Teachers unions have strayed far from their original purpose of supporting classroom teachers and have morphed into a powerful political machine that primarily serves the Democratic Party. 

But here’s the game-changer: the power to dismantle this machine lies not in distant courtrooms or legislative halls, but in the hands of teachers themselves. Teachers can take it apart from the inside, one dues opt-out at a time.  

Thanks to landmark legal victories and new alternatives, teachers no longer have to fund this partisan juggernaut with their hard-earned paychecks. It’s time to defund the unions, keep more money in the pockets of teachers, and refocus education on the kids. 

For decades, teachers unions like the American Federation of Teachers (AFT) and the National Education Association (NEA) compelled educators to pay dues as a condition of employment. That meant a teacher’s salary was automatically funneled into union coffers, whether you agreed with their agenda or not.  

But in 2018, the Supreme Court delivered a blow to this coercive system with the Janus v. AFSCME decision. The ruling affirmed that mandatory union dues violate the First Amendment by forcing public employees to subsidize speech and political causes they might find objectionable. In other words, you can’t be forced to pay for someone else’s politics anymore. 

Teachers unions are deeply political and overwhelmingly partisan. More than 99 percent of the AFT’s campaign contributions in the last election cycle went to Democrats, and this lopsided giving has been the norm for decades. 

The unions are essentially money-laundering operations for the Democratic Party, siphoning billions from teachers’ salaries to prop up one side of the aisle. A 2017 Education Week survey revealed that only 41 percent of teachers nationwide identify as Democrats, with the rest leaning conservative or independent. Yet nearly all union political spending backs Democrats. (More recent national surveys that exclude independents show marginally higher support for Democrats.)

Many teachers have stuck with the unions out of fear, particularly because of the liability insurance they provide. No one wants to face a lawsuit without protection. But the game is changing. 

The Teacher Freedom Alliance just announced that they’re offering free liability insurance to teachers who leave the union.They provide $2 million per teacher, which is twice the amount typically provided by national unions like the AFT or NEA. And this insurance is in the teacher’s name, not the union’s, giving teachers direct control and peace of mind. More than 2,500 teachers have already opted out this year to join the alliance. 

If you’re one of the 59 percent of teachers who identify as conservative or independent, staying in the union at this point is downright crazy. Why would anyone hand over their dues to fund causes they oppose when they can opt out, keep their money, and still get superior liability protection? The unions’ grip is loosening, and teachers hold the key to breaking it entirely. 

Randi Weingarten of the AFT and Becky Pringle of the NEA don’t represent everyday educators. They’re political operatives raking in about half a million dollars each year in salary. Meanwhile, inflation-adjusted teacher salaries have only crept up by 3 percent since 1970, even as public school spending per student has skyrocketed by 164 percent over the same period.  

Where’s all that money going? Not to the classroom teachers. It’s padding union bureaucracies, funding lavish conventions, and ultimately bankrolling Democrat campaigns. 

The unions do nothing for the best teachers. They fight tooth and nail against merit pay, which would reward excellence and boost salaries for top performers. Instead, they protect the lowest common denominator through rigid collective bargaining that treats all teachers the same, regardless of skill or effort. Individual educators can’t negotiate their own deals with employers because the union monopolizes the process. Get the union out of the way, and the best teachers would thrive, commanding higher pay based on their results. 

Take Becky Pringle’s NEA as a prime example of misplaced priorities. Out of their 3 million members, they chose Ashlie Crosson as “Teacher of the Year.” At their annual convention, Crosson let the mask slip. She declared that her job as a teacher is “deeply political” and always has been. 

The teachers union’s “2025 Teacher of the Year” said her job is “deeply political” and always has been.

“Once I realized how deeply political our profession had always been, I knew I could no longer stay on the sidelines.” pic.twitter.com/YKexuHPwG1

— Corey A. DeAngelis, school choice evangelist (@DeAngelisCorey) July 6, 2025

That’s who Pringle elevates – not someone focused on academic excellence, but a political activist. The unions reward ideology over instruction. 

At AFT’s convention this year, Randi Weingarten announced a “partnership with the World Economic Forum to create a curriculum.” Teachers who don’t buy into this globalist agenda or the unions’ endless political pet projects need to wake up. They hold the real power. If they lock arms and spark a mass exodus, they’ll send a shockwave through the system.  

Opting out en masse will either force the unions to stay in their lane, focusing on education instead of politics, or cripple their influence by starving the beast of funds. 

Randi and Becky aren’t concerned about everyday teachers who just want to educate kids without the drama. They’re obsessed with using teachers’ dues to advance far-Left agendas and elect their Democrat buddies. But teachers can fix that incestuous relationship. We can save our country from this partisan overreach by dismantling the teachers unions. 

For decades, economists and central bankers have relied more on the Core Consumer Price Index (CPI) than the headline CPI because Core CPI excludes volatile food and energy prices; this permits a clearer read on long-term inflation trends, which is critical for setting interest rates and guiding economic policy. 

Think of it like steering a ship: if you focus only on the choppy surface waves (headline inflation), you’ll get tossed around by every sudden storm in food or energy markets. Core CPI lets you read the underlying current and where the economy is truly headed. 

The Data Tell the Story 

• June 2025 Core CPI: Up 2.9 percent year-over-year (from 2.8 percent in May), slightly below the 3 percent economists expected. Headline CPI was 2.7 percent. 
• July 2025 Core CPI: Rose to 3.1 percent year-over-year, above forecasts. Headline CPI stayed at 2.7 percent. 
• Month-over-month July Core CPI: Up 0.3 percent — an annualized pace of 3.6 percent, accelerating from May’s 1.2 percent and June’s 2.4 percent. 

Economists noticed the climb began in May, and the timing coincides with the start of President Trump’s new tariffs, which many expect will raise prices on imported goods, by year end. July’s data showed increases in tariff-sensitive categories: household furnishings, appliances, toys, and footwear (apparel was the exception). 

The New York Post headline on August 12 summarized this belief: “Inflation came in flat in July – the Core figure rises in sign that Trump’s tariffs are hitting prices.” 

What’s Driving It 

From the July report, certain categories posted price gains well above the Fed’s two-percent target: 

• Used autos: +4.8 percent 
• Medical services: +4.3 percent 
• Housing: +3.7 percent 
• Transportation: +3.5 percent 
• Food: +2.9 percent 

Energy was the outlier, falling 1.6 percent, which helped hold headline CPI steady. 

The report arrived amid ongoing trade developments that could further alter the US effective tariff rate, now hovering near 18.6 percent  —  the highest since 1933, according to the latest Yale Budget Lab estimate.    

Behind the numbers are trade realities often overlooked: 

• In 2024, 15 countries accounted for 75 percent of US trade. Mexico (1), Canada (2), China (3), India (10), and Brazil (15) alone represented 45.1 percent. 
• To date, negotiations with China, Mexico, Canada, India, and Brazil remain unsettled. 
• To many Americans’ surprise, the US imports 97–99 percent of footwear, over 60 percent of appliances, and over 50 percent of furniture. 
• Canada supplies 30 percent of our softwood lumber, 90 percent of potash, 25 percent of nitrogen fertilizer, and 62 percent of crude oil imports — vital for the operation of Midwest refineries designed for heavy oil. 

When tariffs hit such concentrated supply chains, price effects can spread fast. 

