Washington has a habit of changing its budget goals — not because the country solved the spending-driven debt problem, but because each goal proved harder than lawmakers were willing to confront.
I remember working on fiscal policy in 2011, when lawmakers still talked about balancing the budget. It was an intuitive target. If the government only spent what it collected in revenues, the debt problem would eventually disappear.
Simple in theory. Difficult to achieve in practice.
So the focus shifted to stabilizing the debt. When debt began approaching 100 percent of GDP in 2020 — as spending kept climbing and interest costs began growing steeply — balancing the budget looked increasingly unattainable.
Republicans kept up appearances for a while longer, inflating economic growth expectations in their budget plans to make up for a lack of fiscal restraint. If you can’t balance the budget honestly, maybe you can fake it? At least they tried to make the numbers work, albeit by invoking fiscal fantasies.
Now there is a new goalpost: limiting deficits to three percent of GDP. As House Budget Committee Chairman Jody Arrington (R-TX) recently stated on CNBC’s Squawk Box, following a congressional hearing to discuss the new target:
We’ve been looking at 10-year balanced budgets for decades. And we haven’t had a balanced budget in a quarter of a century. Today, if we’re going to balance in 10 years — that’s $18 trillion. We’d have to do what we did in the Big Beautiful Bill every year for 10 years.
So, I think any successful endeavor starts with defining success and setting achievable — ambitious — but achievable goals.
And in this case, we’re talking about reframing where we take our crisis level annual deficits per economic output, which is about six percent of GDP, and put it on a glide slope down to three percent — here we’re growing the economy faster than our rate of deficit spending and inflation. That should put us on a better trajectory, a more sustainable one. And then, we can take it from there on a more ideal path to balance.
Arrington is right that setting an achievable goal matters. We should also be clear about what this new goal represents.
A deficit-to-GDP target is no more — or less — arbitrary than any other fiscal benchmark short of balance. There is nothing inherently magical about three percent. It is not a law of economics. It is a political and analytical compromise.
For years, New Keynesian economists have argued that governments do not need to balance their budgets, only to keep deficits at a level consistent with a stable, or even slowly rising, debt burden, so long as the interest rate on public debt remains below the economic growth rate. This politically convenient argument was lauded in academic and government circles. How swell to have cover to continue growing the debt burden on younger generations because “the economists” said it was OK to do so.
But “sustainable” was never meant to suggest “unlimited.”
In that sense, the three percent target may be more honest than what came before. It acknowledges that the United States is not on a path to balance anytime soon and sets a minimum condition for avoiding further deterioration.
This is important if we can finally achieve bipartisan recognition that current deficits — growing from six percent of GDP to nine percent annually over the next few decades — are unsustainable. As discussed in the recent House Budget Committee hearing, reducing deficits to three percent of GDP would roughly stabilize the debt at today’s already elevated levels. It could stop the debt from growing even bigger as a share of the economy. That’s critical.
And yet even this goal demands far more political will than Congress has demonstrated. The scale of the adjustment is significant. Bringing deficits down to three percent of GDP would require roughly $10 trillion in deficit reduction over the next decade.
That is the real test. Can Congress agree on a target and make the necessary fiscal adjustments to achieve it?
Because the urgency to rein in the growth of US debt is no longer abstract. The United States has now been downgraded by all three major credit rating agencies. Interest costs are rising rapidly and already rival spending on national defense. Looking ahead, the federal government’s largest obligations — Social Security, Medicare, Medicaid, and interest on the debt — are projected to consume all federal revenues within little more than a decade. At that point, every other government function — from national defense to infrastructure to basic operations — would have to be financed with borrowed money.
Something has to give. And that is where Congress consistently falls short.
Most federal spending operates on autopilot. Mandatory programs — primarily Social Security, Medicare, and Medicaid — make up the bulk of the budget and are rarely revisited in any comprehensive way. Lawmakers barely even debate discretionary spending anymore, and Republicans have increasingly turned to mandatory spending to fund portions of defense and immigration enforcement.
Following the deficit-increasing One Big Beautiful Bill Act from July 2025, Congress is again considering budget reconciliation — this time in part to finance additional military spending related to the conflict with Iran and to circumvent Democratic opposition to funding ICE.
Reconciliation could provide an opportunity to enact broader fiscal reforms, including reducing spending on major entitlement programs. The growth in Medicaid and food stamp spending, for example, was slowed in the latest reconciliation bill, in part framed as an effort to reduce waste, fraud, and abuse. Those are legitimate concerns. Yet even eliminating fraud would not come close to arresting the growth in spending and debt.
Without significant changes to health care programs and Social Security — the largest drivers of rising government debt — the pattern will repeat. Congress will announce targets, defer them, and eventually replace them.
Congress does not lack warnings. Interest costs are rising, debt is growing faster than the economy, and fiscal space is shrinking. The question is whether lawmakers will treat the three percent target as a turning point — or as the next step in lowering expectations.
Adam Smith (1723-1790) is widely considered to be the father of modern economics. There were precursors, such as the School of Salamanca and the French Physiocrats, but Adam Smith’s 1776 magnum opus, An Inquiry Into the Nature and Causes of the Wealth of Nations, was the first comprehensive treatise.
In this 250th anniversary year, much ink will be spilled – and with good reason – celebrating the legacy of Adam Smith. My purpose here is as joyous as it is modest: to share ten quotations that are particularly relevant today, and demonstrate Adam Smith’s enduring influence. I like to weave them into my lectures – on markets, on political economy, on constitutional economics, or on the moral foundations of capitalism. Adam Smith, in the versatility of his writings, was indeed a man for all seasons.
1. The Invisible Hand Acts
[B]y directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
Perhaps the single best-known concept from Adam Smith, the invisible hand was famously picked up by the Austrian school of economics and its key lesson of spontaneous order. FA Hayek, especially, noted the importance of phenomena that were “the result of human action, but not of human design.” Alas, interventionists of all stripes still think they can supersede the invisible hand of the market.
2. People Are Not Pawns
The flip side of the invisible hand involves social and economic engineering. Adam Smith was prescient in describing the psychology of social engineers, those self-proclaimed experts who believe, in their hubris, that they can run an entire economy.
The man of system…is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.
3. Collective Action Can’t Be Imposed
The “man of system” quotation is long enough that it bears cutting in two. In the second part, Smith laments the unintended consequences of social engineering. If the policymaker is cautious and respects both human nature and local knowledge, the results can be a marginal improvement over the status quo (this is the basis of Buchanan and Tullock’s theory of collective action through the state).
“If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.”
4. Markets Coordinate Effort
Adam Smith’s key theoretical contribution is the division of labor. But this is not merely an economic model, to be calculated with production charts by eager students of microeconomics. For Smith, it is something more, an instrument of cooperation to overcome the limitations of human beings:
This division of labor, from which so many advantages are derived, is not originally the effect of any human wisdom… It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature…, the propensity to truck, barter, and exchange one thing for another.
The division of labor solves a social problem:
It is thus that man, who can subsist only in society, was fitted by nature to that situation for which he was made. All the members of human society stand in need of each others’ assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from love, from gratitude, from friendship, and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bands of love and affection, and are, as it were, drawn to one common centre of mutual good offices.
But though the necessary assistance should not be afforded from such generous and disinterested motives, though among the different members of the society there should be no mutual love and affection, the society, though less happy and agreeable, will not necessarily be dissolved. Society may subsist among different men, as among different merchants, from a sense of its utility, without any mutual love or affection; and though no man in it should owe any obligation, or be bound in gratitude to any other, it may still be upheld by a mercenary exchange of good offices according to an agreed valuation.
5. Self-Interest Actually Helps Everyone
Smith was excited about the potential for markets to align incentives. In another famous quip, he reminded us that markets transform private interest into public harmony:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
In more recent terms, we are reminded of Deirdre McCloskey and Art Carden (both fellows of AIER). The title of their book speaks for itself: Leave Me Alone, and I’ll Make You Rich: How the Bourgeois Deal Enriched the World.
6. Permissionless Societies Creates Prosperity
The bourgeois deal has alternately been described in Physiocrat ARJ Turgot’s plea: “laissez-faire, laissez-passer” (let us act, let us pass). Ever the professor of moral sentiments (and not just the founder of modern economics), Smith was quick to show that the bourgeois deal was instrumentally good, indeed – but it was also the grounding for a free society: “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way.”
