The American Institute for Economic Research’s Everyday Price Index (EPI) declined 0.13 percent to 290.9 in August 2024, the same level it held in both April and May 2024. This is the second monthly decline the index has seen this year, with the previous coming in June.

AIER Everyday Price Index vs. US Consumer Price Index (NSA, 1987 = 100)

Among the twenty-four EPI constituents, seven declined, one was unchanged from the prior month, and sixteen rose in price.

On September 11, 2024, the US Bureau of Labor Statistics (BLS) released Consumer Price Index (CPI) data for August 2024. The month-to-month headline CPI number rose by 0.2 percent, meeting surveyed predictions. The core month-to-month CPI number increased by 0.3 percent, higher than the forecast increase of 0.2 percent. 

In August 2024, shelter costs increased by 0.5 percent, contributing significantly to the overall rise in the all-items index, while food prices saw an 0.1 percent increase, following a 0.2 percent rise last month. Food consumed away from home rose 0.3 percent, while prices for food at home remained stable. Energy costs saw a notable 0.8 percent decline after remaining unchanged in the prior month. 

Excluding food and energy, the month-to-month core index saw an 0.3 percent uptick in August, slightly higher than the 0.2 percent increase recorded in July. Contributing were gains in many of the expected areas, some of which fall within the Fed’s closely watched “supercore” category:  shelter, airline fares, motor vehicle insurance, education, and apparel. On the other hand, categories like used cars and trucks, household furnishings, medical care, communication, and recreation saw declines, all of which reflecting a mixed landscape for consumer prices.

August 2024 US CPI headline & core month-over-month (2014 – present)

In year-over-year data, headline CPI rose 2.5 percent, which met forecasts. Year-over-year core CPI rose 3.2 percent, meeting the 3.2-percent prediction.

August 2024 US CPI headline & core year-over-year (2014 – present)

Over the 12-month period ending in August, the all-items index rose by 2.5 percent, marking the smallest year-over-year increase since February 2021, while the core index (excluding food and energy) increased by 3.2 percent. Energy prices saw a significant 4.0 percent decrease over the past year, contrasting with a 2.1 percent increase in the food index. 

Over the past 12 months, the index for all items excluding food and energy rose by 3.2 percent. The shelter index rose by  5.2 percent, contributing to more than 70 percent of the total rise in the index for all items except food and energy. Other significant increases over the past year include motor vehicle insurance (up 16.5 percent), medical care (up 3.0 percent), recreation (up 1.6 percent), and education (up 3.1 percent).

While disinflation in goods remains persistent (despite rising freight costs through much of the last year) housing rents and auto insurance prices remain elevated. Historically, changes in freight prices lead price changes in core goods inflation by six to twelve months. Given that freight costs have been climbing since mid-2023, we would expect them to be reflected in core goods prices by now. That does not seem to have happened yet, which suggests that firms are absorbing those rising costs, and may explain why S&P profit margins have been declining for the past quarter or two. If true, the willingness of private companies to eat higher freight costs would indicate that inflation expectations are well-anchored — at least in corporate board rooms and on loading docks. If that is the case, though, it suggests that going forward firms will have a limited ability to pass on increased costs. With the US savings rate approaching an all-time low and consumer distress ticking up, the pricing power of US companies may be also at or near a low. 

Looking at persistent inflation in auto and home insurance, one is best reminded that these sectors are only marginally impacted by the business cycle. Even if unemployment were to rise substantially over the next 12 months, inflation in those categories is likely to remain robust. Compounding this, Medicare service costs, which are also acyclical, are anticipated to rise next year.

While there was good news in the August CPI release, two tentative conclusions of a somewhat somewhat less positive character may be drawn. First, in light of today’s numbers, the likelihood of a 50-basis-point rate cut at the September 18 meeting of the Federal Open Market Committee (FOMC) has dissipated almost completely. And second, that inflation in the United States will end 2024 above the Fed’s target range. Justifications for easing the monetary policy stance over the next quarter or two are therefore likely to come from worsening labor market conditions alone. 

Price growth was moderate in August, the Bureau of Labor Statistics reports. The Consumer Price Index (CPI) rose 0.2 percent last month and 2.5 percent over the past year. On a continuously compounded basis, prices grew at an annualized rate of 2.24 percent in August. Core CPI, which excludes volatile food and energy prices, grew slightly faster at 0.3 percent per month and 3.2 percent per year. The continuously compounded annual rate was 3.37 percent in August.

Inflation rose slightly over the past two months, but not by enough to undermine the general disinflationary trend. Dollar depreciation is back within a steady range. The Federal Open Market Committee (FOMC) will likely infer from this data that it’s time to loosen monetary policy.

Current monetary policy remains tight. Both interest rates and money supply data tell us that it’s appropriate for the Fed to ease up. Because monetary policy usually works with a lag, if the Fed waits until inflation falls all the way to 2-percent before loosening, it may sow the seeds for an unnecessary downturn. The time to adjust policy is now.

Let’s start with interest rates. The federal funds rate target range is 5.25 to 5.50 percent. Adjusting for inflation using the prior month’s continuously compounded annual rate, we get a real interest rate range of 3.01 to 3.26 percent. As always, we need to compare this to the hypothetical interest rate that brings supply and demand in capital markets into balance. Economists call this the natural (or neutral) rate of interest. 

We can’t observe the natural rate directly. But we can estimate it based on economic fundamentals. One popular set of models from the New York Fed put it somewhere between 0.74 and 1.22 percent in Q2:2024. Actual market interest rates are significantly above the natural rates. In fact, they’re between two and three times as high. This strongly suggests monetary policy is restrictive.

Monetary data tell a similar story. The M2 monetary aggregate, which is the most commonly cited measure of the money supply, is 1.7 percent higher today than a year ago. Broader aggregates, which weight money supply components based on liquidity, are up 1.10 to 1.80 percent on the year. But money growth by itself doesn’t imply loose money.

It’s normal for the money supply to grow when the economy (GDP) and population are growing. In fact, to keep monetary policy on track, the money supply should grow at about the rate of economic and population growth summed together, which would keep cash balances per person roughly equal.

