April 15 is the only day the federal debt goes down. For the rest of the year, it’s business as usual, including deficits and borrowing approaching a $37 trillion debt. But on this one day, Americans file their taxes, send off their payments, and fund a system many no longer trust. And five years after Covid-19 first shut down American cities, more people than ever are asking: What are we really paying for?

Tax Day 2025 reveals a truth that’s become impossible to ignore: for millions of Americans, paying high state and local taxes no longer feels worth it. The Covid-19 pandemic didn’t just disrupt our lives; it exposed how little many governments deliver in return for the taxes they collected. And once people saw that clearly, they took action.

The post-Covid migration wasn’t just about sunshine or square footage, it was about value. In New York City, top earners face a combined state and local income tax rate of nearly 15 percent, 11 percent from state income tax and 4 percent from city income tax, the highest in the country. On the West Coast, California’s state income tax reaches 12 percent, plus one of the highest sales taxes in the nation at a staunch 7.25 percent. These taxes were tolerated when city living came with strong public services, infrastructure, and job opportunities. But during Covid, that deal fell apart.

Beginning in 2020, the repeated phrase, “Two weeks to flatten the curve” echoed on every media outlet. Dr. Jerome Adams, then US Surgeon General, laid out the case that the US can either mitigate the spread like South Korea or face high mortality rates like Italy. On March 17, 2020, he stated, “Fifteen days, you can do anything for 15 days. Stay at home as much as possible, limit the spread, we do not want to look like Italy does two weeks from now.” 

Two weeks turned into months, which turned into years.

Public schools stayed closed for months. Subways ran empty but still drained public funds. Between 2019 and 2020, the focus on lockdowns proved ineffective, as the murder rate rose 30 percent. Sanitation departments in major cities faced new obstacles in managing the growing amounts of trash left on the curb. State bureaucracies expanded while basic services deteriorated. People looked around and realized they were being taxed like everything was working, while everything was breaking.

To make matters worse, what people saw wasn’t just failure, but favoritism. Americans were told they couldn’t visit elderly relatives, attend funerals, or gather for Independence Day or Thanksgiving. But mass protests following the death of George Floyd were organized with the vocal support of prominent politicians, ranging from Nancy Pelosi to Kamala Harris. In city after city, many of these protests turned into riots and widespread unrest, all while media outlets insisted they were “fiery but mostly peaceful protests.” Meanwhile, small business owners were fined millions of dollars for opening during the pandemic, and many faced penalties for attending Church, weddings, and house parties. In 2020, trust in institutions didn’t just erode, it collapsed. Instead of enduring it, many left for greener pastures.

The world’s largest podcast host, Joe Rogan, left California for Austin, Texas. Elon Musk followed suit, moving Tesla’s HQ to Austin. California was not the only state facing a brain drain. Since 2020, New York has lost ten billionaires — including Carl Icahn and Daniel Och — a blow to a state that leans heavily on the wealthy to pay for services. The top 1% of taxpayers cover 42% of New York’s tax revenue, and billionaires face the highest rate: a staggering 14.8%.

Och and Icahn were not outliers but high-profile examples of a much larger movement. Millions of Americans did the same, quietly relocating to states like Florida and Texas, where the state income tax is zero and the sense of freedom runs higher.

Between 2020 and 2024, Florida added over 1.6 million residents, while Texas gained more than 2 million. Meanwhile, New York and California saw population declines. For the first time in over a century, California’s population shrank. Nationally, both Texas and Florida gained seats in the House of Representatives.

During this period, Americans began to rethink their relationship to government and especially to taxes. Once seen as a civic duty, taxes are now increasingly viewed as a transaction. And like any transaction, people want value in return.

Taxes and Americans have a long, winding history. Benjamin Franklin famously said that “nothing is certain except death and taxes.” Adding his two cents a century later, Supreme Court Justice Oliver Wendell Holmes Jr. offered his view of the bargain: “Taxes are what we pay for a civilized society.” For generations, Americans accepted that bargain, grudgingly or not, because the system, though imperfect, seemed to function.

At the other end of the spectrum, libertarian economist Murray Rothbard put it bluntly: “Taxation is theft.” For years, that sentiment lived on the margins. But when Americans were locked down, masked up, and still forced to fund broken systems, the idea struck differently. The feeling wasn’t just that people were paying too much, it was as if they were being robbed.

In that void, where trust collapsed and institutional legitimacy eroded, a new idea was born—albeit five years later. The Department of Government Efficiency (DOGE) didn’t emerge despite bureaucracy. It emerged due to its poor handling of taxpayer money in a time of crisis. Citizens looked toward the federal government for support and were given mandates to always stay six feet apart. This illusion of safety was not even backed by science. Dr. Fauci, then Director of the National Institute of Allergy and Infectious Diseases, later admitted, “It sort of just appeared, that six feet is going to be the distance.”

Altogether, citizens were forced to pay for a government that gave them little in return, neither security, nor dignity, nor even consistency.

DOGE is the natural evolution of post-Covid disillusionment. A new agency born from the public’s rising awareness of government overreach and systemic failure. It represents a growing consensus that the government must be held accountable. And it’s no longer a fringe idea.

In February, a Harvard CAPS-Harris poll showed that 72 percent of Americans support an agency focused on cutting government waste. Additionally, a Gallup poll from last year found that 54 percent of Americans believe the federal government is “almost always wasteful and inefficient.”

For decades, politicians assumed residents would complain but ultimately put up with it. The draconian laws of the pandemic changed all that. Americans are more mobile, more skeptical, and more conscious of what they are funding. They’re no longer afraid to uproot their lives if it means greater freedom, efficiency, and dignity. The cities and states that lost residents have a choice: defend broken systems, or start competing on services, on governance, and yes, on taxes. Because the old tax bargain is over.

The Mahmoud Khalil case has prompted much commentary on the following question: should the US government deport noncitizen terrorist sympathizers? The main argument against doing so is that this policy threatens freedom of speech. 

But such a policy could also help protect freedom of speech and advance the cause of immigration liberalization. (To be clear, I’m a First Amendment absolutist. I even think blackmail should be legal, as Walter Block argued in Defending the Undefendable.) I’m going to set aside the details of the Khalil case and the question of whether the US government is enforcing the law appropriately, which is more of a legal than a philosophical and political question. Instead, I want to look at the law the US government is relying on in this case and evaluate whether it’s good policy in general.

That law reads as follows: 

Except as otherwise provided in this chapter, aliens who are inadmissible under the following paragraphs are ineligible to receive visas and ineligible to be admitted to the United States:… Any alien who… endorses or espouses terrorist activity or persuades others to endorse or espouse terrorist activity or support a terrorist organization. 

I fully admit this policy punishes resident aliens for their speech, and it does so in a manner that would clearly violate the First Amendment if applied to citizens. The First Amendment protects the rights of noncitizens, too, yet the policy of deporting noncitizen terrorist sympathizers is arguably a wise one.

US citizenship is quite properly a privilege, not a right. Citizenship confers the rights to vote, hold office, and collect welfare benefits, among other things. These are not natural rights but government-conferred privileges. If they were natural rights inherent to every human being, the US government would have a duty to confer them on all human beings on the planet, not just residents of the territory it governs.

Currently, US law provides no mechanism for permanently denying citizenship to a lawful permanent resident. The process for becoming a citizen is almost entirely mechanistic and “shall-issue”: a permanent resident willing to go through the steps cannot be denied citizenship.

