political manipulation of money and a deterrent to reckless borrowing.
Promotion of International Trade
A universal gold anchor simplified exchange and reduced transaction costs. With stable exchange rates, traders and investors faced fewer risks, and international settlements could be made in a currency recognized everywhere.
Protection Against Manipulation
Unlike modern systems, in which central banks can devalue currencies or engage in “quantitative easing,” the gold standard made competitive devaluations and “currency wars” far more difficult. Its rules constrained the temptation to seek economic advantage through monetary distortion.
Encouragement of Saving and Investment
Stable prices preserved the purchasing power of money, fostering an environment in which long-term planning, capital accumulation, and thrift were rewarded. Investors could rely on real returns rather than on nominal gains eroded by inflation.
To the gold standard’s defenders, these traits explain why the classical gold standard coincided with rapid industrialization, robust trade expansion, and rising living standards across much of the world.
Alleged Disadvantages of the Gold Standard: A Balanced Examination
Critics of the gold standard see those same features — discipline and rigidity — as liabilities. But many alleged flaws reflect implementation failures or modern misinterpretations, rather than inherent defects.
Inflexibility and Limited Policy Response
Opponents argue that tying money to gold prevents governments and central banks from acting decisively during crises. Under the gold standard, expanding the money supply or lowering interest rates risked losing gold reserves. Supporters counter that this discipline prevented the political misuse of money and forced governments to confront fiscal realities instead of masking them with currency inflation.
Deflationary Tendencies
Because gold supplies grow slowly, economies under the standard could face mild deflation during periods of rapid productivity growth. Critics warn that falling prices increase debt burdens and discourage investment. Much of this “deflation,” however, was of the benign kind — reflecting efficiency gains rather than collapsing demand — and often coincided with strong economic growth.
Vulnerability to Gold Supply Shocks
The discovery of new gold deposits could modestly increase money supplies, while scarcity could constrain growth. Still, such changes were gradual and predictable (about one percent per year) compared with the abrupt inflationary shocks that fiat regimes can unleash through policy error or political expediency.
Constraints on Growth
Some economists claim that a gold-based system limits credit creation. Historically, however, banking systems developed fractional-reserve practices that allowed credit to expand well beyond physical gold holdings, so long as public confidence remained intact. The industrial revolutions of Britain, Germany, and the United States unfolded entirely under gold-linked regimes.
Difficult International Coordination
The interwar period demonstrated how uneven adherence to gold rules could destabilize the system. Yet the problem lay in inconsistent policies — overvalued currencies, protectionist trade barriers, and poor coordination — rather than in gold itself.
Exposure to Crises
Some have claimed that the gold standard worsened bank runs by restricting emergency liquidity. But under the classical system, private clearinghouses often filled that role effectively by issuing temporary certificates and policing member banks. Such crises also occur under fiat systems; their frequency since 1971 suggests that discretion is no panacea.
Historical Instability
The Great Depression is often cited as proof that the gold standard was fatally flawed. In fact, many economists — including Barry Eichengreen and Milton Friedman — acknowledge that poor policy choices, such as Britain’s overvalued return to pre-war parity and the Federal Reserve’s inaction in 1931-33, deepened the downturn. Nations that left gold earlier — like Britain in 1931 — recovered faster than those that clung rigidly to it. The failure was less about gold itself than about governments’ unwillingness to adapt intelligently.
In short, while the gold standard imposed constraints, many of its supposed defects stemmed from mismanagement or misunderstanding. Every monetary system involves trade-offs; gold’s discipline may appear harsh, but it also forestalled the chronic inflation and debt accumulation that define modern economies.
Rise of the Gold Standard
Gold has served as money for millennia because of its scarcity, divisibility, and durability. Ancient civilizations used gold coins as units of account and stores of value, but the formal linkage between gold and national currencies developed gradually with the rise of modern banking.
In early modern Europe, goldsmiths issued paper receipts for stored metal, which began circulating as money. The realization that not all depositors redeemed their gold simultaneously led to fractional-reserve banking — a key innovation that allowed credit expansion beyond physical reserves.
Britain was the first major nation to codify a gold standard, officially adopting it in 1821 after years of wartime inflation. Its global influence ensured that others followed: Germany in 1871, the United States in 1879, France and Japan soon thereafter. By the 1870s, the classical gold standard had become the backbone of international finance. Currencies were freely convertible into gold, exchange rates were fixed, and trade imbalances were corrected through automatic gold flows.
This system coincided with rapid globalization. Capital moved freely, shipping and communication costs fell, and international investment flourished. The gold standard’s credibility helped unify the world economy in a way unmatched until late in the twentieth century.
Collapse of the Gold Standard
The end of the gold standard came not from economic theory, but from the pressures of war, depression, and political expedience.
World War I (1914)
The classical gold standard’s first collapse came when belligerent nations suspended convertibility to finance massive military spending. Paper money flooded economies, and inflation followed. By the war’s end, the system was in tatters.
The Interwar Gold Exchange (or “Managed”) Standard (1919–1933)
After the war, several nations tried to restore the pre-war order. Britain returned to gold in 1925 at its old parity, overvaluing the pound and triggering deflation. Other countries followed with similar missteps, attempting to maintain gold convertibility without the fiscal discipline that had once supported it. The result was a fragile and uncoordinated system that collapsed under the strain of the Great Depression. Britain abandoned gold in 1931; the United States followed in 1933 for domestic use, though it maintained limited international convertibility.
The Bretton Woods System (1944–1971)
In the wake of World War II, nations sought a more flexible gold-based order. The Bretton Woods agreement pegged other currencies to the US dollar, while the dollar itself was convertible into gold at $35 per ounce. For two decades, the system promoted stability and growth. Yet in its success were the seeds of its downfall. As global trade expanded, the supply of dollars grew far faster than US gold reserves. Massive spending on the military in Vietnam and on expansive social programs at home fueled deficits and inflation. Confidence in the dollar waned.
In August 1971, President Richard Nixon suspended the dollar’s convertibility into gold — a moment known as the Nixon Shock. Within two years, the world’s major economies had shifted to floating exchange rates. By 1973, the gold standard, in all its forms, had come to an end.
Conclusion
The gold standard shaped global economic history for nearly two centuries. It imposed a clear, transparent rule linking money to a tangible asset, thereby restraining inflation and curbing political manipulation. That very discipline, however, proved incompatible with the fiscal demands of modern warfare, welfare states, and activist monetary policy.
The shift to fiat money systems brought flexibility to spend more but also chronic inflation, recurring financial crises, and rising public debt. Today, few economists advocate a full return to gold, recognizing that the scale and complexity of global finance make it impractical. But the gold standard remains a touchstone in debates over monetary integrity, symbolizing a time when money was anchored in something real — and when the value of currency depended less on trust in the discretion of governments than on the weight of a metal measured in ounces.
Even if the world never returns to a gold-based system, understanding how it worked — and why it failed — offers enduring lessons. Stability and discipline come at a cost, but so does the freedom to create money without constraint. The long arc of monetary history suggests that neither extreme provides a permanent answer, yet the gold standard endures as a benchmark against which every modern experiment is, in some sense, still judged.
References
Bordo, M. D., & Schwartz, A. J. (Eds.). (1984). A Retrospective on the Classical Gold Standard, 1821–1931. University of Chicago Press.
Bordo, M. D. (1981). The classical gold standard: Some lessons for today. Federal Reserve Bank of St. Louis Review, 63(5), 2–17.
Eichengreen, B. (1996). Globalizing Capital: A History of the International Monetary System (2nd ed.). Princeton University Press.
Eichengreen, B., & Sachs, J. (1985). Exchange rates and economic recovery in the 1930s. Journal of Economic History, 45(4), 925–946.
Friedman, M., & Schwartz, A. J. (1963). A Monetary History of the United States, 1867–1960. Princeton University Press.
Luther, W. J., & Earle, P. C. (2021). The Gold Standard: Retrospect and Prospect.
Menger, C. (1892). On the origin of money. Economic Journal, 2(6), 239–255.
Officer, L. H. (2008). The price of gold and the exchange rate since 1791. Journal of Economic Perspectives, 22(1), 115–134.
Rockoff, H. (1984). Drastic Measures: A History of Wage and Price Controls in the United States. Cambridge University Press.
Smith, V. (1990). The Rationale of Central Banking and the Free Banking Alternative (L. H. White, Ed.). Liberty Fund. (Original work published 1936)
Strategic Trade Liberalization and theUnited States’ Future in the Asia-PacificRegion
Executive Summary
Since the nineteenth century, the United States has been a significant economic and political presence in the Asia–Pacific region. That has involved periodic clashes with other powers, the most extensive and brutal being with Japan, culminating in the Pacific War of 1941–1945. The United States also participated in — and lost — a regional war in Vietnam. Today, America finds itself embroiled in a significant geopolitical and regional competition with the People’s Republic of China.
Amidst these political changes, trade has remained central to America’s engagement in the Asia–Pacific region. American entrepreneurs and businesses have long recognized the opportunities for trade in the Asia–Pacific region as well as the subsequent benefits for American consumers and workers. Even before the United States acquired massive territory in the Western half of North America throughout the nineteenth century, American merchants were trading throughout the Pacific Ocean.
Those economic possibilities for Americans remain as alive today as they were in the past. Since the late 2000s, however, new political developments have complicated this picture. Some of the most consequential include changes in China’s relationship with the United States, China’s ongoing use of neomercantilist trade agreements to try to force Asia–Pacific nations into greater dependency on Beijing, and swings toward protectionism across the political spectrum of American opinion and policy.
Protectionism, however, is detrimental to America’s economic and national security interests.[1] This paper lays out a framework for how the United States can advance a trade liberalization agenda for the Asia–Pacific that reflects present geopolitical conditions. National security considerations always shape trade policy and a full liberalization of trade throughout the region is unlikely. Nevertheless, American efforts to promote a strategic liberalization of trade with nations throughout the Asia–Pacific region will serve America’s economic interests, as well as strengthen America’s position in its geopolitical contest with China.
Key Points:
America is being outmaneuvered by China in the Asia–Pacific region through the latter’s use of neomercantilist trade agreements primarily designed to promote Chinese political dominance rather than economic growth. The current US strategy of transactional dealmaking primarily on a nation-by-nation basis, accompanied by significant tariff threats, is an ineffective response to the Chinese use of trade agreements to create deep dependency by countries on Beijing.
America can respond to these challenges by pursuing a strategic trade liberalization agenda in the Asia–Pacific region that involves:
rejecting the ascendant protectionist outlook that dominates important segments of US domestic opinion; and
recognizing geopolitical realities facing the United States in the Asia–Pacific.
America’s pursuit of strategic trade liberalization with Asia–Pacific nations can occur through:
new bilateral trade agreements with important Asia–Pacific nations;
further liberalizing existing bilateral trade agreements with Asia–Pacific countries; and
reentering a regional multilateral trade agreement — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — and focusing its efforts on lowering tariff and non-tariff barriers (NTBs) to trade between CPTPP member states.
America’s position vis-à-vis China will be improved to the degree that the United States is able to enhance freedom of trade between countries in the Asia–Pacific.
Competition from Asia–Pacific nations will spur innovation, adaptability, and the exchange of ideas (including in industry, manufacturing, and technology) in the American economy and produce the greater economic growth that is crucial for long-term US national security.
By presenting itself as the champion of Asian-Pacific trade liberalization, the United States can offer a stark contrast to the Chinese model of neomercantilism and creeping political control.
Introduction
In 1890, the US Census Bureau’s superintendent, Robert P. Porter, declared the closure of the American frontier. The great American westward trek across the continent that had begun in the 1700s was over. Americans, however, kept looking westward, not least by gazing toward the Asia–Pacific and its great economic possibilities.
Trade has long been central to that vision of America’s presence in the Asia–Pacific. The United States’ first formal treaty with an Asian nation — the 1833 Treaty of Amity and Commerce between America and the Kingdom of Siam — was primarily focused on trade relations. But America’s trade engagement with the region accelerated after World War II following the United States’ victory over Imperial Japan. Trade relations were further bolstered as the epicenter of the global economy began to shift away from the North Atlantic in the 1960s. Since then, Western Europe’s share of world GDP has continued to diminish in favor of Asia–Pacific nations.[2] In April 2025, three of the world’s five biggest economies in terms of nominal GDP — specifically, the United States, the People’s Republic of China, and Japan — were located in the region.[3]
Growing awareness of this change in the global economy played a role in President Barack Obama’s November 2011 statement (delivered, not coincidentally, before the Parliament of Australia) in which he announced the following:
As President, I have, therefore, made a deliberate and strategic decision — as a Pacific nation, the United States will play a larger and long-term role in shaping this region and its future, by upholding core principles and in close partnership with our allies and friends.
Let me tell you what this means. First, we seek security, which is the foundation of peace and prosperity. We stand for an international order in which the rights and responsibilities of all nations and all people are upheld. Where international law and norms are enforced. Where commerce and freedom of navigation are not impeded. Where emerging powers contribute to regional security, and where disagreements are resolved peacefully. That’s the future that we seek.[4]
Here we see Obama mixing an emphasis on US national security with a commitment to trade liberalization, along with promoting the growth of “liberal international order” throughout the region. Obama’s insistence on calling the United States “a Pacific nation” underscored the US position that America’s presence in the Asia–Pacific region was not only a geographical fact; it also indicated that America considered much of its political and economic future to be firmly located in the region.
Since 2016, however, the US government has significantly shifted its approach to trade in general, and trade relations in the Asia–Pacific region in particular. Three presidential administrations have moved US trade policy away from free trade agreements (FTAs) and pursuing the type of multilateral framework for trade liberalization that was taken as a given in Obama’s speech. That agenda has been sidelined in favor of America using tariffs and non-tariff barriers (NTBs) as part of a unilateral attempt to reset US trade relations with every other nation in the world through a highly transactional deal-making approach, primarily on a nation-by-nation basis.
While this new strategy, and the associated use of tariffs, is often presented as part of a negotiating stance, Americans’ turn to a unilateral protectionist outlook also reflects considerable emerging skepticism, transcending the political spectrum, about the general trade-stance adopted by the United States since 1945.
As the former trade official Michael L. Beeman writes, “America’s sharp trade policy swerves to the New Right and the Progressive Left have bent both ends of the US political spectrum back toward each other and into rough alignment in a new policy dimension.”[5] That new policy outlook is premised on the (misguided) belief that trade liberalization has undermined the US economy and that America has lost more economically and politically than it has gained by diminishing barriers to freer economic exchanges between its citizens and people in other nations.
American trade policy is consequently in a state of flux and likely to remain so over the next decade. At present, there is little prospect of America returning to the postwar stance that broadly prevailed from the Truman administration to the Obama administration. That, however, constitutes an opportunity for American policymakers concerned about the long term to outline how America might pursue a trade liberalization policy throughout the Asia–Pacific while remaining cognizant of the geopolitical realities in the region. Providing such a framework — a strategic trade liberalization approach — in deliberately broad strokes is the purpose of this paper. But before presenting this framework, we need to provide some theoretical and historical context to outline:
Why trade liberalization is preferable to protectionism.
The general history of American trade policy toward the Asia–Pacific region.
The economic stakes involved in getting US trade policy toward the Asia–Pacific right.
Free Trade Creates Wealth
Any reflection on an American trade liberalization policy toward the Asia–Pacific region requires a reminder of the benefits of free trade for Americans. By trade liberalization, I mean the steady reduction of tariffs and non-tariff barriers that impose costs on exchange between people and businesses based in different countries. In economic terms, trade liberalization produces greater wealth and improves the overall economic welfare of Americans over time.
The evidence for this is frankly overwhelming. First, we know that trade liberalization accelerates per-capita GDP growth. One study of trade reform’s impact upon growth found:
a 25 percent reduction in the tariff on capital or intermediate goods is associated with a 0.75-1 percentage point increase in economic growth for liberalizers compared with non-liberalizers. They show a dramatic divergence in the path of real per capita GDP between the two groups: By 2004 the liberalizers were 10 percent above the 1975–98 trend of both and non-liberalizers had fallen almost 10 percent below trend, creating a 15–20 percent gap between the two sets of countries.[6]
A more recent International Monetary Fund (IMF) 2017 analysis of the trade-growth relationship illustrated how trade across borders significantly contributes to increases in per capita income. It estimated that “a one percentage-point increase in trade openness raises real per capita income by two to six percent.”[7]The reduction in import costs facilitated by trade liberalization brings substantial welfare gains to high- and low-income Americans, but gains to the poorest American households, as economist Michael E. Waugh found, are four and a half times the gains of the richest American households. In his words, “poor, high marginal utility households — which are very sensitive to price — will tend to benefit more from trade than rich households.”[8]
Such benefits and the growth which drives them are facilitated by the way in which trade liberalization expands the division of labor across borders. This greater specialization, in turn, stimulates more efficiency and productivity from businesses. Workers gravitate to more productive economic sectors where higher wages are invariably to be found. Under free-trade conditions, the value of people’s real wages increases, insofar as they can buy more goods and services which have, thanks to trade liberalization, become less expensive. Consumers are thus the direct and ultimate beneficiaries of trade liberalization.
Second, the competition from abroad sparked by ever-expanding trade makes businesses more resilient and adaptable. Exposure to greater foreign competition compels companies to face that their viability is perpetually open to challenges from existing and potential domestic rivals, but also from international competitors. This incentivizes them to constantly evaluate what they are doing and why they are doing it. The deeper and wider the competition, the more businesses are subject to unrelenting pressures to innovate, reassess their comparative advantage, streamline their organizations, shrink costs, find less-expensive inputs, take their products into new markets, reorganize their distribution systems, and thereby lower their prices while maintaining profit margins. Again, consumers benefit as a consequence of businesses doing things more efficiently.
No doubt, the intensification of competition can be unsettling for American businesses and workers alike. The alternative, however, is an America cowering behind tariff walls, pretending that people abroad are not willing to work as hard or be as innovative as Americans, or that economic truths like comparative advantage do not apply to Americans, or that sectoral change can be avoided in the American economy, or that some unproductive forms of employment can be preserved without incurring enormous long-term costs. Adopting such a mindset and embracing corresponding policies is not optimal for the US economy, nor the long-term well-being of Americans.[9]
Trade Amidst Geopolitics
The basic theory of free trade and the empirical evidence for trade liberalization’s economic benefits are well established. Moreover, most Americans recognize the opportunities offered by trade with other nations, be it the possibility of purchasing products at lower prices than it would otherwise cost to produce the same goods in America, or the prospect of the profits to be made from selling American goods in foreign markets.
Trade policy, however, occurs in a world of sovereign nation-states, not an economics textbook. Politically mediated agreements and treaties are subject to often-changing national rivalries and competition. Indeed, trade agreements are regularly pursued in conjunction with attempts to realize specific national security objectives. America’s trade relationships in the Asia–Pacific region are no exception. Some understanding of this history is important for contextualizing the future of US trade relationships in the region.