Why CPI Alone Isn’t the Whole Picture 

Two days after the July CPI report, the Producer Price Index (PPI) landed and initially shocked Wall Street. Like CPI, PPI has headline and core measures, but it tracks wholesale prices for producers. Many economists view PPI as a forewarning for consumer prices, as businesses often pass higher input costs on to consumers. 

After flat readings in June, July’s numbers jumped: 

• Headline PPI: Up 3.3 percent year-over-year (vs. 2.5 percent expected) and 0.9 percent month-over-month, the largest in over three years. Annualized, that’s about 11 percent. 
• Core PPI: Up 3.7 percent year-over-year (vs. 2.9 percent expected) and also +0.9 percent month-over-month, also a more-than-three-year high.  A more detailed breakdown showed machinery and equipment at the wholesale level jumped 3.8 percent, with fresh and dry vegetables rising 38.9 percent. This sharp move suggests tariff costs are filtering through the production pipeline, potentially altering future CPI data. 

 Going Deeper on the Core CPI

As noted earlier, the Core CPI has long been the preferred tool for economists, central bankers, and many financial market analysts. Here’s why it holds such weight in shaping economic policy and market expectations. 

1. Reduced Volatility
Food and energy prices are notoriously unpredictable. A bad harvest in the Midwest, an early frost in Brazil’s coffee fields, or a geopolitical flare-up in the Middle East can send prices soaring or plunging overnight. Energy markets are particularly vulnerable to disruptions in oil production, refinery capacity, and transportation routes. While these swings matter to consumers, they often represent short-term shocks rather than lasting changes in aggregate price structure. By removing food and energy, Core CPI filters out “noise” from erratic changes. The result is a smoother, more stable metric that better reflects the general trend in consumer prices. 

2. Clearer Long-Term Trend
Headline CPI can be skewed by seasonal factors or one-off events. For example, a hurricane that disrupts Gulf Coast oil production might cause a sharp increase in gasoline prices for a month or two — but that doesn’t necessarily mean the entire economy is overheating. Core CPI removes such anomalies, providing a clearer picture of the “fundamental” inflation rate. For economists, this clarity is invaluable. It helps determine whether inflationary pressures are building up across a broad range of goods and services or if it’s just the effects of a single, temporary disruption. This distinction is critical for avoiding overreaction — or underreaction — in policy decisions. 

3. Better Policy Guidance  
Monetary policy works on a lag. When the Federal Reserve adjusts interest rates, it can take months to fully ripple through the economy. Core CPI’s steadier readings make it easier to set policy with confidence. If the Fed relied solely on headline CPI, it could be misled into changing policy in response to short-lived events. By focusing on Core CPI, policymakers can avoid chasing every wave and instead steer toward long-term stability — helping preserve economic growth while keeping inflation in check. 

The Bottom Line 

Core CPI and Core PPI are flashing warning signs: prices are heating up in key areas. Business leaders should watch the August reports closely and be ready to adjust strategies if the trend continues. 

At the same time, the broader US economy remains caught between unexpected strength and surprising weakness: productivity gains from AI are fueling growth, while an underperforming housing market is an economic laggard. How policymakers balance these opposing forces will shape the inflation path through year-end. The One Big Beautiful Bill (OBBB) should spur economic growth by Q4 and into 2026, likely mitigating future tariff concerns.  

After months of hearing chatter about Abundance, I finally decided to listen to Ezra Klein and Derek Thompson’s hit book. What I heard was a hopeful message for the future that resonates with voters. The Democratic Party, however, has been hesitant to embrace the book’s critiques of a liberal governance that prioritizes rules over outcomes. One politician who is not shy about supporting the kind of popular affordability agenda that Abundance advocates for is the Democratic nominee for mayor of New York City, Zohran Mamdani.

Mamdani is a youthful and gregarious New York State representative for Queens’ 36th district, whose smile, charm, and PR acumen rival those of President Obama. Mamdani, a democratic socialist, ran on a popular message — “a New York you can afford” — advocating for government intervention to reduce the cost of living and improve public services. The Abundance-adjacent message resonates with New Yorkers who pay astronomical rent and wait up to 15 minutes for the bus, despite high local taxes.

Mamdani — or “Zohran,” as he calls himself in his campaign poster, featuring bold primary colors and 1970s fonts — speaks to the quality of life issues that win elections. When asked if he supports the Abundance agenda, he said, “There’s a lot that conversation has brought.” In June, he even told Derek Thompson on his Plain English podcast that he now embraces an “abundance agenda.” As much as Mamdani’s heart is in the right place, his youthful idealism drives him toward simple and counterproductive solutions that relate to affordability but do not embrace the reforms to liberal governance that Abundance recommends.

The crisis of local governance that Klein et al. highlight in the book is essentially that property owners, activists, and leaders in blue cities and states have erected too many obstacles to economic growth and infrastructure development, causing the prices of housing, medicine, and education to soar. At the same time, public services have been hindered by cumbersome and often redundant environmental, safety, and zoning regulations.

To Mamdani’s credit, he does support some deregulation, such as loosening building restrictions near transportation hubs and streamlining the application process for opening a business in New York City. But proposing a handful of good ideas does not excuse bad ones. Mamdani’s most counterproductive idea is to introduce a freeze on rent for all of New York City’s nearly 1 million rent-stabilized apartments. While this may provide immediate relief for some New Yorkers, its long-term unintended consequences would worsen the very quality of life issues that clinched him the nomination.

The long-term outcome of a rent freeze on rent-stabilized apartments will be more expensive, non-rent-stabilized units for everyone else. Many renters in these units will want to stay in them due to the low cost, which reduces the number of regularly available affordable housing options. When rents are kept so low that landlords cannot recoup their investments in maintenance and necessary renovations, they are more likely to keep those apartments off the market to avoid losing money, thereby further reducing the supply of affordable housing.

A significant reason many American urbanites support increasing affordable housing is to reduce the homelessness epidemic that New Yorkers encounter every day when we walk outside. In Abundance, Klein examines the research on the causes of high rates of homelessness in different states.

He found that vulnerable people like addicts and the mentally ill are more likely to become homeless in places where housing is more expensive because it is more challenging for them to secure and maintain housing in those locales. Mandami’s plan to reduce housing costs, when it inevitably backfires, will probably exacerbate the homelessness crisis.

Mamdani proposes another solution to the shortage of affordable housing in New York City. He aims to construct 200,000 affordable housing units over the next decade. That’s right — he wants to build 200,000 units, not in one year or five years, but over ten years. Mamdani’s plan promises to remove bureaucratic hurdles to building affordable housing only if those units are union-built, rent-stabilized, and meet sustainability goals. He essentially introduces new regulatory hurdles to replace existing ones.

Mamdani taps into legitimate grievances that sting for New Yorkers, with a giant, toothy smile and a personal warmth that makes voters feel their guy will be in the mayor’s mansion. He misses, however, the policy nuance that makes the Abundance agenda workable. Instead, he advocates for easy-to-understand and straightforward ideas — many of which will actually make day-to-day life more expensive for my fellow New Yorkers.

In the movie There’s Something about Mary, Ted (Ben Stiller) picks up a crazy hitchhiker (Harland Williams) who explains his brilliant get-rich-quick scheme: seven-minute abs.    

“Think about it,” the hitchhiker says. “You walk into a video store, you see Eight-Minute Abs sittin’ there, there’s Seven-Minute Abs right beside it. Which one are you gonna pick, man?”