Given that citizenship, unlike mere residency, confers on a person the right to participate in ruling over his fellow Americans, it would be wiser to treat citizenship more like membership in an exclusive club. A person should need to demonstrate a strong commitment to advancing the well-being and common purposes of the club in order to gain admission. Otherwise, new members with weak or nonexistent commitment to the club could ultimately undermine its purposes and even harm fellow club members.

Of course, the United States is not a club. The government enforces its rules on citizens regardless of whether we’ve consented to them, or even to the process by which they are created. But the analogy of a club helps us understand how the naturalization process should work to maintain a free society.

At minimum, new citizens of the United States should be required to demonstrate convincingly their understanding of and commitment to the founding values of the country as expressed in the Declaration of Independence and the US Constitution. Unfortunately, the government doesn’t do this at present. But one of the tools it does have is to remove resident aliens who pose a threat to our constitutional order. Advocating terrorism — the use of violent aggression against innocent civilians to cause widespread fear in service of a political goal — demonstrates a lack of commitment to our constitutional order and our founding values. Accordingly, someone who advocates terrorism is most certainly someone we should prevent from becoming a citizen, even if preventing that from happening requires deportation.

One argument against deporting terrorist sympathizers is that they haven’t committed a crime or any actual aggression. This is true. If they had committed actual aggression, the government could imprison them, as it does with citizens. But when a resident alien advocates terrorism, he is proclaiming a settled design of committing aggression in the future, at minimum through the ballot box. Terrorist sympathizers, like supporters of overseas totalitarian regimes, will vote away our freedoms when they get a chance. Voting away the freedoms of others is a form of aggression, because it delegates the power to violate rights to government agents. In this way, voting is not like free speech – it necessarily affects the rights and interests of others. (Jason Brennan makes this point in his work to support the claim that you have a duty not to vote if your vote would be incompetent or unjust.) There’s no way to forbid people who are already citizens from committing this kind of aggression — at least, no way that is both feasible and just — but that is no reason to make the problem worse by letting anti-Americans from abroad come, stay, and gain the right to vote and take taxpayer money.

The logic is all the more persuasive for those who favor open immigration. If the US government liberalized its immigration laws, many more people would come here from abroad. Most of them would seek to stay and gain citizenship. It would be disastrous to allow many millions of people committed to destroying the constitutional order to come into the country, gain citizenship, and achieve their goals.

Moreover, if the US government deports immigrants who spew hateful rhetoric against our system and our civilization, it will make American citizens more comfortable with allowing more of the good, productive, tolerant immigrants into the country. To achieve overall immigration liberalization, we need to do a better job of keeping out those who truly don’t belong.

Another argument against the policy is that we can’t trust the government to enforce it properly. Perhaps officials, once so empowered, will define political enemies as “terrorists” and seek to deport them.

I wouldn’t put it past them. But if governments are so abusive, that’s all the more reason to prevent them from falling into the hands of people openly committed to destroying our way of life. We have due process so that the government has to prove its claims that someone is a terrorist sympathizer. Now, the government might try to ignore due process, as the Trump Administration appears to be doing in some of the deportation cases. But if we assume that no constraints on government will ever be even minimally effective, then the only conclusion is a sort of nihilistic pessimism that anything will ever matter.

At the end of the day, we have to compare the realistic threats to freedom represented by alternative policies: allowing avowed totalitarians and terrorism supporters to participate in governing us, on the one hand, versus deporting some foreigners who are mistakenly adjudicated to be totalitarians or terrorism supporters, on the other. Given that the former policy will, in addition, build political support for immigration restrictions, a result to be deplored, it seems clear that the balance of advantages lies in favor of maintaining and enforcing current US policy.

This May in Reykjavik, Iceland, the elegantly modern Harpa Concert Hall and Conference Center will host a meeting of academics, policy makers, business leaders, and politicians known as The Wellbeing Economy Forum. Aligned with sustainable development goals promulgated by the United Nations, the stated purposes include “reshaping our economic systems to operate within environmental limits and prioritize the wellbeing of all generations.” The evening program looks promising, with a singalong and dancing the first night. Daytime sessions will feature more serious fare, such as “Current economic paradigms and the need to rethink them for shared prosperity.”

There is practically a global circuit of gatherings such as these, and their combination of paternalistic rhetoric with vast attendee power often sets conspiracy theorists’ keyboards to clacking. But what is the subject of the Reykjavik meeting—wellbeing economics—really about?

A Google NGram of the term looks like the East Face of Mount Everest. Before 2007, wellbeing economics was practically unheard of. Not coincidentally, that was also the start of the Great Recession, which caused an upheaval in economic thought that has still not shaken itself out. The free-market-based neoclassical paradigm, which once reigned at most American universities, remains a formidable force in both theory and practice. But a mishmash of other schools of thought—from the political left and right—have been gaining power, with each hoping to one day assume the throne.

By itself, a plurality of approaches to the study of economics is a good thing. Like competing firms in product markets, they lead to a wealth of ideas for refinement and growth. When I was in graduate school in the 1990s, for instance, even though neoclassical theories predominated, there were also Keynesian, Monetarist, and other schools which provided opportunities for constructive criticism and healthy debate. All of those approaches, however, were in virtual agreement on the objective yardsticks by which models should be measured and compared. In macroeconomics, that was first and foremost the gross domestic product (GDP), the amount of goods and services the economy produces in a given timeframe. Its dynamics were the mystery which the field’s leading minds were trying to unravel.

Not so with wellbeing economics, which sounds like it was named in a Madison Avenue focus group. After all, what kind of monster would oppose wellbeing? Rather than attempt a scientific approach, though, wellbeing economists want to replace strictly objective yardsticks like GDP, unemployment, and profits with an amalgamation of hard and soft factors, typically structured around the concept of happiness.

One of the movement’s more eloquent voices, Dutch econometrician and environmentalist Gaya Herrington, gave a 2024 TED Talk at last summer’s Bloomberg Green Festival in Seattle in which she outlined a schema to “change the goal of our economic system from growth to human and ecological wellbeing.”

“In a wellbeing economy,” she added, “business activities, government policies, and citizen behavior are aimed at meeting our physical, social, and spiritual needs within planetary boundaries…We differentiate between what should and should not grow, depending on whether it contributes to wellbeing.”

Unfortunately, sometimes one person’s wellbeing is another person’s nightmare. The problem with constructing a God equation to judge our economic theories by is that the kind of people one finds at the Reykjavik meeting, or any meeting anywhere, are simply not up to the task. This is the same egotism that once led monarchs to base their accumulation of power on the belief that it was for the benefit of the ruled, who were too simple-minded to be trusted with directing their own lives.

The classical economic theories of people like Adam Smith turned this idea on its head, as did the U.S. Declaration of Independence that made it not only the right but the responsibility of individuals to define and pursue happiness for themselves.

In the same vein, neoclassical economics at least has the humility to know its limits. It is not the responsibility of the economy to make people happy, if happiness is even the variable someone chooses to maximize in their life. The economy’s job is nothing more or less than producing goods and services which people demonstrate a desire for in their decentralized purchasing decisions.

Economics, of course, can never be as objective as a hard science such as physics. But that does not mean we should muddy its waters with subjective policy goals such as happiness. Top-down impositions of such things are doomed to fail for the same reason centrally planned economies fail. Centralized elites lack the inherently decentralized and ever-evolving knowledge people have of their own lives, values, and goals.