America’s engagement in trade in the Asia–Pacific region dates to the eighteenth century. In 1784, an American ship, The Empress of China, became the first American ship to sail from the young American republic — then still a loose confederation of states, rather than the more unified constitutional regime that emerged in 1790 — all the way to China. Sixty years later, the United States signed the 1844 Treaty of Wangxia with Imperial China, thereby securing access to Chinese markets for American merchants. Nine years later, Commodore Matthew C. Perry sailed his four “black ships” into Tokyo Bay to demand that the until-then closed nation of Japan open its markets to American goods. The result was the Treaty of Kanagawa, signed in 1854.
This marked the beginning of an extended period of US-Japanese trade that persisted until the 1930s. Following Japanese aggression in China throughout that decade, the United States gradually placed sanctions on specific goods (particularly oil and scrap steel) being exported to Japan and then imposed a full trade embargo on exports to Japan throughout 1940 and 1941 after Japanese army and naval units occupied French Indochina. Following Japan’s surrender in 1945, however, considerable efforts were made by Washington and Tokyo to put US-Japan trade relations back on a productive and mutually beneficial footing, though tensions have continued to exist.[10]
The subsequent postwar renewal of US-Japan trade relations formed part of a broader US Cold-War effort to expand American trade globally, with a major objective being to counter the expansion of Communism. As in Western Europe, the opening and re-establishment of trade links was accompanied by the signing of several alliance treaties with Asia–Pacific nations. This included countries like Australia and New Zealand (the 1951 ANZUS treaty), South Korea (the 1953 Mutual Defense Treaty), Japan (the 1952 Treaty of Mutual Cooperation and Security between the United States and Japan), the Philippines (the 1951 Mutual Defense Treaty between the United States and the Republic of the Philippines), and the 1962 Thanat–Rusk communique that formed the basis of America’s modern security arrangements with Thailand. Overlying all this was the now-defunct Southeast Asia Treaty Organization (SEATO) created following the signing of the Southeast Asia Collective Defense Treaty in 1954.
Many of these initiatives were part of the “San Francisco System,” which created a set of bilateral alliances with key Asian-Pacific nations in which the United States was the “hub” and its allies the “spokes.” This contrasted with the single, integrated alliance NATO model that the United States took the lead in establishing in Western Europe in 1949. The context in which the San Francisco System operated changed in subsequent decades. Decolonization, for example, significantly reduced the strategic role once played by European nations like France, Britain, and the Netherlands in Asia. The rapprochement between the United States and mainland China realized during the Nixon administration also had major implications for how America engaged its strategic interests in the Asia–Pacific, as did America’s involvement in, and loss of, the Vietnam War.
These changes were paralleled by shifts in US trade policy from the 1950s onwards. Berkeley political scientist Vinod Aggarwal identifies the following stages in America’s trade stance toward the Asia–Pacific, from the postwar period until 2008:
The first, from World War II to the mid-1950s, can be characterized as a strong commitment to multilateralism and open trade. The second phase from the mid-1950s to the early-1980s can be termed ‘liberal protectionism’ — a pragmatic approach to buying off losers from trade liberalization by providing them with temporary restrictions on trade (some of which, such as textiles and apparel, that grew into widespread protection). From the mid-1980s to the early 1990s, the US shifted to the promotion of regionally focused accords in conjunction with the Uruguay Round. Finally, from the mid-1990s to 2008, the US pursued competitive liberalization, with an emphasis on both open sectoral and bilateral trade arrangements.[11]
One consistency transcending these shifts was America’s leadership in establishing the rules for international trade. This was partly realized through the United States taking an active lead in the General Agreement on Trade and Tariffs (GATT) created in 1941 and which became the World Trade Organization (WTO) in 1995.
On one level, this process resulted, Beeman shows, in the development of rules which injected a high degree of predictability and certainty into the international trading system.[12] But, Beeman notes, US officials also worked hard to ensure that the GATT and WTO rules governing trade served America’s long-term economic and strategic interests — not those of an amorphous global world order. Another advantage conferred by the WTO on the United States was that it provided an established forum in which America, by virtue of its ongoing status as the world’s economic superpower, could exercise huge influence upon global trade and slowly negotiate a wider opening of global markets to American commerce.
Economic Nationalism Redux
Multilateral trade liberalization was thus pursued by Washington through international institutions, with an eye to promoting US national interests. In the late 2000s, this approach began to fall apart, thereby creating many of the conditions presently shaping US trade engagement in the Asia–Pacific region. In the first place, substantial conflicts emerged between China and America over the former’s use of subsidies to bolster exports of particular goods (e.g., solar panels, electric cars, etc.) into global markets, including the United States.[13] As Stephen Ezell illustrates, China also failed to abide by some basic commitments expected of any WTO member “on issues such as industrial subsidization, protection of foreign intellectual property, forcing joint ventures and technology transfer, and providing market access to services industries.”[14] Furthermore, far from embracing the broader trade liberalization agenda expected of WTO entrants, Chinese domestic and international economic policies were more akin, as we will see, to those of an eighteenth-century mercantilist state.[15]
The impact of these changes upon American policymakers was signaled by three developments. First, the Obama administration withdrew from the Doha Round of global trade negotiations in 2015. This move was driven, as former United States Trade Representative Michael B.G. Froman summarizes, by concerns “that the resulting agreement would have locked in preferential treatment for China at the expense of the United States and the rest of the world.”[16]
The second development, and one that indicated deepening skepticism about the WTO’s utility, was the Obama administration’s effort to build a new America-centered regional trade structure in the Asia–Pacific via the Trans–Pacific Partnership (TPP). This also reflected growing concerns about China’s economic and political ambitions in the Asia–Pacific region, especially after Xi Jinping’s ascension to power in China. By the mid-2015s, it was apparent that post-Cold-War ambitions to build a type of liberal international order were coming undone. The US-China competition had become the heart of a renewed geopolitical contest, with the Asia–Pacific rim constituting the primary theatre in which that conflict is being played out.
The third sign of political change driving a major rethinking of trade policy was the election of Donald Trump — a long-term critic of postwar US trade policy[17] — as President. The subsequent political shift was reflected in the first Trump administration’s National Security Strategy document, issued in 2017. Many national security policies of previous administrations, the document stated, had been “based on the assumption that engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners.” But, the document bluntly added, “For the most part, this premise turned out to be false.”[18]
It wasn’t only conservative Americans who believed the promise of free trade had soured. In 2018, two former senior Obama administration officials stated in a Foreign Affairs article that Democratic and Republican administrations “had been guilty of fundamental policy missteps on China.”[19] That included mistaken assumptions that China’s entry into the WTO would help promote the gradual liberalization of other spheres of life in an otherwise highly authoritarian political culture.
From 2017 onwards, US trade policy toward the Asia–Pacific region underwent a dramatic upheaval. Alongside withdrawing from TPP in January 2017, the first Trump administration and then the Biden administration integrated the more expansive use of tariffs into US trade policy, with a particular emphasis upon America’s trade relationship with China. Then, on April 2, 2025, the Trump administration announced Executive Order 14257,[20] outlining a new “Liberation Day” US tariff schedule. This imposed a 10-percent baseline tariff on imports into America from nearly all countries beginning April 5, as well as higher tariffs on imports from 57 specific countries, including many Asian-Pacific nations. The break from the American stance that prevailed from the 1980s until the late-2000s, vis-à-vis the Asia–Pacific region, could not have been starker.
By mid-2025, any prospects for a rules-based liberal international trading system were dead. They were replaced, Froman stresses, “by a flagrant disregard for any semblance of a rules-based system and a clear preference for a power-based system to take its place. Even if pieces of the old order manage to survive, the damage is done: there is no going back.”[21] And to this we should add: the primary players that undone the rules-based order are the People’s Republic of China and the United States of America — the world’s two most powerful nations and the two most significant players in the Asia–Pacific region. For better or worse, the question of the future of trade throughout the Asia–Pacific lies in their hands.
High Stakes, Economic and Political
This background underscores how America’s trade stance vis-à-vis the Asia–Pacific region is presently being driven by reactions to the way China is engaging with the region, the discrediting of multilateral trade liberalization, and the influence of economic nationalist ideas in US domestic politics. These developments, however, make it all the more critical that US policymakers understand the stakes involved in getting trade policy right in this region.
The sheer size of the economies of the Asia–Pacific region alone should focus American minds. At the beginning of the twentieth century, the world economy was dominated by the United States, Great Britain, and other European nations such as Germany and France. But 125 years later, things were different. By April 2025, the IMF listed the United States as the world’s biggest economy in nominal GDP terms ($30.51 trillion), followed by China ($19.23 trillion). Japan was listed as the world’s fifth-largest economy ($4.19 trillion).[22]
Another way to demonstrate the region’s economic significance is to look at the twenty-one nations that belong to the Asia–Pacific Economic Cooperation (APEC) forum. APEC was established in 1989 with the goal of promoting free trade and economic cooperation among Asia–Pacific nations. According to the Office of the United States Trade Representative (USTR), the 21 member economies that made up APEC in 2023 accounted for “approximately 38 percent of the world’s population, 60 percent of the world’s total GDP and 47 percent of the world’s trade.” In 2023, total APEC GDP (which includes US GDP) was a staggering $63.8 trillion, and “US goods and services trade with APEC totaled an estimated $3.8 trillion” that same year.[23]
The sheer scale of these numbers underscores the opportunities that great economic integration into the Asia–Pacific region represents for America. But separating trade issues from national security concerns is never easy. Over the past fifteen years, China’s expanding economic engagement in the region has been accompanied by efforts to improve its strategic presence throughout the Asia–Pacific.[24] Beijing has created new trade agreements with many Asia–Pacific nations and upgraded several other existing trade agreements. Prominent examples include:
The China–Association of Southeast Asian Nations [ASEAN] Free Trade Agreement, first signed in 2011, upgraded in 2015, which regulates trade between China and the 10 ASEAN member states.
The Regional Comprehensive Economic Partnership (RCEP), signed in 2020, by 15 Asia–Pacific countries (China, Japan, South Korea, New Zealand, Australia, and the 10 ASEAN member states). It is presently the largest trade agreement by GDP.[25]
The China–Singapore Free Trade Agreement (CSFTA), originally signed in 2008, and given a Further Upgrade Protocol that became effective on December 31, 2024.
The China–New Zealand Free Trade Agreement, originally signed in 2008, and given an upgrade that came into force on April 7, 2022.
The China–Australia Free Trade Agreement (ChAFTA) that entered into force on December 20, 2015.
In 2025, China was also negotiating several other FTAs, or working on joint feasibility studies for possible FTAs, with other Asia–Pacific nations. These include proposals for a China–Japan–South Korea Free Trade Agreement (CJSKFTA); a China–Canada FTA; and a China–Papua New Guinea FTA.
China’s more recent trade agreements need to be placed in the context of its regional geopolitical ambitions, especially Beijing’s extensive use of neomercantilist policies. In domestic terms, this presently translates into the ruling party-state apparatus placing even tighter constraints upon the economic freedom of entrepreneurs and investors, bringing more and more Chinese businesses under direct state control, putting more party officials on company boards, demanding that CEOs inscribe China’s national goals directly into their business plans, and requiring state-run banks to shift more credit toward state-run enterprises and away from more-or-less private companies.[26] As far as Beijing’s approach to trade is concerned, economist Fu-Lai Tony Yu describes China’s neomercantilist strategies as including:
stockpiling gold and foreign reserves and striving for favorable balance of payment via exchange rate manipulation, tariff, export subsidies, and other trade protections. The Chinese government [also] initiates “Belt and Road” projects and the Asian Infrastructure Investment Bank (AIIB) to counter American and Western influences and deploys strategic expansion in Africa, South Asia, and Latin American countries.[27]
In trade agreements initiated by Beijing, this neomercantilist approach expresses itself in 1) “low quality . . . liberalization because they are driven largely by political, not economic, considerations” and 2) a “preference for narrower, incomplete initial agreements that are progressively expanded over time.”[28] The point of the incompleteness and lack of detail is to give Chinese officials the space and time which it needs to exert pressure to make its trade partners more dependent on Beijing over time. By focusing on politically sensitive economic sectors such as minerals or energy, China seeks to create constituencies inside trade partner countries that will advance its broader political interests in return for ongoing access to Chinese markets. As the international relations scholar Michael Sampson states, “a country that is highly dependent on exporting a particular good to the Chinese market at a very high volume will find it difficult to switch elsewhere without incurring substantial costs given the almost unmatched size of the Chinese market.”[29]
A good example of how Chinese neomercantilism manifests itself in trade agreements is China’s participation in the Regional Comprehensive Economic Partnership. Led primarily by Beijing, RCEP was designed, in part, to orientate trade toward China and away from the United States. The accord commingled the interests of 15 high–, middle–, and low–income Asia–Pacific nations, including US allies like Japan, Australia, South Korea, and the Philippines. As one scholar wrote at the time of RCEP’s signing:
RCEP . . . has little substantive to say on industrial subsidies or state-owned enterprises, almost certainly a nod to Beijing’s desire to safeguard its own domestic economic management tools. . . . Beijing will use its economic heft . . . to exert influence on regulations and standards setting within the bloc, as it is already explicitly trying to do in the countries included in its Belt and Road Initiative.[30]
RCEP did produce some harmonization of rules of origin and some standardization of customs procedures. RCEP’s ambiguities let China avoid reforming at home while pressuring others to adopt its regulatory model — part of Beijing’s broader effort to spread its neomercantilist system beyond its borders. China’s trade agreements replicate its economic model of power and control, in stark contrast to freer market capitalism that the United States once championed throughout the world.
To be sure, Beijing’s effort to advance its economic place in the Asia–Pacific region through a multiplicity of trade agreements has created complications for China’s trade with Asia–Pacific nations. As former World Bank Chief Economist Anne O. Kruger pointed out in the late-1990s, a series of overlapping FTAs can facilitate the type of complicated trade environments that free trade is supposed to supplant.[31] People engaged in cross-border trade find themselves having to navigate conflicting and inconsistent trade regimes. Every new trade agreement also provides fresh opportunities for lobbyists, leveraging loopholes to secure new protections and privileges. They also furnish new grounds for endless litigation by trade lawyers.[32]
The proliferation of such inefficiencies affects China as much as it does the other players involved in one or more of the trade arrangements listed above. That reality must be balanced against the fact that, in all the above-listed regional agreements, China is the biggest economic and political power. That puts China in a far stronger negotiating position and increases the odds that Chinese proposals will prevail in trade disputes. To that extent, the complexity generated by a multiplicity of agreements often serves China’s political interests (though not necessarily its economic well-being) at other nations’ expense.
Unilateral Transactionalism Hurts Americans
Since 2016, the predominant US policy response to these maneuverings on China’s part has been a shift toward mild protectionism and then even further toward unilateral transactionalism. Certainly, like China, the United States has maintained its own web of trade arrangements in the Asia–Pacific region. This includes FTAs with Australia, Korea, Japan, Chile, Peru, and Singapore as well as the United States–Mexico–Canada Agreement (USMCA). America also has trade and investment framework arrangements in place with ASEAN, Brunei, Malaysia, Fiji, Indonesia, New Zealand, the Philippines, Thailand, and Vietnam.
None of these agreements, however, could be described as advancing a radical free trade agenda. Yet there is little dispute that a free trade outlook was more influential than economic nationalist positions in shaping these agreements. That free trade mindset on the part of American policymakers was especially evident in the way the United States used its membership of APEC to try and advance broader trade liberalization. This was partly a consequence of the WTO’s growing unwieldiness. As it expanded from 76 to 164 member countries, the WTO found it harder to build consensus positions. APEC, by contrast, was a smaller (21 members), more geographically aligned group. APEC offered another advantage for trade reform: members didn’t have to be sovereign states. Instead, membership is based on being an “independent economic entity.” Not only did this allow Hong Kong and Taiwan to be APEC members beside mainland China; it reflected the hope of some policymakers in the 1990s that it might be possible to distinguish trade relationships in the region from national security questions.
Confidence that such distinctions can be made has declined in the wake of fundamental changes in the US–China relationship since 2012 and ongoing clashes between Beijing and successive US presidential administrations over trade policy. The second Trump administration has intensified America’s tariff campaign to change China’s behavior through a unilateral, transactional approach to trade policy. The goal is to secure trade deals that, the administration believes, will leave the United States economically better off. But there are good reasons to doubt that this will occur.
Frequent changes to the second Trump administration’s tariff policies — delays, revisions, and shifting targets — make them difficult to model. That said, studies of the effects of the administration’s policies announced, for example, with the revised tariff schedule outlined in the Liberation Day executive order of April 2, 2025, indicate negative effects on US consumers. The Penn Wharton Budget Model states that this tariff schedule “will reduce long-run GDP by about six percent and wages by five percent. A middle-income household faces a $22,000 lifetime loss. These losses are twice as large as a revenue-equivalent corporate tax increase from 21 percent to 36 percent, an otherwise highly distorting tax.”[33]
Similarly dismal results resulted from the Peterson Institute for International Economics’ modelling of five different scenarios based on the tariffs announced (and changed) between April 2 and May 5, 2025. This modelling found that:
“The tariffs significantly reduce US and global economic growth and increase inflation in many economies, depending on how countries respond.”
“Contrary to the claim that the tariff policy will spur an industrial revival in the United States, the tariffs disproportionately hurt the US agriculture and durable manufacturing sectors in terms of output losses, lower employment, and price increases.”
Financial markets’ reaction to the Liberation Day tariffs in the form of “the depreciation of the dollar” and “the sharp rise in US bond yields” “suggest a rise in global perceptions of the relative risk of holding US assets — a rise in the risk premium demanded by investors.” This magnification of risk will accentuate “US losses in employment and income as foreign capital flows away from the United States to other countries.”[34]
These forecasts suggest that serious domestic economic difficulties for the United States will flow from the second Trump administration’s trade policies. One such problem concerns how the tariffs will incentivize American companies to focus on extracting privileges from the US government rather than seeking to out-innovate and outcompete their domestic and foreign rivals. America’s growing use of protectionist measures, Beeman states, will create “new opportunities for interest groups to try [to] capture favorable decisions from America’s policymakers, [thereby] opening the door for further discrimination among them as well.”[35]
The ever-changing US tariff schedule will create a cash bonanza not only for lobbyists, but for trade lawyers with a clear incentive to keep trade regulations as numerous and byzantine as possible. Then there are the growing inefficiencies and higher costs these tariffs will consequently inflict on American businesses, raising prices for American consumers even when they buy domestically.
Whither Trade Freedom?
Will America reverse its present trade trajectory in the Asia–Pacific region? At present, that seems unlikely. The political momentum remains with protectionists. Moreover, while opinion polls in mid-2025 indicated that most Americans favor free trade,[36] that positive disposition always comes with many unspoken caveats. Americans may favor trade liberalization on a generic level, but some will insist their state, their town, their industry, or their company merits some degree of protection. And when the subject of China is introduced, the numbers favoring free trade immediately trend downwards.[37]
In short, many Americans have less-than-straightforward views on trade. Economic nationalists know this, and ruthlessly exploit Americans’ diffidence about trade to cobble together election-winning coalitions. Compounding the problem, no American political leader of sufficient gravitas is currently waving the free-trade flag.