Many of us grew up watching marketing campaigns much like the seven-minute ab idea. Get rich by watching this 45-minute video that teaches you how to invest. Get fit while eating whatever you want. Learn a new language in three weeks by mastering this one trick.

Earlier this month, CrossFit, a California-based company that operates thousands of independently owned affiliate gyms across the world, unveiled a different approach.

“Society wants you to believe there’s a quick fix. But real health is yours for the taking,” the company posted on X. “There is no cheat code. Real change takes work. Grit. Discipline.”

CrossFit’s message is starkly different from marketing campaigns in recent years. While companies like Nike continue to employ brand messaging that says “You Can’t Win” (because of oppression and expectations), CrossFit is saying you have the power to shape who you become.

“Every choice you make today shapes your tomorrow,” the narrator says.

F*ck The Quick Fix. CrossFit Is The Cure.

Society wants you to believe there’s a quick fix. But real health is yours for the taking. There is no cheat code. Real change takes work. Grit. Discipline. Every choice you make today shapes your tomorrow.

Are you ready to fight for… pic.twitter.com/4TrzxYFXv0

— CrossFit (@CrossFit) August 11, 2025

The CrossFit commercial presents a message our culture has been sorely missing: individual empowerment. It’s the simple idea that we have agency and choice, and the choices we make today will determine the person we become. 

It’s a message that would have made Aristotle proud. The philosopher had the radical idea that our habits define who we become, an idea considered quaint today but one that was once embedded in the American ethos.

Unlike Nike’s ad, there’s no oppressor in the CrossFit commercial. It’s about overcoming your self. Instead of seeing yourself as a victim of some external injustice, you can be the author of your own narrative. 

Some trends in our culture, born of a medley of bad postmodern philosophies, seem to be nakedly hostile to the idea of self-improvement.     

Consider that not long ago we were told that exercise was rooted in white supremacy, and working out was “far right.” We heard about a “wellness-to-fascism pipeline.” Parents were cautioned that reading to their children put other kids at a disadvantage, that attempts to improve were sexist, classist, racist. The idea of self-reliance and self-help is considered political, because improving oneself is a distraction from the “structural improvement” of society.

The average person might struggle to imagine how anyone could be opposed to people improving themselves. But to people marinating in collectivism, self-improvement is a threat — because it shifts agency and power from the group to the individual.

But looking after oneself isn’t selfish; it’s common sense. We can only help others if we’re capable of first helping ourselves. Economics teaches us this. 

“All rational action is in the first place individual action,” Ludwig von Mises famously observed. “Only the individual thinks. Only the individual reasons. Only the individual acts.”

If individuals are incapable of thinking for themselves, reasoning clearly, and acting decisively, then nothing meaningful can be built. This is why improving ourselves is so important, even if it begins with simply making one’s bed in the morning, as Jordan Peterson advises. Every work of art began as an individual action. Every invention sprang from an individual mind. Every movement that changed the world started with one person taking initiative. 

CrossFit is offering a simple message: real change begins with you. This message, which was once embedded in American pop music, is far more empowering than the belief that we’re merely victims of external forces — and it has the added virtue of being brutally honest. 
Real progress isn’t easy. Humans may crave shortcuts, but there are no free lunches, no magic formulas. Stop waiting for someone to save you — and start doing the work yourself.

After the dismal July jobs report, President Trump has doubled down on his efforts to pressure the Federal Reserve to lower its target overnight interest rate (FFR).

Two of his proxies on the Federal Open Market Committee (FOMC), Chris Waller and Michelle Bowman, dissented from the FOMC’s decision to leave the Fed’s target FFR unchanged. And his recent appointment of Stephen Miron to replace Adriana Kugler move the Fed more in President Trump’s direction. But even if Trump gets the interest rate target cuts he has been lobbying for, it likely won’t satisfy him.

That’s because he, and many others, are actually concerned about interest rates other than the one that the Federal Reserve sets. Mortgage rates and corporate borrowing rates are tied to the 10-year Treasury bond rate – which also happens to be an important interest rate for the cost of federal government borrowing. While lowering the short-term rate seems like it would put downward pressure on the 10-year rate, this is not necessarily the case. In fact, the FFR is 1 percent lower than a year ago, while the 10-year is .2 percent higher than a year ago.

The 10-year interest rate has not declined because the large increase in government bond supply—driven by high Congressional spending—pushes rates upward. The supply must decrease or the demand must increase for 10-year bonds before the 10-year interest rate will fall. If Congress were to slash the budget deficit, the 10-year rate would fall on the expectation that the future supply of 10-year Treasury bonds will diminish. 

Or if stablecoin adoption continues to grow, fueling greater demand for government debt, the 10-year rate could fall. But lowering the FFR by itself won’t lower the 10-year. In fact, it could push it higher if investors fear that the Fed has caved to political pressure and will generate higher inflation in the future.

But there is another avenue to artificially lower the 10-year rate that Trump has not pushed yet. That avenue entails the Federal Reserve buying longer-term US debt. This has been done before by the Fed under Chairman Bernanke’s Quantitative Easing (QE) programs. It was called Operation Twist. In 2011, the Federal Reserve sold about $400 billion of short-term government debt and replaced it with long-term government debt in order to drive down long-term interest rates.

While this program successfully repressed longer-term interest rates, one can question the merits of such a policy. After all, lowering the cost of federal borrowing made it easier for Congress to run up the debt. With average interest rates on the national debt ranging from about 1.8 percent in 2016 to 2.5 percent in 2019, and then from 1.5 percent in 2020 to 1.6 percent in 2021, the interest cost of debt was small, and the federal government rapidly ran up its tab. 

That changed abruptly when the Fed raised short-term rates to combat inflation. The market also raised longer-term interest rates in response to higher inflation. And so the U. S. debt service rose from $16 billion in interest per trillion of national debt in 2021 to $33 billion in interest per trillion of national debt in 2024. 

And with growing debt principal ($28.4 trillion on Sep. 30, 2021 vs. $35.5 trillion on Sep. 30, 2024), interest payments on the debt rose from approximately $454.4 billion at the end of fiscal year 2021 to $1,171.5 billion in fiscal year 2024; a debt servicing burden roughly two and a half times greater than three years earlier and more than any other line item except Social Security in the federal budget.

Obviously, President Trump and everyone else in Washington would love to see debt service costs return to $16 billion per trillion in debt – creating a “savings” of over $600 billion a year. But would they cut other government spending and the federal deficit should such interest “savings” materialize? Not likely! In fact, they would almost certainly use it as an excuse to increase spending for other programs.

One of the dangers of the FOMC caving to Trump’s pressure to lower the FFR is that he will almost certainly push them to engage in an Operation Twist-style bond-buying program if the 10-year rate fails to fall; and it likely won’t, given that we have trillion-dollar deficits as far as the eye can see.

Were President Trump to really gain control of Fed policy, we would see monetary policy shift to accommodate the short-term desires and interests of politicians, not the well-being of citizens under a relatively stable monetary regime.

Trump and his allies claim that lowering interest rates will help them reduce the deficit. While that is true all else equal, the claim would be far more compelling if Congress and the White House had chosen to reduce non-interest outlays substantially with the Big, Beautiful Bill. Instead, they hardly cut overall spending at all. Yet cutting government spending on programs and departments would reduce the deficit and reduce the interest cost of federal borrowing, too.