7. Cooperation Connects Us
Smith’s first major work, The Theory of Moral Sentiments (1759), predated The Wealth of Nations by almost two decades. While demonstrating how markets advance the public good by appealing to and channeling private interests, Smith made it clear that human beings are fundamentally creatures of cooperation:
How selfish ‘soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.
8. Individual Responsibility… With Limits
While emphasizing the importance of individual responsibility, Smith was also realistic about the limitations of what human beings could do. He warned:
The administration of the great system of the universe… is the business of God and not of man. To man is allotted a much humbler department, but one much more suitable to the weakness of his powers, and to the narrowness of his comprehension; the care of his own happiness, of that of his family, his friends, his country: that he is occupied in contemplating the more sublime, can never be an excuse for his neglecting the more humble department.
In a similar spirit, Ludwig von Mises explained in his 1927 book, Liberalism: “[classical] liberalism limits its concern entirely and exclusively to earthly life and earthly endeavor. The kingdom of religion, on the other hand, is not of this world. Thus, liberalism and religion could both exist side by side without their spheres’ touching.” Smith, Mises, and the classical liberal tradition stand as a foil against the busybodies – on the right and on the left – who would attempt to administer the universe through temporal means.
9. Collusion Threatens Competition
If Smith was worried about the political “man of systems”, he was also worried about business colluding against the consumer, instead of serving the market through competition. “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…”
Smith cautioned us, however, against state efforts to prevent industry collusion: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice… ” But he did offer a solution, in the form of more free trade, and fewer regulations to discourage competition: “But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”
10. Institutions Drive Economic Growth
I am an institutional economist. I first came to economics from a preoccupation with economic development and ending (or at least abating) poverty. With economist Robert Lucas (if not with the same success), I am obsessed with such questions. When observing that some countries are rich and others poor, and that some grow slowly and others quickly, he commented: “I do not see how one can look at figures like these without seeing them as representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia’s or Egypt’s? If so, what, exactly? If not, what is it about the “nature of India” that makes it so? The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.”
International development is infuriating, for two reasons. First, it has been a massive failure – well, international aid has been a massive and expensive failure; behind the futile efforts of the men and women of systems, markets have been plugging along, and poverty has fallen radically in the past 200 years. Second, because the recipe for growth is so obvious. It works every time it’s applied, from the US and Western Europe in the early 1800s to China after Mao’s death and India after the end of the licensing raj, and to every country that embraced globalization and market reforms. It’s the recipe that Smith offered as early as 1755, twenty years before The Wealth of Nations, and well before the Enlightenment ideals were translated into economic policy: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice, […the] rest being brought about by the natural course of things.” (This quotation is thought to come from a transcript of a 1755 Adam Smith lecture, from Dugald Stewart’s lecture notes.)
In more modern language, peace is obvious, as is low and transparent taxation. A “tolerable administration of justice” might be translated as rule of law. Taken together, we have economic freedom, which is closely correlated with growth and wealth. Instead of fancy macroeconomic policies, imposed from the top down by the men and women of systems, the New Development Economics proposes a radical and simple solution. Focus on microeconomics, institutions, incentives, and the transmission of knowledge in the Austrian tradition.
Smith warned us what happens when the basic conditions for economic growth are ignored by conceited policymakers and politicians: “All governments which thwart this natural course, which force things into another channel, or which endeavor to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”
Tyranny is the midwife of poverty; liberty, of prosperity.
As a college student with little understanding of how money works, Caleb Hammer racked up thousands in credit card debt, an outsized car note, and private student loans. That’s when he discovered the previous generation of financial advice personalities: Dave Ramsey, Graham Stephan, and Robert Kiyosaki, author of Rich Dad, Poor Dad. He absorbed their lessons, stabilized his spending, accelerated his earnings, and dug himself out of debt.
“Now my mission is to have the conversations that I wish someone had with me over a decade ago,” he says of his YouTube channel, where more than 500 applicants have now submitted their spending situations to his tough-love, line-by-line audit.
Hammer’s social media rise has been meteoric: his top-ten-ranked YouTube series, Financial Audit, has collected billions of views, and its most watchable moments are repackaged for Facebook, Twitter, and TikTok. The message of fiscal discipline and personal responsibility seems to be reaching new audiences. The YouTube channel has three million subscribers and now offers premium subscriptions, a user community, and branded budgeting software.
Hammer’s success demonstrates demand for financial accountability and education, and provides vivid examples of how personal choices create needless financial crises. His content capitalizes on internet discourse and the economy of attention, using moral outrage and entertainment value to present lessons that Americans desperately need.
Hammer deliberately leans into controversy and games the attention algorithm by getting special permission from his guests to create unflattering thumbnails that call them “moron,” “loser,” and “liar.”
It’s a considerably spicier format than those of Dave Ramsey and Suze Orman, who emphasized conservative social values along with financial responsibility. While Hammer condemns “BS purchases” and living beyond one’s means, he doesn’t specifically suggest how people ought to conduct themselves beyond their financial choices. Still, guests submitting all their financial statements provide plenty of opportunity for Caleb’s vivid criticisms: “You are behind on your mortgage and you DoorDashed Wendy’s? You creature.”
The episode content can be explosive. Married couples learn about each other’s debts and spending habits for the first time. Gamers spending the rent money on digital goods get a serious setting straight, as do Disney-obsessed parents spending their kids’ college funds and ex-sugar-babies trapped in cycles of payday borrowing. Viewers get vivid warnings against traps like sports betting and compulsive shopping, but also of bad debt, insidious “pay in four” installment plans, and predatory car loans.
For Hammer’s guests, the results are undeniable. As an incentive to submit to this ritual humiliation, they receive financial counseling, mental health care where appropriate, free access to his budgeting and investing software, and a handcrafted budget designed to get them out of debt and onto firm financial ground. They also get a huge helping of accountability on a very public stage (the faint of heart ought not wander into the comments section) after signing the show’s many disclaimers, waivers, and consent agreements.
Of the self-selecting applicants who appeared on Hammer’s Financial Audit program in 2024, “the average guest had paid off $22,807 of debt in 12 months [after the audit], and the median had paid off $12,000 in 8 months.”
When Private Choices Have Public Consequences
While growing his audience and creating his central messages of personal finance, Hammer hasn’t revealed much about his personal politics. But combing through the spending habits of struggling citizens reveals uncomfortable truths about modern poverty: self-defeating behavior often plays a role. His content consistently emphasizes how individual financial decisions ripple outward, affecting not just the spender but also lenders, family members, and, at times, taxpayers.
Particularly, Hammer articulates how the fungibility of money results in taxpayers footing the bill for bad decisions (not to mention family and friends who lend to or rely on the irresponsible interviewees). Of one resident of a rent-stabilized apartment who spent frivolously elsewhere, he groaned, “Great. Thanks, City of Seattle, everyone’s rents went up endlessly to subsidize her Hawaiian vacation.” The comment is partly rhetorical flourish, but it reflects a broader theme of the show: financial irresponsibility rarely exists in isolation.
Of one guest’s refusal to get a better job, he wailed, “She is holding back our civilization! Our GDP would be double if we didn’t have these types of people.” When the guest pushed back, arguing that her reckless spending stimulates the economy and contributes to GDP, he slumped onto the desk, whimpering, “No, you’re right, we do need morons like you to go spend more than they have.”
The show has a general appeal to schadenfreude or morbid fascination, but his guests aren’t total outliers. Financial insecurity becomes a way of life for many, and we end up publicly subsidizing that situation in cases where we should not.
Access to Information ≠ Behavior Change
What makes Hammer’s success notable is not just the spectacle, but the substance. He is delivering a form of basic financial education — budgeting, delayed gratification, the mechanics of compounding — that isn’t taught systematically in schools. While some educators resist attempts to replace traditional economics courses with personal finance, Hammer’s content suggests the broad social value of starting with everyday, individual incentives.
The basic principles of personal finance function less like technical knowledge and more like civic virtues: defer gratification, differentiate between wants and needs, spend less than you earn, and pay back what you borrow.
A layer of added complexity, still readily accessible in plain language, reveals how compounding works (for you or against you), and how to avoid accumulating debts and account fees that sap away your savings. Hammer repeatedly emphasizes the time element of savings and investing: his median guest has already lost at least a decade of potential compounding, which can shrink potential retirement income by half.
Guests don’t end up on Hammer’s Financial Audit after making good money decisions. That wouldn’t fulfill his format. But for those who don’t have to undo years of damage, many other YouTube channels offer endless, free advice, from financial fundamentals to advanced insights for experienced investors.