Supporters of approaches like wellbeing economics often complain that there is more to life than can be captured by strictly quantitative economic measures, and they are right. Sometimes economists need to be reminded of this. But their prescription for change is, in typical leftist fashion, both too grandiose and ignorant of the lessons of history. Wellbeing economics wants to centralize power to make everyone happy, whether they like it or not. Speaking only for myself, I’ll be in the latter group.

If you pay any attention to left-of-center commentary these days, you would know that an identity crisis is in full bloom. The left is having a major debate over what liberals should and shouldn’t believe. 

A focal point of the debate is Abundance, a new book by Ezra Klein and Derek Thompson. It argues that liberal fondness for regulation has undermined their ability to achieve other liberal goals. 

If you find it surprising that liberals are arguing with each other about what liberalism really is, that is probably because you think liberalism is an ideology. It is not.

Libertarianism is an ideology. So is socialism.  But conservatism and modern liberalism are not ideologies. They are sociologies. 

What’s the difference?  

An ideology is a set of ideas that cohere. They fit together in a logical and predictable way. A sociology, by contrast, is a set of ideas that mainly reflects likes and dislikes of people with similar world views. They are not necessarily consistent and, taken as a whole, they may not make any coherent sense at all. 

Think about an alien visitor from Mars. If he sampled a belief or two from an ideologue, he would probably be able to predict many other beliefs held by the same person. This wouldn’t necessarily be true for a sampling of beliefs from a member of a sociological group, however. 

Here is why this matters: the American political system is not a clash of ideologies. It reflects a conflict of likes and dislikes. 

Policy Likes and Dislikes 

Have you ever heard someone express outrage over the fact that “the U.S. spends more on health care than any other country, but our health outcomes are very mediocre.” What about outrage over the fact that “the U.S. spends more on public education per pupil than any other country in the world, but we rank dead last among developed countries in outcomes”? 

It’s not obvious that the first problem is any better or worse than the second. But the former concern is likely to be expressed by a liberal, and the latter by a conservative. Rarely do you find someone equally concerned about both problems. People who are equally concerned about both problems are being logically consistent, but they are probably neither conservative nor liberal. 

Party Likes and Dislikes 

The Medicare Advantage program, under which private insurers offer an alternative to traditional Medicare, has come under relentless attack in recent years. Many of these attacks have been in scholarly papers published in such journals as Health Affairs. Others are screeds by the likes of Alexandria Ocasio-Cortez (AOC) and Paul Krugman, asserting that private Medicare plans are a private insurance company rip-off.  

But private insurers also provide virtually all of Obamacare exchange insurance and manage two-thirds of Medicaid plans. Have you ever heard anyone on the left complain that Obamacare insurance or Medicaid is a rip-off by profit-hungry private insurers? I bet you haven’t.  

So, what’s the difference? Although Medicare Advantage is generally thought of as a Republican program, Medicaid and Obamacare were created by Democrats. That’s about the only difference I can think of. 

The best evidence that liberal sociology (as opposed to ideology) is at work comes about when people like or dislike the exact same policy, depending on which party enacts it. Lots of people on the left are vocally critical of DOGE policies under Donald Trump. But they had no problem with the similar efforts implemented by Barack Obama or Bill Clinton.  

Hypocritical Likes and Dislikes 

Almost all our large cities are run by Democrats. And the pattern is pretty much the same. Low-income, predominantly minority families are forced to live in the worst neighborhoods, send their children to the worst schools, endure the worst environmental pollutants and receive the worst city services – including police protection, trash removal, etc. 

Further, the more liberal the city the worse these problems are. The most liberal cities have the most homelessness, the most income inequality, the worst housing segregation, the worst school segregation, etc. 

Here are some specific candidates for hypocritical likes and dislikes: 

• Wealthy liberals oppose school choice but send their own children to private schools or to elite public schools that are not accessible by ordinary folks. 
• They’re against red-lining and racial discrimination in housing, yet they support zoning regulations that keep the riff-raff out of their neighborhoods. 
• They may believe the police are racists and even call for defunding the police, but there is no lack of police protection in their neighborhoods. 

The tax system provides another example. The left tells us repeatedly that the rich take advantage of tax loopholes and don’t pay their fair share. 

Yet the most outrageous loophole in the tax code is a favorite tool of “trust fund babies” (more than a few of whom are very liberal). Many of them live off trusts established by their parents or grandparents and see no need for gainful employment. Instead of paying taxes on their trust fund withdrawals, the withdrawals are characterized as loans that may never be paid back. 

When was the last time you heard a liberal politician call for an end to this loophole? I bet you never have. 

Likes and Dislikes When Policies Conflict 

Many on the left are enamored of big spending projects, like high-speed rail. On the other hand, they also like government regulation and almost never call for deregulation. 

One result noted above: the liberal penchant for big projects is undermined by excessive regulation. As Noah Smith explains:  

California’s high-speed rail, hyped so much over decades and given billions of dollars in funding, still doesn’t exist. “Affordable” (i.e. subsidized) housing often costs half again as much to build as privately built housing. Biden’s programs to build nationwide systems of electric vehicle chargers and rural broadband ended up producing almost zero chargers and almost zero broadband. 

Likes and Dislikes without Economics 

Whatever causes conservatives to have the policy preferences they have, they are lucky to have one thing going for them. Most of what they think is consistent with economic theory. 

Not so on the left of the political spectrum. No economist believes inflation is caused by greed, and you won’t find that idea in any economics textbook. Yet knowing this, former President Biden nonetheless believed that condemning greed inflation was an effective way to communicate with his base. 

Understanding Each Other 

The late Charles Krauthammer was fond of saying, “Liberals think conservatives are evil, and conservatives think liberals are stupid.” 

Of course, neither of those views is correct. But if the two sides understood each other perfectly, they would still find themselves far apart.

It must be frustrating to be an economist. Theoretical discussions and arguments about tariffs date back to at least the eighteenth century. In 1776, Adam Smith, in The Wealth of Nations, argued against mercantilist policies, advocating for free trade and cautioning against retaliatory tariffs. He contended that such measures often lead to economic inefficiencies and harm all parties involved. In The Wealth of Nations, he acknowledged that retaliatory tariffs might sometimes lead to the quid pro quo reduction of foreign tariffs, but he was cautious — skeptical: 

There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. […] When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people [by doing]…another injury ourselves, not only to those classes, but to almost all the other classes of them.

Later economists reinforced and enlarged Adam Smith’s foundational critique of retaliatory tariffs, contributing to a nuanced understanding of the complexities of international trade and the importance of maintaining open markets. (More nuanced than President Trump’s “They treat us horribly.”) 

In the nineteenth century, John Stuart Mill, utilitarian philosopher and economist, acknowledged, like Smith, that while tariffs could theoretically improve a nation’s terms of trade, they more frequently exacerbated international tensions and economic inefficiencies. Imposing tariffs to manipulate trade terms provoked further retaliatory measures from other nations — and trade wars detrimental to all parties. 

Recent Developments: Tariffs Imposed 

On February 1, 2025, President Trump signed executive orders imposing a 25 percent tariff on all imports from Mexico and Canada and a 10 percent tariff on imports from China — effective March 4, 2025. They take aim at illegal immigration, drug trafficking, and trade imbalances. ​Almost immediately, President Trump delayed implementing the tariffs in favor of negotiations, seeking a series of concessions from both Canada and Mexico. His administration sought better terms on trade imbalances, particularly in the automotive and agricultural sectors, and to pressure these nations into adopting stricter policies on Chinese imports being rerouted through their markets. After weeks of talks, however, President Trump in a speech to Congress on March 5 said responses from Canada and Mexico had fallen short of his expectations; the tariffs would go into effect immediately.  