Real GDP grew at an annualized rate of 3.15 percent in Q2:2024. In 2023, the most recent year we have data, the US population grew 0.5 percent. Hence it would be appropriate for the money supply to grow around 3.65 percent. Actual money growth is much slower. In other words, the conclusion one should draw from the monetary data is the same as that from interest rate data: policy is too restrictive.

Unfortunately, the shadow of the presidential election hangs over Fed decision-making. If they loosen, Team Trump will throw a fit. If they don’t, Team Harris will. That’s just how it goes. The Fed should ignore the political noise and follow the data. Central bankers failed to curb inflation, but that doesn’t mean they should deliberately make the opposite mistake now. The economy is signaling it’s ready for looser money. Let’s hope the FOMC delivers.

As Jonah Goldberg recently noted in the Los Angeles Times, “All presidential candidates vow to unite Americans.” He provided recent examples. Many more could be found if we look back in time. In contrast, “nearly every pundit and public intellectual laments the lack of unity.” He sees that gap as evidence that unity is “the single most abused, misused and misunderstood word in American politics.” 

Goldberg’s analysis is insightful. He recognizes that current political appeals to unity are really appeals to power (“If you people would just get on board with me, we could achieve what we are united about”), so that such unity’s goodness “depends entirely on what you do with it.” What do we tend to do with it? Partisans try to “steamroll political opponents with forced unity and power not granted by the Constitution.”

That recognition leads me to ask, is real unity, as opposed to political unity of 50 percent plus one against a minority (as with James Bovard’s assertion in Lost Rights that “Democracy must be something more than two wolves and a sheep voting on what to have for dinner”), even possible today, or is it a chimera whose allure leads us into a great of trouble?

The answer turns on precisely what we are trying to agree upon. When we talk in broad generalities and aspirations, we appear to be unified. We may agree, for example, that we all want people to have food, clothing, housing, medical care, education, etc. But that seeming agreement falls apart as soon as we consider specifics. We differ on almost every aspect of almost every specific good. 

In other words, we want different types, qualities and quantities of all of those goods and services, provided in different ways, at different times and places, for different people. Given the vastly varied specific desires and tradeoffs that characterize us, not to mention whom we think should pay the bills, this means our specific ends and goals will conflict rather than align.

When discussing this issue in my classes, I like to use the example of breakfast. Are students’ families unified about breakfast? Does everyone agree it is “the most important meal of the day”? Does everyone even eat breakfast? Do they all drink the same thing, or do people choose a wide gamut running from coffee to tea (sometimes decaffeinated) to colder forms of caffeine like soda and energy drinks, to milk and a variety of juices? Are all agreed on when, where, what, or how much to eat? Who should have to pay for it, cook it, and clean up afterwards? Do we agree on the dress code that should apply, either at breakfast or afterward?

Now multiply by the uncountable number of decisions that must be reached in society every day, and our fundamental disunity becomes clear. And rather than disappearing when we get to public policy, that disunity can grow further. Public policies that take from some to give to others, for a start, create inherent disagreement from those whose pockets are involuntarily picked. And such efforts have increasingly become the central focus of government policy, so much so that reducing what we take from some also triggers disagreement, because it would entail giving less to others than they are currently given now. When government focuses on such issues, real unity is very unlikely, and coercion will be part and parcel of policy.

That makes the central concern not that of implementing specific ends we agree on, but how best to mutually achieve our different and conflicting ends. It is whether we can find a way to “disagree better” than the political hash we make of things now. And doing so requires us to recognize that we share far greater agreement about what all of us want to avoid for ourselves than about specific things we want. 

In contrast with political “successes” which consist in taking others’ resources, there is one area in which we could agree if we were given the chance — all of us want freedom to peacefully pursue our own goals. Each of us wants ourselves, our rights and our property defended against invasion. You see this in the traditional functions of government which, in a nutshell, are to protect us from violations by foreign powers and by our neighbors. As Lord Acton put it, “liberty is the only object which benefits all alike, and provokes no sincere opposition,” because freedom to choose for ourselves is always the primary means to our ultimate ends, and that liberty requires “the limitation of the public authority.” But we are incredibly far from agreement on that today.

Despite vast differences in our personal circumstances, preferences and goals, all individuals gain from “the mutual preservation of their lives, liberties and estates,” as John Locke put it, for our “pursuit of happiness,” in Jefferson’s words in the Declaration of Independence. This means defending people’s personal freedom, property rights, and rights to trade and contract.

David Hume put it this way:

The convention for the distinction of property, and for the stability of possession, is of all circumstances the most necessary to the establishment of human society …after the agreement for the fixing and observing of this rule, there remains little or nothing to be done towards settling a perfect harmony and concord.

In other words, once property rights are clearly established and uniformly defended, all subsequent arrangements are voluntary. No one can impose his will by violating others’ rights. The traditional definition of justice — “to give each his own” — is met, and all of us in society (except for predators who would be denied prey) would gain. Well-established property rights and the voluntary market arrangements they enable let individuals decide for themselves, limiting each of us to persuasion rather than coercion. Except in the very unusual case where we must all make the same specific choices, this allows us to better match our choices to our abilities, preferences and circumstances. And defending our rights is within the competence of government, unlike when it goes further.

As Herbert Spencer summarized this point, “To guard its subjects against aggression, either individual or national, is a straightforward and tolerably simple matter; to regulate, directly or indirectly, the personal actions of those subjects is an infinitely complicated matter.” That is, because we disagree on our specific ends, when government overrides people’s choices instead of protecting their ability to make their own choices, it imposes domination rather than allowing cooperation and mutual consent. That is also why claims of political unity generally mean the imposition of injustice on some to feather others’ nests.

In sum, respecting all of our property rights reduces the risk from predation for each of us, allowing us all greater freedom to pursue our own particular goals. That is, we can “disagree better.” But our current binging to add rights and privileges for some at the expense of others’ equal rights and privileges cannot bring real unity. It does, however, make government potentially the most dangerous predator of all, needing to be controlled (as with the Bill of Rights, which Justice Hugo Black described as the “Thou shalt nots” to be applied to government) even when who is in charge is determined by majority vote.