The abundance of information has exposed a deeper problem. Anyone with an internet connection can access high-quality financial advice suitable to their situation. The harder challenge is behavioral — helping people recognize good advice and, more importantly, act on it.
Hammer’s format, equal parts education, confrontation, and entertainment, appears to bridge that gap.
“People come in for the tea,” he says, using the Gen Z shorthand for gossip. “They exit with the finances.”
His rapid rise suggests the future of financial literacy will depend as much on engagement and emotion as on information.
That’s what Secretary Hegseth may be wondering, given Anthropic’s refusal to grant the US military autonomy over its Claude model — a stance that makes the company an abject outlier in Silicon Valley. Many tech firms are eagerly building alliances and selling services to the federal government. Government contracts are booming, and patriotism is the new subscription software service.
Elon’s leadership of the Department of Government Efficiency (DOGE) is the highest profile example of bringing tech talent into the government. Although DOGE overpromised a trillion dollars of cuts and underdelivered, it still helped reduce the size of the federal workforce and pared back egregious waste at the State Department. Elon has also played a role in geopolitics by offering Starlink services to Ukrainian military forces and putting a hundred or so US government satellites into orbit via SpaceX.
But Silicon Valley’s realignment behind American interests extends well beyond Elon’s network of companies. Anduril, a major tech defense firm founded by Palmer Luckey, is supplying the US military with relatively cheap next-gen hardware and software. And the meteoric rise of Palantir, headed by Alex Karp, has been revolutionizing government intelligence and law-enforcement operations.
President Trump has aggressively courted the CEOs of Silicon Valley — and not without reason. These are the titans of the US economy managing companies worth trillions of dollars and employing millions of people. They are also on the cutting edge of technological innovation and, therefore, driving the process of creative destruction. And some key tech leaders were instrumental in helping Trump win the 2024 presidential election.
Elon Musk was the most visible and well-known tech CEO campaigning for Trump, but a large number of others, from Peter Thiel to Joe Lonsdale to Larry Ellison, and many more — pejoratively called the “tech bros” — also threw their support behind Trump. Huge swaths of the crypto community backed Trump because he promised clear, fair regulation for their industry.
This support for Trump from the tech and crypto industries represents a remarkable departure from the political status quo in Silicon Valley. San Francisco, Berkeley, and tech companies have long been bastions of Democratic and Progressive ideology. And to be fair, they remain deeply blue. The “vibe shift” or realignment towards the political right has mostly been limited to corporate executives, founders, and venture capitalists. The employees of Amazon, Apple, Meta, Alphabet, and dozens of other big tech companies remain committed to Progressive ideology by roughly a 3:1 margin.
Tech executives have moved towards the political right for two reasons: energy and self-preservation. The explosion of AI has changed the technology game and ended the era of ‘pure’ software. Silicon Valley can no longer remain insulated in the world of bits; its advancement now depends entirely on the world of atoms. More than at any time in its existence, Silicon Valley needs a physical presence to advance.
Beyond insatiable energy needs, the shift into hardware — rocketry, EVs, and autonomous drones — has forced tech companies into the same regulatory thicket that entangles the rest of the industrial economy. They must confront all the red tape created by government bureaucrats, but strongly lobbied for and supported by the political left.
Why would Google or Microsoft have cared about restrictions on nuclear power or fossil fuel utilization in the 2000s? Why would they be concerned about the EPA and other regulatory agencies choking off the development of new mines or the production of refined rare earth minerals? Their business was driven by coding and by programmers. They were only constrained by their access to talent, their customer base, and their ingenuity.
Fast-forward to the early 2020s, and the world has shifted in important ways. The push for electrification and the development of the solar panel industry has revealed the importance of the world of atoms. Silicon Valley cannot program its way to electric vehicles, solar panel production and distribution, or advanced batteries. They need inputs and refining know-how that are in rare supply in the US due to decades of tightening bureaucratic regulations.
Then there is the issue of artificial intelligence (LLMs) revolutionizing the technological infrastructure. AI represents a major advance in computing. But building and operating these models requires advanced semiconductor technology, large outputs of these advanced semiconductors, and most importantly, electricity to power these semiconductors in data centers. And so the tech companies that have inhabited the world of bits for decades have rediscovered that they depend on silicon. And they also depend on the electrons powering that silicon.
Which brings us back to the issue of realignment. Silicon Valley companies have discovered that they need inordinate amounts of electricity to drive their technology forward. But they have a problem: many politicians and regulators have been warring against energy development for decades in the name of protecting the planet. The US electric grid is old and relatively inefficient. Most legacy utility companies have tied their own hands at the demand of climate crusaders — retiring coal and gas power plants or, in the case of Germany, shuttering nuclear power plants.
Most of the data centers that tech companies want to build cannot tap the existing electrical grid without raising retail electricity rates or straining current power supplies. They also cannot rely solely — or even primarily — on wind or solar power, because these sources are intermittent and battery storage remains prohibitively expensive. Yet politically, wind and solar were treated as the only acceptable options under the Biden administration and in deep-blue states like California. The Trump administration and Republicans offered a necessary corrective, promoting all forms of energy development and advancing a policy of energy abundance.
Silicon Valley’s rightward shift has another cause: self-preservation. The Democratic Party has lurched dramatically left over the past twenty years. In the 1990s and 2000s, blue states like California would tax businesses and the wealthy more heavily than red states, but they weren’t seeking aggressive confiscation and redistribution of wealth. Now they are. The success of Democratic-Socialists in New York City and in Seattle, as well as the proposal to tax people’s wealth, not just their income, are symptomatic of Democrats’ leftward shift.
Perhaps more alarming is the perceived authoritarianism of the left, which began with pandemic-era lockdowns and has since evolved into aggressive enforcement of speech codes and militant identity politics. Rebellion and protest began erupting within tech companies. This political and cultural shift has sent a message to tech executives loud and clear.
Rather than simply bearing higher taxes to support broader welfare programs, and otherwise being respected or at least ignored, wealthy founders and venture capitalists have discovered that they are hated by left-leaning constituencies. The reaction to Elon and DOGE is instructive.
People were so outraged by him and his politics that they vandalized Teslas and firebombed dealerships. The open hostility in rhetoric towards wealth, success, and productivity caused leaders in Silicon Valley to reassess the political landscape — resulting in significant political migration to the Republican Party and physical migration to red states.
This realignment is still in its early stages. Whether this shift is transitory remains to be seen. But at the very least, being a Republican is no longer a mark of shame among the leaders of Silicon Valley, though it may still be among the rank and file. We are also in the early stages of the physical realignment caused by confiscatory tax proposals in California and other states, labyrinthine bureaucratic regulation, and general hostility to entrepreneurship and business. California alone has seen several billionaires relocate in the past few months, including the founders of Google and Meta.
Nothing guarantees Silicon Valley and San Francisco will remain the center of the tech world. In fact, if history is any indication, industrial and creative centers often change locations — just ask anyone living in Detroit or Chicago in the mid-twentieth century, or in Scranton, Pennsylvania, in the late nineteenth century. This might be a bit premature, but we are heading for a Silicon Rust Belt on the West Coast replaced by Silicon Prairie or Silicon Hills. If that materializes, it won’t be because of trade policy or unfettered capitalism. It will be because of political and regulatory failure.
It was a brutal winter in New England. Many mornings, I got out of bed to fire up our snowblower and tackle the latest round of snow. When the wind was blowing, I often got snow blasted right back in my face.
I could have fought reality, but instead I came to see—as the burnt-toast theory suggests—that inconveniences (like burnt toast) can lead to positive outcomes.
While snowblowing, I don’t have to wait too long for positive opportunities to crop up. As I settle into a rhythm, my mind stills, and ideas often arise for the essay I’m writing. Morning exercise takes the form of snow removal. If you enjoy skiing, or, as my wife and I do, getting out in the woods on snowshoes, the cold, snowy winter offered other advantages, too.
Although the burnt toast theory originally appeared on TikTok, it does have a resemblance to the butterfly effect in chaos theory—the idea that small changes can produce large effects. And it certainly reminds us of the ancient Taoist parable of “The Old Man Lost His Horse,” in which the initial event of a poor farmer losing his horse brings perhaps good tidings.
The qualifier “perhaps” is important because the “everything happens for a reason” rendition of the “burnt toast” theory can seem hollow in the face of inevitable human tragedy. The Taoist farmer is wise enough to know that he doesn’t know what may be right around the corner.