That’s a far better strategy for restoring fiscal sanity than jaw-boning the Federal Reserve. Playing games with the central bank and creating new currency to finance irresponsible deficit spending is the practice of struggling third-world countries. As the wealthiest nation in the world, we should ask more of our leaders and of our central bank officials.

The Trump administration is reportedly negotiating to turn Intel’s $10.9 billion CHIPS Act subsidies into a 10 percent equity stake in the company. If finalized, Washington would be among Intel’s largest shareholders. 

That should set off alarm bells for anyone who still believes in free markets. A conservative administration that came to power promising deregulation and opportunity is now taking steps that blur the line between capitalism and state management of industry.

This move is part of a larger pattern. 

Earlier this year, the Pentagon took a preferred equity position in MP Materials, the country’s largest rare-earth mining firm, effectively giving the government direct financial leverage over a critical supply chain. After Nippon Steel’s bid for U.S. Steel, the administration negotiated a “golden share” in the company, giving Washington veto power over decisions ranging from executive pay to plant closures. 

Abroad, Trump officials have reportedly floated proposals that would grant the US government direct payments from foreign resource revenues in exchange for trade or security guarantees.

Some conservatives defend these arrangements as “strategic.” They argue that America cannot afford to rely on foreign suppliers for semiconductors, rare earths, or steel. National security, they insist, justifies extraordinary measures. 

But once government crosses the line into equity ownership, the game changes. It’s no longer about setting fair rules of the road—it’s about Washington joining the race as a participant. That undermines competition, politicizes corporate decisions, and exposes taxpayers to risks they never agreed to take.

Economics 101: What’s Wrong With Equity Stakes

The first lesson comes from opportunity cost. Every dollar the government spends buying shares is a dollar it cannot use to reduce taxes, retire debt, or provide genuinely public goods. 

The resources are scarce, and putting them into Intel stock means less available for other, possibly more valuable, uses. Economists from Adam Smith to Milton Friedman have warned that when governments redirect capital for political reasons, the result is misallocation.

The second lesson is about incentives. Private investors demand efficiency because their money is on the line. Government officials, by contrast, make decisions based on politics. If Intel falters, will Washington push for restructuring and accountability—or will politicians double down to save face? History suggests the latter. 

From Amtrak to Solyndra, government ownership often locks in inefficiency rather than driving improvement.

The third lesson concerns public choice economics. Once government owns part of a firm, special interests swarm. Lobbyists push for favorable regulation, subsidies, and procurement contracts that tilt the playing field. This breeds cronyism—where success depends on political access instead of innovation. 

Thomas Sowell put it plainly: “The first lesson of economics is scarcity. The first lesson of politics is to disregard the first lesson of economics.” 

Government-as-investor is the embodiment of that tension.

Lessons From History

This kind of industrial policy is not new. Japan’s Ministry of International Trade and Industry (MITI) famously tried to steer the country’s industries in the 1980s, funneling state resources to “strategic sectors.” Yet the results were mixed at best. Japanese chipmakers, once dominant, fell behind precisely because competition gave way to cozy relationships with bureaucrats.

Closer to home, the federal government nationalized passenger rail with Amtrak in 1971, promising efficiency and profitability. Fifty years later, Amtrak still relies on billions in subsidies and remains unable to compete with private alternatives where they exist. 

Similarly, the 2009 federal bailout of GM and Chrysler made taxpayers temporary shareholders. The firms survived, but at the cost of distorting the bankruptcy process and politicizing capital allocation. 

These examples show that once government enters the boardroom, it rarely leaves.

Why Conservatives Should Worry

Perhaps the most troubling aspect of the Intel stake is not economic but political. Conservatives long criticized Democrats for pursuing industrial policy through the CHIPS and Science Act. Yet now, under Republican leadership, we see the same tactics—only bigger. 

If the right normalizes government equity stakes in the name of security, they will have no credibility left to oppose similar measures when the left expands them to other industries.

This is a bait-and-switch for the conservative movement. Tax cuts and deregulation were supposed to unleash private enterprise. Instead, Washington is embracing what can only be called corporate socialism—profits privatized, losses socialized, and taxpayers held hostage to the fortunes of politically connected firms.

A Better Path Forward

National security threats can happen, but equity ownership is the wrong response. Instead, policymakers should focus on conditions that encourage all firms to invest and innovate in the United States:

• Broad-based tax reform that lowers rates and removes carveouts.
  
• Regulatory streamlining that shortens permitting timelines and reduces red tape for manufacturing and energy projects.
  
• Sound money that preserves purchasing power and reduces uncertainty for investors.
  
• Rule of law and strong property rights, ensuring businesses know their assets won’t be subject to political manipulation.
  
• Spending restraint that limits government growth to the pace of population plus inflation, freeing up resources for the private sector. Cutting spending is not just fiscally responsible; it’s the only way to ensure the government cannot continue to expand its role as the investor of last resort.

If Intel or any other company cannot survive without a government equity injection, then it may not deserve to survive. That is how markets work: failure clears the way for success. Shielding firms from discipline delays the very innovation policymakers claim to seek.

Conclusion

The Trump administration’s Intel play is more than a one-off—it’s a signal of a broader shift. By taking equity stakes in private firms, the government ceases to be a referee and becomes a competitor. That distorts markets, undermines incentives, and saddles taxpayers with risks.

The lesson from Economics 101 is timeless: scarce resources must be allocated by markets, not ministries. The role of government is to set clear, neutral rules—not to hold stock certificates. If conservatives abandon that principle, they hand their opponents the blueprint for permanent industrial policy.

America doesn’t need Washington in the boardroom. It needs Washington to cut spending, balance the books, and let markets do what they do best: allocate capital, reward innovation, and drive prosperity. 

Intel’s future should be decided in the marketplace—not in the halls of the Treasury.

Famed investor Ray Dalio makes the case in How Countries Go Broke that the United States government is too heavily indebted and that significant changes to spending, taxes, and interest rates all need to be made, and soon, to save us from looming fiscal catastrophe.

This position is mostly uncontroversial outside of the halls of Congress, and practically the conventional wisdom in most economic policy circles today. Yet Dalio’s approach to making this argument is prefaced by almost 400 pages of intellectual empire-building and chart-making. This approach turns what could have been a tightly argued Substack essay into a quasi-memoir/manifesto.  

Dalio’s business thought-leader status is currently quite secure. He has written multiple books on similar themes over the last several years, including Principles: Life & Work (2017), Principles for Navigating Big Debt Crises (2018), and Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail (2021). He also maintains a website, principles.com, which collects his various writings, a recording of his 2017 TED talk, a series of 30-minute animated videos based on his writings, and the Dalio Market Principles self-study course, among other materials. He clearly considers himself to be a principled guru of sorts, and he has the stats to prove it – his books have been bestsellers, translated into multiple languages, and widely reviewed and discussed. His testimonials page overflows with praise from former cabinet secretaries, CEOs, and fellow celebrity authors.  

His body of work is based on the principles that guide the management and business practices at his investment firm, Bridgewater Associates, as well as his own related theories about world history, culture, and economics. This is an unusual blend in the world of business publishing. Most successful CEOs who write books tend to stick to self-help advice for young professionals and aspiring entrepreneurs rather than branching out into master theories covering thousands of years of world historical dynamics, but Dalio is nothing if not an ambitious thinker.  