In contrast, most of the appeals to, or promises to bring, unity we currently hear on behalf of politicians really amount to saying “those of us in this group are unified in what we want, and we mean to get our way, regardless of others’ desires.”

We disagree on a vast panorama of specific ends. So when “unity” means government policies will substitute for choices we would make for ourselves, it means domination, even though we do not want to be dominated. That kind of unity is not good. In contrast, if it means coming together in a common commitment to honoring one another’s rights and the liberty and social cooperation it allows, it advances our common interests. The unity of such peaceful and productive disagreement is good because it provides the greatest unity actually possible towards our often-inconsistent ends.

There’s an aging silver cup on my bookshelf. If you look closely at it, a faded imprint reads “eSpeed: We Are Markets.” I received it at a securities industry trade show in the summer of 2001 after a friendly conversation with a gentleman at a booth display. On September 11, 2001, that man and over 650 of his colleagues were murdered, along with thousands of other people.

I’ve dreaded this day for a while now. Two decades* is a lot of distance. But the higher the anniversaries’ number, the stronger my worst memories of my experience at the World Trade Center that day become.

Today, a feeling that has simmered for years will rise to a fever pitch. The nation will honor New York City firefighters, police officers, Port Authority employees, medical personnel and first responders, and military servicemen killed in the Pentagon. There will be some mention of Flight 93 and the passengers who died in Shanksville, Pennsylvania. There will be no shortage of salutes to the soldiers, sailors, airmen, and Marines killed in the global war on terror which, launched in Afghanistan shortly after 9/11, also came to involve action in Iraq, Syria, the Philippines, Mali, Pakistan, Yemen, Libya, Cameroon, Ethiopia, Somalia, Kenya, and other nations.

There’s a reminder that always accompanies these ceremonies: “Never forget.” While understandable, it is untrue to suggest that the aforementioned groups have been neglected. A host of parades, charity events, fundraisers, monuments, and ceremonial namings and renamings have arisen in their honor over the last decade or so. And that is to say nothing of the retail discounts, higher levels of service, and other commercial benefits those groups receive. There are also the informal, unspoken distinctions, like the social reverence that has made a near-imperative out of thanking anyone who has ever worn a uniform in any capacity for any amount of time for their service. (Thirty-something years ago, someone’s military service was more likely to be met with a “Couldn’t afford college?” quip than fawning appreciation.) This writing has nothing to do with those people –– however honorable they may be –– nor the accolades afforded them.

Instead, I write this to celebrate the truly forgotten. There are no elegies for them; no concerts, flags, or bumper stickers. The closest thing they have to monuments are the random sections of beams from the Twin Towers that were distributed to town and county parks nationwide after the attacks.

Those beams, twisted and deformed, once supported floors. And 23 years ago today, at about the time that this article is published (8 am Eastern), those floors were already alive with the footsteps of traders, brokers, portfolio managers, accountants, tech workers, customer service representatives, and administrative personnel engaged in the lifeblood of global commerce: finance. 

It can be easy to forget the people who were actually targeted in the World Trade Center attacks. It’s increasingly customary to do so, in fact. Many Americans link intrinsic value with visible toil. Individuals dealing in financial markets, negotiating transactions, and managing great amounts of capital are often assumed to be wealthy, corrupt, or engaged in elaborate and ultimately unproductive activity, or some combination of the three. None of those labels invite much sympathy –– even considering the horrors that so many people in these scrutinized fields faced on that day.

Nationwide, on this 20th anniversary of September 11, 2001, more will be said about the Army, Navy, Air Force, Marines, NYPD, NYFD, EMS, and scores of other groups than about the thousands of hardworking, productive people killed in downtown Manhattan that day.

Some argue that the Twin Towers were targeted because of their prominence; they were among the most recognizable man-made structures on Earth. Others maintain that, going back to the 1993 truck bomb attempt, the two towers represented the best “bang-for-the-buck” opportunity for saboteurs to inflict massive casualties with minimal effort. But the prevailing explanation for the repeated attempts to assault and destroy the World Trade Center complex, which could easily engulf the nearby New York Board of Trade, New York Mercantile Exchange, and New York Stock Exchange, is its tremendous economic significance. It was a choice lucidly indicating that America’s attackers understood more about the roots of American prosperity and the wellspring of human prosperity than most Americans do.

What tens of thousands of men and women in the North and South towers of the World Trade Center did all day, every day, was not simply “push pieces of paper around.” They were not opportunistic, cleverly positioned middlemen. Their work did not simply create inconsequential, flashing numbers on computer terminals. What they did was nothing less than lay the foundation upon which the modern world sits and functions. 

For time immemorial, human beings have struggled to determine the best means of producing goods and services. At one time, that effort centered on crafting spears and shelters; today, it focuses on such ends as nanotechnology and selecting composites for space travel. Among competing means of production, regardless of the proposed output, there is some combination of inputs and processes that is the most economically efficient. Only prices, generated in market exchange, fulfill that calculation function adequately. Those prices, by reflecting the current consensus valuation of producers and consumers, allow planning. They send signals to all other market participants regarding scarcity, abundance, and shifts in the overall appraisal of countless resources.

Prices are also the means through which profitability is determined. Today, profitability is increasingly treated as a profane term and concept, but there are no other means of adequately determining where and how resources are being combined into the most customer-satisfying goods or services. Profits draw in competition, which results in the amazing diversity of products available in market economies.

Market-derived prices affect billions of people. They do not, and could not, come from governments. Only seasoned financial professionals, employing knowledge and experience from trading, designing transactions, or advising on business deals can discover prices. They frequently assume risk on behalf of strangers, bring together far-flung counterparties, and smooth out otherwise “lumpy” flows of money and capital in ways that make the completion of long-term projects possible. The coordination of the numerous stages of producing complex goods, the funding of innovation, and the transfer of risk via hedging or synthetic products would not be possible without modern finance. 