The question for those convinced of the economic case for trade liberalization thus becomes: How does the United States advance a trade liberalization agenda in the Asia–Pacific region in a manner cognizant of geopolitical realities, most notably Beijing’s neomercantilist approach to the region? Americans should be capable, despite the challenges, of realizing the enormous economic opportunities of strategic trade engagement in one of the world’s fastest-growing regions. It makes neither economic nor political sense for the United States to allow Beijing to slowly turn the Asia–Pacific rim into a Chinese-dominated economic lake, from which America is excluded or excludes itself. Nor is it obvious how a slow US retreat from the world’s most dynamic economic region would promote America’s national security interests.
Certainly, a general overall lowering of trade barriers for all nations (of the type pursued from the 1990s until the late-2000s) would avoid the problems associated with overlapping trade agreements. The WTO’s ability to advance a multilateral trade liberalization agenda for all its members remains limited, however, and there is no indication that this will change in the short to medium term.[38] No major multilateral trade agreement has been successfully pursued and concluded under the WTO’s auspices since the Uruguay Round (1986–1994). Although the Doha Development Round started in 2001, it has not been concluded and there is no prospect of this occurring anytime soon, especially given post-2016 shifts in US trade policy. Thus far, post-1994 WTO multilateral agreements have been limited to extremely specific goals, such as the Agreement on Fisheries Subsidies, adopted on June 17, 2022. Even that narrowly focused rule has not been ratified by the required two-thirds of WTO members, illustrating the sheer difficulty in reaching comprehensive multilateral agreement.
Americans anxious to liberalize trade in the Asia–Pacific must consider other options. One way forward is for the United States to pursue a three-pronged strategic trade liberalization strategy. This would involve:
Further liberalizing existing bilateral trade agreements with those Asia–Pacific countries with whom it already has such agreements.
Pursuing new bilateral trade agreements with important Asia–Pacific nations which are focused upon reducing tariffs and NTBs.
Reconstructing a US-led regional multilateral trade agreement through the CPTPP in which the primary focus is upon lowering tariffs and diminishing NTBs among CPTPP members.
Admittedly, this strategic trade liberalization agenda risks adding to the proliferation of trade agreements, generating some conflicts and contradictions. Nonetheless, this approach realistically appreciates the geopolitical challenges of the Asia–Pacific that no responsible US trade policy can ignore. Moreover, it stands in sharp contrast to China’s neomercantilist model, relying instead on expanding market freedom between the United States and its current and prospective Asia–Pacific partners.
Liberalizing Bilaterally
In bilateral terms, a first step would be for the United States to engage those Asia–Pacific countries with which it already has existing FTAs with proposals to further liberalize these agreements. A free trade agreement between the United States and any country is just a start, serving as a platform for further negotiations, especially for greater market access and trade between partnered nations.
Most particularly, long-standing US allies like Korea, Australia, and Japan might be engaged in talks to further diminish the tariffs and NTBs still inhibiting trade. Such upgrades could also involve targeted initiatives such as freeing up digital trade and e-commerce between these countries, thereby growing the access of American tech companies to these markets. America could, for instance, seek to update its FTA with Singapore, as tech companies in both countries deepen links stretching back to 1987. Such cooperation would surely increase the number of start-ups in both nations.[39]
A second step would be to pursue bilateral trade agreements that liberalize US trade with geopolitically critical Asia–Pacific nations such as Vietnam and Indonesia. These nations have large consumer markets (the population of Indonesia alone is 284 million people) that contain opportunities for US exporters. Specific trade nuisances (such as poor enforcement of intellectual property rights, a perennial problem in developing nations) could be addressed on a nation-by-nation basis throughout the Asia–Pacific.
American importers and exporters would have to navigate the contradictions generated by America entering into new bilateral agreements with different Asia–Pacific nations. The upside is that deeper and more bilateral agreements of a liberalizing nature would tie these countries’ economies more closely into the US economy, facilitate economic growth in the United States and these nations, and help counter Chinese pressures upon these countries to put more distance between them and the United States. Even more significantly, bilateral liberalizing trade agreements would build momentum to help the United States realize an even bigger trade objective: the development of a US-led multilateral regional market-liberalizing agreement. Embracing an increasing number of Asia–Pacific nations would further blunt China’s ability to realize its geopolitical and neomercantilist ambitions.
From Bilateral to Regional
Any regional trade agreement (RTA) typically involves countries (usually, though not always, geographically adjacent in some way or enjoying certain political and historical ties) agreeing to reciprocal arrangements to standardize trade barriers between the participating nations. The form assumed by an RTA can vary, from customs unions to free trade zones. They can focus on tariffs but also NTBs. In some cases, they specify particular treatment of investments and services among signatories to the agreement.
As the WTO points out, “These deals, by their very nature, are discriminatory as only their signatories enjoy more favorable market-access conditions.”[40] This is one reason why the WTO’s formal documents express only mildly favorable views of RTAs. These texts typically insist that RTAs “must remain complementary to, not a substitute for, the multilateral trading system.”[41] The concern is that many, if not most trade questions can only be properly addressed via the multilateral framework established by the WTO. Given, however, the WTO’s ongoing paralysis, an American-led RTA is a more politically plausible route for the United States to promote trade liberalization and advance its economic and political interests in the Asia–Pacific region.
Of course, the content and underlying logic of such an agreement would matter a great deal. An American-led RTA that effectively encouraged its members to embrace neomercantilist policies (i.e., the present Chinese trade model) would neither advance trade liberalization nor serve the interests of American consumers. There is also the question of whether such an agreement would remain closed to any group beyond the original signatories, or whether it could be opened to others.
This is where injecting a plurilateral dimension into such an RTA could help. Plurilateral trade arrangements involve a set of nations agreeing on new trade commitments and then either extending the benefits to all members on a most-favored-nation (MFN) basis, or offering non-signatories the opportunity to enter into such agreements at a future date.[42] As the WTO understands plurilateral arrangements, they embrace cases whereby:
certain member states may agree on rules on trade in specific subjects that not all Member States may agree to. As such, plurilateral agreements come to the fore where there is no multilateral consent. These plurilateral agreements therefore only bind Member States that have signed up to them.[43]
An American-led Asia–Pacific RTA grounded on such plurilateral principles could offer a pathway for the United States to gradually draw Asia–Pacific nations into a free-trade orientated RTA focused on a limited number of goals, at the heart of which is the promotion of greater economic liberty — specifically, a progressive lowering of tariffs and NTBs between the countries. Such an RTA would thus offer a genuinely market-orientated alternative to China’s neomercantilist trade arrangements.
How might this RTA with plurilateral characteristics be advanced by the United States? One option would be for America to revisit the defunct Trans-Pacific Partnership (TPP) and its successor arrangement — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — by joining and leading it in market-liberalizing directions.
What Could Have Been
Developed under American leadership from the 2000s onwards and signed by the United States and the other 11 members (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) on February 4, 2016, TPP was not ratified by America. It encountered immense domestic opposition in the United States from groups such as economic nationalists and trade unions. The US subsequently withdrew from TPP in February 2017.
The topics addressed in TPP’s 30 chapters ranged from the level of tariffs applied to goods and services to mechanisms for resolving disputes between signatories. The treatment of environmental and labor standards, intellectual property, and regulations concerning e-commerce were also included. Additionally, TPP contained many provisions having little to do with trade, such as the maintenance of cultural diversity, the right to develop healthcare systems, and supporting the development of small and medium-sized businesses. At the time, however, the USTR described TPP’s primary objective and achievement in the following manner:
The TPP eliminates or reduces tariff and non-tariff barriers across substantially all trade in goods and services and covers the full spectrum of trade, including goods and services trade and investment, so as to create new opportunities and benefits for our businesses, workers, and consumers.[44]
Some of the most substantive of these reductions in barriers were aimed at manufacturing goods, agricultural products, and textiles. This was to be accompanied by eliminating restrictions on cross-border services and opening markets to greater foreign investment among members.
In presenting its case for Congressional ratification of TPP throughout 2015 and 2016, the Obama administration stressed two points. The first was economic: TPP would open more markets to American goods, creating new opportunities for American businesses and workers. It would also lead to greater and easier foreign investment in the US economy as well as lower prices for American consumers. The second point was geopolitical. In Obama’s own words, “we have to make sure the United States — and not countries like China — is the one writing this century’s rules for the world’s economy.”[45]
Throughout 2016, in the face of attacks on TPP by presidential candidates Hillary Clinton and Donald Trump as well as sections of the Progressive Left and New Right, Obama repeatedly stressed that TPP excluded China from its membership. From this standpoint, TPP was understood as a way for America to pursue an Asia-centered strategy that combined the pursuit of economic growth and freer trade with the imperative of underscoring that there would be no geopolitical retreat on America’s part from the Asia–Pacific in the face of China’s determination to stamp its political preferences on the region. Awareness of the geopolitical stakes also underlay the 2016 warning by Singapore’s prime minister Lee Hsien Loong that China is “engaging all of the countries in the region around its own version of trade agreements, and they’re sure not worried about labor standards, or environmental standards, or human trafficking or anti-corruption measures.”[46]
As far as Obama was concerned, the rules needed to include environmental and labor regulations of the type that China had no intention of embracing. “Right now,” he argued, “China wants to write the rules for commerce in Asia. If it succeeds, our competitors would be free to ignore basic environmental and labor standards, giving them an unfair advantage over American workers.”[47] These words may be seen as Obama seeking to shore up support for TPP among some of his domestic political constituencies and/or reflective of his own ideological preferences. Nonetheless, TPP did lower tariffs and NTBs more than RCEP that was being pushed aggressively by China during the same time period.[48]
Significantly, TPP’s provisions concerning state-owned enterprises — which have proliferated in China since 2012 — would have significantly inhibited the ability of Chinese state enterprises to operate in TPP signatory nations. This was not a coincidence.
Multilateral, Regional, and Plurilateral
With the benefit of hindsight, the United States’ decision to withdraw from TPP now looks to have been a serious error. Leaving aside the economic benefits of freer trade with the 11 other member states, an American-led TPP would have signaled continuation of America’s deep economic commitment to the Asia–Pacific region, reassured member states of America’s capacity to resist domestic pressures to turn economically inwards, and, above all, demonstrated America’s unwillingness to allow the region to become economically dominated by China. Key US allies like Australia, Japan, Korea, and Singapore would have particularly taken heart from an American ratification of TPP. Instead, withdrawal from TPP allowed China to fill the void with the RCEP.
Although the Biden Administration stated its willingness to reconsider American involvement in TPP, it did little to revive the initiative. This reflected the bipartisan turn against trade liberalization in the United States. While the influence of economic nationalists grew within the Republican party, plenty of Democratic-leaning constituencies likewise insisted that their economic well-being had been undermined by free trade initiatives. In his survey of the Biden administration’s trade posture, Beeman states that “What became more apparent over time was that it…was a union-centered, and at times union-directed, trade policy.”[49] More generally, Beeman adds, “the administration’s trade policy continued to prioritize the fundamentally anti-free trade and broadly anti-corporate views of its trade union and civil society constituents.”[50]
Abandonment of TPP did result in the United States effectively ceding a major rule-making role for trade in the Asia–Pacific region and making it easier for Beijing to push through RCEP. The 11 remaining members of TPP (known as the TPP-11) sought to salvage as much as they could of the original TPP, revealing ongoing reservations about China’s influence. Signed in March 2018, CPTPP was soon ratified by a majority of members and became effective for ratifying countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) in December 2018. For a trade agreement, this qualifies as lightning speed. In December 2024, Britain was admitted to the CPTPP.
CPTPP largely replicated TPP, especially concerning tariff reductions. It also retained TPP’s high transparency standards for state-owned enterprises — something not to China’s liking. Moreover, as economist Matthew P. Goodman pointed out in March 2018, “a total of 22 provisions from the original agreement were suspended or otherwise changed, setting aside issues that were priorities for the United States in the original negotiations but did not enjoy similar support among the other TPP countries.”[51] These suspensions mattered, because they sought to make it easier for the United States to enter CPTPP in the future. That signaled a desire to see more (rather than less) American economic and political leadership in the Asia–Pacific area.
But while other Asia–Pacific countries — such as Costa Rica, Ecuador, Indonesia, and Taiwan — have applied to become CPTPP members since 2018, America has not and shows no sign of wanting to do so. By contrast, China announced its desire to join CPTPP in September 2021. This could be read as an indication of Beijing’s determination to inhibit any future US administration from using CPTPP as a counterweight to China’s geopolitical and economic agendas for the region.
Naturally, some CPTPP members would be wary of allowing the United States back inside this RTA, having been frustrated once by American domestic politics that terminated its TPP participation in January 2017. Many CPTPP members would, however, welcome US reentry. As well as increasing their access to the world’s largest economy, it would reduce pressures on them to admit China to CPTPP.
A US reentry into CPTPP would require some humility, as the US would have to concede that leaving TPP was a misjudgment. This would not be the first time that America found itself conceding serious trade policy errors. The Smoot-Hawley Tariff Act of 1930 inflicted considerable damage on the US economy by raising American tariffs on imports. It was superseded just four years later by the Reciprocal Trade Agreements Act of 1934, which started returning the United States to a trade liberalization agenda by reducing tariffs.
A comparable American admission about TPP would have to be preceded by something even more difficult: the establishment of a broad bipartisan domestic consensus in favor of a strategic trade liberalization agenda for the Asia–Pacific region. While overcoming opposition would be hard, it is not inconceivable. Should America’s more recent embrace of protectionist policies produce the inefficiencies, cronyism, and higher prices associated with such trade arrangements, the trade policies followed by the Trump I, Biden, and Trump II administrations stand some chance of becoming discredited among critical masses across the American political spectrum.
Granted, overcoming resistance from special interests and their lobbyists who directly benefit from protectionist policies at consumers’ and taxpayers’ expense would be especially challenging. The special interests that directly benefit from subsidies will fiercely resist any attempt to take away what amounts to corporate welfare. Though large numbers of Americans may have a dim view of government subsidies, organized minorities that stand to gain immediately from subsidies ultimately paid for by American taxpayers are more likely to get their way because the majorities who economically gain from trade liberalization in the long term (like consumers) are dispersed and disorganized. Nonetheless, a resurgence of free trade sympathies on a scale that political leaders find difficult to ignore would create space for trade liberalizers to stress the benefits of greater American access to markets throughout the Asia–Pacific as well as draw attention to how an American-shaped CPTPP could counter Chinese influence in the region.
The next step for a United States inside CPTPP’s fold would be to 1) make further tariff reductions a goal for CPTPP; 2) promote updates to CPTPP that encompass issues like artificial intelligence and digital trade which have assumed greater significance since 2017; and 3) direct more attention to diminishing NTBs or non-tariff measures (NTMs). All three provisions could be given plurilateral status, thereby allowing CPTPP to expand by admitting member-states willing to adopt these market liberalizing provisions.
Reducing the impact of NTBs on CPTPP members would be an especially important feature of such a strategy. Amid impassioned debates about tariffs, NTBs’ role in blocking freer trade is often overlooked. Some of the more typical NTBs include the following:
Government licenses or permits that must be acquired before particular goods can be exported.
Extremely complicated customs protocols that slow down the speed of trade and thereby increase the costs.
Technical barriers to trade (TBT) associated with the testing and certification of products before they can be imported or exported.
Safety standards concerning imports of products such as food can significantly limit trade.
Subsidies to domestic industries.
In 2019, the United Nations Economic and Social Commission for Asia and the Pacific estimated that “Trade costs of NTMs are more than double that of ordinary customs tariffs.”[52] This only underlines the need for American leadership on this issue. Realizing this objective would be easier in some areas than others. Harmonizing licensing and safety standards, for example, is simpler than achieving agreements on reducing subsidies. These difficulties should, however, not impede the United States from emphasizing the benefits of radically reducing NTBs through CPTPP.
America Wins
The specific combination of American-led trade-liberalization measures proposed by this paper for the Asia–Pacific region amounts to an ambitious agenda for the expansion of economic liberty and America’s presence in the Asia–Pacific region. Any one of the three prongs — liberalizing existing bilateral agreements with Asia–Pacific nations, entering into new bilateral agreements with critical Asia–Pacific countries, reengaging in multilateral regional arrangements— would require major expenditures of political capital by a presidential administration and legislators alike.
If the United States were to pursue a trade liberalization agenda of the type proposed in this paper throughout the Asia–Pacific, it would confront domestic US bipartisan opposition of the type which is inclined to view extensive American trade with the rest of the world as a zero-sum game in which America is inevitably the loser. It would also encounter obstruction by Beijing who would see a US strategic trade liberalization agenda as implicitly challenging China’s neomercantilist ambitions for the region. These difficulties should not, however, cause us to lose sight of the benefits for the United States if Washington pursued a strategic trade liberalization policy in the Asia–Pacific. To reiterate, these benefits would include:
Offering economic advantages to American consumers in the form of lower prices, and to American businesses in the form of cheaper inputs as well as the disciplining effects of enhanced competition.
Giving the US an edge in a geopolitical contest with China.
Signaling a revival of American ambition to take the lead in setting the rules for trade.
In geopolitical terms, it is always better for a nation to be a rule-setter than a rule-taker. The United States must not cede that role to a China that has a distinctly neomercantilist view of the world’s economic future and an authoritarian conception of the nature and ends of politics.
Above all, America’s pursuit of strategic liberalization in the Asia–Pacific region would help set the United States up to be the leading player in a twenty-first century in which Asia and the Asia–Pacific will assume the place occupied by European nations in the nineteenth and early-to-mid twentieth centuries. The economic and political payoff would be formidable. For that reason alone, it would be a shame if America decided to turn its back on a new Western frontier. Like the frontier of the nineteenth-century United States, the Asia–Pacific offers so much opportunity to any country enterprising enough to seize it.
Glossary of Abbreviations Used in the Text
Abbreviation
APEC
Asia–Pacific Economic Cooperation
ANZUS
Australia, New Zealand, United States Security Treaty
ASEAN
Association of South-East Asian Nations
ChAFTA
China–Australia Free Trade Agreement
CJSKFTA
China–Japan–South Korea Free Trade Agreement
CPTTP
Comprehensive and Progressive Agreement for Trans-Pacific Partnership
CSFTA
China–Singapore Free Trade Agreement
GATT
General Agreement on Trade and Tariffs
GDP
Gross Domestic Profit
IMF
International Monetary Fund
MFN
Most-Favored-Nation
NTB
Non-Tariff Barriers
NTM
Non-Tariff Measures
RCEP
Regional Comprehensive Economic Partnership
RTA
Regional Trade Agreement
SEATO
Southeast Asia Treaty Organization
TBT
Technical Barriers to Trade
IFA
Trade and Investment Framework Arrangements
TPP
Trans-Pacific Partnership
USMCA
United States-Mexico-Canada Agreement
WTO
World Trade Organization
Endnotes
[1] The framework adopted in this paper for reflecting upon the relationship between trade and national security and how trade liberalization generally advances a country’s national security is outlined in Samuel Gregg, A Free, Prosperous and Secure America How Trade Liberalization Strengthens US National Security, and Economic Nationalism Undermines It, AIER Papers #2 (July 15, 2024), accessed August 23, AIER Papers #2 (July 15, 2024), accessed August 23, 2025, https://aier.org/wp-content/uploads/2024/07/AIER_Whitepaper-02_Trade-Liberalization.pdf.