On April 2, 2025, President Trump made a “Declaration of Economic Independence” during a Rose Garden address, unveiling a comprehensive overhaul of US tariff policy. The new measures introduce a universal baseline tariff of 10 percent on all imports, effective April 5, 2025, aiming to bolster domestic manufacturing and address longstanding trade imbalances. Additionally, the administration announced higher “reciprocal” tariffs on countries with significant trade surpluses or those imposing substantial duties on US goods.

The president held up a chart comparing the tariffs imposed by major trading partners on US goods, along with instances of currency manipulation used to undercut American exports. He cited China’s long-standing 68-percent average tariff on US autos, Vietnam’s 92-percent tariff on certain agricultural products, and the European Union’s 35-percent duty on American tech goods. He declared that under his new policy, the United States would respond with “reciprocal tariffs” — set at half the level of what those countries charge the US. Thus, China faces a 34 percent tariff, Vietnam 46 percent, and the EU 17.5 percent on corresponding imports. Furthermore, a 25 percent tariff on all foreign-made automobiles began April 3, 2025. President Trump emphasized that these actions are designed to protect American industries and reduce the national debt, asserting that the tariffs would generate substantial revenue to achieve these goals. “We’re not asking for fairness,” Trump said, “we’re demanding half as much unfairness as we’ve been getting.”

It is fair, I think, to say that the media, especially the financial press, had been anticipating the announcement with stories, interviews, and panel discussions that almost without exception predicted dire results of the President’s policy, whatever the details. The warnings dominated comment on U.S. markets. Few readers anywhere could absorb this media campaign without dread. The same press coverage immediately greeted the President’s announcement: recession or depression, stagflation, “economic nuclear winter,” collapse of the world financial system, $10,000 cellphones, and consumer misery stared us in the face.

The result was more than predictable. Thursday and Friday saw a stock market crash called the worst two-day crash in market history. It was not, but it was in the running. Stock portfolios saw jaw-dropping losses. The media stories, if anything, intensified. The financial press’s full focus turned to reactions from major industries scrambling to assess the damage, with reports of companies considering price increases, supply chain shifts, and potential layoffs.

US automakers, for example, rely on parts from Mexico and Canada. They warned that higher costs meant higher vehicle prices for consumers and reductions in production. Farmers, often at the center of trade disputes, worried over retaliatory tariffs affecting agricultural exports, especially dairy and grain products. Large retailers and manufacturers predicted that a trade war could squash consumer spending, a chief engine of the economy. 

The way the president presented the tariffs did not emphasize that they were intended to force US trading partners to negotiate. Economists and business leaders, but above all the media, focused almost solely on the opposite possibility: setting off a trade war. China’s reaction, imposing retaliatory tariffs and declaring that it “would fight to the end,” fed the fear of years-long trade war. Above all, the well-known bottom line was that all  uncertainty is anathema to markets and this has been no exception. 

Treasury Secretary Bessent assured reporters (and markets) that the tariffs were about negotiations that would result in free trade. President Trump added that “almost all world leaders” already had been in touch with him about negotiations. Just a matter of processing them. Great Britain and Australia announced they would not retaliate; they would negotiation. 

It did not calm the financial markets. After a jittery weekend, the markets opened Monday, April 7, in a continuation of the nosedive.  J.P. Morgan CEO Jamie Dimon pleaded for a 90-day delay on tariffs while negotiations went ahead. At first, it seemed that unlikely that Trump would make that concession, seemingly a capitulation to critics. But by April 9, financial market chaos (and probably public urging by Elon Musk) led to another “pivot.”

Trump announced that the 10 percent tariff would remain in effect, but there would be a three-month pause in implementation of specific tariffs on 75 different countries that had shown a willingness to negotiate trade deals in good faith with the United States. Secretary Bessent added that it had always been about negotiations. For the remainder of the day, the US stock market staged a rally that I dare say few investors had every experienced.  

Sampling of Critical Reactions 

The Wall Street Journal: the editorial board criticized the tariffs as “the dumbest trade policy of the 21st century,” arguing that they would harm American consumers and businesses more than their intended targets.  

Barron’s: An analysis highlighted that the tariffs could lead to significant economic uncertainty, potentially resulting in one of the most substantial tax increases since World War II.  

Reuters: The news agency reported that the tariffs have sparked trade wars that could hinder economic growth and raise prices for Americans still recovering from years of high inflation.  

CNN: Coverage emphasized that Canada and China have immediately retaliated against the US tariffs, escalating tensions and impacting global markets. ​  

MarketWatch: An article discussed how the tariffs are expected to increase prices of fresh fruits and vegetables, disproportionately affecting low-income Americans.  

The Sun: The publication highlighted China’s stern warning, stating it is prepared for any type of war, including a trade war, in response to the US tariffs. ​  

The Austrian School Makes the Case (Again) 

In our era, the Austrian School, with internationally celebrated economists like Ludwig von Mises, Nobel laureate Friedrich Hayek, and Murray Rothbard, has resolutely and consistently opposed not only tariffs but, specifically, the damage done and the risks of wider harm caused by retaliatory tariffs. 

Mises (1881-1973) argued that tariffs interfere with the principle of comparative advantage, which implies that each country should specialize based on its relative advantage. Even if Country A in absolute terms is better at producing both textiles and electronics, it is relatively better at producing one of them, say textiles, while Country B is relatively better at producing one, say electronics. If both countries specialize accordingly, then trade, both enjoy more of each good than if they tried to produce both themselves. If Country A, however, imposes a 25 percent tariff on imported electronics from Country B, the cost increases, making them less competitive in Country A’s market. This could cause Country A to shift resources back into electronics production, even though it is less cost-effective than focusing on textiles. Mises laid down the principle: “It is always and everywhere the citizens and consumers of the domestic market who pay the cost of protective tariffs.” 

Murray Rothbard (1926-1995) reiterated the argument that retaliatory tariffs provoke a cycle of escalating trade barriers, or trade wars, severely disrupting international trade, harming all parties involved, and occasioning prolonged economic downturns. He warned against the economic fallacy that tariffs stimulate domestic consumption (a Keynesian doctrine), noting, “The underconsumptionist of 1819 believed that consumption would be stimulated by tariffs…” 

Friedrich Hayek (1899-1992) warned that government interventions such as tariffs undermine economic freedom — and that always engenders unintended consequences. Retaliatory tariffs expand government control into trade, a portal to further interventions and wider departures from free-market principles. His famous statement: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” By that he meant: they imagine they can plan an economic order more effective, conducive to innovation, and resilient than the “spontaneous order” that emerges when producers and consumers freely enter into economic exchanges of every kind, including between nations. 

Notably, these comments do not seem to emphasize the single overwhelming reaction, to date, to the Trump tariff plans: pervasive uncertainty, confusion, and despair of planning or projecting…anything. Walmart Chief Financial Officer John David Rainey said the guidance acknowledged that “we are in an uncertain time,” and he didn’t want to “get out over our skis” and try to predict anything.  “[W]e don’t have any explicit assumption in our guidance around tariffs.”  

History Holds Out Little Hope 

The Smoot-Hawley Tariff Act of 1930 is the classic tariff example in America. The legislation, says the Mises Institute, “increased tariff rates on over 800 items with an average rate of 59.1 percent… Twelve countries immediately retaliated by placing high tariffs on American imports into their own countries, spawning an international trade war. By March of 1933, international trade by the seventy-five most active trading countries had shrunk from $3 billion/month to less than $.5 billion/month, an 83 percent reduction. This meltdown of world trade imploded the international division of labor and greatly exacerbated the Great Depression. 