William N. Goetzmann, professor and director of the International Center for Finance at Yale University, puts the birth of financial concepts at the root of civilization itself, crediting it with the early development of language and the apprehension of time beyond the crude demarcations of seasons or lunar cycles. Financial practices, building off of the social technology of money and private property rights, forged and continue to govern virtually our entire world. But those practices are not automated, which is why financial professionals ranging from asset managers and speculators to algorithmic developers, accountants, and clerical personnel are so critical.

The tablet or monitor you are reading this on, the house or building you are doing so in, and the furniture, appliances, and vehicles you might happen to own would either not exist, or would be far more expensive, without the institutions and practices of finance. Finance is to economics what engineering is to physics and chemistry. 

Money and finance are the font and essence of modernity.

And so, 20 years after one of the most awful days of my and countless others’ lives, I honor and praise the memory of the people who worked in the World Trade Center. I honor those who were slaughtered that sunny, blue, and virtually cloudless Tuesday morning. When they perished, most of them were still at their desks, donning headsets or handling phones, squawking our arcane language of growth and prosperity. I remember those who were injured, and those who escaped unharmed, but were by no means unaffected. 

To the 12 or 13 dealers, traders, brokers, and other individuals based in the towers with whom I transacted and developed a rapport for years, who were gone in a flash: I remain grateful for your service, skills, and friendship.

To my friend B, killed 20 years ago today, enduring esteem.

I was privileged to work with and among all of you. Many of the things I learned from you set me on the path I am on today. None of you are forgotten, nor will I let you be.

*This article first appeared at The Daily Economy on September 11, 2021.

On September 9, 2009, President Barack Obama addressed a special joint session of Congress and implored the assembled legislators to ensure all Americans, without exception, were enrolled in secure and affordable health insurance. Referring to the uninsured, he said “we are the only … wealthy nation that allows such hardships for millions of its people.” 

Universal coverage advocates rejoiced as they sensed the best opportunity in memory to reach their long-sought objective. In March 2010, after a heated debate, Congress approved the Affordable Care Act (ACA) on a party-line vote. In the years that followed, those who fought for its passage have become even more convinced that the debate marked a seminal moment in US social policy. 

And yet Liran Einav and Amy Finkelstein, two of the nation’s most accomplished health economists, see what occurred differently. In their recent book, We’ve Got You Covered: Rebooting American Health Care, they argue that the country’s uninsured problem remains acute and morally unacceptable, even with the ACA in place. Their view accedes that the ACA was directionally right, but (to use their preferred metaphor) it was another subpar remodeling effort when a full tear-down and rebuild is necessary. From their perspective, everything must go, to make room for a sturdier dwelling. That means full repeal of the ACA, and of Medicare, Medicaid, and tax support for employer coverage too. Theirs would be radical surgery indeed. 

Much of the book is about convincing the reader that this recommendation is justified by the shoddiness of current rules and programs. Given the leap that would be required, the case would need to be considerably stronger than what is presented. 

Identifying the Cracks 

The book is divided into two parts. 

The first is a presentation of the authors’ rationale for what they believe should be the primary objective of a health insurance system in every high-income country, along with a review of the many ways the US fails to achieve that central objective. The second offers a plan for constructing a better edifice.   

The style throughout is journalistic rather than academic. Both are accomplished social scientists credited with scores of insightful research efforts (Einav is an economics professor at Stanford University while Finkelstein is at MIT). They sprinkle the book with references to the consensus findings from their profession, but the intended audience here is the general public, not their fellow professional travelers. As such, they rely more on stories and anecdotes than data to develop their argument. 

They have plenty of material to work with, even post-ACA. With so many insurance options, and poor coordination among them, it is not hard to find vulnerable Americans who have been left in impossible situations by today’s maddeningly complex environment. The authors recount the story of a man who was just short of Medicare’s eligibility age (65) and yet also unaware of special coverage he could have had when a fever sent him to the hospital in early 2020 (a negative COVID test ruled out one type of assistance). A year later, the hospital was trying to collect on some $20,000 in unpaid bills. They also cite numerous examples of patients facing exorbitant charges despite being insured. 

The intended takeaway is that the country still has a wholly inadequate insurance coverage system, despite the best intentions of many lawmakers over the years. It is not, as they note, that Americans want their fellow citizens to go without needed services or to face unpayable bills. Rather, the problem is one of haphazard construction driven by political expediency. Americans want their neighbors to get beneficial medical care even when they cannot pay for it. But that impulse has not translated into an effective policy design. 

The causes for the failure are multiple, according to Einav and Finkelstein, but fall under a general heading of excessive complexity. Instead of a simple universal plan, the US has tried to construct a patchwork approach to address the many varied reasons why a person might be vulnerable to uninsured costs. The end result, in the authors’ estimation, is a faulty system with wide cracks that many fall through, and many more might if fate dealt them a bad break or two.  

An NHS With Singaporean Characteristics 

And so what should the US do instead?  

Einav and Finkelstein cite several international examples approvingly, with a focus on a combination of the U.K. and Singapore. The first component would be something like the British National Health Service. All Americans would be eligible for it automatically. The second would be a permissive, privately run (but probably federally regulated) supplementary insurance system that individuals could voluntarily join and pay for themselves. 

If built successfully, this simple structure would have some strong selling points and would likely be popular with many voters. Most importantly, all Americans would know with certainty that they would have permanent and irrevocable access to medical care when they really needed it, even if they did not buy a personal insurance plan. There would be no enrollment process. Eligibility would be based on birth and residency. And there would be no premiums, deductibles, nor co-pays either. The costs would be paid from taxes, which means the burden would likely be heavier on those who can pay more and less on those with modest incomes.  

The government would set a budget for the public plan but how it would be enforced is left unstated. With repeal of Medicare and Medicaid, the resources set aside for those programs could be redirected to the universal plan. Presumably, the government would reduce reimbursements to hospitals and doctors as needed to keep costs in check, as is done today with public insurance. 