His status as the enlightened despot of Bridgewater has generated its own share of myths and legends over the years, with many journalists, investigators, and former employees using terms like “cult,” “cult-like,” and “cult leader” to describe Dalio’s management style. He has extremely specific ideas about how things should be done and has an almost unlimited ability to impose conformity with those ideas within the firm that he founded.  Bridgewater reportedly has highly specific and aggressively enforced standards for workplace conduct and subjects its employees to idiosyncratic surveillance and accountability practices. 

Dalio and Bridgewater have plenty of defenders, of course, and the firm has been extremely successful. Forbes estimates Dalio’s net worth to be over $14 billion. Dalio’s much-remarked-upon internal management theories inform an understanding about his systematic thinking on public affairs in How Countries Go Broke. 

The tone of his latest book takes some getting used to. It ricochets between the absolute certainty of a messiah figure who has discovered the innermost secrets of the universe to the shrugging dismissal of a guy who is just asking questions. Dalio emphasizes his long study of historical cycles in economic affairs. He claims to have identified certain patterns that can help us understand our current times and even predict the future. His certainty is sufficient for him to refer, several times, to his theories with phrases like “timeless and universal truths” and “timeless and universal mechanics and principles.” Dalio is, in general, very confident that he has identified important patterns in human affairs that have eluded lesser observers and that readers would be foolish to ignore.  

At other times, however, he yields his status as knower of timeless and universal truths, with statements like “…what I don’t know is much greater than what I do know.” He offers a detailed analysis, for example, of the global power dynamics between the United States, the People’s Republic of China, and Taiwan, only to sum it up with the statement “Keep in mind that while that is what I think about the world’s geopolitical order, I’m not sure of anything.” That may be an admission of admirable modesty, but it rather undermines the urgency of some of his claims.  

While Dalio holds forth on a broad range of topics relating to history, government, economics, and culture, How Countries Go Broke is primarily about government debt, and students of monetary policy will no doubt be very interested in the analysis presented. He points out that in many previous cases of rising government debt, central governments and finance ministries around the world have had recourse to the same tools for debt management. Total indebtedness has frequently risen over multiple decades, until a crisis emerges and the existing regime for issuing, valuing, and monetizing debt breaks down. Post-crisis, a new system emerges.  

Governments tend to shortsightedly load up on debt until they eventually default. Dalio presents many data points and charts showing parallel examples through the last few hundred years that suggest a more predictable cycle than most observers might initially imagine. Because the cycle of debt and default (and the attendant financial pain that comes with that process) is reasonably predictable, the book’s warning comes at a particularly timely moment. According to the Dalio timeline, we’re dangerously close to the moment we should be expecting a US debt-overload meltdown. 

As with many public intellectuals outside government, the real purpose of Dalio’s book seems to be to persuade those with power – the Federal Reserve chairman, the president, and members of Congress – to adopt a wise course of policy action before the looming disaster strikes. He advises higher taxes, lower spending, and lower interest rates. There are many books with such a formula. The odd angle with How Countries Go Broke, though, is that Dalio’s own eccentric theory of human civilization might make his entire book moot. 

The reader is repeatedly reminded that cycles of government debt, which Dalio calls the Big Debt Cycle, as well as the grand civilizational cycle by which empires rise and fall, which he terms the Overall Big Cycle, are something akin to iron laws. They are detectable and predictable precisely because they do not vary once they have begun. By the end of the book, Dalio reveals that he actually believes in a highly deterministic universe in which relatively little responds to the will of individual human beings.  

He considers the forces that govern human society to be a kind of “perpetual motion machine” that functions the same across the centuries and around the globe. By the final chapter, he pushes this view even further, saying that “everything (other than the quantum world) is predestined” and that the only thing stopping human beings from essentially knowing the future is an insufficiently detailed model of causes and effects – something he expects to “get much closer to achieving” using the tools of artificial intelligence.    

Dalio believes that economic affairs are basically “mechanical” – moving forward in a fixed way, like a set of interlocking machine parts. But if the Big Debt Cycle is literally inevitable (as discovered by Dalio’s own scholarship), then why write a book about how the US needs to avoid public debt in the first place? When giving his specific policy recommendations about taxes, spending, and interest rates, he seems to suggest, like most policy advocates, that his preferred policies can make the difference between prosperity and disaster. But that seems to be at odds with his fatalistic assumptions about how the boom-and-bust rollercoaster of government debt actually works.    

Presumably, Dalio’s theory of free will extends to his own smart investing choices that have made him, and many of his clients, rich. But a world that actually worked in the way he describes it would seem to leave little room for guiding major world historical events like currency collapses and global recessions. One also wonders how often Dalio’s galaxy-brain theorizing is challenged by those closest to him, since his most frequent collaborators are his own employees, whose professional futures are subject entirely to his managerial discretion as Bridgewater’s founder.  

No commentary on How Countries Go Broke would be complete without mentioning the book’s unusual layout. In a strategy that seems inspired by modern productivity-maximizing tools, the book’s text is sometimes presented as normal, sometimes in blocks of bold, and sometimes (for the most important insights) in passages that are bolded, italicized, and preceded by a red dot. Unlike most authors who restrict their formatting emphasis to a single bolded or italicized phrase, Dalio’s text often runs to entire paragraphs in bold, sometimes with multiple pages almost entirely set off with emphatic formatting. Each chapter also comes with specific advice for engaging with it, with readers alternately advised to skip, browse, or attend closely, depending on their expectations and education levels. While obviously meant to be helpful, this overload of visual and narrative cues is ultimately a distracting gimmick that retards, rather than enhances, the reader’s focus.  

Then again, it’s possible that effect was simply part of the inevitable mechanism of history at work.

Joseph Schumpeter famously said that creative destruction is the “essential fact about capitalism.”  Entrepreneurs are the moving force in Schumpeter’s drama, but they are victims as often as heroes. The reason is that having an idea is not enough; you have to make it work in the marketplace. The invention of ideas, and the fast borrowing of those ideas, reflect both the destruction and the creation of Schumpeter’s insight. Or, as Milton Friedman often said, capitalism is a system of profit and loss; the “and loss” part is important.

This truth is put in sharp relief by the story of the McDonald’s “Happy Meal,” a tale of innovation, theft, and Count Fangburger.  In America, there are few childhood icons more deeply felt than the cheerful red box, branded toys, and child-sized portions, especially the (let’s be honest) French fries. But behind that cheerful cardboard is a real tale of creation, and destruction: RIP, Count Fangburger.

There are three narratives that one might deploy to explain the origins of the Happy Meal, and I’m going to present all three. The first begins in Guatemala in the mid-1970s; for some reason, this one has become dominant, perhaps because it smacks of the “colonial oppression” stories so popular in faculty lounges and hipster coffee shops. 

The second, and more historically tenable, account begins with a rival fast-food chain called Burger Chef, which claimed (correctly) that McDonald’s had mimicked their packaging idea. The third, and even more correct, view holds that this kind of creative borrowing is a normal, even essential, part of capitalist creation, and destruction. 

All three narratives are in some sense true, of course. But the real story of the Happy Meal is one of convergence, competition, and creative imitation — a tale as much about economics as about hamburgers.

Yolanda Fernández de Cofiño and the “Menú Ronald”

In 1974, Yolanda Fernández de Cofiño and her husband José María Cofiño acquired the first McDonald’s franchise in Guatemala, located in Zone 1 of Guatemala City. The Cofiños quickly noticed a problem: families visiting their restaurant often found that the standard McDonald’s portions were too large for their young children. Rather than simply shrink existing meals, Yolanda had a more creative solution.