[2] See, for example, Rajiv Biswas, “The Ascent of APAC in the Global Economy,” S&P Global Economic Intelligence (July 1, 2022), accessed August 18, 2025, https:/www.spglobal.com/marketintelligence/en/mi/research-analysis/the-ascent-of-apac-in-the-global-economy-june22.html
[3] See IMF, “World Economic Outlook Database, April 2025,” accessed August 25, 2025, https://www.imf.org/en/Publications/WEO/weo-database/2025/April/weo-report
[4] “Remarks By President Obama to the Australian Parliament” (November 17, 2021), accessed August 19, 2025, https://obamawhitehouse.archives.gov/the-press-office/2011/11/17/remarks-president-obama-australian-parliament
[5] Michael L. Beeman, Walking Out: America’s New Trade Policy in the Asia–Pacific and Beyond (Stanford, CA: Stanford University Press, 2024), 1.
[6] See Douglas A. Irwin, “Does Trade Reform Promote Economic Growth? A Review of Recent Evidence,” National Bureau of Economic Research Working Paper (June 2019), accessed August 24, 2025, https://www.nber.org/system/files/working_papers/w25927/w25927.pdf, citing Antoni Estevadeordal and Alan M. Taylor, “Is the Washington Consensus Dead? Growth, Openness, and the Great Liberalization, 1970s–2000s,” The Review of Economics and Statistics 95, no. 5 (2013): 1669-1690.
[7] See International Monetary Fund, Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment (April 10, 2017), accessed August 18, 2025, https://www.imf.org/en/Publications/ Policy-Papers/Issues/2017/04/08/making-trade-an-engineof- growth-for-all
[8] See Michael E. Waugh, “Heterogeneous Agent Trade,” Federal Reserve Bank of Minneapolis Staff Report no. 653 (October 2023), 2.
[9] This section draws on Samuel Gregg, “Make Trade Free Again,” Law & Liberty (August 17, 2023), accessed August 14, 2025, https:// lawliberty.org/make-trade-free-again/
[10] See Shujiro Urata, “US-Japan Trade Frictions: The Past, the Present, and Implications for the US–China Trade War,” Asian Economic Policy Review 15 (2020): 141-159.
[11] Vinod K. Aggarwal, “Look West: The Evolution of US Trade Policy Toward Asia,” Globalizations 7, no. 4 (2010): 460-1.
[12] See Beeman, Walking Out, 3, 7, 13.
[13] See Samuel Gregg, The Next American Economy: Nation, State, and Markets in an Uncertain World (New York: Encounter, 2022), 74-75.
[14] See Stephen Ezell, “False Promises II: The Continuing Gap between China’s WTO Commitments and Its Practices,” Information Technology and Innovation Foundation (July 2021), accessed August 25, 2025, https://itif.org/sites/default/files/2021-false-promises.pdf
[15] See Gregg, The Next American Economy, 59; and Lingling Wei, “China’s Xi Ramps up Control of Private Sector. ‘We Have No Choice but to Follow the Party’,” Wall Street Journal, (December 10, 2020), accessed May 6, 2021, https://www.wsj.com/articles/china-xi-clampdown- private-sector-communist-party-11607612531?mod=searchresults_ pos3&page=3
[16] Michael B.G. Froman, “After the Trade War: Remaking Rules From the Ruins of the Rules-Based System,” Foreign Affairs (August 11, 2025), accessed August 25, 2025, https://www.foreignaffairs.com/ united-states/after-trade-war-michael-froman
[17] See Jim Tankersley and Mark Lander, “Trump’s Love for Tariffs Began in Japan’s ‘80s Boom,” New York Times (May 15, 2019), accessed October 17, 2025, https://www.nytimes.com/2019/05/15/us/ politics/china-trade-donald-trump.html
[18] National Security Strategy of the United States (December 2017), accessed August 23, 2025, https://trumpwhitehouse.archives.gov/ wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf.
[19] See Kurt M. Campbell and Ely Ratner, “The China Reckoning: How Beijing Defied American Expectations,” Foreign Affairs (March/April 2018), accessed August 25, 2025, https://www.foreignaffairs.com/ articles/china/2018-02-13/china-reckoning
[20] See President Donald J. Trump, “Executive Order Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits” (April 2, 2025), accessed August 25, 2025, https://www. whitehouse.gov/presidential-actions/2025/04/regulating-importswith- a-reciprocal-tariff-to-rectify-trade-practices-that-contributeto- large-and-persistent-annual-united-states-goods-trade-deficits/
[21] Michael B.G. Froman, “After the Trade War: Remaking Rules From the Ruins of the Rules-Based System,” Foreign Affairs (August 11, 2025), accessed August 25, 2025, https://www.foreignaffairs.com/ united-states/after-trade-war-michael-froman
[22] See International Monetary Fund, World Economic Outlook Database, accessed August 11, 2025, https://www.imf.org/en/Publications/ WEO/weo-database/2025/April/weo-report
[23] Office of the United States Trade Representative, “US-APEC Trade Facts,” accessed August 11, 2025, https://ustr.gov/trade-agreements/ other-initiatives/Asia–Pacific-economic-cooperation-apec/us-apectrade- facts
[24] See Charles Edel and Kathryn Paik, “China’s Power Play Across the Pacific,” Commentary (April 8, 2025), accessed August 12, 2025, https://www.csis.org/analysis/chinas-power-play-across-pacific
[25] See DFAT, Regional Comprehensive Economic Partnership Agreement (RCEP), accessed August 14, 2025, https://www.dfat.gov.au/ trade/agreements/in-force/rcep
[26] See Gregg, The Next American Economy, 29.
[27] FL.Yu, “Neomercantilist Policy and China’s Rise as a Global Power,” in Contemporary Issues in International Political Economy, eds. FL.T. Yu and D.S. Kwan (Singapore: Palgrave Macmillan, 2019), 175.
[28] Michael Sampson, “The evolution of China’s regional trade agreements: power dynamics and the future of the Asia–Pacific,” The Pacific Review 34 (2), 2021, 261.
[29] Ibid., 263.
[30] Robert Ward, “RCEP trade deal: A Geopolitical Win for China” (November 25, 2020), accessed August 14, 2025, International Institute for Strategic Studies Online Analysis, https://www.iiss.org/ online-analysis/online-analysis/2020/11/rcep-trade-deal/
[31] See Anne O. Krueger, “Problems with Overlapping Free Trade Areas,” in Regionalism versus Multilateral Trade Arrangements, eds. Takatoshi Ito and Anne O. Krueger (Chicago: The University of Chicago Press, 1997), 22.
[32] See ibid., 18.
[33] Penn Wharton Budget Model, “The Economic Effects of President Trump’s Tariffs” (April 10, 2025), accessed August 13, 2025, https://budgetmodel.wharton.upenn.edu/issues/2025/4/10/economic-effects- of-president-trumps-tariffs
[34] See Warwick J. McKibbin, Marcus Noland, and Geoffrey Shuetrim, “The global economic effects of Trump’s 2025 tariffs,” Peterson Institute for International Economics, Working Paper 25-13, (June 2025), accessed August 13, 2025, https://www.piie.com/sites/default/ files/2025-06/wp25-13.pdf
[35] Beeman, Walking Out, 307.
[36] See, for example, The Chicago Council on Global Public Affairs, “Most Americans Think the United States Should Pursue Global Free Trade” (May 5, 2025), accessed August 24, 2025, https://globalaffairs. org/research/public-opinion-survey/most-americans-thinkunited- states-should-pursue-global-free-trade
[37] See, for example, Pew Research Center, “Views of trade between China and the US,” (April 17, 2025), accessed August 24, 2025, https://www.pewresearch.org/global/2025/04/17/views-of-tradebetween- china-and-the-us/
[38] See, for example, Alan Wm. Wolff, “Is the World Trade Organization Still Relevant?” Peterson Institute for International Economics Policy Brief 24–15 (December 2024), accessed August 18, 2025, https://www.piie.com/sites/default/files/2024-12/pb24-15.pdf
[39] See Jack L. Harris and Max-Peter Menzel, “The Silicon Valley – Singapore connection: The role of institutional gateways in establishing knowledge pipelines,” Geoforum 144 (2023), 103803, accessed September 9, 2025, https://www.sciencedirect.com/science/article/ pii/S001671852300129X?via%3Dihub
[40] WTO, “Regional trade agreements and the WTO,” accessed August 14, 2025, https://www.wto.org/english/tratop_e/region_e/ scope_rta_e.htm
[41] Ibid.
[42] See James Baccus, The Future of the WTO: Multilateral or Plurilateral?, Cato Institute Policy Analysis No. 947 (May 25, 2023), accessed August 9, 2025, https://www.cato.org/policy-analysis/future-wto
[43] “An introduction to plurilateral agreements of the WTO Lexis Nexis” (2025), accessed August 8, 2025, https://www.lexisnexis. co.uk/legal/guidance/an-introduction-to-plurilateral-agreements- of-the-wto
[44] Office of the US Trade Representative, “Summary of the Trans-Pacific Partnership Agreement” (October 4, 2015), accessed August 22, 2025, https://ustr.gov/about-us/policy-offices/press-office/press-releases/ 2015/october/summary-trans-pacific-partnership
[45] President Barack Obama, “Writing the Rules for 21st Century Trade” (February 18, 2015), accessed August 22, 2025, https:// obamawhitehouse.archives.gov/blog/2015/02/18/president-obamawriting- rules-21st-century-trade
[46] Quoted in Brett Fortnam, “Singapore PM: US Failure to Ratify TPP Would Damage Its Diplomatic Relations,” World Trade Online, August 2, 2016.
[47] Obama, “Writing the Rules for 21st Century Trade.”
[48] See, for example, Suzie Park, “The Rise of Asia–Pacific Regionalism in Trade Agreements Following the US Withdrawal from the Trans-Pacific Partnership,” NYU Journal of International Law and Politics 53, no. 27 (2020): 27-36.
[49] Beeman, Walking Out, 51.
[50] Ibid., 245.
[51] Matthew P. Goodman, “From TPP to CPTPP,” Center for International and Strategic Studies, Critical Questions (March 8, 2018), accessed August 16, 2025, https://www.csis.org/analysis/tpp-cptpp
[52] Asia–Pacific Trade and Investment Report 2019: Navigating Non-tariff Measures towards Sustainable Development (2019), xiii, accessed August 17, 2025, https://repository.unescap.org/server/api/core/bitstreams/93123bda-646d-42e1-a689-fb7c7d37ef77/content
Medicaid, Title XIX of the Social Security Act, is a joint federal-state program that finances health care to the poor.[1] When it was first signed into law, Medicaid eligibility was limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities. In the sixty years since the program was enacted, however, it has strayed from its mission of providing healthcare for the most vulnerable and has become a steppingstone toward universal government-run health insurance.
This explainer will outline how Medicaid functions, the program’s costs, its influence on healthcare in the United States, and how the proposed policy changes in 2025 could reshape the program.
How Does Medicaid Work?
Medicaid is divided into two groups: traditional Medicaid and the Medicaid Expansion group. Before discussing the differences between the two, it’s important to understand that there are strings attached. For a state to participate in Medicaid (either traditional or expansion), the federal government requires that state to provide Medicaid coverage for certain eligibility groups, including[2]:
Certain low-income families, including parents, that meet the financial requirements of the former Aid to Families with Dependent Children (AFDC) cash assistance program;
Pregnant women with annual income at or below 133% of the Federal Poverty Level (FPL);
Children with family income at or below 133% of FP;
Aged, blind, or disabled individuals who receive cash assistance under the Supplemental Security Income (SSI) program;
Children receiving foster care, adoption assistance, or kinship guardianship assistance under the Social Security Act (SSA) Title IV–E;
Certain former foster care youth;
Individuals eligible for the Qualified Medicare Beneficiary program; and
Certain groups of legal permanent resident immigrants.
Federal law provides two primary benefit packages for state Medicaid programs: traditional benefits and alternative benefit plans (ABPs). These benefit categories (taken from the Congressional Research Service) are recreated in Table 1. States also have some flexibility through Medicaid program waivers, which allow them to be exempt from certain federal requirements. These include research and demonstration projects (Section 1115), managed care/freedom of choice programs (Section 1915(b)), and home and community-based services (Section 1915(c)). To receive a waiver, a state must meet federal financing requirements such as budget neutrality, cost-effectiveness, or cost-neutrality.[3]
It is also important to note that Medicaid spending is often lumped in with the Children’s Health Insurance Program (CHIP) and similar federal subsidies created under the Patient Protection and Affordable Care Act (Affordable Care Act or ACA). The CHIP program provides health coverage to eligible children in families with incomes above the Medicaid threshold, either through Medicaid or separate state programs. The federal subsidies created under the ACA include premium tax credits (which subsidize the cost of an insurance premium) and cost-sharing reductions (reducing out-of-pocket costs such as deductibles, copays, and coinsurance) for those who purchase health insurance through a government-created healthcare marketplace.
Traditional Medicaid
Traditional Medicaid covers both primary and acute care as well as long-term services and supports (such as care for disabled adults and individuals with chronic illnesses). Eligibility is limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities. In this program, states are guaranteed federal matching dollars without a cap for qualified services, based on a formula that matches at least 50 percent of state spending. The portion of the federal government’s share of most Medicaid expenditures is known as the Federal Medical Assistance Percentage (FMAP). This matching rate increases as state per-capita income decreases.
Under traditional Medicaid, states define the specific features of each covered benefit within four broad federal guidelines:
Each service must be sufficient inamount, duration, and scope to reasonably achieve its purpose. States may place appropriate limits on a service based on such criteria as medical necessity.
Within a state, services available to the various population groups must be equal in amount, duration, and scope (the comparability rule).
With certain exceptions, the amount, duration, and scope of benefits must be the same statewide (the statewideness rule).
With certain exceptions, enrollees must have freedom of choice among health care providers.[4]
Looking ahead to FY 2026 (October 1, 2025 – September 30, 2026), the federal matching rates for state funds are expected to range from 50 percent (the mandatory minimum matching rate) to nearly 77 percent.[5] Figure 1 shows the federal Medicaid FMAP matching rate for each state.
Figure 1: Federal FMAP Percentages, FY 2026
Sources: KFF estimates of increased FY 2026 FMAPs based on Federal Register, November 29, 2024 (Vol 89, No. 230), pp 94742-94746.
Note: Estimates are rounded to the nearest whole number.
The Medicaid Expansion Group
Under the Affordable Care Act (ACA), states had the option to expand Medicaid to non-elderly adults with income up to 133 percent of the Federal Poverty Level. When states were initially allowed to expand Medicaid starting January 1, 2014, the federal government promised to cover 100 percent of Medicaid expansion costs to encourage states to participate. With this promise of a “free lunch,” many states rushed to expand Medicaid, sharply increasing enrollment. By 2020, however, the federal match rate for the expansion program was reduced to 90 percent. As a result, states had to increase their own Medicaid spending, on average, $26.7 billion from 2017 to 2022 from their own sources.
As of 2025, all but 10 states have expanded Medicaid.[6] Those states are shown in Figure 2.
Figure 2: States that Have Not Expanded Medicaid as of 2025
Sources:KFF tracking and analysis of state actions related to adoption of the ACA Medicaid expansion and Searing, Adam. “Federal Funding Cuts to Medicaid May Trigger Automatic Loss of Health Coverage for Millions of Residents of Certain States.” Say Ahhh! Georgetown Center for Children and Families, November 27, 2024
How Much Does Medicaid Cost? Who Pays?
Given that Medicaid is a joint federal and state program, it is important to examine the costs of Medicaid at the federal and state levels. At the federal level, Medicaid, the Children’s Health Insurance Program (CHIP), and other healthcare marketplace subsidies enacted by the ACA cost $759 billion in FY 2024. Put another way, for every dollar the federal government spent, eleven cents of that dollar went to Medicaid, CHIP, and the ACA subsidies.[7]
At the state level, Medicaid accounts for about 30 percent of total state spending (capital inclusive) and is the single largest expenditure in all state budgets. For every dollar the average state spends, thirty cents go to Medicaid—only ten cents come from state revenue while the remaining 20 cents come from federal transfers.[8]
Although Medicaid was designed to be a “joint” funding program, state policymakers have found ways to get the federal government to cover the lion’s share of Medicaid spending. This reflects the incentives elected officials face: using accounting gimmicks to offer more generous Medicaid spending while passing the cost to federal taxpayers can help them win reelection.
This problem was exacerbated by Medicaid expansion under the ACA. Figure 3 (recreated from the CRS report) shows the breakdown of federal and state Medicaid spending. The percentages atop each column indicate the federal share of total Medicaid spending.
Figure 3: Federal and State Shares of Medicaid Spending
Sources: Congressional Research Service “R43357: Medicaid: An Overview,” Figure 6: Federal and State Actual Medicaid expendituresCMS, Form CMS-64 Data as reported by states to the Medicaid Budget and Expenditure System, as of May 29, 2024, at https://www.medicaid.gov/medicaid/financial-management/state-expenditure-reporting-for-medicaid-chip/expenditure-reports-mbescbes. CPI-U inflation data collected from US Bureau of Labor Statistics
Notes: CMS, Form CMS-64 Data as reported by states to the Medicaid Budget and Expenditure System, as of May 29, 2024, at https://www.medicaid.gov/medicaid/financial-management/state-expenditure-reporting-for-medicaid-chip/expenditure-reports-mbescbes.
In the end, federal taxpayers are footing the bill for Medicaid. However, as the national debt continues to strain the federal budget and crowd out other priorities, policymakers in DC are desperate to cut costs. One likely area is federal Medicaid spending. If the federal government were to change the matching rates of either traditional Medicaid or Medicaid expansion, state spending on Medicaid would rapidly increase and crowd out other spending. In more fiscally distressed states, this could spur a fiscal crisis.
How Does Medicaid Impact Healthcare?
The size of Medicaid means that it shapes almost every corner of the American healthcare system, from hospital and acute care to long-term care to medical research. The program covers one in five Americans and finances 19 percent of all health spending in the United States. Here are some of the results of that influence.[9]
Increasing Coverage with Little to Show for Health Access or Outcomes
Medicaid increases healthcare coverage. Thanks to the Medicaid Expansion under the ACA and more generous federal matching programs created during the COVID-19 era and through the Biden administration’s stimulus packages, enrollment in Medicaid dramatically increased and the percentage of uninsured Americans decreased, reaching an all-time low in 2022.[10]
Additionally, while use of healthcare services increased, other negative outcomes emerged that decreased access to care, especially for those in traditional Medicaid. Cannon (2022a) notes that the Medicaid Expansion under the ACA creates an incentive for state policymakers to prioritize Medicaid expansion group recipients over traditional Medicaid recipients.[11] Blase and Gonshorowski (2025) confirmed these findings, noting that Medicaid expansion decreased access to care, crowded out private options, and shifted funds away from the poorest Medicaid recipients.[12]
In a review of the literature, Sigaud (2025) also finds depressing results[13] States that expanded Medicaid saw longer wait times and reduced access to care for traditional Medicaid enrollees. Additionally, he notes that symptoms of depression increased among near-elderly adults on Medicaid before and after expansion, especially among rural residents with extremely limited access to mental health providers. He also notes slower ambulance response times and greater delays in the emergency room.