Einav and Finkelstein are well aware of the history showing public insurance tends toward long wait times and inadequate supplies of services. Their remedy – modeled on Singapore – is a supplementary private market that they expect a large majority of Americans would join. They emphasize an important detail: this additional insurance would only pay for the incremental costs above the amounts public insurance would pay for the same services. This stipulation is critical, as it would prevent consumers from double-paying for the same services (once through taxes for the public plan and then again through premiums for a duplicative private offering). 
 
With supplemental coverage, patients could get shorter wait times for services and perhaps better-quality care, owing to the ability to pay more for services. The existence of this private market would serve as a safety valve for the public plan by providing an additional source of funding outside of the government’s budget. It would also reduce demand for publicly funded care. 

What’s Missing? 

The authors nod toward some of the objections their plan would face (beyond the obvious hurdle of getting elected officials to repeal Medicare, Medicaid, and the ACA) but fail to really wrestle with several important concerns. 

A first consideration is a lack of perspective. According to the Kaiser Family Foundation, there were 25.6 million uninsured Americans in 2022 under the age of 65, which, at 9.6 percent of the total population in this age group, was the lowest rate ever recorded. Only 1.5 million people, or less than 1.0 percent of the total US population, had low incomes and yet were ineligible for Medicaid. The rest of the uninsured – some 24 million – were either eligible for affordable coverage but had not signed up, or else were residing in the US without proper legal authority to do so. 

Put another way, Einav and Finkelstein would set aside the system now in place, built over approximately 80 years, with all the upheaval that would entail, to guarantee coverage to a relatively small segment of the overall population. 

A second unmentioned objection is the political struggle that their plan would ignite. They are explicit in endorsing a two-tiered system of health insurance, with a basic plan providing security for everyone and supplemental coverage offering better access to those who could afford it. They expect most enrollees in Medicare and employer plans would buy a supplemental policy (combined, that’s over 200 million people).  

It should go without saying that not all factions in American politics would find this compromise acceptable. Many would embrace the egalitarian public plan and then wage war on any possibility of escaping it. Moreover, this fight would never end, as can be seen in the ongoing battles over wait times in the NHS and Canada. 

Third, the authors never grapple seriously with one of the most important considerations, which is the mechanism for allocating resources in the broader economy and within the health sector. They contend that the NHS offers a model worth emulating, but without acknowledging its abysmal record of capital investment spanning several decades. Communities in the UK wait years for the government to put them on the list of potential future hospital investments, only to learn of delays owing to insufficient funds. Full reliance on a public budgeting system for providing access to medical care is a certain prescription for millions of disappointed patients. 

Remodeling, Again 

Despite serious omissions, the book offers important insights, including the observation that today’s harmful insurance coverage disconnects are partially caused by repetitive enrollment processes. With multiple insurance platforms, the participating plans want to be sure they are paying only for the claims of their customers and not others. Thus, individuals carry some responsibility for signing up for the insurance they are eligible for, which is why, for various reasons, some end up without any coverage at all. 

Einav and Finkelstein favor a universal public plan in large part because enrollment is automatic. There is no need to fill out a bureaucratic application.  

It would be possible, however, to benefit from automatic enrollment without throwing out today’s insurance system entirely. For instance, individuals could be determined eligible each spring (during tax season) for Medicaid coverage based on last year’s income and then allowed to keep it for a full year (enrollment out of this period would still be possible for the numerous other qualifying events, including loss of another plan). Similarly, those with incomes above Medicaid’s limits could be placed into ACA coverage if they fail to select a plan themselves (the deductible could be adjusted to ensure their subsidies covered the full premiums). Finally, employers could be allowed to make enrollment in their offerings the default option unless workers attest to having other insurance (through a spouse, for instance). 

Another important step would be to close the coverage gap in Medicaid in those states with very low income standards. Instead of penalties, the federal government should try offering these states more flexibility in return for moving the threshold to at least the federal poverty line.  

Further, Medicaid could become the insurance plan for the unemployed. Any worker with a sufficient record of earnings could qualify for one year of coverage when in-between jobs regardless of their other sources of income. This expansion would offer more security to the millions of people who are at any given moment at risk of temporary job loss. 

Lastly, a plan to stabilize the insurance safety net should be coupled with reforms to promote much stronger market discipline in the provision of medical services. Einav and Finkelstein sidestep this question based on their view that research has yet to provide clear answers about what could be done without harming access to beneficial care. But this explanation suggests that such research may be forthcoming, which is not likely, given the difficulty of untangling the many different forces at work in the health sector. 

There is plenty of direct and indirect evidence that better market incentives would improve productivity in hospitals, physician practices, and other settings and thus lessen cost pressures without harming the quality of care provided to patients. What is needed are sensible steps to make it easier, and more financially rewarding, for millions of American insurance enrollees and patients to identify and select lower-priced but still high-quality options for their coverage and medical care. That would be possible with rules that structure the market to allow for ready cost comparisons. 

The Next Reform 
 

While Einav and Finkelstein fall short of making a strong case for starting from scratch, they do offer an articulate defense of the kind of insurance system that some countries might consider if what they have today is not entrenched and their population is politically homogenous and of a mind to trust their public institutions.  

That is not a description of the United States. For better or worse, Medicare, Medicaid, the ACA, and employer coverage are not going anywhere anytime soon. Fortunately, retention of these long-standing insurance arrangements is not inconsistent with offering more secure and reliable coverage to all Americans, with enhanced cost discipline. As always, the country is another remodel away from something better, but far from perfect. 

Bloomberg reported recently that “Kroger Co. said it plans to lower grocery prices by $1 billion” if federal regulators approve the proposed $25 billion merger with Albertsons. While antitrust litigation slows the merger’s progress, that leaves the company with plenty of time to unpack that promise. 

What does it mean to lower total future prices by a set amount? Does that mean $1 billion lower than this year’s levels, or lower than projected price levels for next year? Given the complexity of the sheer number of products on offer, different locations, and constantly shifting costs, it is unclear what this announcement means. How can Kroger promise to lower prices when the future costs of inputs are unknowable? At best, the outcome of this promise would be impossible to measure. To do that, we would need to compare it to a hypothetical of what the price levels would have been without this commitment.