“She created what she called the ‘Menú Ronald’ — a kid-sized meal with a small burger, fries, drink, a sundae, and a toy,” writes Katarina Hall in Reason magazine’s 2025 summer issue. Rather than wait for corporate approval, Fernández de Cofiño took matters into her own hands. She purchased small toys from local Guatemalan markets and packaged them in a child-friendly meal designed specifically for young customers. The innovation was not simply a smaller portion, but a tailored experience: food, fun, and a sense of being important.

This localized creation was an immediate success in Guatemala. But its influence would soon go much further. As Hall notes, the Menú Ronald “was not the product of a structured research team or marketing department, but of observation, care, and resourcefulness.” In time, word of its success made its way to McDonald’s corporate headquarters in the United States.

By the mid-1970s, McDonald’s was actively looking for ways to capture the attention of younger customers. Company executives had taken note of how breakfast cereal brands were marketing to kids through toys, mascots, and collectible items. When the seed of Fernández de Cofiño’s idea reached headquarters in Chicago, it landed in fertile ground, and sprouted into a corporate initiative in 1977, opening in a limited market (Kansas City), and then quickly spreading nationwide.

At least, that is the story McDonald’s tells the world. There is (record scratch!) another story.

Burger Chef: Creation, then Destruction

Burger Chef had been founded as a burger and fries restaurant, a rival of McDonald’s, in 1954. Headquartered in Indianapolis, founders Frank and Donald Thomas (no relation to Wendy’s Dave Thomas, though it’s a good story) had grown the Burger Chef franchise to more than 1,200 locations — second only to McDonald’s in the US. Burger Chef and McDonald’s were very aware of each other, and they were watching each other.

A big part of the reason for that watchfulness was that Burger Chef had always been an innovator. Years before McDonald’s introduced the Big Mac, Burger Chef had launched the Big Shef, a double-decker burger that one could describe as “two all-beef patties, special sauce, lettuce, and cheese on a sesame seed bun.” It also developed an imaginative cast of cartoon mascots — including Burger Chef & Jeff, Count Fangburger, Burgerini the magician, Burgerilla the talking ape, and Cackleburger the witch — decades before the Ronald McDonald’s cartoon universe was developed into the McDonaldland characters.

But the biggest and most important marketing idea came in 1973: the Fun Meal, the first prepackaged meal specifically designed for children. The idea evolved from a 1972 offering called the “Funburger,” a child-sized portion, which featured a burger in puzzle-covered packaging and a small toy — two full years before Ms. Fernández had the same idea in Guatemala. The full Fun Meal launched a year later and included a hamburger, fries, drink, cookie, and a toy — all packaged in a colorful, game-filled box featuring Burger Chef’s cartoon characters.

This was not merely a meal; it was a branded, immersive experience. As The Indianapolis Star reported, the Fun Meal “transformed dinnertime into entertainment for children.” It became a defining feature of Burger Chef’s brand.

(Full disclosure: I was a night manager at a Burger Chef for two years, and I would estimate that I unboxed and folded more than 10,000 Fun Meal boxes during those evenings.  I can personally attest that by the summer of 1977 Fun Meals were fully distributed at thousands of Burger Chefs nationwide, and were very popular for children, long before McDonald’s had Happy Meals. Furthermore, the “Works Bar,” a place where you could add lettuce, tomato, onions, pickles and other things to your burger, was a work of innovative genius.)

Of course, here comes McDonald’s:  “Something something food for kids, something Guatemala….” Look, regardless of what Ms. Fernández de Cofiño did or didn’t do, the similarities between the Fun Meal and the “new” Happy Meal were impossible to ignore: a burger, fries, drink, toy, and a box decorated with puzzles, games, and cartoon characters. Sure, they were different cartoon characters, but this was clearly just corporate theft.

Burger Chef responded by filing a federal lawsuit, accusing McDonald’s of trademark infringement and unfair competition. The company argued that McDonald’s had copied not only the idea of a bundled kids’ meal, but its exact format, marketing structure, and even its packaging concept, with slightly different cartoons.

The late ‘70s were a time when consumer advocates, right or wrong, were looking for a chance to strike a blow against corporate power. Legal experts viewed the case as a rare and important challenge by a smaller innovator against a corporate giant. But….wait. Burger Chef had failed to formally trademark or patent key elements of the Fun Meal. The court ultimately dismissed the case, ruling that the concept of bundling food with toys in child-oriented packaging was too broad to be protected as intellectual property.  (Besides, Cracker Jack wants a word…)

As Elpack.co.uk reports: “The lawsuit was ultimately dismissed… The idea of bundling food with toys and child-themed packaging was deemed too generic to merit legal protection.” The courts found no legal wrongdoing. But the ruling was a devastating blow for Burger Chef.

Already struggling with corporate mismanagement, over-expansion, and competition from McDonald’s selling Happy Meals, Burger Chef never recovered. In 1982, General Foods sold the brand to Imasco, the Canadian parent of Hardee’s. Most Burger Chef locations were converted to Hardee’s stores or shuttered entirely. By 1996, the last Burger Chef closed its doors.

The Nature of Capitalist Innovation — Imitation and Improvement

So, who invented the Happy Meal? And does it matter?

Yolanda Fernández de Cofiño really did have a good idea, adapting a children’s menu for Guatemalan families. More people bought meals as a result, a lot more. But Burger Chef really did conceive and produce a whimsical, folded box Fun Meal with cartoons and puzzles printed on the box, and with child-sized portions, and it was fully in operation across the US years earlier.  On the other hand, McDonald’s marketing executive Bob Bernstein really did gather together the pieces, and took a huge gamble on marketing the Happy Meal, going all in on the concept, the packaging, and the (new) cartoon characters, combining the parts into a nationally scalable product.

The answer is that it doesn’t really matter now, though of course it mattered to the participants at the time. The complexity of innovation, and the ability to adopt and adapt innovations we see around us, is the real essence of creative destruction. McDonald’s did not destroy Burger Chef; that was the logic of profit and loss. But the innovations Burger Chef brought to the market changed the business in ways that now seem essential: all of us younger than about 60 remember Happy Meals at McDonald’s as a rite of childhood.

Rather than undermining the validity of the Happy Meal’s story, this multiplicity highlights something crucial about how capitalist innovation works. In a market system, ideas are rarely born perfect and complete. Rather, parts are borrowed, copied, improved, and scaled. Success does not always go to the first inventor, but often to the best replicator and popularizer. James Watt didn’t invent the steam engine, but he produced steam engines that were commercially viable.

As Katarina Hall rightly notes, Fernández de Cofiño’s contribution “is a testament to Guatemala’s deep entrepreneurial energy — an informal, voluntary spirit that thrives even in the face of bureaucracy and poverty.” Her story shows how powerful innovation can emerge from ground-level observation, not corporate strategy.

Likewise, Burger Chef’s experience reveals the fragility of innovation when not legally protected or effectively promoted by competent management. Frankly, it’s not clear that Burger Chef should have been able to patent the concepts it innovated, and McDonald’s did not directly infringe on any trademarks, since they used new and different cartoon characters.