“Think about all this the next time you hear President Trump wax eloquently and lovingly about protectionist tariffs and threaten 200 percent tariffs on country after country, oblivious to the societal train wrecks that protectionist tariffs have caused throughout American history.” 

Less discussed, by the way, is that some nations refrained from retaliating to Smoot-Hawley and were rewarded with stable trade relationships and less economic contraction. 

The Fordney-McCumber Tariff Act, 1922, slightly earlier than Smoot-Hawley, imposed high American tariffs to protect domestic industries. Many trading partners declined to retaliate. Instead, for example, the United Kingdom pursued other strategies, seeking new markets and forming trade agreements within the British Commonwealth. These mitigated the impact of US tariffs by a non-retaliatory approach, helping the UK and others to maintain more stable trade relationships — and avoid a trade war disaster like Smoot-Hawley eight years later. 

The Anglo-Irish Trade War in the 1930s pitted the United Kingdom against the Irish Free State. The conflict began when the Irish government ceased payments of land annuities to Britain, prompting the UK to impose a 20 percent tariff on Irish agricultural imports. The Irish government retaliated with tariffs on British goods; tit-for-tat escalation caused economic hardship in both nations, but particularly affected Irish farmers and British exporters. In short, retaliatory tariffs reduced trade and heightened economic strains without resolving the conflict. That eventually yielded to negotiations — the Austrian school’s point that avoiding retaliation fosters better long-term outcomes. 

Without Theory, What Do We Have? 

The Austrian School’s contribution to the exposition of retaliatory trade dynamics gains exceptional force and cogency by being integrated into a consistent system of free market economics that is critical of all economic intervention. Thus, when it restrains the hand of government in international trade, it cannot be reproached with inconsistency because it advocates domestic subsidies. New economic thinking the world needs in the twenty-first century?  Hardly. The classic of laissez faire, the world’s best-known work on economics, appeared in the same year as the American Declaration of Independence, 1776, and never has been out of print. 

But Hayek, in The Constitution of Liberty (University of Chicago Press, 1960), warned that the principles of liberty, including of free markets, must be taught afresh in each generation: stated in contemporary parlance and applied to a new contexts. Writing as the Cold War tightened its grip on the mind of the West, he said that  “…only since we were confronted with an altogether different system…[have we] discovered that we have lost any clear conception of our aims and possess no firm principles which we can hold up against the dogmatic ideology of our antagonists.” 

Not a persuasive excuse for President Trump. Not only because in our time the Austrian school has undertaken such a rejuvenation of the principles of the free society, but, also, few economists have much good to say about tariffs and criticism of Trump has been wide and immediate. No, President Trump most likely relies on the vast disparity in economic clout between America and almost any other nation — the sole caveat mentioned by Adam Smith in his arguments against retaliatory tariffs. If a nation believes that its rivals can be forced into prompt negotiations by retaliatory tariffs, “there may be good policy” in retaliations. 

Unfortunately, even if this works in the short term, it undermines the long-term benefits of avoiding retaliation. It undercuts the powerful principle of comparative advantage. It distorts the price system, undermining economic calculation. It adds yet another precedent to the many precedents for economic intervention by government to achieve supposed benefits. And it sets an example for such interventions that other governments do not need. The citadel (or should we say instead “the last stand”) of “free enterprise” seems to be acting more mercantilist than capitalist. 

Meanwhile, we watch a demonstration that, even if America’s economic weight decisively tips the scale against most other nations, that does not settle the risk of retaliation. BRICS (Brazil, Russia, India, China, and South Africa), founded in 2009, is an intergovernmental economic-financial organization explicitly viewed as an alternative to the West’s network of powerful organizations (such as the International Monetary Fund, World Bank, European Economic Union). In January 2024, the name became BRICS-Plus as it doubled in size, joined by Egypt, Ethiopia, Iran, and the United Arab Emirates. And then, on January 30, Saudi Arabia hastened to join. Now, 34 additional countries have announced that they wish to join BRICS-Plus — soon.  

Certainly, BRICS heavy weights — China, Russia, and Iran — are not motivate solely by economic competition with the United States (by then, neither is Mexico, with immigration issues foremost). But reportedly, BRICS-Plus has well advanced projects or plans for alternative financial mechanisms to those of the West such a blockchain and digital structure to support new systems, a new interbank payment and transfer system, and many initiatives to advance a gold-back currency to replace the US dollar. We are not navigating the economic world of Adam Smith. 

Whatever his good instincts about freedom and capitalism, President Trump has shown precious little awareness of philosophical principles or economic theory — and that severely curtails the hopes of those who have long awaited a champion of the free society. Or just hoped for a systematic scourge of encroaching Big Brother.

We do not know, yet, if the President’s objective all along was to use retaliatory tariffs to bring US trading partners into negotiations for genuinely free trade — a goal and tactic Adam Smith approved. We do not know if the blunt “here they are” presentation of the new US tariffs was the “dealmaking” for which Trump is famous. Perhaps you cannot open a “deal” by announcing: these tariffs aren’t real, just to force you into negotiations. In all fairness, if Trump was “dealing,” the media blitz did everything possible to kill the deal.

But if the result is negotiations and freer trade, not only by the United States but its trading partners, my optimism about the second Trump administration will experience its own impressive rally.

After a quarter-long inflationary resurgence, it looks like prices are now falling. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) declined 0.1 percent in March. Prices rose 2.4 percent year-over-year, compared with 2.8 percent last month. The biggest decrease was for energy, which fell 2.4 percent. Gasoline prices were down 6.3 percent.

Excluding volatile energy and food prices, inflation stayed in positive territory. Core CPI rose 0.1 percent in March (2.8 percent year-over-year). But this is lower than February’s 0.2 percent monthly increase. 

This is good news. Both headline and core inflation are heading in the right direction. But the Federal Reserve’s job might not get easier. Fed Chair Jerome Powell recently noted that Trump’s tariffs may complicate the Fed’s task by pushing up prices. This would be a one-time price increase rather than sustained inflation. Yet it might compel monetary policymakers to respond anyway.

We don’t know for sure whether disinflationary trends will continue. But if they do, we will get closer to the goals monetary policymakers have been chasing for more than a year.

The current target range for the federal funds rate, the main barometer of monetary policy, is 4.25 to 4.50 percent. From BLS’s most recent data, the continuously compounded annual inflation rate is -0.60 percent. Hence the inflation-adjusted fed funds rate target is between 4.85 to 5.10 percent. We can use these figures to infer the stance of monetary policy.

First, we need an estimate for the natural rate of interest, which is the short-term capital price that balances supply and demand. The economy will operate as close to its productive potential as possible, with inflation low and stable, if the natural rate of interest matches the (inflation-adjusted) market rate of interest. The New York Fed puts the natural rate of interest between 0.80 and 1.31 percent. The Richmond Fed’s model suggests it’s between 1.15 and 2.61 percent. Either way, market interest rates significantly exceed the natural rate estimates. This is a stark contrast to recent months! Now it looks like money is tight.

Money supply and money demand data tell a different story. The M2 money supply grew 3.84 percent over the past year. The broader aggregates rose between 3.41 and 3.50 percent over the same period. In comparison, money demand (proxied by the sum of real GDP growth and population growth) grew roughly 3.3 percent year-over-year in Summer 2024, the most recent period for which we have data. The money supply is growing about the same as money demand. This suggests monetary policy is approximately neutral.