Psychologists such as Dr. Brianne Markley and Dr. Alexandra Stratyner note that the burnt toast theory encourages “reframing,” which helps individuals view minor setbacks not as failures but as protective or redirecting events. This shifts our mindset from frustration to curiosity and acceptance, thereby increasing our resilience.
By recognizing that we cannot control every outcome, we ease the anxiety of micromanaging our lives. The upside is learning equanimity in life’s circumstances, from ordinary annoyances to major disruptions, something the Stoic philosophers practiced two thousand years ago.
The Stoics
You may have thought the Stoics were above being impacted by burnt toast. On the contrary, they practiced their philosophy on small events so they would be better equipped to handle major life events.
Upon waking, Marcus Aurelius told himself, “Today I am going to meet a busybody, an ingrate, a bully, a liar, a schemer, and a boor.” (Meditations, 2.1)
The Philosopher King was not complaining. This was another chance to put his philosophy into practice. He reminded himself that his daily work was to change his mindset about the “wrongdoers”: “I know that these wrongdoers are by nature my brothers, not by blood or breeding, but by being similarly endowed with reason and sharing in the divine.” Marcus didn’t avoid taking necessary action in the world, even while he recognized his common humanity with “wrongdoers.”
He continually admonished himself to be a better practitioner: “Strive to be the man your training in philosophy prepared you to be… Stop all this theorizing about what a good man should be. Be it!” (Meditations, 6.30 and 10.16)
Do you think it would be easier if life didn’t serve up burnt toast? You are not alone. Marcus wrote, “Everyone dreams of the perfect vacation—in the country, by the sea, or in the mountains. You, too, long to get away and find that idyllic spot.” (Meditations, 4.3)
“How foolish you are,” Marcus observed, since “at any time you are capable of finding that perfect vacation in yourself.”
This is what Stoic philosophy trains us to do. It teaches us to live by our values and purpose, and to furnish our minds so that even “the briefest inward glance brings peace and ease.”
This is the goal, even when life delivers us pain, injustice, and daily struggles.
‘A Veritable Fortress’
In essence, the burnt toast theory serves as a modern proxy for the Stoic recognition that our distress stems not from the event itself, but from our judgment of the event. “Free from passions, the mind is a veritable fortress,” Marcus reminded himself. (Meditations, 8.48)
French philosopher Pierre Hadot called Marcus’s fortress an “inner citadel.” “Burnt toast” — a metaphor for the setbacks we encounter in our daily lives—can be the catalyst for finding this inner strength, leading to less focus on external outcomes and more control over our own reactions. Some contend that burnt toast thinking could lead to a lack of responsibility, but Stoicism is the antidote to this fear.
Born into slavery, Epictetus became one of the most celebrated Stoic philosophers. He asked himself, “How much longer will you delay before you think yourself worthy of what is best, and transgress in nothing the distinctions that reason imposes?” (Handbook, 51.1)
He chided himself, asking, “Are you still waiting for more theory before you practice what you preach? What kind of teacher, then, are you still waiting for, that you should delay any effort to reform yourself until he appears?” Epictetus makes it clear that our delay is a failure to realize our potential.
The challenges of life, big and small, Epictetus argued, are our personal Olympic events:
If you come up against anything that requires an effort, or is pleasant, or is glorious or inglorious, remember that this is the time of the contest, that the Olympic Games have now arrived, and that there is no possibility of further delay, and that it depends on a single day and single action whether progress is to be lost or secured. (Handbook, 51.1.2)
The Stoics constantly urged us to build robust habits by putting our values into practice every single day. Their advice is timeless because they didn’t tell us to think only positive thoughts, which is impossible. Instead, we are to focus on training for our personal Olympics as we respond to our burnt toast.
Putting a practical philosophy into practice is not an easy path through life. Seneca, in his Letters on Ethics, emphasizes that virtue is a good you must commit to immediately. In letter #37, he wrote, “There is no better way of binding yourself to excellence of mind than the promise you have given, the oath of enlistment you have sworn: to be an excellent man.”
Seneca added, “Only as a joke will anyone tell you that this is a soft and easy branch of service.”
Epictetus stressed the power of building good habits through action: “Every habit and capacity is supported and strengthened by the corresponding actions.” (Discourses, 2.18.1)
It should be obvious, for example, “If you want to be a good reader, read; if a good writer, write.”
On the other hand, “if you lie in bed for ten days, and then get up and try to walk a fair distance, you’ll see how weak your legs are.”
Here is the lesson: We become what we do.
Epictetus demolished the “I’ll do better tomorrow” excuse. He instructed, “When you lose your temper, you should recognize not only that something bad has happened at present, but also that you’ve reinforced the habit, and you have, so to speak, added fresh fuel to the fire.” (Discourses, 2.18.5)
The lesson: “If it would be good for you to pay attention tomorrow, how much better it would be to do so today, so that you may be able to achieve the same tomorrow also, and not put it off once again until the following day.” Today — not tomorrow — is your Olympic event. (Discourses, 4.12.21)
When you let your emotional horses out of the barn, you won’t easily call them back. Epictetus warns, “Don’t you realize that when you’ve let your mind roam free, it is no longer in your power to call it back, either to decorum, or to self-respect, or to good order?” (Discourses, 4.12.6)
Watch your mind and notice that a twinge of annoyance can escalate into full-blown fury if left unchecked. Learn for yourself how timeless Epictetus’s advice remains.
Every few years, political leaders promote sporting mega-events such as the Olympic Games and the FIFA World Cup as engines of economic growth, promising tourism booms, job creation, and infrastructure development. That same narrative is now playing out in the United States, as it prepares to host the 2026 FIFA World Cup and the 2028 Olympic Games in Los Angeles — both presented as major economic opportunities.
Yet decades of evidence tell a different story. Studies and past experience show that these events rarely deliver the promised windfalls, often resulting instead in cost overruns, heavy public spending, and infrastructure that struggles to justify its cost long after the event ends. While international organizers capture much of the global revenue, the financial burden of hosting is largely borne by local taxpayers.
The Illusion of Economic Windfalls
The economic case for hosting mega-events relies heavily on impact studies predicting large multiplier effects. Organizers argue that visitor spending will ripple through the local economy, boosting tourism, creating jobs, and generating lasting growth. In practice, however, these projections rarely materialize.
Since 1960, every Olympic Games has gone over its initial budget — a pattern revealing a systemic underestimation of costs. A University of Oxford study found that all 23 host cities examined exceeded their budgets, with Rio and Tokyo experiencing significant overruns of 352 percent and 128 percent, respectively. Thirteen cities faced cost overruns exceeding 100 percent of planned spending.
These overruns are worsened by poor financial returns. The London 2012 Games cost about $14.6 billion but brought in only $5.2 billion; Beijing 2008 cost roughly $42 billion while earning just $3.6 billion; and Tokyo 2020 about $13 billion in costs generated just $5.8 billion. As economists Robert Baade and Victor Matheson have shown, Olympic benefits are consistently overstated while costs are systematically underestimated.
The World Cup follows a similar pattern. FIFA regularly promotes large economic gains — projecting roughly $40 billion in impact for the 2026 tournament in North America — but historical results suggest otherwise. Twelve of the last 14 World Cups since 1966 have resulted in financial losses for host countries.
Recent tournaments highlight the gap between costs and returns. Brazil spent $15 billion to host the 2014 tournament, yet it generated only about $3 billion from visitor spending. Russia invested over $11 billion for the 2018 World Cup, but visitor spending reached just about $1.5 billion. Qatar’s 2022 World Cup cost an estimated $220 billion, making it the most expensive in history, yet tourism and event-related spending brought in only about $2.3–4.1 billion.
Beyond these financial shortfalls, these events often leave behind “white elephants” — costly facilities with little long-term use. For example, Beijing’s Bird’s Nest stadium costs an estimated $10 million a year for maintenance, while Montreal took until 2006 to pay off its 1976 Olympic debt after nearly bankrupting the city. Athens’ 2004 Olympic facilities now stand abandoned, contributing to Greece’s debt crisis, and Rio de Janeiro’s 2016 Games left Brazil with crumbling infrastructure and mounting debt. These outcomes underscore a persistent reality: mega-event investments rarely deliver lasting economic value, but often impose long-term financial burdens.
Why the Economic Promises Rarely Deliver
Despite their disappointing track record, mega-events continue to be promoted through optimistic studies that often rely on unrealistic assumptions. These projections frequently overlook the crowding-out effect, in which regular tourists and locals avoid host cities due to congestion and higher prices, thereby reducing overall economic gains. They also ignore revenue leakage, as much of the income flows to international governing bodies rather than remaining in local economies.