So the conclusion should not be colonialism, or cynicism; creative destruction requires realism. Capitalist economies work because good ideas move, spreading quickly. Innovations get copied, improved, and recombined in unexpected ways. The Happy Meal wasn’t “stolen” so much as refined. It emerged from a decentralized ecosystem of franchise owners, regional ad firms, and small competitors.

In the end, the Happy Meal is not just a fast-food product — it’s a case study in how markets generate progress. Imperfectly. Inequitably. But effectively.

Burger Chef is long bankrupt, the end point of the “destruction” of capitalism. Yolanda Fernández de Cofiño is also gone; she passed away in 2021. Yet their ideas are still served millions of times each day — in red boxes, with golden arches. And with a toy.

Federal Reserve Chair Jerome Powell is expected to release the details of the Fed’s framework review at this week’s annual Jackson Hole Economic Policy Symposium. The Fed’s framework specifies the objective of monetary policy — that is, how the Fed intends to respond to changes in inflation, unemployment, and production. In other words, it determines how the Fed will conduct monetary policy.

The Fed reviews its framework every four to five years. The current review began in January 2025. In addition to discussions at Federal Open Market Committee (FOMC) meetings, the review included Fed Listens events and the Thomas Laubach Research Conference. Back in January, Powell said Fed officials will “be open to new ideas and critical feedback and we will take on board lessons of the last five years in determining our findings.”

Most Fed watchers anticipate significant revisions to the Fed’s Statement on Longer-Run Goals and Monetary Policy Strategy (henceforth, “Consensus Statement”). At the January FOMC meeting, “participants assessed that it was important to consider potential revisions to the statement, with particular attention to some of the elements introduced in 2020.” Specifically, they identified the “focus on the risks to the economy posed by the [effective lower bound], the approach of mitigating shortfalls from maximum employment, and the approach of aiming to achieve inflation moderately above 2 percent following periods of persistently below-target inflation” as areas of the Consensus Statement potentially in need of revision. That was welcome news to economists like me, since those 2020 changes arguably contributed to the Fed’s slow response to rising inflation in late 2021 and early 2022.

Prior Changes

The Fed made two important changes to its Consensus Statement during its last review, which concluded in August 2020. First, it replaced its Flexible Inflation Target (FIT) with an asymmetric Flexible Average Inflation Target (FAIT). Second, it replaced its symmetric approach to delivering maximum employment with an asymmetric approach aimed at preventing shortfalls from maximum employment. Why did the Fed make those changes then?

The move from FIT to FAIT was intended to address problems with the conduct of monetary policy that emerged in the immediate aftermath of the Great Recession. The Fed formally adopted a 2-percent inflation target in January 2012. Although the Fed’s FIT was intended to deliver inflation at 2 percent, the Fed generally failed to hit its target in the years that followed. The Personal Consumption Expenditures Price Index, which is the Fed’s preferred measure of inflation, grew at a mere 0.9 percent on average from January 2012 to January 2016. As I wrote back in 2015, it was “widely believed that the Fed’s stated 2 percent target is, in fact, a 2 percent ceiling.”

In 2016, the Fed revised its Consensus Statement to clarify that its 2-percent FIT was symmetric: it would be just as likely to overshoot its inflation target as to undershoot it. By clearly stating that its FIT was symmetric, the Fed hoped to anchor inflation expectations at 2 percent and, in doing so, make it easier to conduct monetary policy to deliver 2-percent inflation. As written in the 2016 Consensus Statement: 

Communicating this symmetric inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances.

Alas, that proved easier said than done. Inflation (as measured by PCEPI) averaged just 1.7 percent from January 2016 to January 2020, just prior to the pandemic.

Having persistently undershot its inflation target under FIT for the better part of a decade, the Fed adopted its FAIT framework in August 2020. Whereas FIT was designed to deliver 2 percent inflation on a go-forward basis, regardless of any past mistakes, FAIT included a make-up policy that was intended to deliver 2-percent inflation on average. The Fed was explicit in noting that, “following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” It did not explicitly state how it would conduct policy following periods when inflation has been running persistently above 2 percent, but the assumption I (and many other economists) had at the outset was that it would engage in FAIT symmetrically — i.e., that it would similarly make up for periods when inflation had been too high. The A in FAIT stood for average, after all; and inflation would not average 2 percent if the Fed only made up for periods of below-target inflation.

Despite the name, we soon learned that the Fed did not intend to make up for periods of above-target inflation. Inflation (as measured by PCEPI) has averaged 3.9 percent since August 2020. And, although the Fed has worked to bring inflation back down to 2 percent from a high of 11.3 percent in June 2022, it does not intend to deliver below-target inflation for a period, as would be required for inflation to average 2 percent. FAIT was not symmetric: the Fed would only engage in make-up policy if it undershot its target.

The reason for the move from a symmetric approach to delivering maximum employment to an asymmetric approach is somewhat harder to pin down. Three possible reasons come to mind.

1. Fed officials wanted to reinforce the Fed’s asymmetric approach to targeting inflation.
2. Fed officials came to accept a plucking model of business cycles.
3. Fed officials became concerned about employment gaps between races, and thought the best way to prevent such gaps was to ensure the economy was always at or above full employment.

One might make a strong case for any of these reasons, and perhaps all three played a role. In any event, the consequences of such an approach soon became clear: the Fed was slow to tighten monetary policy when inflation picked up in 2021, out of concern that doing so might cause employment to fall below potential.

Expected Changes

Although the Fed has not yet released its revised Consensus Statement, the minutes from FOMC meetings held earlier this year offer a good sense of what changes will be made. 

At the March 2025 meeting, participants “discussed the implications of pursuing a strategy that seeks to mitigate shortfalls of employment from its maximum level, as described in the statement, and the ways the public has interpreted that approach since it was introduced into the statement” and “indicated that they thought it would be appropriate to reconsider the shortfalls language.” In other words, the Fed is likely to replace its focus on shortfalls from maximum employment with deviations from maximum employment, which would result in a more symmetric approach to achieving maximum employment.

At the May 2025 meeting, participants “indicated that they thought it would be appropriate to reconsider the average inflation-targeting language in the Statement on Longer-Run Goals and Monetary Policy Strategy.” They “noted that an effective monetary policy strategy must be robust to a wide variety of economic environments” and “viewed flexible inflation targeting as a more robust policy strategy capable of correcting persistent deviations of inflation from either side of the Committee’s 2 percent longer-run objective.” In sum, the Fed is likely to replace its asymmetric FAIT with a symmetric FIT.

Taken together, the FOMC meeting minutes from March and May of this year suggest the Fed intends to undo the changes made to the Consensus Statement back in August 2020. That’s understandable, given the experience of the last five years. Focusing on shortfalls rather than deviations from maximum employment and failing to commit to offset periods of above-target inflation enabled the Fed to delay tightening monetary policy in late 2021 and early 2022. As a consequence, inflation rose higher than it otherwise would — and the level of prices will remain permanently elevated above its pre-2020 trend path. In other words: the Fed’s framework did not serve the American people well during this period.

Tell Me Why

Somewhat surprisingly, Chair Powell maintains that the existing framework did not prevent the Fed from conducting policy appropriately over the last five years:

There was nothing moderate about the overshoot. It was an exogenous event. It was the pandemic and it happened and, you know, our framework permitted us to act quite vigorously. And we did, once we decided that that’s what we should do. The framework had really nothing to do with the decision to — we looked at the inflation as — as transitory and — right up to the point where the data turned against that. [W]hen the data turned against that in late ‘21, we changed our — our view and we raised rates a lot. And here we are at 4.1 percent unemployment and inflation way down. But the framework was more irrelevant than anything else — that part of it was irrelevant. The rest of the framework worked just fine as — as we used it — as it supported what we did to bring inflation down.