Last month’s deflation significantly affects our estimates of inflation-adjusted market interest rates. This explains the big discrepancy between the interest rate data and the monetary data. We shouldn’t overcorrect from a single month of falling prices. But monetary policymakers should definitely keep their eye on things. Overtightening could impose needless costs on the economy by slowing job and output growth.

The Federal Open Market Committee next meets in early May. That’s a ways off, and there will be several more data releases before then. Again, fallout from tariffs might cause Fed officials to refrain from monetary loosening. We can’t speculate too much on how they will react to the March CPI figures specifically. It’s just one of many factors to consider.

If disinflationary or deflationary trends continue, a cut to the target rate range would be appropriate. Yet we must remember the FOMC is on guard against inflationary resurgences. We just had one, after all. And let’s not forget the specter of political pressure on the Fed. All these factors make it very difficult to predict how they will adjust policy.

The Everyday Price Index (EPI) rose 0.18 percent in March 2025, bringing the index to 292.9. The March increase brings the number of consecutive increases in the AIER inflation measure to five since November 2024.

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

Amid the EPI’s twenty-four constituents 16 rose, six declined, and two were unchanged from February to March 2025. The largest price increases occurred in the recreational reading materials, audio discs tapes and other media, and tobacco and smoking products categories. The most pronounced declines were seen in prices of cable satellite and live streaming TV services, motor fuel, and prescription drugs.

Also on April 10, 2025, the US Bureau of Labor Statistics (BLS) released its March 2025 Consumer Price Index (CPI) data. The month-to-month headline CPI number fell by 0.1 percent, less than the 0.1 percent forecast. The core month-to-month CPI number increased by 0.1 percent, also 0.2 percent less than the 0.3 percent increase expected. 

March 2025 US CPI headline & core month-over-month (2015 – present)

In March, energy prices fell sharply, with the index declining 2.4 percent — driven by a 6.3 percent drop in gasoline, which outweighed gains in natural gas (3.6 percent) and electricity (0.9 percent). Meanwhile, food prices rose 0.4 percent, led by a 0.5 percent increase in food at home and a 0.4 percent rise in food away from home. Within groceries, meats, poultry, fish, and eggs surged 1.3 percent, with eggs alone up 5.9 percent and beef up 1.2 percent. Dairy rose 1.0 percent, other food at home rose 0.5 percent, and nonalcoholic beverages climbed 0.6 percent. Fruits and vegetables declined 0.5 percent — led by a 3.5 percent drop in lettuce — and cereals and bakery products edged down 0.1 percent. For dining out, full service meals increased 0.6 percent and limited service meals rose 0.2 percent.

Core inflation (excluding food and energy) edged up just 0.1 percent in March, following a 0.2 percent rise in February. Shelter contributed modestly, with overall shelter up 0.2 percent, rent up 0.3 percent, and owners’ equivalent rent rising 0.4 percent, while lodging away from home fell 3.5 percent. Notable increases included personal care (1.0 percent), education and apparel (both 0.4 percent), and new vehicles (0.1 percent). Medical care rose 0.2 percent, with hospital services up 1.1 percent and physician services up 0.3 percent, though prescription drugs dropped 2.0 percent. Airline fares plunged 5.3 percent, following a 4.0 percent drop in February. Additional declines were seen in motor vehicle insurance, used cars and trucks, and recreation, while household furnishings and operations were flat. March inflation data, overall, hints at easing pressures in core goods and services, even amid localized price spikes in key food categories.

On the year-over-year side, the March 2024 to March 2025 headline CPI reading came in at 2.4 percent, lower than forecasts of a 2.5 percent rise. Core CPI in this category also came in under surveys, registering a 2.8 percent rise versus an expected 3.0 percent increase.

March 2025 US CPI headline & core year-over-year (2015 – present)

For the 12 months ending in March 2025, core inflation (excluding food and energy) rose 2.8 percent, marking its smallest annual increase since March 2021. Food prices increased 3.0 percent over the same period, with food at home up 2.4 percent. Notably, the meats, poultry, fish, and eggs category surged 7.9 percent, driven by a staggering 60.4 percent rise in egg prices. Other food-at-home components saw more modest increases: dairy and related products rose 2.2 percent, nonalcoholic beverages rose 2.4 percent, and cereals and bakery products gained 1.1 percent, while fruits and vegetables declined 0.7 percent. Meanwhile, food away from home climbed 3.8 percent year-over-year, with full-service meals rising 4.1 percent and limited-service meals up 3.4 percent.

The energy index fell 3.3 percent over the past year, exerting a strong downward pull on headline inflation. Gasoline prices dropped 9.8 percent, and fuel oil declined 7.6 percent over the same period. Not all energy components moved lower, however — electricity prices increased 2.8 percent, while natural gas rose a steep 9.4 percent. These mixed results within the energy sector highlight divergent inflation pressures across household utilities and transportation fuels. The data underscore moderating core inflation but continued volatility in food and energy prices, reflecting both easing demand in some sectors and persistent supply-side pressures in others.

The March CPI report revealed a surprisingly mild inflation picture, one with little evidence that the recent wave of tariff hikes — specifically the 20-percentage-point increase on Chinese imports in February and March — are being passed through to consumers. Key goods categories that are heavily reliant on Chinese imports, including apparel, furnishings, and recreation products, saw either outright price declines or only modest gains. Meanwhile, core services inflation decelerated sharply, driven by falling prices in discretionary travel categories like airfares, hotels, and car rentals. Of particular note, the softness occurred even as owners’ equivalent rent (OER), a major CPI component, rose 0.4 percent. 

The data suggests that consumers and perhaps small businesses are pulling back on discretionary spending in both goods and services. Although further tariff hikes — including a 125 percent levy on Chinese goods and a 10 percent universal tariff effective in April — may eventually raise input costs, current trends imply that businesses will absorb much of the pressure via margin compression rather than passing it on to consumers.

While public focus remains on goods inflation and tariff effects, both the March CPI data underscores that housing remains the central inflation driver within services. Shelter prices continued to rise moderately, though hotel costs posted their steepest drop in over three years. Some persistent price pressures remain — grocery prices rose 0.5 percent, matching the largest increase since October 2022, and meat costs accelerated — but eggs saw a more tempered rise than in prior months. Services categories like car rentals and insurance declined, helping to pull down services inflation excluding housing and energy by the most in nearly five years. This alternative services measure, often used by policymakers, is captured more fully in the Fed’s preferred metric — the personal consumption expenditures (PCE) price index — which assigns less weight to housing. All in all, today’s numbers reinforce expectations that the Federal Reserve will remain patient before restarting any monetary easing.

The Everyday Price Index (EPI) rose 0.18 percent in March 2025, bringing the index to 292.9. The March increase brings the number of consecutive increases in the AIER inflation measure to five since November 2024.

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

Amid the EPI’s twenty-four constituents 16 rose, six declined, and two were unchanged from February to March 2025. The largest price increases occurred in the recreational reading materials, audio discs tapes and other media, and tobacco and smoking products categories. The most pronounced declines were seen in prices of cable satellite and live streaming TV services, motor fuel, and prescription drugs.

Also on April 10, 2025, the US Bureau of Labor Statistics (BLS) released its March 2025 Consumer Price Index (CPI) data. The month-to-month headline CPI number fell by 0.1 percent, less than the 0.1 percent forecast. The core month-to-month CPI number increased by 0.1 percent, also 0.2 percent less than the 0.3 percent increase expected. 