Cementing the Relationship Between Employment and Healthcare
Medicaid expansion under the Affordable Care Act further entrenched employer-sponsored insurance (ESI) as the backbone of American healthcare. The ACA kept the ESI tax structure in place, essentially creating what Cannon (2022b) calls “an implicit penalty on workers who do not (a) surrender control of a sizable portion of their earnings to an employer; (b) enroll in a health plan that their employers choose, control, and revoke upon separation; and (c) pay the balance of the premium directly.”[14]
In an ideal world, Americans would not need to leave their jobs to change healthcare provider networks. Unfortunately, if Americans want a different health insurance package, they must “fire” their employer, pay a large tax penalty for choosing an employer-sponsored plan, or be stuck with an inferior, public option.
Increasing the Cost of Healthcare
Medicaid costs for healthcare are much greater than the costs of healthcare in the private sector. In my AIER paper “The Work vs Welfare Tradeoff Revisited,” I found that Medicaid paid more per full-year equivalent enrollee than the average annual single premium for an employer-sponsored plan in 43 states.[15] Despite the higher payments, health outcomes for Medicaid recipients are not better than those of Americans with private insurance.
The reason why Medicaid is so costly comes from the incentives created under the joint federal-state funding relationship, as discussed in the previous section. Cannon (2022a) elaborates, “Spending $1 on police buys $1 of police protection. Spending $1 on Medicaid, however, buys $2 to $10 of medical or long-term care. Medicaid rewards states for spending the marginal dollar on medical and long-term care even when spending it on police, education, or transportation would provide greater benefit.”[16]State officials have an incentive to maximize Medicaid while cutting basic public services. The open-ended federal matching system allows states to maximize federal matching dollars (especially for expansion populations) through gimmicks such as provider tax loopholes.[17]As spending on the expansion population increases, traditional Medicaid enrollees are pushed aside, leading to less access to care and worsening health outcomes.
The Government Accountability Office (GAO) regularly lists Medicaid (and its relative Medicare) among the “High-Risk” list for improper payments. The GAO notes that Medicaid program integrity must be strengthened through both legislation and “coordinated effort across multiple entities.”[18] Additionally, America is one of the most charitable nations in the world. In closing, Mueller opines,
In other words, Medicaid is rife with waste, fraud, and abuse, and fixing it is no small task.
Increased Regulatory Complexity
Medicaid also has a significant impact on the nature and shape of healthcare regulations. Federal rules dictating how states shape their Medicaid policies discourage innovation, research, and flexibility because state policymakers want to maximize those federal matching dollars. Furthermore, states will shape their own healthcare regulations to ensure compliance with federal Medicaid guidelines and maximize federal Medicaid funding. This results in states limiting access to new therapies to control costs.
What Do the 2025 Policy Changes Mean for Medicaid?
In 2025, two major policy changes have impacted Medicaid: proposed changes under the “One Big Beautiful Bill” (H.R. 1) and a Centers for Medicare and Medicaid Services proposed rule to close a provider tax loophole. These changes have the potential to provide immediate fixes to Medicaid, but much deeper reforms are needed.
The largest change comes from the legislative and CMS rule changes toward Medicaid provider taxes. The changes in H.R. 1 phase the Medicaid provider tax rate from 6 percent to 3.5 percent and freeze any new provider taxes created[19] It would also mandate waiver resubmissions and suspend existing approvals in noncompliant states. These reforms would ensure Medicaid financing aligns with federal intent, helps reduce wasteful spending, and prevents states from misusing federal Medicaid funds for other general fund programs.[20] It would also mandate waiver resubmissions and suspend existing approvals in noncompliant states. These reforms would ensure Medicaid financing aligns with federal intent, helps reduce wasteful spending, and prevents states from misusing federal Medicaid funds for other general fund programs.
Additionally, H.R. 1 also strengthens work requirements and eligibility checks, ensuring that verification standards are improved and states are allowed to remove ineligible enrollees from Medicaid.
These reforms, unfortunately, only scratch the surface. Deeper changes to Medicaid (as well as healthcare broadly) are needed. One such change is offered by economist David Rose. Rose writes,
“To put it simply, eliminate Obamacare, Medicare, and Medicaid and replace them with a national healthcare voucher system. This transformative change for American healthcare could be limited to the level paid for with a national sales tax, and our unfunded liability problems would simply disappear. While, for practical reasons, this would likely have to start at the national level, the goal could be to then spin it off to the states.”[21]
There is no shortage of ideas available for healthcare reform. The problem lies in changing the incentives that millions in the healthcare sector face (both in government and the private sector) that keep them maintaining the status quo.
Conclusion
Medicaid was designed to provide a safety net for the most vulnerable Americans. After sixty years, trillions spent, and millions of Americans enrolled, the program has little to show for it. It has strayed from its mission of helping the poor because policymakers prioritize maximizing federal matching rates. Medicaid spends more yet fails to provide better health care access or health outcomes, increases costs, and discourages choice and innovation in healthcare.
The United States—the wealthiest nation in history—and its people deserve health care that delivers access, valuable health outcomes, affordability, and choice. Market-driven solutions can provide such a system.
Footnotes
[1] Social Security Administration. Medicaid. In Annual Statistical Supplement to the Social Security Bulletin, 2015. https://www.ssa.gov/policy/docs/statcomps/supplement/2015/medicaid.html.
[2] Congressional Research Service. Medicaid: An Overview. R43357. Washington, DC: Library of Congress, 2023. https://www.congress.gov/crs-product/R43357.
[3] Ibid.
[4] Ibid.
[5] KFF. “Federal Matching Rate and Multiplier.” KFF State Health Facts. Accessed July 9, 2025. https://www.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier.
[6] KFF. “Status of State Medicaid Expansion Decisions.” KFF. Accessed July 9, 2025. https://www.kff.org/status-of-state-medicaid-expansion-decisions.
[7]
[8]
[9] Office of the Assistant Secretary for Planning and Evaluation. The Benefits of Expanding Medicaid Eligibility to Low-Income Adults: Evidence from State Expansions. U.S. Department of Health and Human Services, March 28, 2022. https://aspe.hhs.gov/reports/benefits-expanding-medicaid-eligibility.
[10] Office of the Assistant Secretary for Planning and Evaluation. 2022 Uninsurance Rate at an All-Time Low: New Estimates Highlight the Role of the ACA and Medicaid Expansion. U.S. Department of Health and Human Services, September 2022. https://aspe.hhs.gov/reports/2022-uninsurance-at-all-time-low.
[11] Cannon, Michael F. Cato Institute. “Medicaid and the Children’s Health Insurance Program.” In Cato Handbook for Policymakers, 9th ed., 2022. https://www.cato.org/cato-handbook-policymakers/cato-handbook-policymakers-9th-edition-2022/medicaid-childrens-health-insurance-program#perverse-incentives.
[12] Blase, Brian and Gonshorowski, Drew. “Resisting the Wave of Medicaid Expansion: Why Florida Is Right.” Paragon Institute. May 1, 2024. https://paragoninstitute.org/medicaid/resisting-the-wave-of-medicaid-expansion-why-florida-is-right.
[13] Sigaud, Liam. “Losing Focus: How the ACA’s Medicaid Expansion Left Traditional Enrollees Behind.” Paragon Prognosis, February 10, 2025. https://paragoninstitute.org/paragon-prognosis/losing-focus-how-the-acas-medicaid-expansion-left-traditional-enrollees-behind/#:~:text=A%202021%20analysis%20in%20Health,adverse%20outcomes%2C%20including%20higher%20mortality.e.
[14] Cannon, Michael F. Cato Institute. “The Tax Treatment of Health Care.” In Cato Handbook for Policymakers, 9th ed., 2022. https://www.cato.org/cato-handbook-policymakers/cato-handbook-policymakers-9th-edition-2022/tax-treatment-health-care#the-tax-exclusion-for-employer-sponsored-health-insurance.
[15] Savidge, Thomas. “The Work vs. Welfare Tradeoff Revisited.” American Institute for Economic Research, June 17, 2022. https://aier.org/article/the-work-vs-welfare-tradeoff-revisited/#medicaid.
[16] Cannon (2022a). supra note 11.
[17] Blase, Brian. Medicaid Provider Taxes: A Gimmick that Exposes the Flaws in Medicaid’s Financing. Arlington, VA: Mercatus Center at George Mason University, June 20, 2023. https://www.mercatus.org/research/research-papers/medicaid-provider-taxes-gimmick-exposes-flaws-medicaids-financing.
[18] U.S. Government Accountability Office. Medicaid Financing: Actions Needed to Ensure Provider Taxes Do Not Undermine Federal Oversight. GAO-25-107743, May 2025. https://www.gao.gov/products/gao-25-107743.
[19] U.S. Congress.H.R. 1: “One Big Beautiful Reconciliation Act of 2025,” 119th Cong., 1st sess., § 71115, “Provider Taxes” (2025). https://www.congress.gov/bill/119th-congress/house-bill/1/text
[20] Centers for Medicare & Medicaid Services. Preserving Medicaid Funding for Vulnerable Populations by Closing Health Care-Related Tax Loophole: Proposed Rule. Fact Sheet. Washington, DC: U.S. Department of Health and Human Services, May 2, 2024. https://www.cms.gov/newsroom/fact-sheets/preserving-medicaid-funding-vulnerable-populations-closing-health-care-related-tax-loophole-proposed#_ftn2.
[21] Rose, David C. “Want to Fix Medicaid? Look to Milton Friedman.” The Daily Economy, June 6, 2025. https://thedailyeconomy.org/article/want-to-fix-medicaid-look-to-milton-friedman.
This paper investigates the effect of affordable housing obligations in New Jersey on cost of living, cost of housing, and actual housing production. New Jersey’s Mount Laurel court cases established a doctrine whereby municipalities must permit their “fair share” of affordably priced housing. At various points since then, the legislature has interpreted this doctrine with specific, quantitative targets for municipalities to reach, or it has declined to do so, leaving enforcement up to the courts, which in turn backed away for several years from enforcing affordable housing targets. These policy changes provide an opportunity to investigate whether affordable housing targets are having their intended effect. Based on synthetic control analysis, the results show no effect of affordable housing mandates on housing production and minimal to no effect of affordable housing mandates on housing costs.
1. Introduction
The Mount Laurel court cases in New Jersey established that “a developing municipality may not, by a system of land use regulation, make it physically and economically impossible to provide low and moderate income housing.”[1]
While the initial ruling merely held that municipal land-use regulations could not exclude everything other than large-lot single-family houses, the legislature has interpreted the Mount Laurel doctrine to say that municipalities have an affirmative obligation to construct deed-restricted affordable housing. Until 1985, the legislature did not act. Municipalities had widely flouted or challenged the 1975 New Jersey Supreme Court decision, leading to a “mass of protracted litigation.”[2] In 1983, the Mount Laurel II decision affirmed a “builder’s remedy” against municipalities that failed to meet judicially determined affordable housing targets, thereby incentivizing the legislature finally to act.[3]
The result was the Fair Housing Act of 1985, which established an independent body tasked with calculating each municipality’s “fair share” allotment of new affordable housing units, which would afford them safe harbor from builder’s remedy lawsuits. That body, the Council on Affordable Housing (COAH), issued its first round of fair share calculations in 1987, and they remained in force until 1993. Round II of COAH’s fair-share obligations were in force from 1993 to 1999, and after 1999 COAH went effectively defunct after its Round III calculations were invalidated by the courts. It was finally abolished in 2024 in favor of a new method of calculating fair-share obligations. Since 2007, then, when COAH’s Round III rules were invalidated, New Jersey municipalities have had to revert to the former method of judicial certification of compliance with the Mount Laurel doctrine.
How have the Mount Laurel doctrine and its varied interpretations by the legislature affected housing production and costs in New Jersey? To answer this question, we first need to understand the political economy of affordable-housing targets and inclusionary zoning programs.
2. The Effects of Affordable-Housing Mandates
In order to comply with COAH rules, New Jersey municipalities adopted inclusionary zoning. Inclusionary zoning comes in two forms: mandatory and voluntary. Mandatory inclusionary zoning requires that any new development of a specified size or kind set aside a percentage of units that must be rented or sold at an affordable price to low- or moderate-income consumers. Deed restrictions and income verification enforce the affordability requirement. Voluntary inclusionary zoning offers a developer a regulatory benefit, such as an increase in allowed density, provided a certain percentage of units are rented or sold at below-market rates in the same manner.
The Fair Housing Act of New Jersey requires municipalities to develop at minimum a voluntary inclusionary zoning program, but mandatory programs are ubiquitous throughout the state, according to a database maintained at inclusionaryhousing.org.
Inclusionary zoning only functions if the market-rate units in an inclusionary development are expensive. The developer has to make a large profit on those units to offset the losses on the units that are required to be sold or rented at below-market rates. If housing in general becomes affordable, then, inclusionary zoning does not work.
Inclusionary zoning has other curious effects. As a form of price control, it creates shortages and rationing. More people want the below-market units than are available, so they have to be allocated by lottery. Moreover, inclusionary zoning, at least in the mandatory form, reduces the supply of housing, because developers know they will make less profit from building than they would if there were no inclusionary requirements.
Empirical research largely confirms these theoretical expectations. Research in the Baltimore-Washington area finds that mandatory inclusionary zoning increases the cost of market-rate housing, though it might not affect new housing supply (Hamilton, 2021). An earlier study of California found that inclusionary zoning policies decreased the size and increased the price of single-family houses (Bento, et al., 2009). A study of San Francisco and Boston found that mandatory inclusionary zoning increased prices and reduced production in Boston while increasing prices during periods of rising prices and reducing prices during periods of falling prices in San Francisco, and not affecting production there (Schuetz, et al., 2011). Yet another study of California found strong adverse effects on production and prices (Means & Stringham, 2012). There’s only one contrarian study on the issue, finding that reduction in inclusionary zoning requirements in parts of California did not affect house prices (Hollingshead, 2015). It could be that these programs create hysteresis in housing markets once they’re implemented.
While these studies focus on mandatory inclusionary zoning, there are reasons to think that even voluntary inclusionary zoning, which is much more widespread, could have adverse consequences for housing production, particularly in a state like New Jersey or Massachusetts with a “builder’s remedy” available when municipalities fail to meet affordable housing targets.
Suppose that municipal leadership generally opposes new multifamily development. If a developer proposes a new market-rate multifamily development, it generally does not directly help the municipality meet its affordable housing target, because the units are usually not priced affordably enough. Moreover, since housing markets are supra-municipal, corresponding largely to commuting areas, municipal leaders may well realize that building market-rate housing has only weak effects on the overall affordability of housing within municipal boundaries, contributing rather to the affordability of housing throughout the local labor market. Realizing that they must meet their affordable housing targets, but disfavoring multifamily development generally, municipal leadership will have a clear incentive to deny planning permission for market-rate multifamily developments.
Anecdotally, the market-rate nature of a development (i.e., the lack of deed-restricted affordable units) frequently comes up as a justification for planning denials. State law doesn’t expressly protect municipal decisions to deny planning approval to market-rate multifamily projects, but municipalities generally enjoy broad discretion to deny approval for larger multifamily projects, through either site plan review, variance, or conditional use permit processes. When a lack of deed-restricted affordable units is combined with other features that may justify a denial, such as traffic impacts, a municipal land-use board may feel themselves on firmer ground to issue a denial than otherwise.
Anecdotally, the market-rate nature of a development (i.e., the lack of deed-restricted affordable units) frequently comes up as a justification for planning denials. State law doesn’t expressly protect municipal decisions to deny planning approval to market-rate multifamily projects, but municipalities generally enjoy broad discretion to deny approval for larger multifamily projects, through either site plan review, variance, or conditional use permit processes. When a lack of deed-restricted affordable units is combined with other features that may justify a denial, such as traffic impacts, a municipal land-use board may feel themselves on firmer ground to issue a denial than otherwise.
In this way, a state-level requirement that municipalities meet affordable-housing production targets will tend to reduce overall housing production and thereby increase overall housing costs.
Have affordable-housing production targets and inclusionary zoning had these effects in New Jersey? We need a credible empirical test comparing New Jersey to similar states.
3. Empirical Analysis
The empirical strategy here is to compare the rounds of binding affordable-housing obligations in New Jersey to the same periods in other states and to periods in New Jersey when there were not binding affordable-housing obligations. Of particular interest are two outcomes: building permits per capita (the best measure of housing production) and two measures of cost of living in general and cost of for-sale houses in particular. There is only one annual measure of state-level cost of living that goes back before 2008 (Berry, et al., 2000). We do not have annual data on rental costs, but the FHA produces an all-transactions house price index based on resales and appraisals. Their quarterly data are averaged by year to create an annual index.
The outcome variables are as follows: 1) total housing units permitted per capita, from the U.S. Census Bureau, 2) housing units in five-or-more-unit buildings per capita (these housing units are most likely to be affordably priced), 3) annual change in state cost of living, and 4) annual change in the state’s all-transactions house price index. The annual state-level building permits data go back to 1980 and up to 2023. The cost of living data go back to 1960 and up to 2007. House price data go from 1975 to 2024.
Figure 1 shows how total building permits per capita have evolved in New Jersey and two neighboring states since 1980. The vertical lines set off the period of 1985 to 1999, when Mount Laurel obligations were most seriously enforced, and the period 1999 to 2007, when Mount Laurel obligations were barely enforced at all, because the courts were waiting on a legislative solution that never came.
Figure 1: Total Building Permits per Capita in New Jersey and Neighboring States
We see here that before 1985, New Jersey was permitting a lot more units per capita than Pennsylvania and New York were. Shortly thereafter, however, New Jersey permitting plunged, and it remained more or less at Pennsylvania’s level until about 2012, when the state regained a small but steady advantage over its neighbors. These changes in permitting do not line up well with the enforcement of affordable housing obligations.
Figure 2 shows how building permits for units in buildings with five or more units evolved over time in the same group of three states.
Figure 2: Five-Plus Building Permits per Capita in New Jersey and Neighboring States
The results here are similar to those in Figure 1, except that Pennsylvania and New York switch places. Pennsylvania produces more housing than New York, but New York produces more multifamily housing than Pennsylvania, which is not surprising since New York is more urbanized. After 1990, New Jersey’s permitting of larger multifamily buildings closely tracks New York’s, but New Jersey did have a slightly higher rate between 2016 and 2022.
So far, the raw data do not show a strong effect of affordable housing obligations on housing production in New Jersey. New Jersey is the most densely populated state in the country, so it makes sense that New Jersey would produce a larger share of multifamily housing than a state like Pennsylvania. But only in the last few years has New Jersey produced more overall housing than Pennsylvania. There is no evidence that the 1985 to 1999 period specifically was more productive of housing in New Jersey than other periods, or that the 2000 to 2007 period was particularly unproductive, except perhaps relative to the post-2012 period.