The facts are more complicated than what was reported. When I reached out to Kroger for comment, a spokesperson said, “We can confirm this number is correct and consistent with what we continue to share with regulators. As we’ve prepared for integration since announcing our planned merger nearly two years ago, we continued our ongoing work to confirm and increase opportunities to generate efficiencies to invest back in customer prices, associate wages and store experience. After the merger closes, Kroger will invest $1 billion to lower Albertsons’ prices, consistent with Kroger’s track record of fighting inflation and providing value to customers.” (emphasis added)

This statement reveals a different promise than simply lowering prices by $1 billion, as reported. Kroger plans to invest $1 billion dollars to lower prices. This statement makes more sense, as the company wouldn’t be able to guarantee the price levels at some future time. It could however, pledge a set amount to increasing efficiencies and improving its supply chain. The result of that investment on prices is unclear. 

The original article in Bloomberg, which has been widely cited, including by Reuters, does not link to a source, so we don’t have the exact wording of the original announcement. At least one outlet has used the exact same language the Kroger spokesperson gave me, so it is possible that Kroger is giving the same statement to every journalist who inquires. The author of the original Bloomberg article did not respond to my requests for the source of the original story, so I don’t know whether the author re-worded the commitment or whether there are multiple statements circulating.

Putting the wording of the statement aside, antitrust litigation creates strange debates over prices — debates which are often disconnected from market realities. Kroger had previously committed to investing $500 million to lower prices, but has now raised the number to $1 Billion without providing an explanation of the underlying reasoning. You can picture the executives and consultants sitting in a room making up numbers, debating the $500 million or $1 billion announcements. The antitrust argument compels companies to make these types of assertions.

Kroger’s more convincing case is that the merger will lower prices based on economies of scale. In line with its statement above, it plans to “generate efficiencies” by merging the supply chains of the two grocery chains. CEO Rodney McMullen said in a statement to Supermarket News, “We believe the way to be America’s best grocer is to provide great value by consistently lowering prices and offering more choices. When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices.”

As I have written elsewhere, a key part of the debate over antitrust litigation centers around anticompetitive behavior. Pricing strategies are often used as evidence of such behavior. The problem that quickly arises is that, as it pertains to pricing, competitive behavior looks a lot like anticompetitive behavior. Lowering prices could unfairly hurt rival companies, but raising them looks like harming consumers. Given enough choices, consumers will gravitate towards the options with the best combination of price and quality to fit their needs. Were the Kroger-Albertsons merger to proceed and result in higher prices, that would give space for Aldi, Walmart, or other budget-friendly options to capture market share.

Regardless of the outcome of antitrust cases, it is nonsensical to say that Kroger will lower grocery prices by $1 billion. Prices reflect complex market realities of supply and demand over time, myriad constantly shifting factors. Only time will tell whether it follows through with the commitment to invest $1 billion to lower prices. Consumers would be better served if companies could spend more time on improving their services and less on fending off litigation. 

So far, Kroger and Albertson have spent more than $800 million on merger fees, as reported by Bloomberg. The high costs Kroger faces reflect the cases seeking to block the merger. Other than the many lawyers and consultants booking extra hours, the public are not served by these outlays. Gimmicks and commitments to regulators are immaterial compared to market innovation. 

Modern-day politics is a Niagara of annoyances. Not the least of these, at least for me, is the inappropriate use of first names. My e-mailbox regularly is filled with notes imploring me (always addressed by my first name, “Don”) to “Join with Joe” to do this, to “Support Kamala’s” quest to do that, and to “Help Donald” achieve these other marvels. I’ve never met, or even been in a group chat, with Joe Biden, Kamala Harris, or Donald Trump, and I’m quite confident that I never will personally encounter these individuals. (My confidence on this front is enhanced by my genuine repulsion at the thought of being in the presence of any of them.) Of course, I know who they are. Or, rather, I know their public personas. But neither they nor their staffs know me.

I don’t blame Messrs. Biden and Trump and Ms. Harris, or their staffs, for not knowing me. Each of us, including even high and mighty government officials, has no knowledge of the specific existence of the vast majority of our fellow citizens. But I do blame them and their staffs for insulting my intelligence by presuming that the faux familiarity of their blast e-mails and mass mailings will cause me to suppose that, being on a first-name basis, “Donald,” “Joe,” and “Kamala” are personal friends of mine in whom I should put my trust.

Don’t think of me as being merely cantankerous. My objection to this ersatz intimacy is grounded in a substantive concern.

I know something specific about every individual with whom I’m actually on a first-name basis. Obviously, I know much more about some of these individuals – for example, my brother Ryan and my dear friend Vero – than I know about other individuals, such as Jaime, the pleasant young woman who works at the dry cleaner that I use. But about each of these individuals I do indeed know something particular. And about each of these individuals I have some concern that runs more deeply than my abstract, philosophical concern for humanity in general.

Being on a first-name basis implies personal connections beyond the merely formal or abstract. These personal connections – except with those relatively few individuals who we come to personally know but dislike – foster genuine and mutual interest, caring, and trust. These sentiments are impossible to have with strangers. These personal connections – from the closest, as with our families, to the more distant, as with neighborhood merchants – give richness, meaning, and joy to our lives. They also give ballast. We social creatures seek, because we need, personal connections not only to share pleasant times but to call us out when we err. To one degree or another, we care for and respect those individuals who we know well enough to call by their first names. To one degree or another we put our confidence in these individuals. This care, confidence, and respect are simply not available to or from strangers.

Politicians’ practice of calling each of us targeted voters by our first names, and of suggesting that we should think of each of them as people who we know on a first-name basis, is meant to trick us into thinking that they care for us in the same way as do those individuals with whom we really are on a first-name basis. This practice is a mercenary maneuver to gain our confidence on the cheap. It is literally a con game. “Kamala calls me by my first name and lets me call her by hers. I can put my confidence in her!”