March 2025 US CPI headline & core month-over-month (2015 – present)

In March, energy prices fell sharply, with the index declining 2.4 percent — driven by a 6.3 percent drop in gasoline, which outweighed gains in natural gas (3.6 percent) and electricity (0.9 percent). Meanwhile, food prices rose 0.4 percent, led by a 0.5 percent increase in food at home and a 0.4 percent rise in food away from home. Within groceries, meats, poultry, fish, and eggs surged 1.3 percent, with eggs alone up 5.9 percent and beef up 1.2 percent. Dairy rose 1.0 percent, other food at home rose 0.5 percent, and nonalcoholic beverages climbed 0.6 percent. Fruits and vegetables declined 0.5 percent — led by a 3.5 percent drop in lettuce — and cereals and bakery products edged down 0.1 percent. For dining out, full service meals increased 0.6 percent and limited service meals rose 0.2 percent.

Core inflation (excluding food and energy) edged up just 0.1 percent in March, following a 0.2 percent rise in February. Shelter contributed modestly, with overall shelter up 0.2 percent, rent up 0.3 percent, and owners’ equivalent rent rising 0.4 percent, while lodging away from home fell 3.5 percent. Notable increases included personal care (1.0 percent), education and apparel (both 0.4 percent), and new vehicles (0.1 percent). Medical care rose 0.2 percent, with hospital services up 1.1 percent and physician services up 0.3 percent, though prescription drugs dropped 2.0 percent. Airline fares plunged 5.3 percent, following a 4.0 percent drop in February. Additional declines were seen in motor vehicle insurance, used cars and trucks, and recreation, while household furnishings and operations were flat. March inflation data, overall, hints at easing pressures in core goods and services, even amid localized price spikes in key food categories.

On the year-over-year side, the March 2024 to March 2025 headline CPI reading came in at 2.4 percent, lower than forecasts of a 2.5 percent rise. Core CPI in this category also came in under surveys, registering a 2.8 percent rise versus an expected 3.0 percent increase.

March 2025 US CPI headline & core year-over-year (2015 – present)

For the 12 months ending in March 2025, core inflation (excluding food and energy) rose 2.8 percent, marking its smallest annual increase since March 2021. Food prices increased 3.0 percent over the same period, with food at home up 2.4 percent. Notably, the meats, poultry, fish, and eggs category surged 7.9 percent, driven by a staggering 60.4 percent rise in egg prices. Other food-at-home components saw more modest increases: dairy and related products rose 2.2 percent, nonalcoholic beverages rose 2.4 percent, and cereals and bakery products gained 1.1 percent, while fruits and vegetables declined 0.7 percent. Meanwhile, food away from home climbed 3.8 percent year-over-year, with full-service meals rising 4.1 percent and limited-service meals up 3.4 percent.

The energy index fell 3.3 percent over the past year, exerting a strong downward pull on headline inflation. Gasoline prices dropped 9.8 percent, and fuel oil declined 7.6 percent over the same period. Not all energy components moved lower, however — electricity prices increased 2.8 percent, while natural gas rose a steep 9.4 percent. These mixed results within the energy sector highlight divergent inflation pressures across household utilities and transportation fuels. The data underscore moderating core inflation but continued volatility in food and energy prices, reflecting both easing demand in some sectors and persistent supply-side pressures in others.

The March CPI report revealed a surprisingly mild inflation picture, one with little evidence that the recent wave of tariff hikes — specifically the 20-percentage-point increase on Chinese imports in February and March — are being passed through to consumers. Key goods categories that are heavily reliant on Chinese imports, including apparel, furnishings, and recreation products, saw either outright price declines or only modest gains. Meanwhile, core services inflation decelerated sharply, driven by falling prices in discretionary travel categories like airfares, hotels, and car rentals. Of particular note, the softness occurred even as owners’ equivalent rent (OER), a major CPI component, rose 0.4 percent. 

The data suggests that consumers and perhaps small businesses are pulling back on discretionary spending in both goods and services. Although further tariff hikes — including a 125 percent levy on Chinese goods and a 10 percent universal tariff effective in April — may eventually raise input costs, current trends imply that businesses will absorb much of the pressure via margin compression rather than passing it on to consumers.

While public focus remains on goods inflation and tariff effects, both the March CPI data underscores that housing remains the central inflation driver within services. Shelter prices continued to rise moderately, though hotel costs posted their steepest drop in over three years. Some persistent price pressures remain — grocery prices rose 0.5 percent, matching the largest increase since October 2022, and meat costs accelerated — but eggs saw a more tempered rise than in prior months. Services categories like car rentals and insurance declined, helping to pull down services inflation excluding housing and energy by the most in nearly five years. This alternative services measure, often used by policymakers, is captured more fully in the Fed’s preferred metric — the personal consumption expenditures (PCE) price index — which assigns less weight to housing. All in all, today’s numbers reinforce expectations that the Federal Reserve will remain patient before restarting any monetary easing.

On Capitol Hill, where memories are short, concern about open-ended military conflicts — or as one might call them, war — is now considered “hysteria.” Such was the case when Senator Tom Cotton, during hearings on the recent nomination of US Air Force Lieutenant General Dan Caine, mocked concerns about the prospect of US strikes on Iran’s nuclear program as “hysteria” while dismissively referring to concepts such as endless war or forever war in scare quotes. The Senator from Arkansas further justified the idea by invoking the Tanker War as a historical analogy; an example of a “forceful but discriminant application of military power” that led “to peace.” 

Like other historical comparisons used to justify Washington’s current or prospective war, this one too falls short, failing to account for the strategic and geopolitical differences between the present and a comparatively limited naval campaign of the late 1980s. And, like other euphemisms for war, Senator Cotton’s attempts to ignore likely contingencies that would stem from such military action, one that even hawkish think tanks have categorized as “a lengthy campaign employing military strikes, covert action, and other elements of national power.” In a town that overflows with tortured analogies and euphemisms, Cotton’s recent statements are nevertheless impressive in their myopia.     

The strategic situation in the Middle East is considerably different than during the height of the Tanker War. The maritime skirmishes that constituted that conflict with Iran were primarily defensive, meant to reestablish deterrence, and not designed to elicit escalation. This is a far cry from the prospect of a sustained air campaign on Iranian soil. Unlike the late 1980s, the United States military’s footprint in the region is considerably larger, and includes Iran’s near abroad, Syria, and Iraq. 

In the event of US airstrikes inside Iran, those troops, approximately 4,500, would present prime targets for Iranian retaliation, thereby creating incentives for an escalatory spiral, the very forever war that Cotton dismisses.  

Unlike the Tanker War or the assassination of Qasem Soleimani, another example that Cotton positively invokes, the prospect of an air campaign launched against Iran’s most cherished strategic asset, its nuclear program, is inherently escalatory. Iranian military capacities have improved significantly since the late 1980s, and, unlike the Tanker War, when Iran was embroiled in a war with Iraq, the Iranian government could focus on retaliation against US assets in the region and would assuredly do so. Assassinating a general on Iraqi soil is orders of magnitude lower than an active bombing campaign inside Iran. Cotton’s conflation of the two reflects not only poor judgment, but hubris.