Of course, building permits are a measure of quantity supplied, but economics teaches us that both supply and demand jointly determine an equilibrium. We cannot reason from quantity changes alone that New Jersey’s affordable housing obligations did not work, because perhaps New Jersey had abnormally low housing demand, which caused builders to want to build less regardless of regulations. If affordable housing obligations corresponded to periods of slow growth in the cost of living in New Jersey, we could infer that these obligations boosted housing supply after all.
Figure 3 shows the evolution of state cost of living from 1960 to 2007 for New Jersey and its larger neighbors.
Figure 3: Cost of Living in New Jersey and Neighboring States
This chart suggests as well that affordable housing obligations did not work. Cost of living in New Jersey grew more rapidly than in neighboring states between 1980 and 1990 and since then has remained consistently higher. This evidence suggests that demand for housing in New Jersey was growing rapidly in the 1980s, and more housing units would have been supplied to meet market conditions even in the absence of affordable housing obligations. It’s even possible that affordable housing obligations suppressed supply through the regulatory incentives established by inclusionary zoning.
Finally, Figure 4 plots the annual change in the house price index for all three states. It is important to note here that the house price index is specific to each state, so levels are not comparable across states, only changes are. Every state’s house price index is set to 100 in the first quarter of 1980.
Figure 4: Changes in House Prices in New Jersey and Neighboring States
New Jersey house prices mostly change in lockstep with New York’s. But between 2015 and 2020 there is a brief period when New Jersey’s house prices rose less rapidly than New York’s. We probably shouldn’t overinterpret six years of data in this time series, but in concert with the evidence from Figure 2 it might suggest that the period of court supervision of Mount Laurel obligations was more productive for housing than either the period of legislative supervision or the period when these obligations were mostly not enforced.
Still, these charts are not conclusive. We can investigate the effects of New Jersey’s affordable housing obligations using synthetic control analysis (Abadie, et al., 2015). Synthetic control creates a weighted average of similar units to the treated unit, then compares the actual results in the treated unit to the counterfactual results represented by the weighted average of similar units. The treatment effect of the intervention equals actual New Jersey’s value minus synthetic New Jersey’s value on an outcome.
I used the immediate lag of the dependent variable, population, personal income, land area, and number of local governments per square mile from Ruger and Sorens (2023) to create a “synthetic” New Jersey from other states. In the change in cost of living and change in house prices analyses, I also used the one-year lag of the level of each index to capture any scale effects occurring in long time series of price indices. This synthetic New Jersey is as similar as possible to the real New Jersey, allowing us to investigate the counterfactual building permits, cost of living, and housing costs that would have occurred in New Jersey in the absence of the Mount Laurel affordable housing obligations.
I look at two treatment periods, the first when the legislature made Mount Laurel obligations effective from 1985 to 1999, and the second when neither the legislature nor the courts were enforcing Mount Laurel obligations (2000 to 2007). Separate synthetic control analyses are run for each period.
Outcome:
Total units
Total units
5-Unit permits
5-Unit permits
Δ Cost of living
Δ Cost of living
Δ House price index
Δ House price index
Treatment period:
1985-1999
2000-2007
1985-1999
2000-2007
1985-1999
2000-2007
1985-1999
2000-2007
Massachusetts
0.66
0.58
0.82
0.22
0.6
0.29
0.44
0.2
Pennsylvania
0.24
0.17
0.17
0.22
0.52
Connecticut
0.13
0.46
0.14
0.38
New York
0.02
0.23
0.17
0.28
0.09
0.16
0.01
Florida
0.09
0.27
Nevada
0.07
0.04
Arizona
0.02
Hawaii
0.25
California
0.1
Table 1: Construction of Synthetic New Jersey in Each Analysis
Because I’m running eight different synthetic control analyses (two treatment periods combined with four outcomes), the precise content of synthetic New Jersey varies from analysis to analysis. Table 1 shows how synthetic New Jersey is constructed in each analysis; the numbers represent the weights on each state.
Unsurprisingly, neighboring states New York and Pennsylvania contribute a lot to many of these analyses. Massachusetts is the only state that contributes to synthetic New Jersey in every analysis. The biggest surprise is to see Hawaii enter as a significant contributor to synthetic New Jersey in the 1985–1999 house price index analysis. Otherwise, unusual states make up only a very small proportion of synthetic New Jersey in each instance.
Predictor balance was largely good, with treated and synthetic New Jersey matching closely on population, personal income, and effective competing jurisdictions per square mile. However, treated New Jersey land area was generally about a half to a quarter of synthetic New Jersey’s. New Jersey is abnormally small for its population and personal income (it is the most densely populated state), and it’s hard for the algorithm to replicate that pattern with other states.
Figure 5 shows the results of the synthetic control analyses of total building permits per capita for the two treatment periods.
Figure 5: Synthetic Control Analysis of New Jersey Total Building Permits
The synthetic control algorithm ends up replicating New Jersey’s pre-treatment permitting extremely closely in the earlier period and only moderately closely in the later period. New Jersey’s actual permitting fell below its counterfactual permitting over most of the earlier treatment period, corresponding to the first legislatively enforced Mount Laurel regime. But the differences are tiny in an absolute sense, and when we take into account normal variation in other states, they are not statistically significant in any year. The same is true of the treatment effects in the later period, corresponding to no enforcement of Mount Laurel obligations, except in 2000, where the result goes in the “wrong” direction (New Jersey built more than expected). In other words, neither legislative enforcement of Mount Laurel nor a suspension of Mount Laurel made any difference to New Jersey residential building permits.
Figure 6 presents equivalent results for five-unit production.
Figure 6: Synthetic Control Analysis of New Jersey Five-Unit Building Permits
The results are basically the same. The only statistically significant results based on standardized p-values are in 1986 and 2000, but they go in the “wrong” direction, suggesting that New Jersey had abnormally few five-unit permits in 1986 and abnormally many five-unit permits in 2000.
Figure 7 moves on to general inflation. Here, we would expect legislative enforcement of Mount Laurel to reduce state inflation rates and no enforcement of Mount Laurel to increase them, if the system actually promoted housing supply.
Figure 7: Synthetic Control Analysis of New Jersey Inflation
Here, we are able to model New Jersey’s pretreatment inflation extremely closely and accurately. Once again, we find essentially no effect of the Mount Laurel regime. None of the treatment effects are close to statistical significance, except in 2002, where the result suggests that the lack of Mount Laurel enforcement may have added a tenth of a percentage point to the state’s inflation rate. But for most years, the data suggest that Mount Laurel has made no difference to general inflation in New Jersey.
Next, Figure 8 looks at the results for change in the all-transactions house price index.
Figure 8: Synthetic Control Analysis of Change in New Jersey House Prices
The results here are all over the map, suggesting that Mount Laurel enforcement raised house prices in 1986 and 1987 and cut them in 1989, 1990, and 1991. The average treatment effect over the first period is -1.2, corresponding to about a 0.5 percent change in house prices over the whole 1985–1999 era. After enforcement was removed, house prices rose, but only in two years was that increase statistically significant: 2002 and 2006. The average treatment effect over this period is 11.7, corresponding to about a 2.7 percent change in house prices during that era. There is inconsistent evidence that Mount Laurel enforcement kept house prices down slightly.
When we put all this evidence together, it suggests that Mount Laurel enforcement did not increase housing supply. It may have cut housing prices slightly without increasing permitting, suggesting a reduction in demand for housing, but those changes were too slight to make any impact on broader state-level inflation.
4. Discussion
The results from the foregoing analyses suggest that the Mount Laurel doctrine and multiple rounds of affordable housing obligations dating back at least 39 years have done nothing, or next to nothing, to make housing more abundant or affordable in New Jersey. This is a disappointing result, perhaps, but it’s hard to see it as a surprising one, since New Jersey remains a costly state for housing and relatively slow-growing compared to Sunbelt states that make it easy to build.
Some of the evidence suggests that New Jersey built a lot of housing during 2015 to 2020, and that this period also corresponded to a moderation in house price increases. This was a period of judicial enforcement of Mount Laurel obligations without any legislative framework. At least, the results still support pessimism about the legislature’s ability to come up with criteria for Mount Laurel compliance that foster growth in housing supply.
These results also shouldn’t be surprising since the bulk of the scholarship on the question finds that inclusionary zoning policies tend to make housing less affordable, less abundant, or both. The Fair Housing Act’s mandating of voluntary inclusionary zoning and encouragement of mandatory inclusionary zoning has, at minimum, counteracted the intent of the law to make housing more available to families of modest income.
New Jersey is currently undergoing a fourth round of affordable housing obligations, and the process has generated much controversy. The law, Act 2 of 2024, requires the Department of Community Affairs to develop municipality-specific affordable housing obligations under a detailed, precise formula. Those obligations go into force this year.
Parts of the law’s formula are worth questioning. First of all, “Qualified Urban Aid” municipalities are exempted entirely from the law. This might make sense if all of these municipalities already offered abundant affordable housing, but that is not necessarily the case. Municipalities can qualify for this list if they have a high proportion of substandard and deficient housing or simply a high population density.
Second, Prospective Need – the new affordable housing obligation – is calculated on the assumption that 40% of the housing demand in every region and in every municipality will come from low and moderate income (LMI) households. This ignores the likelihood that LMI households prefer to live in some places rather than others (for instance, places with access to public transit or walkable to employment).
Communities end up with a higher quota if they have had more rapid commercial valuation growth over the previous decade. This provision encourages communities to squelch commercial development. Moreover, commercial valuation growth does not necessarily imply employment growth. Smart-growth principles suggest using employment growth instead to determine housing need.
The formula also includes an income capacity factor, which punishes communities not just for being wealthy, but also for having a small population, because it averages a purely income-based measure with a household-weighted income-based measure. To avoid penalizing communities for having a small number of households, the measure should simply be the household-weighted measure.
The law does take into account land capacity of the municipality, which is supposed to reduce new housing obligation for already built-out municipalities. However, the calculation depends in part on Geographic Information Systems (GIS) land-cover and tax map data that are often not sufficiently granular, accurate, and up-to-date for the purpose.
Finally, the “allocation factors” are simply averaged to produce the fair share calculation, with no justification. For example, the small community of Monmouth Beach has complained about its positive Prospective Need number, given that it has zero developable land.
Given these problems, it is no wonder that the renewed affordable housing obligations are facing strong resistance around the state. Sometimes state governments do need to put guardrails on the municipal zoning power, but in general, mandates on the number of units to produce do not work well, because they encourage wasteful litigation, and municipalities are often able to avoid them through sub rosa methods like delaying permits, requiring extra studies, and zoning land for development that is not actually developable.
5. Conclusion and Recommendations
Is the Mount Laurel doctrine working for New Jersey? Not in its legislative interpretations to date. The legislative framework based in 1985’s Fair Housing Act has demonstrably failed to solve the affordable housing problem in New Jersey. In fact, there’s no evidence it has increased permitting at all, and precious little that it has brought down the cost of housing in the state.
Three recommendations for reform follow.
As mentioned, Act 2 exempts urban municipalities from affordable housing mandates. This exemption makes little sense if one’s goal is to provide more affordable housing where there is demand for it. Act 2 could therefore be amended to apply to all municipalities in the state, and the quantitative housing mandates recalculated. Some lawmakers may question this approach on the grounds that higher affordable housing mandates for suburban and rural municipalities will be more likely to reduce residential segregation. But it is a generally valid maxim that when one aims at two targets at once, one risks hitting neither. A better way to deal with segregation would be to address its negative consequences directly.
A modest reform would shift affordable housing targets from municipal to regional bodies, either the existing county planning boards or new regional authorities created by legislation. These bodies could review development applications specifically for affordable housing developments, in consultation with the municipalities involved. A regional target system would be more flexible than the existing municipal target system, and could allow market demand to have a greater say in where these projects occur.
New Jersey lawmakers should consider repealing Act 2 entirely and discuss ways to leverage private property rights and the free market to grow housing supply, such as by conferring definite development rights for certain types of projects based on site and infrastructure conditions.
The state can also speed up permitting with shot-clocks, third-party permitting, and broadened exemptions from special permit requirements. The Mercatus Center publishes an annual report on the state legislative “toolbox” for housing, a useful source of ideas on this front (Furth, et al., 2024).
Instead of detailed affordable housing mandates that have spawned an entire litigation industry, the state should move toward regulatory reforms aimed at general housing abundance. The state could still financially reward towns that actually permit a lot of new building, but those rewards should come after the permits have been issued, not after mere rezonings. This approach would build a more collaborative relationship between the state and municipalities and also make it easier for builders to know what they can build and where, without having to go through years of legal rigmarole. These reforms would make housing more abundant where it’s needed, bringing down the cost and doubling down on New Jersey’s existing economic strengths, like a skilled, urbanized workforce and strong industrial and port infrastructure.
Acknowledgments
The author thanks Audrey Lane for editorial support and guidance and anonymous referees for helpful feedback. All remaining errors are the author’s responsibility.
References
Abadie, A., Diamond, A. & Hainmueller, J., 2015. Comparative Politics and the Synthetic Control Method. American Journal of Political Science, 59(2), pp. 495-510.
Aten, B. H., 2017. Regional Price Parities and Real Regional Income for the United States. Social Indicators Research, 131(1), pp. 123-143.
Bento, A., Lowe, S., Knaap, G.-J. & Chakraborty, A., 2009. Housing Market Effects of Inclusionary Zoning. Cityscape, 11(2), pp. 7-26.
Berry, W. D., Fording, R. C. & Hanson, R. L., 2000. An Annual Cost of Living Index for the American States, 1960-1995. Journal of Politics, 62(2), pp. 550-567.
Furth, S., Hamilton, E. & Gardner, C., 2024. Housing Reform in the States: A Menu of Options for 2025, Arlington, Va.: Mercatus Center at George Mason University.
Hamilton, E., 2021. Inclusionary Zoning and Housing Market Outcomes. Cityscape, 23(1), pp. 161-194.
Hollingshead, A., 2015. When and How Should Cities Implement Inclusionary Housing Policies?, Berkeley, Calif.: Cornerstone Partnership.
Means, T. & Stringham, E. P., 2012. Unintended or Intended Consequences? The Effect of Below-Market Housing Mandates on Housing Markets in California. Journal of Public Finance and Public Choice, 30(1-3), pp. 39-64.
Ruger, W. & Sorens, J., 2023. Freedom in the 50 States: An Index of Personal and Economic Freedom. 7th ed. Washington, D.C.: Cato Institute.
Schuetz, J., Meltzer, R. & Been, V., 2011. Silver Bullet or Trojan Horse? The Effects of Inclusionary Zoning on Local Housing Markets in the United States. Urban Studies, 48(2), pp. 297-329.
End Notes
[1] Southern Burlington County N.A.A.C.P. v. Township of Mount Laurel, 67 N.J. 151 (1975).
[2] Monaghan, Justin M., and William Penkethman Jr. “The Fair Housing Act: Meeting the Mount Laurel Obligation with a Statewide Plan.” Seton Hall Legis. J. 9 (1985): 585–619, 587.
[3] Southern Burlington County NAACP v. Mount Laurel Township, 92 N.J.
VANCOUVER, BRITISH COLUMBIA / ACCESS Newswire / December 30, 2025 / Prince Silver Corp. (CSE:PRNC,OTC:PRNCF)(OTCQB:PRNCF)(T130:Frankfurt) (‘Prince Silver’ or the ‘Company) is pleased to announce that its ongoing reverse circulation (‘RC’) drilling program has encountered favourable alteration in all ten drill holes completed to date at the Prince Silver Mine Project (the ‘Project’). Furthermore, the Company will increase the planned drill program from 21,000 feet (~6,400 metres) to over 30,000 feet (~9,100 metres) and accelerate drilling with the addition of a second RC drill rig next month.
Current drilling is focused on evaluating near-surface (less than 300 metres) carbonate replacement (‘CRD’) silver-gold-manganese and base-metal mineralization, as well as sediment-hosted gold-silver zones, along a 3,500-foot (~1,070-metre) structural corridor ranging from 600 to 1,200 feet (~180-360 metres) in width. Mineralization at the Project remains open in all directions within shallow, gently dipping mineralized zones that present potential for open-pit mining.
The first batch of assays for the ten completed drill holes is expected in January 2026. Results will provide important insight into the scale and continuity of mineralization across the Exploration Target (as defined below) and the broader mineralized system, and to help guide subsequent phases of drilling with the objective of incorporating new data into an initial NI 43-101-compliant mineral resource estimate.
‘The alteration encountered in the drill holes reinforce our confidence in the Prince Silver Mine Project and support our decision to expand and accelerate drilling,’ said Derek Iwanaka, CEO of Prince Silver Corp. ‘With a second drill rig coming on site and assays pending, we are well positioned to advance the Project toward a maiden mineral resource while continuing to test the broader mineralized system.’
Exploration Target
Historical drilling at the Project identified an exploration target (the ‘Exploration Target’) outlined in an independent historical report prepared in accordance with JORC guidelines by OmniGeoX Exploration Consultants of Perth, Australia. The report, titled ‘Prince Project Exploration Target’ (dated April 24, 2024), was authored by Dr. Lachlan Rutherford and Michael Martin (OmniGeoX Exploration Consultants, 2024, Independent Report prepared for Prince Silver Corp.).
The Exploration Target is based on 129 historic drill holes testing mineralized carbonate replacement beds and host Pioche Shale to depths of up to 300 metres. Historical block modelling of polymetallic mineralization suggests the immediate Exploration Target ranges from approximately 25-43 million tonnes with grades of 1.44-1.57% Zn, 0.78-0.87% Pb, 0.28-0.40 g/t Au, 37-40 g/t Ag, and 3.62-4.30% Mn. Dr. Rutherford and Mr. Martin are Competent Persons as defined under the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).
Additional details on the Exploration Target and historic production are available in the Company’s press release dated February 27, 2025, filed on SEDAR+ (Prince Silver Corp., 2025, Historic Drilling and Production Summary).
Readers are cautioned that the Exploration Target is not a mineral resource as defined under National Instrument 43-101. The Exploration Target is conceptual in nature and based on historic drilling totaling 16,606 metres, historic production records, mine level plans, and 3D geological modelling. There has been insufficient exploration to define a mineral resource, and it is uncertain whether further exploration will result in the delineation of a mineral resource.
Annual General Meeting Results
Prince Silver Corp. held its annual general meeting of shareholders on December 23, 2025 (the ‘AGM’). Shareholders approved all matters presented, as set out in the Company’s management information circular dated November 25, 2025, including:
Setting the number of directors at five (5);
Election of Derek Iwanaka, Ralph Shearing, Marco Montecinos, Darrell Rader, and Robert Wrixon as directors until the next annual meeting or until their successors are appointed;
Re-appointment of Davidson & Company LLP as auditor for the ensuing year; and
Adoption of the Company’s 20% rolling omnibus equity incentive plan.