We thus put trust in individuals who’ve done nothing to earn it. Some of these individuals turn out, luckily, to be decent human beings. But far too many of them are little more than con men and women. In their selfish quest for personal power, they gain our confidence under false pretenses. They trick our emotions into prompting us to suppose that they know more about us than they do, that they care more about us than they do, and that they – like our actual friends – will sacrifice their own welfare in order to further ours.

One of the great mysteries of modernity – this age of science, reason, and rationality – is the widespread, unthinking presumption that winning a democratic election turns members of our favored political party into people as trustworthy as our neighbors, siblings, and even parents. We give to elected politicians, almost none of whom any of us knows personally, the power to take our money and interfere with our personal and commercial affairs. The very same acts that, if carried out by unelected Smith, would land her in prison, instead, if carried out by elected-to-office Jones, often win him praise for being a selfless visionary helping to lead his people to the Promised Land.

If candidates for office were referred to more formally as, say, Ms. Harris and Mr. Trump – and if these candidates and their campaigns similarly referred to each of us as Ms. Smith and Mr. Boudreaux – there would be conveyed the more honest realization that we don’t personally know the candidates and they don’t know us. Voters might, just might, be a bit more guarded when pondering whether or not to turn more power over to Ms. Harris or Mr. Trump than when pondering the same about Kamala or Donald. And regardless of which candidate wins the election, when in office that individual would be less likely to be mistaken as someone who should be regarded as a personal friend and confidant.

Of course, precisely because this false familiarity is a winning political tactic, it will not be abandoned. Each of us, for the rest of our lives, every election year will receive missives and mailings, addressed to us by our first names, from the many Bens, Beths, Jerrys, and Jennifers who pant for political office and who have no shame in using whatever ploys they believe will improve their prospects of laying hold of the power they so desperately crave. Such political pandering is all-too-familiar. Yet it’s a con game.

American progressives are out of ideas. Instead of a bold economic agenda, all they have to offer is reruns of policy failures. Vice President Kamala Harris’s recent proposals are notable examples. Behind the facade of joy hides an alarming indifference to the immense costs her schemes would create if she wins the presidency. Economists have a duty to point out just how destructive these proposals are.

Exhibit A is her call for price controls on groceries. Ignore the rhetorical sleight-of-hand from the campaign and its defenders, who insist they only want to clamp down on “price gouging.” This is clearly a call for the government to crack down on retailers who are selling food at any price Harris and other progressive elites deem excessive. 

Perhaps no policy has a record as consistently bad as mandatory price caps. While Econ 101 doesn’t always tell the full story, it does an admirable job in this case. Expect shortages, portion shrinkages, and discriminatory sales practices if Harris gets her way. Price controls are such bad policy that other prominent Democrats almost immediately promised that they will never happen. Yet the very fact Harris proposed them is appalling. It is too dangerous to give her the benefit of the doubt.

Next is her growth-killing tax plan. Harris is among those calling for the rich to “pay their fair share.” For starters, the rich tax skimps narrative is ridiculous. The top one percent of income earners already pay more than 40 percent of all federal income taxes. Yet she wants to raise rates anyway. This will dampen incentives to produce and innovate.

The same is true for corporate taxes. Raising the corporate tax rate from 21 percent to 28 percent would inhibit capital formation, resulting in smaller returns for owners, higher prices for consumers, and lower wages for workers. This last point should dispel the myth that Harris and the progressive elite are concerned about economic opportunity. 

Finally, and most egregiously, is her endorsement of President Biden’s plan to tax unrealized capital gains. Just look at the awful incentives this policy would create. Instead of keeping their wealth in capital markets, bearing risk and facilitating growth, those experiencing unrealized capital gains would likely have to divest their position to discharge their tax liability. This policy seems designed to dry up capital markets, or else provide a beachhead for future direct wealth seizures by the government. Those objecting that the policy only applies to the hyper-rich (those with a net worth of more than $100 million) are clearly unfamiliar with the history of the income tax. Once upon a time, only high income earners paid any tax at all. Now the IRS has its tendrils everywhere. The same will eventually be true with unrealized capital gains, unless we root out this weed right away.

Lastly, her so-called home affordability plan is rubbish. Harris wants to give new homebuyers up to $25,000 in “down payment assistance.” I’m sure that phrase poll-tested well, but a subsidy by any other name is still a subsidy. If you give a family $25,000 to help purchase a home, they’ll be much better off. But the gains are much smaller if you give it to many families. Harris’s proposal would boost market demand, further driving up housing prices. Keep in mind that housing supply is generally much less responsive to price changes than housing demand. New home construction is subject to high fixed costs, significant time to build, and oftentimes zoning laws and other local restrictions. The implication is that homebuyers won’t get much of the benefit of the subsidy, since prices will go up by much more than the quantity of homes. If your goal is transferring wealth to homebuilders and existing homeowners, Harris’s plan is great. But if your goal is making housing more affordable, it’s terrible.

She keeps piling on examples. Her stated desire to throw 180 million Americans off their private health insurance plans, her eagerness to impose massive regulatory costs on energy producers, and her enthusiasm for hamstringing law enforcement come easily to mind. The result is a political-economic model guaranteed to induce malaise. Vice President Harris’s ongoing audition for Enfeebler-in-Chief proves the American left needs a hard reset. Otherwise, the “opportunity economy” they claim to want will never materialize.

American progressives are out of ideas. Instead of a bold economic agenda, all they have to offer is reruns of policy failures. Vice President Kamala Harris’s recent proposals are notable examples. Behind the facade of joy hides an alarming indifference to the immense costs her schemes would create if she wins the presidency. Economists have a duty to point out just how destructive these proposals are.

Exhibit A is her call for price controls on groceries. Ignore the rhetorical sleight-of-hand from the campaign and its defenders, who insist they only want to clamp down on “price gouging.” This is clearly a call for the government to crack down on retailers who are selling food at any price Harris and other progressive elites deem excessive. 