Consequently, the economic benefits are often greatly overstated. Evidence from past events illustrates this gap: the 2002 Salt Lake City Olympics created only about 7,000 temporary jobs — just 10 percent of projections — and during the 2012 London Olympics, only 10 percent of the 48,000 temporary jobs went to the unemployed. In Salt Lake City, general retailers even lost $167 million, despite tourism-related businesses earning $70 million during the event. These outcomes demonstrate that the expected economic gains often fail to materialize.
Hidden costs further weaken the economic argument for hosting these events. Stadium construction and upgrades have traditionally been among the costliest aspects of mega-event planning, often totaling billions and leaving venues that struggle to generate revenue after the event ends. Even when new stadiums are unnecessary, operational costs — like policing, transportation services, emergency services, and fan zones — can impose a heavy financial burden on city budgets.
The preparations for the 2026 FIFA World Cup already highlight these issues. US host cities have requested $625 million in federal aid for security, but they might still face $100–200 million each for stadium upgrades, policing, transportation, and public services — while mandated fan festivals alone can cost up to $1 million per day. According to The Independent, host cities are collectively facing at least $250 million in shortfalls, which has led major cities to recently reduce or cancel large fan festivals due to rising costs, security concerns, and stalled federal funding.
Preparations for the 2026 FIFA World Cup are underway at Arrowhead Stadium in Kansas City, Missouri. Photo dated May 2025. Wikimedia.
Meanwhile, FIFA controls the tournament’s most profitable revenue streams — broadcasting rights, global sponsorships, ticket sales, and in-stadium advertising — leaving cities to cover much of the costs while earning only a small share of the financial gains.
Political incentives also help explain why cities continue to pursue these events despite the evidence. Hosting a World Cup or Olympics gives leaders global visibility and symbolic prestige. The benefits are immediate and highly visible, while the costs are borne by taxpayers and often spread over many years. This dynamic encourages optimistic forecasts and ambitious bids, even when the economic fundamentals are weak. In practice, mega-events often act less as engines of economic growth than as risky public ventures whose financial impacts last well beyond the celebrations.
The drive to bring jobs back to American soil is a compelling political instinct. But soundbites aside, Washington’s campaign to engineer domestic employment through tariffs, subsidies, and executive pressure reveals a fundamental misunderstanding of how markets and jobs actually work.
Jobs represent ever-evolving responses to consumer trends, resource development, market expansion, technological change, and entrepreneurial imagination. Some of today’s occupations — prompt engineer, EV charging station technician, dispensary budtender, app developer — couldn’t have been imagined a decade or two ago. Others, like food delivery drivers, household organization consultants, or telehealth coordinators, exist because consumers have demanded greater convenience and care.
The gig economy itself — a phenomenon barely imaginable before the smartphone — reflects exactly this kind of market-driven reinvention of work.
Value Is Discovered, Not Decreed
Carl Menger, in his 1871 Principles of Economics, argued that value is not an intrinsic property of goods or industries but a subjective judgment made by individuals based on their own needs and circumstances. And since needs and circumstances change, so too does the perception of value. Consider something as simple as diapers: a parent of young children assigns great value to a reliable brand like Pampers; that same parent, a decade later with grown children, assigns it none. The product hasn’t changed. The person’s needs have.
Friedrich Hayek understood why this matters for policy. In his 1945 essay “The Use of Knowledge in Society,” he argued that the information needed to allocate resources effectively is not concentrated in any one place — it is dispersed across millions of individuals, embedded in local conditions, personal preferences, and fleeting circumstances that no central authority can fully observe or anticipate.
Consider Play-Doh. The product now beloved by children worldwide began as a wallpaper cleaning compound. The putty almost faced extinction when vinyl wallpaper rendered it obsolete, but fortunately, a schoolteacher recognized that the non-toxic compound was ideal for children’s crafts. The product was rebranded and relaunched as a toy in the 1950s, and jobs associated with Play-Doh shifted from industrial cleaning supply manufacturing to creative play and childhood education. In 2024, the company rolled out Play-Doh Imagination Curriculum, complete with programming and educational materials that “have been developed by leaders in play and imagination, whose experience spans more than 40 years of expertise in qualitative research, inclusive design and creative arts.” Entrepreneurial adaptation drove the transformation — and no federal agency could have predicted it, let alone planned for it.
Consider PetSmart. When it was founded in 1986, PetSmart was a straightforward pet supply retailer. Today, the bulk of its economic activity lies less in product sales and more in services: grooming, training, boarding, veterinary care, and pet adoption events. This shift emerged because pet owners increasingly embraced their animals as family members and demanded services to match. PetSmart’s mission — to “help everyone experience more joy with pets” — reflects a broader cultural transformation. The most common reason for pet ownership today is pleasure and companionship, a far cry from the functional role animals once played. The jobs followed the values.
Consider Peacock. NBC’s streaming platform takes its name from the network’s famous multicolored feathers logo, developed in 1956 as a promotional tool to encourage Americans to upgrade to color television. Fast forward seventy years, and the consumption of home entertainment has generated an entire ecosystem of streaming-age employment: content creators, data engineers, and digital rights managers. These are not jobs that were moved from somewhere else — they were invented. As the broadcast industry shifted to streaming, the labor market transformed along with it.
Creative Destruction Is Not a Problem to Be Solved
The continuous process by which employment positions and old industries are dismantled to make room for new ones was coined by Joseph Schumpeter as “creative destruction.” In Schumpeter’s framework, the entrepreneur is the engine of economic transformation — an active disruptor who recombines resources in novel ways to meet emerging demand. The churn of job categories is not a market malfunction; it is the market working exactly as it should.
The 1991 film Other People’s Money dramatizes this tension with unusual clarity. Danny DeVito plays “Larry the Liquidator,” a Wall Street corporate raider targeting a small, family-run New England wire and cable company. His argument is unsentimental but economically coherent: the company is inefficient, copper wire is being replaced by fiber optics, and the capital locked inside it would generate far more value elsewhere. In the film’s pivotal shareholder meeting speech, Larry puts it plainly:
You know, at one time there must’ve been dozens of companies making buggy whips. And I’ll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead.
Just as the car replaced the need for buggy whips, so too will new innovations generate obsolescence for some of today’s products and positions. This is why the current push to repatriate manufacturing jobs through tariffs and executive pressure commits what some might recognize as a category error: treating the economic snapshot of a previous era as a permanent template for what American employment should look like. The jobs being chased are not lost — they have been superseded.
Protectionist measures also misread the supply chain reality of modern manufacturing. The components of consumer goods routinely cross borders dozens of times before final assembly. Tariffs inevitably raise costs for both producers and, ultimately, for consumers. Diapers illustrate the point concretely. The modern disposable diaper sold in American stores sources its superabsorbent polymers primarily from manufacturers in Japan and Germany, relies on globally distributed production for its adhesives, elastic components, and fluff pulp, and moves through an international logistics network before landing on a store shelf. It is, in every meaningful sense, a product of globalized supply chains — and it is better and cheaper for it. And given the rising costs of raising kids, parents need all the help they can get.
You Can’t Mandate a Better Economy Into Existence — But Entrepreneurs Can Build One
The cost of protectionism, however, goes beyond higher consumer prices. When governments insulate old industries, they do not merely slow destruction — they slow creation. The capital and labor locked up in a subsidized, tariff-protected sector are unavailable to the entrepreneurs building the next economy. Protection does not preserve prosperity. It mortgages it.
Now, none of this is to say that economic transitions are painless. They are not. Workers in disrupted industries face real hardship, and a society that cares about its members will want to ease those transitions. But the core lesson from Menger, Hayek, and Schumpeter must not be lost. Value is determined by individuals acting on their own preferences and the entrepreneur’s restless recombination of resources is the true engine of prosperity. The best employment policy, therefore, is one that removes obstacles to innovation rather than erects obstacles to change.
The jobs of tomorrow have yet to be realized. But one thing is certain: they will create value that no industrial policy could have molded or modeled. Giving entrepreneurs room to operate, rather than burdening them with the cost of propping up yesterday’s economy, is not indifference to American workers. It is the greatest service we can render.
Recently, as I sat in my small undergraduate economics class, another student raised his hand to share a thought about the current state of markets. Though quite well-spoken, he quickly began expressing disdain for the system of capital markets that has created the prosperity and flourishing of modern life, encapsulated in the oft-cited sentiment that “the elites are getting richer while the rest of us are held down!”