The Company thanks former director Neil MacRae, who did not seek re-election, for his valuable guidance and support.
Ralph Shearing, P.Geo. (Alberta), a Qualified Person under NI 43-101 and Director and President of the Company, has reviewed and approved the technical disclosure in this news release.
About Prince Silver Corp.
Prince Silver Corp. is a silver exploration company advancing its flagship Prince Silver Project in Nevada, USA, featuring a near-surface, historically drilled deposit that remains open in all directions. The Company also holds an interest in the Stampede Gap Project, a district-scale copper-gold-molybdenum porphyry system located 15 km north-northwest, highlighting Prince Silver’s focus on high-potential, strategically located exploration assets.
On Behalf of the Board of Directors
Derek Iwanaka, CEO & Director Tel: 236-335-9383 Email: info@princesilvercorp.com Website: www.princesilvercorp.com
Forward-Looking Information
Certain statements in this news release are forward-looking statements, including with respect to future plans, and other matters. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations, or intentions regarding the future. Such information can generally be identified by the use of forwarding-looking wording such as ‘may’, ‘expect’, ‘estimate’, ‘anticipate’, ‘intend’, ‘believe’ and ‘continue’ or the negative thereof or similar variations. Some of the specific forward-looking information in this news release includes, but is not limited to, statements with respect to: completion of the Acquisition and related transactions, proposed drill programs, amendments to the Company’s website, property option payments and regulatory and corporate approvals. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, business, economic and capital market conditions, the ability to manage operating expenses, dependence on key personnel, completion of satisfactory due diligence in respect of the Acquisition and related transactions, and compliance with property option agreements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, anticipated costs, and the ability to achieve goals. Factors that could cause the actual results to differ materially from those in forward-looking statements include, the continued availability of capital and financing, litigation, failure of counterparties to perform their contractual obligations, failure to obtain regulatory or corporate approvals, exploration results, loss of key employees and consultants, and general economic, market or business conditions. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information.
The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘U.S. Securities Act’) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons (as defined under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
SOURCE: Prince Silver Corp.
View the original press release on ACCESS Newswire
Saga Metals Corp. (‘TSXV: SAGA,OTC:SAGMF’) (‘FSE: 20H’) (‘SAGA’ or the ‘Company’), a North American exploration company focused on discovering critical minerals, is pleased to announce the results from its follow up field program at the North Wind Iron Ore project in West Central region of Labrador, Canada.
Key Field Program Highlights
High-Grade Iron Ore Potential: Iron content (Fe₂O₃) in grab samples from the Sokoman Formation range as high as 84.57% Fe₂O₃, with continuous high grade in the Lower, Middle and Upper Iron stratigraphy’s. Highest grab sample of 2025 returned 79.26 %Fe₂O₃, from the Middle Iron Formation.
Magnetite-Rich Ore: Davis Tube separation techniques confirm the presence of magnetite-rich taconite ore, along with the occurrence of hematite, limonite, and goethite. These results are comparable to historical regional resources at the KéMag, Sheps Lake, and Perrault Lake deposits, which boasted strong resource estimates.
Extensive Mineralization Zone: Fieldwork identified iron ore mineralization over a 4km NW-SE trend, with indications that the mineralized zone continues southeast. Mapping in the area suggests that the units dip shallowly to the northeast which would make easy drill targets for resource estimation. Surface thickness of the mineralized trend ranges between 600 and 700 meters, underscoring the project’s potential scale.
Figure 1: Regional map of the North Wind Iron Ore Project in Labrador, Canada
SAGA’s North Wind Iron Ore Project: A highly prospective iron ore asset located in the globally recognized, resource-rich Labrador Trough
The North Wind Iron Ore property located 16 kilometers southwest of Schefferville, Quebec, within the prolific Labrador Trough, represents a secondary but high-potential critical mineral asset within Saga Metals’ portfolio. The Labrador Trough, an extensive 1,100-kilometer suite of Proterozoic rocks, is renowned for hosting world-class iron ore deposits and is a major hub for iron ore exploration.
In February of 2025, Cyclone Metals Limited announced that it signed a binding commercial agreement with Vale S.A. regarding the joint development of its Iron Bear iron ore project. (See Figure 1 above for project location). Under the terms of the agreement, Vale has the right to provide up to USD $138 million of funding to the Iron Bear Project in two Phases and earn 75% of the project. If Vale elects to proceed to Decision to Mine (DTM), Vale can elect to acquire the remaining 25% of the Iron Bear project at fair market value or carry Cyclone to production with no dilution.
SAGA’s North Wind property spans 6,375 hectares across 255 claim blocks under a single license. Its geological framework holds significant potential, reinforced by a portion of a historical resource estimate (NI 43-101 compliant) completed in 2013 by New Millennium Iron. This estimate included two key types of iron ore commonly found in the Labrador Trough:
Soft iron ores: Composed of fine-grained secondary iron oxides, including hematite, goethite, and limonite.
Taconites: Fine-grained, weakly metamorphosed iron formations with above-average magnetite content.
Historical exploration at North Wind includes data from eight drill holes, drilled by New Millenium in 2013, which averaged 20.74% Total Fe (iron) content over 590 meters drilled. Notably, the Lower Red Green Chert (LRGC), a key stratigraphic unit within the property, returned an average grade of 24.76% Fe across 277 meters drilled and was intercepted in all eight holes. This LRGC unit forms part of the Sokoman Formation’s ‘Lower Iron Formation,’ a high-priority target confirmed by both New Millennium Iron and SAGA’s exploration team.
Figure 2: Saga Metals Mapping the North Wind Property in October of 2025
North Wind Iron Ore Field Program 2025
As part of routine claims maintenance, Saga Metals conducted a short field program at the North Wind Iron Ore property in the Autumn of 2025. In total, 38 rock samples were collected within the target area, all being grab samples, across all units, with the main focus on the Middle and Lower iron formations. Of those 38 Grab samples, 17 of them were above 30% with the highest sampling coming from the Middle Iron Formation with 79.26% Fe₂O₃.
The program focused on mapping, prospecting, and rock sampling, targeting the northern and central areas of the property for follow up and drill hole verification, and the south first pass evaluation.
The Sokoman Formation, a high-priority target for Saga Metals, forms the core focus of exploration. This formation is subdivided into three stratigraphic members based on iron content (Fe₂O₃) seen below with the 2025 Top 18 samples:
Upper Iron Member: 37%–70.42% Fe₂O₃
Middle Iron Member: 36 %–79.26% Fe₂O₃
Lower Iron Member: 32.97 %–66.75% Fe₂O₃
The highest sample collected during the program (Sample ID: 1800354) returned 79.26 % Fe₂O₃, originating from the middle Iron members of the Sokoman Formation. These middle and lower members of the Sokoman Formation are particularly prospective, offering the most favorable grades based on iron content.
To further evaluate the potential of these units, SAGA employed Davis Tube Magnetic Separation techniques (as seen below in Table 1). This analytical method effectively separates magnetic (magnetite) and non-magnetic fractions (hematite, limonite, goethite and gangue minerals), providing a robust measurement of magnetite content. Results from these tests indicate that the magnetic fraction compares favorably to grades from nearby historical deposits, including the KéMag, Sheps Lake, and Perrault Lake deposits along the same geological trend. These regional deposits have reported 20%–34% Davis Tube Weight Recovery (DTWR) in historical NI 43-101 mineral resource estimates. *Past results or discoveries of resources on adjacent or nearby properties may not necessarily be indicative of the presence of significant mineralization on the Company’s property.
The 2025 work program confirmed the continued definition of the prospective Middle and Lower Iron members of the Sokoman Formation. Detailed structural mapping has shown the shallow dip of these formations to the northeast which the team has recognised is a great opportunity to expand on the New Millennium resource in the future by defining the grade continuity under cover of the Menhek formation and the less mineralised Upper Iron formation. New Millennium’s drilling in 2012 concentrated on the narrow strip in the middle where these formations were exposed on the surface.
Michael Garagan, CGO & Director of Saga Metals Corp. stated: ‘These findings, including the identified shallowly dipping mineralization to the east, reaffirm the North Wind Iron Ore Project’s potential to become a significant iron ore asset. With iron ore playing a critical role in the steelmaking process and increasing demand driven by infrastructure and renewable energy developments, Saga Metals sees considerable growth potential for the projects value and positions it as a promising contributor to SAGA’s portfolio of critical mineral assets.’
Results of the 2025 Field Program:
Figure 3: Interpreted cross-section from West to East Across the Northwind Property. Shows shallowly dipping iron formations to the east.
Figure 4: Sample location map of 2024-2025 Rock Samples showing total iron grade overlying a geological map of the area.
Figure 5: Sample 800354: Strongly magnetic sample of ‘banded magnetite and red chert, predominately massive magnetite (~2cm diameter) with goethite’ 48.05 Fe2O3(T) % (FUS-ICP)
Sample_ID
Formation
Fe2O3(T) (%) FUS-ICP
LOI (%) GRAV
Magnetic Fraction (g) DT
Non-Mag Fraction (g) DT
Calculated Start Mass (g) DT
1800309
Middle Iron Formation
79.26
-0.94
17.39
12.658
30.048
1800352
Upper Iron Formation
70.42
5.57
11.024
18.962
29.986
1800371
Lower Iron Formation
66.75
-0.86
16.648
13.22
29.868
1800353
Middle Iron Formation
60.01
2.51
0.486
29.513
29.999
1800307
Lower Iron Formation
48.91
5.41
0.007
29.955
29.962
1800354
Lower Iron Formation
48.05
2.32
0.102
29.879
29.981
1800312
Upper Iron Formation
43.62
23.43
0.008
29.961
29.969
1800311
Middle Iron Formation
40.41
-0.18
8.45
21.5
29.95
1800303
Upper Iron Formation
39.77
0.89
9.876
20.13
30.006
1800365
Middle Iron Formation
39.69
3.54
0.054
29.974
30.028
1800357
Lower Iron Formation
39.57
4.27
5.213
24.873
30.086
1800310
Middle Iron Formation
38.15
-0.15
8.389
21.59
29.979
1800305
Lower Iron Formation
38.07
4.72
0.012
30.004
30.016
1800366
Upper Iron Formation
37.38
12.54
0.025
29.926
29.951
1800369
Middle Iron Formation
36.88
-0.56
9.826
20.124
29.95
1800304
Lower Iron Formation
33.74
1.12
6.402
23.584
29.986
1800306
Lower Iron Formation
32.97
3.48
0.018
29.802
29.82
Table 1: Results from all samples over 30% Fe₂O₃ including theDavis Tube Separation Analysis
Corporate Update
The Company further reports that it entered into a digital marketing services agreement dated December 29, 2025 (the ‘Marketing Agreement‘) with Machai Capital Inc. (‘Machai‘). Pursuant to the Marketing Agreement, Machai will, among other things, provide the Company with certain marketing services to expand investor awareness of the Company’s business and to communicate with the investment community (the ‘MachaiServices‘).
The Machai Services will include, among other things: (i) branding, content and data optimization to assist the Company to create in-depth marketing campaigns, and (ii) tracking, organizing and executing the Machai Services through search engine optimization, search engine marketing, lead generation, digital marketing, social media marketing, email marketing, and brand marketing. In consideration of the Machai Services, and pursuant to the terms and conditions of the Marketing Agreement, the Company has agreed to pay Machai a fee of C$400,000 (plus applicable taxes) over a 120-day term, which will be paid using the Company’s available working capital. This agreement may be terminated at any time, with mutual consent of both parties
The Machai Services will be rendered primarily online through a variety of news and investment community communications channels. Suneal Sandhu, the President of Machai – located at 101 – 17565 – 58 Avenue, Surrey, BC, V3S 4E3 – will be involved in conducting the Machai Services. Machai and Mr. Sandhu do not have any interest, directly or indirectly, in the Company or its securities, or any right or intent to acquire such an interest.
The terms and conditions of the Marketing Agreement remain subject to approval of the TSX Venture Exchange.
Qualified Person
Peter Webster, P. Geo., of Mercator Geological Services is a professional geologist registered with the Professional Engineers and Geoscientist of Newfoundland and Labrador, is an Independent Qualified Person as defined under National Instrument 43-101 and has reviewed and approved the technical information disclosed in this news release.
References:
Balakrishnan, T. (2013). Supplementary assessment report, national instrument 43-101 technical report, resource estimation of Sheps Lake and Perault Lake properties. Prepared for New Millenium Iron Corporation. Newfoundland and Labrador Mineral Lands Division Report, Assessment File 023J/0394.
Géostat, (2007). Technical Report, estimation of the mineral resources of the KeMag iron ore deposit. Énergies et resources naturelles Québecs, GM 64046.
Neal, HE., Watts, Griffis. (2001) Iron deposits of the labrador trough. Explore mining geol. Vol.9, No.2, pp 113-121, 2000.
Cyclone Metals and Vale sign joint development agreement
About Saga Metals Corp.
Saga Metals Corp. is a North American mining company focused on the exploration and discovery of a diversified suite of critical minerals that support the North American transition to supply security. The Radar Titanium Project comprises 24,175 hectares and entirely encloses the Dykes River intrusive complex, mapped at 160 km² on the surface near Cartwright, Labrador. Exploration to date, including a 2,200m drill program, has confirmed a large and mineralized layered mafic intrusion hosting vanadiferous titanomagnetite (VTM) with strong grades of titanium and vanadium.
The Double Mer Uranium Project, also in Labrador, covers 25,600 hectares and features uranium radiometrics that highlight an 18km east-west trend, with a confirmed 14km section producing samples as high as 0.428% U3O8. Uranium uranophane was identified in several areas of highest radiometric response (2024 Double Mer Technical Report).
Additionally, SAGA owns the Legacy Lithium Property in Quebec’s Eeyou Istchee James Bay region. This project, developed in partnership with Rio Tinto, has been expanded through the acquisition of the Amirault Lithium Project. Together, these properties cover 65,849 hectares and share significant geological continuity with other major players in the area, including Rio Tinto, Winsome Resources, Azimut Exploration, and Loyal Metals.
With a portfolio spanning key commodities critical to the clean energy future, SAGA is strategically positioned to play an essential role in critical mineral security.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Disclaimer This news release contains forward-looking statements within the meaning of applicable securities laws that are not historical facts. Forward-looking statements are often identified by terms such as ‘will’, ‘may’, ‘should’, ‘anticipates’, ‘expects’, ‘believes’, and similar expressions or the negative of these words or other comparable terminology. All statements other than statements of historical fact, included in this release are forward-looking statements that involve risks and uncertainties. In particular, this news release contains forward-looking information pertaining to the Company’s North Wind Project and other corporate initiatives, including market awareness contracts. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, changes in the state of equity and debt markets, fluctuations in commodity prices, delays in obtaining required regulatory or governmental approvals, environmental risks, limitations on insurance coverage, inherent risks and uncertainties involved in the mineral exploration and development industry, particularly given the early-stage nature of the Company’s assets, and the risks detailed in the Company’s continuous disclosure filings with securities regulations from time to time, available under its SEDAR+ profile at www.sedarplus.ca. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company will update or revise publicly any of the included forward-looking statements only as expressly required by applicable law.
Back on Inauguration Day, few in Washington would have believed that the highly publicized friendship between President Donald Trump and Elon Musk would implode before the year’s end.
No political partnership burned brighter or fizzled faster than Trump and Musk’s in 2025. What began as a joint crusade to cut federal spending through the newly minted Department of Government Efficiency quickly devolved into a public falling out that unfolded in a full-blown social media feud.
As 2025 comes to a close, here’s a look back at the biggest political breakup of the year.
October 2024 — First public appearance together
The 2024 presidential campaign was the driving force for the high-profile partnership that ensued.
After the first Trump assassination attempt at a rally in Butler, Pennsylvania, on July 13, 2024, Musk endorsed Trump in an X post. Musk went on to donate more than $200 million to Trump’s presidential campaign through his super PAC, America PAC.
While the two appeared together for a virtual town hall that August, the X owner and Tesla CEO made his first public appearance with Trump on Oct. 5, as the soon-to-be president returned to Butler three months after the shooting and one month before Election Day.
Musk was jumping for joy as he joined Trump on stage.
November 2024 — Musk appointed to lead DOGE
After Trump won the 2024 presidential election, Musk was appointed to lead the Department of Government Efficiency.
On stage in Mar-a-Lago in Palm Beach, Florida, after winning the election, Trump said of Musk, ‘A star is born!’
Two weeks after the election, Trump and his family attended the SpaceX ‘Starship’ launch with Musk.
January 2025 — Inauguration Day
Trump made DOGE official on Inauguration Day by signing an executive order to cut waste, fraud and abuse in the federal government with a mandate to modernize ‘Federal technology and software to maximize governmental efficiency and productivity.’
Musk joined fellow tech moguls Jeff Bezos, Tim Cook and Mark Zuckerberg for Trump’s inauguration.
Early 2025 — DOGE cleans house
As the Trump administration got settled, DOGE got to work pursuing Musk’s ambitious goal of cutting up to $2 trillion from the federal budget.
As of October 2025, DOGE has saved approximately $214 billion through a combination of asset sales, contract or lease cancellations, fraud and improper payment deletions, grant cancellations, interest savings, programmatic changes, regulatory savings and workforce reductions, according to the DOGE website.
When tens of thousands of federal workers were laid off, protests began erupting across the United States, rejecting Musk’s leadership and Trump’s sweeping, second-term agenda.
March 2025 — Trump buys a Tesla
Amid growing discontent directed at Musk and DOGE, Tesla stocks began seeing a drop earlier this year.
Meanwhile, Musk’s political involvement prompted push back from protesters. Tesla vehicles, charging stations and dealerships were targeted in a string of vandalism attacks.
In a show of support for Musk, Trump turned the White House South Lawn into a Tesla showroom and bought a red Tesla Model S.
‘He’s built this great company, and he shouldn’t be penalized, because he’s a patriot,’ Trump said.
May 2025 — Musk departs DOGE
By May, Musk began paring back his hours leading the controversial agency.
According to the Office of Government Ethics, ‘special government employees’ like Musk can work for the federal government no more than 130 days a year, which in Musk’s case was May 30.
On his last day at DOGE, Musk joined Trump in the Oval Office for a press conference celebrating the billionaire’s legacy.
June 2025 — Musk torches OBBB
Soon after Musk left the White House, Trump and Musk had their ‘big, beautiful’ breakup, fueled by congressional negotiations for Trump’s One Big Beautiful Bill Act.
‘I’m sorry, but I just can’t stand it anymore,’ Musk said in a post on June 3. ‘This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it.’
Trump’s megabill included tax cuts, green energy spending cuts and Medicaid reform, but fiscal conservatives, like Musk, argued it didn’t do enough to reduce the nation’s $38 trillion debt crisis.
Trump told reporters he was ‘very disappointed’ in Musk’s criticism of his marquee megabill.
‘Elon and I had a great relationship. I don’t know if we will anymore,’ Trump said.
Musk then fired back on X, arguing that, ‘Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate.’
The Tesla CEO urged Trump to ‘keep the EV/solar incentives cuts in the bill.’