Perhaps no policy has a record as consistently bad as mandatory price caps. While Econ 101 doesn’t always tell the full story, it does an admirable job in this case. Expect shortages, portion shrinkages, and discriminatory sales practices if Harris gets her way. Price controls are such bad policy that other prominent Democrats almost immediately promised that they will never happen. Yet the very fact Harris proposed them is appalling. It is too dangerous to give her the benefit of the doubt.

Next is her growth-killing tax plan. Harris is among those calling for the rich to “pay their fair share.” For starters, the rich tax skimps narrative is ridiculous. The top one percent of income earners already pay more than 40 percent of all federal income taxes. Yet she wants to raise rates anyway. This will dampen incentives to produce and innovate.

The same is true for corporate taxes. Raising the corporate tax rate from 21 percent to 28 percent would inhibit capital formation, resulting in smaller returns for owners, higher prices for consumers, and lower wages for workers. This last point should dispel the myth that Harris and the progressive elite are concerned about economic opportunity. 

Finally, and most egregiously, is her endorsement of President Biden’s plan to tax unrealized capital gains. Just look at the awful incentives this policy would create. Instead of keeping their wealth in capital markets, bearing risk and facilitating growth, those experiencing unrealized capital gains would likely have to divest their position to discharge their tax liability. This policy seems designed to dry up capital markets, or else provide a beachhead for future direct wealth seizures by the government. Those objecting that the policy only applies to the hyper-rich (those with a net worth of more than $100 million) are clearly unfamiliar with the history of the income tax. Once upon a time, only high income earners paid any tax at all. Now the IRS has its tendrils everywhere. The same will eventually be true with unrealized capital gains, unless we root out this weed right away.

Lastly, her so-called home affordability plan is rubbish. Harris wants to give new homebuyers up to $25,000 in “down payment assistance.” I’m sure that phrase poll-tested well, but a subsidy by any other name is still a subsidy. If you give a family $25,000 to help purchase a home, they’ll be much better off. But the gains are much smaller if you give it to many families. Harris’s proposal would boost market demand, further driving up housing prices. Keep in mind that housing supply is generally much less responsive to price changes than housing demand. New home construction is subject to high fixed costs, significant time to build, and oftentimes zoning laws and other local restrictions. The implication is that homebuyers won’t get much of the benefit of the subsidy, since prices will go up by much more than the quantity of homes. If your goal is transferring wealth to homebuilders and existing homeowners, Harris’s plan is great. But if your goal is making housing more affordable, it’s terrible.

She keeps piling on examples. Her stated desire to throw 180 million Americans off their private health insurance plans, her eagerness to impose massive regulatory costs on energy producers, and her enthusiasm for hamstringing law enforcement come easily to mind. The result is a political-economic model guaranteed to induce malaise. Vice President Harris’s ongoing audition for Enfeebler-in-Chief proves the American left needs a hard reset. Otherwise, the “opportunity economy” they claim to want will never materialize.

The federal government taxes cryptocurrencies as “property.” Income, if there is any, is taxed at regular income tax rates and changes in prices are treated as capital gains or losses. This treatment means that every transaction requires computation of the capital gain or loss in terms of US dollars.

Transactions using foreign currencies, in contrast, do not require paying capital gains tax for gains under $200. There is no reason not to treat cryptocurrencies the same way. Indeed, there have been several proposals to do exactly that.

For example, Robert F. Kennedy, Jr. proposes eliminating capital gains taxes on de minimis transactions in cryptocurrencies. “De minimis” is a legal term from Latin that means “sufficiently unimportant that it can be ignored.” A $200 gain is regarded as de minimis for foreign currencies. Why not for cryptocurrencies?

The Virtual Currency Tax Fairness Act has been submitted to Congress in recent years, including the current session of Congress. The 2024 bill would eliminate the tax on a de minimis amount of $200 and index that amount by inflation.

Taxing cryptocurrencies as property is no more of a problem for cryptocurrencies held as an investment than for corporate stock. Corporate stock has had this tax treatment for many years.

Taxing cryptocurrencies as property makes it more costly to use cryptocurrencies to buy or sell goods and services. If a buyer pays dollars to purchase a gallon of milk, he does not incur a tax on the dollars. (He may incur a sales tax on the value of the milk, but this is a separate issue.) If, instead, the buyer pays with a cryptocurrency, he must compute the capital gain or loss on the cryptocurrency and determine his tax. First, he must identify the dollar price of the cryptocurrency at the time it was acquired. Then, he must determine the dollar price of the cryptocurrency when the milk was  purchased. The change in the value of the cryptocurrency in dollars is the capital gain or loss. Finally, he must determine the capital gains tax rate that applies to the transaction.

That’s a lot of calculating to purchase a gallon of milk. Moreover, he must perform a similar calculation for every cryptocurrency transaction.This extra work raises the cost of using cryptocurrencies in transactions and limits their use in transactions. Even today, some people have long lists of gains and losses on cryptocurrencies to send to the Internal Revenue Service.

It is not hard to improve this situation: eliminate capital gains taxes on cryptocurrencies used in smaller transactions. A capital gains tax on small gains, for example a gain of one dollar, is absurd: the tax rounds to zero dollars because tax forms ignore pennies.

A common complaint by those who would like to eliminate cryptocurrencies is that cryptocurrencies seem more like financial assets than monies. Treating cryptocurrencies like property for tax purposes discourages people from using them like monies. By reducing the cost of using cryptocurrencies in small transactions, treating them like foreign currencies for tax purposes would encourage people to use them like monies.

Treating cryptocurrencies like foreign currencies might seem like an unimportant change, but it isn’t. Early cryptocurrency proponents suggested they might be used (among other ways) to make micro-payments on the Internet. For example, the Basic Attention Token lets people pay for content and advertisers pay people for viewing advertisements. This and similar schemes might well be more widely used if cryptocurrencies were treated like foreign currencies for tax purposes. Instead, they are treated like property. That means the associated taxes are either a pain if computed or a gray area if ignored.

Cryptocurrencies should be taxed in the United States on the same basis as foreign currencies. This would be a big change in the taxation of cryptocurrencies and might have big effects on how much they are used.