The student cited the success of entrepreneurs such as Jeff Bezos and Elon Musk, along with the growth of wealth inequality in the United States and between the developed and developing worlds. This sentiment has only grown in light of political division and rampant populism, and has now spread to both left and right, albeit with different “flavors.” While my classmate may have been speaking to sentiments that are deeply felt for Americans across the political spectrum, the quantitative and qualitative reality could not be further from the truth. In fact, the very market forces now blamed for inequality have quietly delivered more concrete improvements to ordinary life, especially for the poor, than any system in human history. Arguments for aggressive government redress of inequality often risk undermining precisely the innovations that benefit consumers most.
Empirically, statistics about inequality are often static, based only on income without taking account of consumption. This means they ignore price declines, quality improvements, and common access to goods formerly thought of as luxury. Furthermore, access has largely replaced ownership as the priority for many consumers due to the relative convenience of streaming services such as Netflix rather than purchasing and owning DVDs, for example. What matters for human flourishing is not whether billionaires exist, but whether regular people can do more, flourishing in the “ordinary business of life” as Alfred Marshall famously said. This can be seen in our access to services never dreamed of even thirty years ago. Uber and Lyft have reduced transportation costs substantially, and generated substantial consumer surplus just in the past fifteen years. The convenience of such a service for both drivers and riders has expanded access in previously underserved areas.
As an MIT study points out, “In many cities, ride-sharing platforms extend affordable transportation into outer neighborhoods where taxis rarely traveled, expanding mobility for people without cars…a form of latent quality-of-life enhancement not captured in income statistics.” Ride sharing is just one of many examples of increased consumer surplus, only made possible by a profit incentive on the part of entrepreneurs. The same could be said for food delivery, smartphones, and Amazon. Time is a real economic good, as Bastiat’s broken window fallacy points out, and convenience that increased consumer surplus disproportionately benefits lower-income households, even when these gains are not captured by income statistics.
Twentieth-century Austrian economists F.A. Hayek and Joseph Schumpeter offer helpful resources to explain the benefits of markets despite popular narratives. For Hayek, markets themselves — interaction of buyers and sellers — coordinate knowledge that no government has the ability to possess, meaning attempts to centrally correct perceived ‘inequality’ are not merely undesirable, but epistemically incoherent. As Hayek points out, “The economic problem of society is thus not merely a problem of how to allocate ‘given’ resources… it is a problem of the utilization of knowledge not given to anyone in its totality.” The consumer benefits of rideshare and delivery services are a direct result of competitive price discovery made possible by capital markets, local knowledge, and trial and error. In an almost prophetic sense, Schumpeter argues that “the fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation…”
Within Schumpeter’s model of “creative destruction,” such innovations may be painfully disruptive at first, but they prevent stagnation — which would be far worse — and ultimately expand human possibility.
The benefits of capitalist innovation are diffuse, incremental, and uncelebrated, while the costs are concentrated, visible, and politically mobilizable. Schumpeter anticipated this, pointing out that “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses. But it also, in doing so, creates conditions that make the masses unwilling to tolerate the social discipline required by the capitalist system.”
The frustration and impatience with markets of the populace is caused and enabled by the very success of the market system. Both the left and right mistake transition for decline, pointing out the “inequality” of entrepreneurs who benefit from their innovation while omitting the access and surplus offered to them.
Returning to my undergraduate classroom, the frustration of my peer is real, but his diagnosis is sorely mistaken. The ‘cure’ offered by populist would-be saviors and technocrats is worse than the disease, stifling both producers and consumers through regulatory overreach. The greatest achievements of markets rarely look like triumphs; they look like ordinary conveniences. So ordinary, in fact, that we forget how extraordinary they are.
If April Fools has a patron saint in politics, it may be the candidate who promises lower costs and less war, then delivers the reverse on both. Just months into his second administration, the gap between Donald Trump on the campaign trail and Donald Trump in office has already become difficult to ignore. These were not peripheral campaign themes; they were central to the case for Trump’s return. As with so many politicians before him, the promises that helped fuel victory now sit uneasily beside the realities of governing.
The United States today carries more than $39 trillion in federal debt relative to an economy producing about $30 trillion in annual nominal output, while inflation remains above the Federal Reserve’s long-run target at 2.4 percent, with core inflation at 2.5 percent. The post-COVID economy has hardly returned to a feeling of normalcy; instead, Americans remain uneasy about prices, growth, and the possibility of a downturn.
On the campaign trail, Trump promised affordability and peace. He argued that domestic mismanagement and global conflict were making life harder at home.
Affordability
“But if I win,” Donald Trump said on October 30, 2024, “We will rapidly defeat inflation and I will make America affordable again.” Yet once back in office, his administration returned to one of Washington’s oldest economic delusions: mercantilism. Tariffs were imposed haphazardly and sold as national strength, even though the costs were always likely to land at home. What was marketed as relief for ordinary Americans instead threatened to make some of the most basic pillars of affordability — housing, groceries, and other everyday goods — even more expensive.
Housing offers one of the clearest examples. The National Association of Home Builders estimates that recent tariff actions add about $10,900 to the cost of a typical new home. That burden lands in a housing market where younger Americans already lag their predecessors in homeownership. Nor was the pass-through effect hard to foresee. Americans had just lived through the inflationary aftermath of COVID-era supply shocks, and IMF research published in February 2026 found that a 100-hour shipping delay can raise consumer inflation by roughly 0.5 percentage points at its five-month peak. In that sense, the idea that tariffs would also raise costs at home was not some arcane theory. It was the plain lesson of recent experience.
Food was hardly spared either: higher steel tariffs raise the cost of tin-coated steel used in food cans, and those costs do not simply disappear inside the supply chain. The Wall Street Journal reported that steel-can prices could rise by 10-15 percent, meaning a $2 can of vegetables could cost 18 to 30 cents more.
A president who campaigned on affordability thus embraced a policy mix that put pressure on two of the most politically sensitive parts of any household budget: shelter and groceries.
The contradiction became even sharper when the tariff strategy began to unravel legally. Reuters reported that the Supreme Court ruled on February 20, 2026, that President Trump had overstepped his authority by using the International Emergency Economic Powers Act to impose sweeping tariffs, leaving roughly $175 billion potentially subject to refunds. Since then, importers have gone to court seeking recovery. More than 1,000 firms have joined, including FedEx, Hasbro, L’Oréal, Dyson, Bausch + Lomb, Costco, Goodyear, and J. Crew.
That leaves behind an especially perverse result. Consumers absorbed part of the tariff burden through higher prices, yet the legal right to seek reimbursement belongs to the importing firms that remitted the duties at the border. In other words, Americans were asked to pay more under a policy sold as patriotic affordability, while businesses are now forced into court to claw back money collected under tariffs the Supreme Court found illegal. The contradiction is difficult to miss: Trump promised to make America affordable again, but his administration delivered higher costs, legal disorder, and a growing scramble for refunds across corporate America.
Peace
Trump did not present peace merely as a diplomatic aspiration. He framed it as both a humanitarian and economic good. On the campaign trail, he repeatedly claimed he could end the Russia-Ukraine conflict in “24 hours,” said he wanted to “stop the killing,” and also promised to cut energy and electricity prices in half within his first year in office. That pairing mattered because energy markets are acutely sensitive to geopolitical disorder.
When war threatens oil supplies, shipping routes, or regional stability, energy becomes more expensive, and those costs ripple outward into transport, production, and household bills. Peace, then, is not just a diplomatic virtue but an economic good. As the old phrase often attributed to Frédéric Bastiat has it, when goods do not cross borders, soldiers will. An integrated world with free trade means less pressure on oil and gas markets, fewer disruptions to trade, and fewer external shocks passed through to households already strained by inflation.
The promise of quick peace and cheap energy has collided with a much more familiar reality. The administration’s own military posture has remained expensive, not restrained. Congress approved a record $901 billion in military spending for 2026. Trump then said the 2027 budget should rise to $1.5 trillion, and the Pentagon is now seeking more than $200 billion in additional funding for the Iran conflict.
Moody’s has warned that such an expansion would widen deficits, increase the government’s interest burden, and reduce fiscal flexibility, while budget analysts estimate the 2027 proposal alone could add roughly $5.8 trillion to the national debt through 2035 once interest is included.
Even if America’s debt problem cannot be reduced to defense spending alone, that does not make the cost of permanent preparedness any less real. It simply means the country is adding yet another major claim on already strained public finances.