After Musk fired off several posts on X, Trump started firing back on his own social media platform, writing on Truth Social that Musk was ‘wearing thin’ and claiming that he asked Musk to leave the White House.
‘I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!’ Trump said.
The president then threatened to ‘terminate Elon’s Government Subsidies and Contracts.’
Musk fired back with a ‘really big bomb,’ accusing Trump of being ‘in the Epstein files.’
‘This is an unfortunate episode from Elon, who is unhappy with the One Big Beautiful Bill because it does not include the policies he wanted. The President is focused on passing this historic piece of legislation and making our country great again,’ White House press secretary Karoline Leavitt said in response.
July 2025 — Fall-out fireworks
Congress narrowly passed Trump’s One Big Beautiful Bill Act by a self-imposed July 4 deadline.
Ahead of its final passage, Musk renewed his criticism of the reconciliation bill on social media.
In response, Trump threatened to use DOGE to investigate Musk’s government subsidies for his companies.
September 2025 — Brought together at Charlie Kirk’s memorial service
Months later, Trump and Musk reunited to honor the conservative activist Charlie Kirk, who was assassinated during a Turing Point USA event in Orem, Utah, on Sept. 10.
Trump and Musk were spotted shaking hands at Kirk’s memorial service in a box at State Farm Stadium in Glendale, Arizona.
‘For Charlie,’ Musk later responded to the photo on X.
October 2025 — Trump offers kind words
Aboard Air Force One on Oct. 27, Trump seemed to bury the hatchet when asked about Musk.
‘During Charlie’s beautiful tribute, Elon came over. It’s good with Elon. I like Elon. I have always liked Elon. Elon’s good,’ Trump said.
When asked if he had spoken to Musk since Kirk’s memorial, Trump said the two have spoken ‘on and off, a little bit, very little, nothing much.’
‘Look, he’s a nice guy, and he’s a very capable guy. I have always liked him. He had a bad spell. He had a bad period. He had a bad moment. Stupid moment in his life. Very stupid. I’m sure he’d tell you that, but I like Elon, and I suspect I will always like him,’ Trump added.
November 2025 — Musk back at the White House
On Nov. 18, Musk attended a White House dinner as Trump hosted Saudi Crown Prince Mohammed bin Salman.
December 2025 — Moving forward
The dust seemed to settle on Trump and Musk’s ‘big, beautiful’ breakup as 2025 came to a close.
FOX Business’ Edward Lawrence asked Trump during a cabinet meeting on Dec. 2 whether Musk was ‘back in [his] circle of friends’ after their falling-out.
‘Well, I really don’t know. I mean, I like Elon a lot,’ Trump responded.
Musk did not immediately respond to Fox News Digital’s comment request.
Fox News Digital’s Emma Colton contributed to this report.
As New York City Mayor-elect Zohran Mamdani prepares to take office, tax-happy progressive groups are eager to let you know that the idea that rich people move because of taxes is all a big myth. There are no consequences to raising taxes on rich people, they argue, because rich people will be rich no matter what.
It’s a pretty picture, and a convenient one for those who have never met anything economically productive that they didn’t want to tax. The only problem is that the data proves it just isn’t true.
The latest media blitz comes in response to Mamdani’s campaign proposals to raise the income tax rate for top earners in the city from 3.9 percent to 5.9 percent. That’s in addition to statewide rates, which currently run as high as 10.9 percent. That means that, under Mamdani’s proposal, the wealthiest Big Apple residents would face state and local income taxes as high as 16.8 percent, even before federal taxes.
But never fear, say progressive groups such as Patriotic Millionaires — Zohran can tax to his heart’s content without fear of millionaire tax flight. They attempt to fortify their claims with research by the Center for Budget and Policy Priorities and tax-happy academics who make points that are technically true, yet entirely miss the point.
For instance, Patriotic Millionaires cites data showing that the millionaire population in New York grew in the wake of recent tax increases on the wealthy at the state level. But of course it did — the population of millionaires is constantly growing across the country due to economic growth and inflation. The more important thing, as the New York-based Empire Center shows, is that New York’s share of the nationwide millionaire population has dropped precipitously in recent years, from 12.7 percent in 2010 to 8.7 percent in 2022.
Others point to a spike in sales in the New York City luxury real estate market to suggest that “there is no Mamdani effect.” But that actually is an indication of the ongoing exodus, not a rebuttal. The New York City housing market has such a severe shortage of housing that when some wealthy New Yorkers pack up and leave, it’s no surprise that remaining millionaires snap up those luxury properties quickly. It’s no coincidence that inquiries from New Yorkers to the Miami Beach Ritz-Carlton for beachfront penthouses worth $10 million or more nearly tripled in the wake of Mamdani’s election.
Looking at the impact of net migration, the highest-tax states lose big among the wealthy every year. In the most recent IRS data, New York lost the second-most wealthy residents (shocker: California lost the most). On the other hand, Florida gained the most new wealthy residents from other states, followed by Texas.
If pressed further, progressive tax advocates may fall back on another true yet ultimately irrelevant point: that specific tax increases, generally speaking, raise more money than they lose in tax flight. And, indeed, Zohran’s two-percent income tax surcharge would likely leave the city with more revenue in the short term. But the cost comes in the long term, and has been coming for spending-addicted cities and states for some time.
The National Taxpayers Union Foundation estimates that New York will have $3.8 billion less tax revenue to work with at both the state and local levels in 2025 because of out-migration. New York and New York City are losing that revenue year after year, shrinking the tax base and making future spending binges even harder to finance.
As the cash cows in the top income brackets leave for greener pastures, there are only two options for politicians who treat the idea of “reining in spending” as an odd foreign custom. One is to increase taxes further on the wealthier New Yorkers who are left, which only exacerbates the problem. The other is to start to shift more and more of that tax burden onto the middle class.
And guess what? A lot of those wealthy emigrants take their businesses — employers who provide jobs and pay a lot of tax revenue — with them. No state is losing firms to other states faster than New York.
Even long-time New York City staples are looking elsewhere, as Mamdani’s election has managed to accelerate the already exploding growth of the Dallas counterpart to Wall Street (affectionately known as “Y’all Street”). Big names such as Goldman Sachs and JPMorgan Chase continue to shift more and more of their operations to the Lone Star state, and Texas now boasts more jobs in the financial services sector than New York does.
Progressives should not stick their heads in the sand about the consequences of their policies. Many wealthy New Yorkers will choose to stay after yet another tax hike from Mayor Mamdani, and some of those will stay after the next tax hike as well. But with death by a thousand cuts, it’s the steady bleeding that kills you.
Well, 2025 has already come and gone. Hard to believe, isn’t it? It was not a great year for the US economy, but it was a very good year for The Daily Economy.
More than a million readers have enjoyed TheDailyEconomy.org since it spun off from AIER.org in 2024, where our headlines previously appeared. Visitors are greeted with the latest on economic ideas shaping everyday life in America: inflation, interest rates, government spending, monetary policy, and more. Along the way, we expanded our roster with 50 new contributors and contributing fellows, sharpened our editorial focus, and reached a broader audience than ever before.
We’d like to thank our many authors and you, our readers. And before 2025 is over, we’d like to leave you with a sampling of our most-read articles of 2025 (in no particular order).
1. How Congress Created the Doctor Shortage by Laura Williams
Laura Williams explores the artificial scarcity of doctors in the US, which drives up health care costs. Why, with demand rising and hospitals desperate for staff, are thousands of “perfectly qualified doctors-in-waiting” locked out of the system? What created this massive bottleneck of healing potential, which is expected to result in a shortage of at least 86,000 physicians by 2036?
The answer is depressingly simple and mind-bogglingly shortsighted: in 1995, Congress made it illegal to train more doctors.
2. How Germany Became the World’s Worst-Performing Economy by Mohamed Moutii
Mohamed Moutii breaks down how a one-time economic powerhouse slid into stagnation. Germany’s economy — once the engine of Europe — is now struggling with slow growth, high labor costs, and a bloated welfare burden that saps competitiveness.
“The welfare state as we know it today can no longer be financed by our economy,” declared Chancellor Friedrich Merz.
So what sank the German miracle? Mohamed traces the decline to policy choices that expanded welfare faster than wealth creation — and the political reluctance to confront these decisions.
3. Delistings Surge as Housing Market Teeters Toward Correction by Pete Earle
As the spring housing market should’ve been heating up, Pete Earle dug into a troubling shift: a rising tide of home delistings.
“Sellers are holding out, but buyers aren’t showing up,” Pete wrote. “The standoff signals a dramatic drop in prices might be closer than you think.”
What’s driving this stalemate between buyers and sellers? Pete traces the trend to a mix of stubborn price expectations, high borrowing costs, and broader economic strain. Even ten months later, this is a juicy read on where the housing market is swiftly heading.
4. Milei’s Economic Miracle: How Argentina Slashed Inflation to 1.5% by Emmanuel Rincon
Emmanuel Rincon breaks down Argentina’s “economic miracle”: how President Javier Milei dramatically brought inflation under control after years of runaway price increases. Under Milei’s free market reforms, monthly inflation fell to just 1.5 percent, the lowest in five years, after peaking at hyperinflation levels above 200 percent when he took office.
So how did he do it? Emmanuel points to sweeping spending cuts, fiscal discipline, deregulation, and ending monetary expansion — moves that slashed inflation, strengthened the peso, and even helped reduce poverty as prices stabilized. Don’t miss this story, which explores one of the most overlooked economic reversals in modern history.
5. DEI: Five Hallmarks of a Hustle by Paul Mueller
Paul Mueller takes aim at what he calls the biggest “hustle” in academia and corporate America: Diversity, Equity, and Inclusion programs that have expanded into costly bureaucracies with little to show for it. Paul says that while corporations and universities are publicly backing away from DEI, the underlying systems and incentives that support it are still deeply entrenched and expensive.
“Corporations and universities are distancing themselves from social virtue‑signaling,” he writes. “But behind new branding, the grift is alive and well.”
Paul documents how DEI initiatives became lucrative sinecures and consulting gigs siphoning money from students and taxpayers, while encouraging counterproductive attitudes and failing to address genuine abuses on campus.
6. There’s a New Sheriff at the Fed by Bryan Cutsinger
In June, Bryan Cutsinger highlighted a noticeable shift at the Federal Reserve, as Michelle Bowman stepped into her role as Vice Chair for Supervision.
So what’s actually changing at the Fed? Bryan examined Bowman’s first public speech for clues on how she plans to oversee banks and how her approach could reshape the Fed’s regulatory priorities.
7. The Economics of Divorce: A New Paper Examines the Harm to Children by Peter Jacobsen
Peter Jacobsen explores an important but often overlooked cost of family breakdown: the economic harm divorce can inflict on children. Drawing on new research, he shows that children from broken homes tend to face lower educational attainment, reduced lifetime earnings, and higher chances of poverty compared with those from intact families.
“These results shouldn’t be surprising. Parenting is a long-term, team project. Early in childhood, parents make plans and establish routines. These plans and routines lay the foundation for the rest of the child’s life. Like any joint project, whether in family, business, or politics, plans are made because the planning process adds value. Scrapping plans is akin to removing an essential part of the foundation.”
Fortunately, laying a positive new foundation is not impossible, Peter writes, but it can be difficult and costly. Read Peter’s analysis to learn more about the hidden economic costs of divorce, an under-discussed element of poverty and inequality.
8. How Did 108 Economists Predict Milei’s Results Exactly Wrong? by Jon Miltimore
In February, Jon Miltimore looked at (yet another) striking forecasting failure: before Argentina’s economic turnaround, a group of 108 economists predicted outcomes that ended up being almost the exact opposite of what actually happened under President Javier Milei’s policies.
“…we believe that these proposals, rooted in laissez-faire economics and involving contentious ideas like dollarization and significant reductions in government spending, are fraught with risks,” the economists warned.
Despite these dark predictions, Milei’s fiscal and monetary changes slashed inflation and grew the economy far beyond what experts expected. How did these 108 economists get things so wrong? Read Jon’s analysis to learn more.
9. Saudi Arabia Didn’t Learn Anything From China’s ‘Ghost Cities’ by Stefan Bartl
Saudi Arabia’s futuristic megaproject The Line — a state-driven, top-down attempt to engineer an ideal city — exemplifies how grand government planning fails to respond to real economic signals and human preferences.
Stefan Bartl explains how true urban success stems from voluntary economic activity, market forces, and individual incentives, not utopian design. As a bonus, Stefan reviews what Aristotle taught: a city requires three things — a citizenry, their economic means, and a shared concept of “the good life.” Without those, all you’ve got is empty buildings.
10. The Penny Problem Has a Third Option: Buy Them Back (With Interest) by Mike Munger
Mike Munger asked back in July why, instead of wastefully minting new coins at a loss, the government shouldn’t “offer to buy back existing pennies from the public at a small premium.” The minting has since been ended (the penny, like the dollar, has lost 97 percent of its purchasing power since 1913) but we could put many back into circulation if we wished to. Let individuals decide whether to turn in their coins — a pragmatic, voluntary solution.
11. Soros and USAID Have Been a Match Made in Hell by Matt Palumbo
Amid media controversy about cuts to the US Agency for International Development (USAID), Matt Palumbo argued the organization had strayed too far from its humanitarian mission. Instead, USAID had become a siphon to divert taxpayer money into politically driven, ideological projects rather than genuine economic development. He provided significant examples of USAID’s meddling around the globe, including attempts at outright regime change.
12. NIH: The $47-Billion Sacred Cow Is Scared by Walter Donway
If there’s nothing more permanent than a temporary government program, there’s nothing more predictable than special interests holding tight to their sources of funding. Walter Donway profiled some of the major institutions and leading laboratories that capture much of the National Institutes of Health’s $47 billion annual budget.
No surprise, the pattern of funding rewards prestige and politics, and neglects genuine innovation. One quoted scientist said, “The current NIH funding mechanism discourages innovative research and perpetuates a cycle where only established investigators receive grants.” That’s pretty backwards for anyone hoping to make real scientific progress.
13. $42 Billion Broadband Boondoggle Brought Internet to Zero Homes by Joel Griffith
Joel Griffith detailed the absurdity of the federal Broadband Equity, Access, and Deployment (BEAD) program, which spent $42 billion without actually connecting a single home to the internet.
“Even if we presume all the 24 million households currently without access will benefit from increased access and affordability, this comes to $1750 per household,” Joel pointed out.
Mandates and bureaucratic requirements deter private investment and distort incentives. Meanwhile, private markets have steadily expanded internet access and lowered prices without subsidies, including by expanding alternatives like satellite broadband.
14. BRICS 2025: Expansion, De-Dollarization, and the Shift Toward a Multipolar World by Pete Earle
Pete Earle has been among the foremost commentators on the trend toward de-dollarization, and on the rise of an alternative international currency.
Originally composed of Brazil, Russia, India, China, and South Africa, BRICS has since expanded to include ten countries. The bloc now accounts for a substantial portion of global GDP and represents over half of the world’s population. By expanding its membership, Pete writes, “BRICS is positioning itself as a more inclusive and powerful alternative to Western-led financial institutions.”
America’s economic bullying has motivated many global players to seek alternatives to trading in dollars, accelerating the geopolitical shift toward a multipolar world. But true prosperity arises from open competition and voluntary use of currency and financial systems — outcomes unlikely to be consistently achieved by political blocs engineered by governments, regardless of how many countries join.
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From all of us at The Daily Economy, we wish you a new year full of every good thing: health, happiness, cherished civil liberties, and sound ideas. We hope you’ll keep coming back for plenty of smart, readable economics in the year ahead.
LONDON, UNITED KINGDOM / ACCESS Newswire / December 30, 2025 / Empire Metals Limited (AIM:EEE)(OTCQX:EPMLF), the AIM-quoted and OTCQX-traded exploration and development company, is pleased to announce that it has entered into a conditional sale and purchase agreement for its 75% interest in the Eclipse Mining Lease (‘Eclipse ML’ or the ‘Project’), a non-core gold asset located near Kalgoorlie, Western Australia.
The agreement includes a three-month exclusivity and due diligence period, during which the proposed purchaser will complete technical and commercial due diligence on the Project.
Highlights
Conditional sale of Empire’s 75% interest in the Eclipse ML, a non-core gold asset
Purchaser is a reputable Western Australian mining services company operating in the Kalgoorlie region
Total consideration of A$750,000 cash for Empire’s interest, subject to successful completion of due diligence
Transaction supports Empire’s strategy to focus capital and resources on the Pitfield Titanium Project
Shaun Bunn, Managing Director, said: ‘This conditional sale represents a further step in our strategy to streamline the portfolio and focus management attention and capital on advancing the Pitfield Project. Eclipse is a non-core asset for Empire, and this transaction provides an opportunity to unlock value while reducing ongoing holding and resourcing costs. We look forward to progressing the due diligence phase with the purchaser.’
The Eclipse ML Project
The Eclipse ML is a small granted mining lease located near Kalgoorlie, Western Australia, which has historically been subject to gold exploration. As part of its broader portfolio rationalization strategy, Empire has been actively reviewing options to reduce exposure to non-core assets and is pleased to have entered into an exclusivity arrangement with the purchaser in respect of its interest in the Project.
Sale Terms
Key terms of the conditional sale agreement include:
The sale relates to Empire’s 75% interest in mining lease M27/153 (Eclipse ML)
The agreement includes a three-month exclusivity and due diligence period
During the exclusivity period, the purchaser may conduct a small RC drilling programme as part of its due diligence
Total consideration of A$750,000 for Empire’s 75% interest, comprising:
A$50,000 non-refundable cash deposit, payable within five days of execution of the agreement; and
A$700,000 cash payable on completion, following successful due diligence
Next Steps
The anticipated next steps are as follows:
The due diligence period last three months, to be conducted by the Purchaser.
A Program of Works has been submitted to the Department of Mines, Petroleum and Exploration (DMPE) to support a small drill campaign, to be funded by the Purchaser
Subject to a successful due diligence period, settlement is expected to occur in early April.
Empire continues to review options for other non-core assets, consistent with its strategy to accelerate development activities at the Pitfield Project.
**ENDS**
For further information please visit www.empiremetals.co.uk or contact:
Empire Metals Ltd (AIM:EEE)(OTCQX:EPMLF) is an exploration and resource development company focused on the commercialization of the Pitfield Titanium Project, located in Western Australia. The titanium discovery at Pitfield is of unprecedented scale and hosts one of the largest and highest-grade titanium resources reported globally, with a Mineral Resource Estimate (MRE) totalling 2.2 billion tonnes grading 5.1% TiO₂ for 113 million tonnes of contained TiO₂.
Titanium mineralisation at Pitfield occurs from surface and displays exceptional grade continuity along strike and down dip. The MRE extends across just 20% of the known mineralised footprint, providing substantial potential for further resource expansion.
Conventional processing has already produced a high-purity product grading 99.25% TiO₂, suitable for titanium sponge metal or pigment feedstock. With excellent logistics and established infrastructure, Pitfield is strategically positioned to supply the growing global demand for titanium and other critical minerals.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
SOURCE: Empire Metals Limited
View the original press release on ACCESS Newswire