The existing framework, according to Powell, is not broken and, hence, does not need to be fixed.

Powell’s statement is somewhat surprising for at least three reasons, as my colleague Bryan Cutsinger has explained. First, the emerging consensus is that much of the inflation experienced between 2021 and 2024 was due to excessive demand, which monetary policy could have and should have offset. Second, the Fed clearly delayed tightening monetary policy, just as one would expect it to do given its existing framework. Third, the Fed’s asymmetric FAIT framework prevented it from bringing prices back down to where they would have been had it not allowed demand to surge; the lack of make-up policy following an overshoot meant prices would remain permanently elevated.

Powell’s remarks also seem incongruent with the facts that (1) the Fed is revising its framework and (2) as he himself has stated, Fed officials “will take on board lessons of the last five years” in making revisions. If the framework “worked just fine” and permitted the Fed to “act quite vigorously” over the last five years, as Powell maintains, then surely the lesson is that the Fed should leave its well-functioning framework as is. As my grandpa used to say: don’t fix what’s not broken.

It seems more likely that Powell and others at the Fed recognize the problems with the existing framework and are making changes to improve it, but do not want to acknowledge their errors: adopting a faulty framework in August 2020 and then sticking with it in late 2021 and early 2022, as inflation climbed. The reluctance for Fed officials to admit they made a mistake — and, in this case, two mistakes — is not at all surprising. The Fed’s mea culpa for the Great Depression was seventy years in the making.

A troubling new piece of legislation continues to make its way through the British parliament. Dubbed the “Banter Bill,” the Employment Rights Bill would criminalize any speech that might be considered offensive by any passerby. 

As Dominic Green reports for The Free Press, under this proposed law, “Britons can be prosecuted for a remark that a worker in a public space overhears and finds insulting.” Under this standard, whether a certain sentiment (for instance, that Britain should reduce immigration) is legal will now depend on whether someone in the vicinity takes offense.

Unfortunately, this new subjective standard for what types of speech are allowed isn’t restricted to Great Britain. In the United States, more and more states are experimenting with a similar system. The Washington Free Beacon reports that eight states have set up “bias-response hotlines” which citizens are encouraged to call if they hear a comment — from a neighbor, coworker, or even passersby on the street — that they consider to be offensive. As Oregon says of their hotline, if you see or hear someone “creating racist images/drawings; mocking someone with a disability; or telling or sharing offensive ‘jokes’ about someone’s identity” they want to hear about it.

For examples of how absurd this can all get, in the United Kingdom, one man was arrested for praying silently in his apartment because a passerby found his praying offensive. In Oregon, a bias response incident was logged when a reporter from the Free Beacon, seeking to test how far this new Orwellian system would go, called to complain that after a dispute with their neighbor about the situation in Gaza, their neighbor had started flying an Israeli flag.

To be clear, the system in the United States, while bad, isn’t nearly as draconian as the system in Europe. In the United States, offensive jokes and racist memes are still legal, and it’s not clear what (if anything) the state has the power to do to people accused of making biased statements. Nonetheless, both systems represent a kind of snitch network: a state-based system that encourages citizens to run to the authorities any time they hear someone say something that they find offensive or disagreeable.

One of the biggest problems with these types of snitch networks is that they threaten to make us worse people.

For one thing, these networks encourage us to act like schoolchildren running to tattle on a classmate. “If you see something, say something” is awful advice when what you see is simply people praying silently or hanging flags with which you may disagree. Over time, networks like these threaten to change our culture from a “dignity culture” into what sociologists Bradley Campbell and Jason Manning call a “victimhood culture.” 

Here’s how Jonathan Haidt and Greg Lukianoff describe dignity culture in their book The Coddling of the American Mind:

In an optimally functioning dignity culture, people are assumed to have dignity and worth regardless of what others think of them, so they are not expected to react too strongly to minor slights…People are expected to have enough self-control to shrug off irritations, slights, and minor conflicts as they pursue their own projects. For larger conflicts or violations of one’s rights, there are reliable legal or administrative remedies, but it would be undignified to call for such help for small matters, which one should be able to resolve on one’s own.

By contrast, Campbell and Manning describe “victimhood culture” as one in which people “display high sensitivity to slights,” “have a tendency to handle conflicts through complaints to third parties,” and “seek to cultivate an image of being victims who deserve assistance.”

Dignity cultures cultivate emotionally healthy responses and encourage people to develop the emotional resilience necessary to cope with life. Victimhood cultures encourage us to see oppression everywhere, to become paranoid, and to see our fellow citizens as possible threats to be reported.

Snitch networks encourage the callers to see themselves as victims. When the reporter from the Free Beacon called to complain about the Israeli flag, the operator suggested that he could “apply for taxpayer-funded therapy through the state’s Crime Victims Compensation Program, which covers counseling costs for bias incidents as well as crimes.” Just to reiterate how insane that is: this is a state government, telling a citizen that he might want to seek therapy because his neighbor was flying an Israeli flag.

This has the potential to do profound psychological damage. The truth is that, as humans, we more or less rise or fall to the standard to which others hold us. If people around us (especially people we endow with authority and trust, such as the operator of a government-sponsored hotline that we’re calling) tell us that we’re so fragile that we might need to seek therapy after seeing a flag, then we’re liable to believe them. We might even go to therapy, which can further reify our thin-skinnedness and reactivity. That, in turn, can make us feel even more vulnerable the next time that we hear or see something that we find uncomfortable, which can encourage us to start the vicious cycle all over again.

As the old saying goes: whether you believe you can or believe you can’t, you’re right. To put a psychological spin on it: whether you believe you are strong and capable enough to see an Israeli flag (or a man silently praying) and then go on with your day, or you believe that you’re so fragile that said sight necessitates a call to a government agency and possibly therapy, you’re right. 

These snitch networks can also encourage catastrophizing in the kinds of people who use them. When the Free Beacon reporter called to report that their neighbor had begun flying an Israeli flag, the operator called it a “warning sign” and suggested that the caller consider installing security cameras in case the situation “escalates.” When the Free Beacon called again, this time posing as a Jewish man whose neighbor had hung a sign that said “From the River to the Sea,” the operator responded by offering to “talk about a safety plan” if the caller didn’t “feel safe.” “We have a small pot of money that can be used to purchase security cameras, locks, and other types of security measures,” the operator said.

But when people we trust encourage us to catastrophize, we can start to see threats all around us. When state operatives tell us that we should install security cameras in case our neighbors take hostile action, we start to see those neighbors as a threat — even if they’re actually completely benign. The whole system is a path to anxiety and paranoia.

These snitch networks threaten to make us more fragile. Instead of calling the authorities every time we see someone say something that we consider to be offensive, perhaps a healthier approach would be to remind ourselves of that old adage about sticks and stones.

These snitch networks are also a good reminder of what happens when our government is no longer limited. 

Limited government encourages its citizens to act like adults, because there’s not always an authority figure hovering nearby to resolve any conflict. By contrast, one of the bigger psychological dangers of a totalitarian government is that it encourages its citizens to act like children.