That is the real April Fools joke. Trump returned to office promising to make life cheaper at home and the world calmer abroad, yet both pledges have given way to the opposite. At home, the burden came through tariffs; abroad, it came through the price of instability. What was sold as national renewal has instead come to resemble a costlier version of the status quo, leaving Americans with higher burdens, weaker confidence, and a growing sense that the slogans were always easier to deliver than the results.
Where occupational licensing exceeds genuine public safety needs, it substitutes centralized judgment and political privilege for the preferences of consumers and workers.
Introduction: Individual Rights and the Public Good
The tension between individual rights and the common good is as old as political theory itself. One area in which this question arises is that of occupational licensing. To what extent can (or should) the government require a license to engage in commercial activity? What are the public safety arguments for that occupational licensing? And what forms can (or should) that occupational licensing take, from fees to examinations, or outside certifications?
To address these questions, this Explainer begins with examples and history. It continues with basic economic analysis, political economy, and constitutional considerations. It concludes with possible alternatives.
1. Examples
Today, an estimated 25 percent to 30 percent of Americans require a license – permission from the government (typically the state, rather than federal) – to engage in their occupation. Examples range from the unobjectionable to the eyebrow-raising.
The Institute for Justice has cataloged 2,749 licenses across the 50 states and the District of Columbia. On average, licenses require 362 days of education, at least one exam, and $295 in fees.
Individual states license anywhere from 26 occupations (Wyoming) to 77 (Louisiana).
Graduation from an accredited medical school is insufficient to practice medicine. Physicians must obtain permission from a state licensing board.
Throughout the US, lawyers must, after successfully completing three years at an accredited law school, pass the state bar examination. In some states, the administering state bar association is a public corporation or a state agency; in other states, the bar is a voluntary association (but one that has a state-granted monopoly to license lawyers to practice in that state). The fees for sitting the exam and obtaining the license range from $500 to $3,000.
In Nevada, would-be travel guides require 733 days of training and a $1,500 licensing fee.
The State of Michigan requires 1,460 days of education and training to become an athletic trainer, but only 26 days to become an Emergency Medical Technician (EMT); the national average is about 150 hours of training (19 eight-hour days), plus an examination for basic EMTs, up to 1,500 hours in a two-year program to become a Paramedic.
For a barber’s license, the state licensing burden ranges from 68 to 896 days, plus an exam and a mandatory fee of $25 to $500.
The District of Columbia government requires anybody who wishes to provide childcare to hold an associate’s degree in an early childhood field or ten years of experience.
In Louisiana, it is illegal to sell flowers without passing a florist’s examination and obtaining a license (this is beyond the operating license required of all businesses).
A few other examples of regulated occupations that require a license: ballroom dance instructors, cat groomers, fortune tellers, home entertainment installers, movie projectionists, taxi drivers, and whitewater rafting guides.
Finally, university professors or other professionals are not allowed to teach high school classes in their specialties without completing student-teaching requirements, passing the state certification exam, and obtaining a state license (details vary by state; the process takes an average of one to two years).
2. History
While the scale of occupational licensing today — affecting between one-quarter and one-third of all working Americans — is new, the concept of worker certification is not. In many ways, the medieval order, with its fixed social stations and occupations determined by birth, functioned as a form of occupational licensing. Noble vassals were bound to serve their suzerain overlords (in a chain going up to the monarch) and protect their peasants; peasants were bound to work the noble’s land, and could not leave the domain or change occupation without permission. Guilds emerged in the mid- to late Middle Ages as a challenge to medieval stasis and aristocratic privilege; however, in their efforts to protect their members, they also excluded outsiders by imposing rigid and lengthy apprenticeships.
Occupational licensing was present in the American colonies, from bakers and ferry operators to peddlers and lawyers. From the Revolution through the Progressive Era, occupational licensing existed at the state level but was not widespread, and was contested by discontented outsiders trying to practice their crafts. The landmark Supreme Court case, Dent v. West Virginia 129 US 114 (1889) addressed the constitutionality of state requirements for medical doctors. The Court ruled that there was a balancing act between individual economic rights and the public interest. On the one hand, the Court held that individuals possess a prima facie right to pursue a peaceful occupation and that the state may not impose arbitrary requirements that would deprive them of that right. On the other hand, the Court ruled that the state has a legitimate interest in promoting public health and safety – and therefore the authority to impose reasonable regulation and restrictions on certain occupations. In sum, the Court upheld the states’ constitutional authority, under their police powers, to impose licensing requirements so long as those requirements are deemed reasonable.
The Progressive era marked the beginnings of widespread occupational licensing, as the state took an increasingly active role in economic regulation, and courts began to downplay individual economic rights in favor of the state’s interest in advancing Progressive goals (see section five below). By 1950, about five percent of American workers required an occupational license to practice their trades. The expansion continued over the next 80 years, as technological advances and increased specialization made it increasingly difficult for consumers to judge for themselves the quality of practitioners (or so went the regulatory logic). This growth in occupational licensing was part of a broader expansion in regulation: today, American consumers and businesses spend about 10 percent of GDP every year to comply with federal regulations, not including state regulations, and 25 to 30 percent of Americans require state licensing to engage in their occupation.
3. A Microeconomic Analysis
From a political economy perspective, occupational licensing goes to the heart of the social contract, balancing individual rights with the state’s interest in regulating individual behavior to advance the public good (and, of course, raising the related question of the state’s ability to do so, per the Austrian critique; see section four). From a microeconomic perspective, one can examine demand-side versus supply-side analyses of occupational licensing. In both cases, the central question is its effect on public welfare.[1]
One theory of occupational licensing emphasizes the demand side (we might call this the “public interest” perspective). According to this approach, there is high potential for market failure – markets generally allocate scarce resources fairly well, and competition provides some discipline and quality control, but they can break down in certain cases.[2] For example, market concentration can limit the benefits of competition; public goods such as education may be underprovided because their social benefit exceeds the private benefit, leading to underinvestment; and pollution may be overproduced because the social cost exceeds the private cost, giving firms an incentive to ignore it.
In the case of occupational licensing, the argument is that information asymmetries exist: consumers often know very little about professionals, especially in highly specialized or technical markets, and professionals can exploit that to cheat consumers. The state can overcome the information asymmetry by requiring an occupational license, effectively certifying professionals for consumer protection.[3] According to this theory, there is an additional benefit: the effort and skill required for licensing will increase the overall quality of professionals, both directly (by keeping out lower-quality professionals) and indirectly (because the higher wages from the barrier to entry reward quality, and provide an incentive for greater investment in human capital). For these reasons, occupational licensing is considered to increase aggregate welfare.
An alternate theory emphasizes the supply side, and is closely linked to Public Choice theory. From this perspective, occupational licensing is primarily driven by producers seeking to reduce competition by raising barriers to entry. This restriction diminishes threats from potential entrants and raises wages for incumbents.[4] In more technical terms, the political process concentrates benefits on a small group of policy beneficiaries while diffusing costs across the broad, unorganized population of consumers, who face higher prices but cannot easily identify the causes. Those in protected groups have an incentive to lobby for continued benefits, and politicians are responsive to this organized and visible constituency. In contrast, the costs are diffuse — borne by consumers and professionals excluded from the market because they lack a license — so there is little incentive for political organization, and politicians remain largely unresponsive to these unorganized groups.[5]
What are we to make of these competing claims? As the next two sections will show, the evidence invites skepticism toward “common good” arguments. Moreover, there are serious doubts about the state’s knowledge to regulate an occupation and about its motivations, given the dynamics of concentrated benefits and diffuse costs.
Indeed, the supply-side theory highlights serious flaws in the demand-side argument. First, occupational licensing drives up prices. It decreases competition. And it leads to market inefficiencies, such as forum-shopping (whereby states attract professionals through higher salaries or lower regulatory burdens) or decreased economic mobility (as professionals licensed in one state will face higher transaction costs, in the form of repeat licensing, if they wish to move to another state.) It’s hard to see how any of these outcomes benefit consumers.
Second, occupational licensing appears to function as a polite form of incumbent protection. A recent Cato Institute report finds that “data on state associations for nine major occupations reveal that the probability of an occupation becoming regulated increased by 20 percentage points within five years of… [the] founding in that state [of a trade association representing that occupation].” Further supporting the supply-side, or lobbying, thesis, the Institute for Justice finds that licensing burdens disproportionately affect low-income occupations.