Unlike the Tanker War, military strikes on Iran would be conducted without the buy-in of the Middle East’s Arab states, and thereby risks their alienation. US naval operations during the Tanker War were conducted to protect Kuwaiti and (implicitly Iraqi) shipping from Iranian interference and occurred against the backdrop of the Iran-Iraq War. Such a setting does not exist today, at least as Saudi Arabia, Qatar, and Kuwait see the current situation, as all have reportedly assured Iran that they will not allow their territory to conduct strikes. The United States would need to conduct them alone, the optics of which would undoubtedly scuttle the Trump administration’s attempts at political normalization and regional stability.  

Similarly, an air campaign against Iran’s nuclear sites would strain US relations outside the region as well and pose stiff geopolitical costs. Again, on the broader geopolitical front, Senator Cotton’s invocation of the Tanker War as a model of limited war worth emulating falls flat. Operation Earnest Will, the naval task force that protected third-party shipping from Iranian attack, had diplomatic cover via the unanimously passed United Nations Security Council Resolution 598 and was enforced in concert with British and French naval forces, as well as those of the United States. 

That is no longer the case, as Iran’s primary international patrons — Russia and China — would almost certainly condemn any US strikes on Iranian soil. As to the former, such strikes would jeopardize a core White House goal of de-escalation with the Russian Federation and retrenchment in Europe. China, too, would publicly balk at the strikes but likely view them as an opportunity for the United States to overcommit itself further and spiral into even deeper insolvency. 

Given this unparalleled risk of escalation, going to war with Iran via bombing its nuclear sites would be a foolish endeavor with no upside for American security interests. Such a prospect is especially imprudent considering that the Trump Administration’s own intelligence community “continues to assess that Iran is not building a nuclear weapon and Supreme leader Khomeini has not authorized the nuclear weapons program that he suspended in 2003.” 

War with Iran would also undermine the Trump administration’s stated objectives, including its rejection of the logic of forever war. Only two and a half months ago, President Trump declared during his second inaugural, “We will measure our success not only by the battles we win but also by the wars that we end  —  and perhaps most importantly, the wars we never get into.”

So far, the Trump White House has failed to live up to either of the first two promises and is poised to blunder itself into violating the third.

For decades, international development has been synonymous with massive aid programs, billion-dollar projects, and slow-moving bureaucracies. Governments and global institutions have spent trillions trying to address economic and social challenges in developing countries, yet these efforts often fail to deliver real impact. Why? Because they overlook the most important factor: the people themselves. 

The global aid system is broken. Instead of empowering individuals, it funnels money into bloated institutions where funds dissipate into overhead costs, corruption, and inefficiency. The intention is good, but the execution is flawed. What if we flipped the model? What if, instead of relying on top-down solutions, we placed resources directly in the hands of those who need them most? 

Consider this: trillions of dollars have been spent in places like Iraq and Afghanistan, yet the tangible outcomes are questionable. The World Bank has highlighted instances where development projects aimed at creating employment have faced criticism for high costs, with some exceeding $20,000 per job. Much of this money never reaches the intended beneficiaries; it gets entangled in administrative expenses, consultant fees, and governmental inefficiencies. 

Moreover, organizations like the United Nations, World Bank, and IMF often channel funds through the very governments whose corruption perpetuates poverty. It’s akin to attempting to cure lung cancer by partnering with tobacco companies. These governments are part of the problem, yet they’re treated as part of the solution. Funds meant for development are siphoned off by elites, squandered on vanity projects, or used to maintain power rather than uplift communities. Meanwhile, millions remain trapped in poverty without real opportunities for change. 

To compound the issue, many of these countries — due to endless war, conflict, and instability — have lost agency over their futures. They’re ensnared in a cycle where external forces dictate their progress, leaving their populations powerless. Large-scale aid programs often reinforce this cycle by prioritizing stability over self-sufficiency, keeping governments dependent on international funds rather than fostering resilience from within. 

Instead of pouring billions into this void, what if we allocated a fraction of that money to directly fund entrepreneurs, innovators, and changemakers? That’s the approach we’re taking at Ideas Beyond Borders, and the results are compelling. 

Take Hakim Hashim from Mosul, Iraq. After his city was devastated by ISIS, he envisioned a female-only taxi service to aid women’s mobility. Traditional banks wouldn’t lend him money, and aid agencies overlooked his vision. So, we provided him with $3,000. Today, he employs 57 people and is transforming transportation for women in his city. 

Or consider Hany Hamada, a Syrian refugee in Turkey. Observing that new refugees struggled to learn Turkish, he established a language school. With a modest grant, he expanded his business to employ 33 people—all refugees. These aren’t isolated incidents; they’re examples of what happens when we trust individuals to shape their own futures. 

One of the greatest advantages of the microgrant approach is its capacity for immediate self-correction. Traditional aid programs can take years to adjust, but microgrants allow for rapid feedback and pivots, minimizing waste and maximizing impact. This method also reduces corruption; by limiting grants to one per person, we eliminate opportunities for centralized exploitation. Leveraging AI and statistical modeling, we can analyze outcomes in real-time, continuously refining the model to ensure resources are allocated effectively. For instance, organizations like GiveDirectly have employed AI to identify disaster-affected households, enabling swift and direct cash transfers. 

The numbers speak volumes. Traditional aid programs may incur costs exceeding $20,000 per job created. In contrast, our microgrant model reduces that cost by more than 90 percent, creating thousands of jobs. It’s not even a competition. The microgrant model succeeds because it eliminates bureaucracy, empowers local talent, and delivers real, measurable outcomes. Beyond its efficiency, microgrants offer a low-risk, high-impact approach to development. Unlike large-scale projects where failure can result in substantial losses, microgrants provide a low-barrier path to opportunity. If a project doesn’t succeed, the loss is minimal; but when it does, the rewards are transformative. This strategy ensures that even in highly unstable regions, risks are contained while the potential for economic growth remains substantial. 

This isn’t solely about aid; it’s about global influence and leadership. The Microgrant Revolution isn’t just an effective economic model—it’s a strategy for America to enhance its soft power. China’s approach to foreign aid is large-scale, centralized, and infrastructure-focused, constructing roads, ports, and railways through top-down, state-controlled projects that often leave recipient countries indebted and reliant on Beijing. Their model emphasizes control, not empowerment. 

In contrast, America’s greatest strength lies not in central planning but in its entrepreneurial spirit, innovation, and individual empowerment. Microgrants embody the American ethos in development aid, focusing on freedom, self-reliance, and grassroots growth. This is what makes America exceptional, and it’s how we can build a better world — by equipping people with the tools to forge their own futures, rather than making them dependent on government assistance. By investing in microgrants, America can redefine its role in global development, demonstrating that true empowerment arises from enabling individuals, not controlling them. This approach fosters goodwill, strengthens alliances, and builds genuine, lasting economic resilience in partner nations. 

If we aim to fund social change, it must originate from within. The experiences in Iraq and Afghanistan have taught us that you can’t impose democracy through force. However, local organizations that advocate for democratic values have a significantly higher chance of long-term success, especially when they’re accountable to their communities and must compete for support, rather than relying on Western aid. Social movements that develop organically, rather than being externally imposed, are far more resilient and impactful. 

Aid doesn’t have to be expensive to be effective. We don’t need more billion-dollar programs that yield minimal impact. We need bold, direct investments in individuals who already possess the ideas, drive, and capability to transform their communities. If we genuinely want to revitalize struggling economies and post-conflict societies, we must shift from funding bureaucracy to funding talent. The question isn’t whether we can afford to do this; it’s how can we afford not to? 

It’s time to stop waiting for governments and institutions to solve the world’s problems. The individuals who can effect change are already here. All they need is an opportunity. Let’s provide it to them.