Third, a study by the Center for Growth and Opportunity at Utah State University identifies three counter-arguments to the public interest (consumer protection) approach: 1) technological advances over the past 30 years have reduced information asymmetries, so, if the consumer protectiontion theory is correct, we should see a decline — not a rise — in occupa-tional licensing (see the discussion of alternatives below); 2) consumer protection cannot explain the wide variation in licensing across states; and 3) consumers do not lobby for occupational licensing, but professional associations do, lending credence to the theory that licensing is motivated more by incumbent protection than by consumer protection.
4. Political Economy
The analysis in the previous section relies on traditional microeconomics — specifically welfare economics, which studies the overall effects of policies on the general welfare. There is another approach to evaluating occupational licensing: political economy, and in particular, an economic theory of the state.
The classical liberal umbrella of those concerned with individual rights and liberty contains three schools of thought, writ large: anarcho-capitalists, minarchists (or minimal state theorists), and super-minimalists (for lack of a more elegant term). All three are, when generously interpreted, genuinely concerned with advancing liberty, individual rights, and the general welfare. But they differ sharply on methods.
While political theory discussions are often divorced from economics, they are relevant here for illustrating the role of the state and the balance between the public interest and individual rights.
For the anarcho-capitalists (e.g., Lysander Spooner and Murray Rothbard), the state is inherently predatory and immoral, organizing human relations through violence. Moreover, the state is also unnecessary: markets can provide what individuals can’t produce on their own, including security and justice through private means, rather than distortionary taxation. Where the market falls short, civil society can fill the gaps — for example, for charity or education without taxation and the rent-seeking problems of state action. An anarcho-capitalist, then, would dispense entirely with occupational licensing. Market forces would handle consumer protection: bad professionals would receive bad reviews and lose customers. Professionals would compete on reputation and transparency, or seek voluntary third-party certification, while robust insurance markets would provide coverage against misconduct.
The minarchists (also called minimal state theorists or libertarians, in the tradition of Ludwig von Mises and Ayn Rand) worry that anarcho-capitalism is a lovely idea, but would quickly devolve into conflict between competing protective agencies. Instead, they propose a neutral, constitutionally constrained, minimal state responsible only for basic functions of security and rights-protection: police, the courts, and national defense. For consumer protection, a minarchist state would rely on the same voluntary mechanisms as anarcho-capitalism, supplemented by tort law and contractual violations litigated in the courts, as well as the public prosecution of fraud.
Super-minimalists share the classical liberal concern with individual rights and constitutional constraints on the state, but they recognize a limited role for the state in remedying market failures – always with great caution and within strict constitutional limits. When collective action is cheaper or more efficient than private action, the state can provide public goods; this is known as the “productive” state. Far from giving carte blanche to the state, as Progressivism seeks to do, super-minimalists are concerned with the fragile balance of the productive state and preventing it from lapsing into a predatory state or the redistributive tendencies of Progressivism or socialism.
Twentieth-century champions of liberty such as F.A. Hayek, Milton Friedman, and James M. Buchanan – who were all deeply concerned with individual rights and the rule of law – called for public support (if not provision) of such things as primary education, mosquito control, the earned-income tax credit, or even a minimum basic income. Super-minimalists would, naturally, rely first on voluntary market and reputational mechanisms; second, on legal action by the state to prosecute contract violations and fraud; and only then, as a last resort, on positive state action to protect consumers in cases of information asymmetry. They are careful to avoid policies that encourage incumbent protection or rent-seeking. Their approach involves gradually intrusive levels of enforcement: mandatory bonding or insurance could be a first step, followed by mandatory registration or disclosure, and only in extreme cases would they propose occupational licensing — and only for the most critical occupations.
5. Public Good and Individual Rights: A Constitutional Approach
The tension between individual rights and the state’s police powers to advance the public good is not just the playground of political theorists. In the American constitutional experiment, the courts have grappled with the balance between true state advancement of the public welfare and naked rent-seeking.
In Nebbia v. New York, 291 US 502 (1934), the United States Supreme Court upheld a New York State price control law, ruling that economic rights fall below political rights – and that the state faced a lower burden for curbing the former than the latter, in the name of advancing the public interest. As the Court explained, “Rational basis review, which is used for economic regulations, requires that the law is not unreasonable or arbitrary and also that there is a reasonable relationship between the law and the interest that it serves.” The Court effectively ruled that economic rights were not fundamental but are instead subject to a public interest test.
Four years later, the US Supreme Court established the (in)famous Caro-lene precedent (United States v. Carolene Products, 304 USS 144; 1938). In that case, the Court ruled that “the existence of facts supporting the legislative judgment is to be presumed, for regulatory legislation affect-ing ordinary commercial transactions is not to be pronounced unconsti-tutional unless in the light of the facts made known or generally assumed it is of such a character as to preclude the assumption that it rests upon some rational basis within the knowledge and experience of the legisla-tors.” Economic rights would henceforth be subject to a “rational basis test,” while political rights were granted stronger protection under “strict scrutiny”.
Clark Neily (formerly of the Institute for Justice, now at the Cato Institute) explains the distinction between the strict scrutiny applied to fundamental (political) rights, and the rational basis test applied to non-fundamental (economic) rights.[6] For political rights, the state or federal government must demonstrate a compelling interest to justify curtailing individual rights in the name of the public good. Economic rights, by contrast, face the much lower bar of the rational basis test. Under this standard, the Court begins with the presumption that government actions are constitutional and places the burden of proof on those claiming a violation of rights. But it goes one step further: actively assisting the government in identifying potential justification, including theoretical and hypothetical scenarios in which the public interest could be advanced by the governmental action.
In sum:
A statute is presumed constitutional and ‘[t]he burden is on the one attacking the legislative arrangement to negate every conceivable basis which might support it,’ whether or not the basis has a foundation in the record. Finally, courts are compelled under rational-basis review to accept a legislature’s generalizations even when there is an imperfect fit between means and ends.
Occupational licensing is but another government action to curb individual economic rights in the name of the general welfare. Economists and political theorists can discuss the proper balance between individual and collective interests, and the often-thin line between true common good and rent-seeking. In the United States, however, the courts have consistently given the benefit of the doubt to the government.
Conclusion: Toward a Spectrum of Consumer Protection
This account has aimed to provide an intellectually generous account of occupational licensing. There are many egregious examples of occupation-al licensing that clearly do not advance the common good, but are thinly veiled exercises in rent-seeking. It is therefore tempting to dismiss all occupational licensing as a use of public means to advance private interests. Yet there are also strong arguments for advancing the common good through basic oversight. Ultimately, judgments about occupational licensing depend heavily on one’s political philosophy and theory of the state.
At the same time, there is value in moving away from an either/or dichotomy. Indeed, just as competition and the general struggle for the consumer dollar provide important discipline to markets, there exists a spectrum of measures to protect the consumer and advance the general welfare – from the voluntary, to a light regulatory touch, and (as appropriate) a more robust regulatory framework.
The Institute for Justice, which routinely litigates abusive occupational licensing, has summarized the hierarchy of alternatives to occupational licensing, placing the least intrusive and most voluntary measures at the top.
One of the key implications of the American experiment in liberty – from economic freedom to the pursuit of happiness – is that individuals are free to pursue honest work and make a living peacefully. Only a compelling government interest would dictate otherwise. Licensing regimes that drift beyond that narrow justification quickly instruments of control rather than guardians of the public welfare. A functioning market economy depends on open entry, competition, and the freedom to experiment and innovate. Where occupational licensing exceeds genuine public safety needs, it substitutes centralized judgment and political privilege for the preferences of consumers and workers. Reaffirming economic freedom through a principled return to the presumption of a right to make an honest living defends both prosperity and personal responsibility.
[2] Generally see P. Samuelson, “The Pure Theory of Public Expenditure,” The Review of Economics and Statistics 36, No. 4 (1954): 387-389.
[3] G. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mecha-nism,” Quarterly Journal of Economics 84, no. 3 (1970): 488–500; H. Leland, “Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards,” Journal of PoliticalEconomy 87, no. 6 (1979): 1328–46.
[4] See J. Buchanan and G. Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, University of Michigan Press, 1962. See also M. Friedman, Capitalism and Freedom, University of Chicago Press, 1962.
[5] See M. Olson, The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard University Press, 1965. See also G. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2, no. 1 (1971): 3–21.
[6] C. Neily, Terms of Engagement: How Our Courts Should Enforce the Constitution’s Promise of Limited Government, Encounter Books, 2013.
