Imagine that you wanted to do some grocery shopping. To do so, you drive your car from your house not to the grocery store, but to a parking lot miles and miles away from the grocery store.  There, you get on a bus (which you have to pay for) that will then take you to the grocery store. You do your shopping, get back on the bus (paying once again) with your groceries, which then takes you back to your car where you can unload the groceries from the bus and reload them into your car before ultimately driving home.  This would be absurd. It’s also remarkably similar to how people in the great states of Hawaii and Alaska must do almost all of their shopping, thanks to the Jones Act. 

Passed in 1920 (long before Alaska and Hawaii were states) the Jones Act requires that any cargo shipped between US ports, such as those in Hawaii and California, use American-built and American-owned ships and with a crew of majority US citizens.  This over-100-year-old law was meant to boost domestic shipbuilding and crewing by protecting them from foreign competition, who may be able to build ships that are bigger, faster, or cheaper to operate, with crews who work for lower wages than their American counterparts. Unfortunately, it has resulted in little more than increasing costs and complicating the lives of Americans, as a newly filed lawsuit alleges. 

For Hawaii and Alaska, which joined the US in 1959, the Jones Act is a daily burden.  Moving cargo from these states to the lower 48 requires hiring a vessel that is compliant with the Jones Act’s provisions, since the ports involved are all US ports. In practice, Alaska and Hawaii must have entire shipping routes specific to their states.  A large container ship coming from, for example, Australia, could not stop by Hawaii on its way to a port in California, pick up some cargo, and deliver both the Australian goods and Hawaiian goods to the US unless, that ship also happened to comply with the Jones Act.  Given the high cost of American-made ships and the more-expensive American crewmembers, most international shipping is not done by vessels that are Jones Act compliant.  A 2023 Hudson Institute report finds that “only 3 percent of the 55,000 ships in the global commercial fleet” are American-owned.  These 1,650 ships include “only 178 large US flag cargo ships, 85 of which are committed to international trade,” leaving only 93 of these large ships permitted to move cargo between US ports. 

As a direct result, shipping to and from Hawaii and Alaska is both less frequent and more expensive than it otherwise would be. A 2011 US Department of Transportation Maritime Administration report finds that operating a Jones-Act-compliant vessel costs $12,600 more per day than a “open registry” ship, with almost 90 percent of this increase attributable to higher labor costs.  By comparison, that’s a difference greater than the annual grocery budget for a family of four.  Every day.

These inflated costs get passed on to Hawaiians and Alaskans, who must import the vast majority of the goods they purchase. The Jones Act also raises prices for anyone elsewhere who consumes goods and services produced in those states. The Kōloa Rum Company, for example, faces significantly higher shipping costs than other domestic rum producers, in part because of geography, sure, but also due to the Jones Act unnecessarily and, as the lawsuit alleges, unfairly raising these shipping costs. 

Repealing the Jones Act would result in cheaper and more frequent shipping to and from the great states of Hawaii and Alaska.  This would only help these people better afford basic items such as food, building supplies, and other consumer goods. Further, it would greatly reduce the cost of shipping domestically for all Americans, which would significantly drive down the cost of goods and services.  So why has this law not been repealed? 

Unfortunately, protectionist measures such as this are easy to pass but incredibly difficult to rescind, at least politically, because of what Mancur Olsen refers to as the logic of “concentrated benefits and dispersed costs.”  Take, for example, US biofuel requirements.  Reportedly, these cost the typical American about $20 per year, which is hardly enough to cause a general uproar from citizens.  Farmers, however, benefit tremendously from this law and would face significant financial losses if it were repealed. They actively lobby Congress for its continuation, because these concentrated benefits are worth fighting to keep. The dispersed costs, though real and greater over all, are hardly worth fighting about for the many more people who bear them. 

Tariffs and other trade restrictions being floated about today should be approached with both skepticism and caution. It is entirely possible that a case can be made for them in the short-term. But the institutional stickiness and inflexibility of policy-making means that we will likely be stuck with these laws for much longer than we expect. All costs, both those felt by today’s generation and by those which will be felt by future generations, need to be accounted for.  Once they are, the economic case for protectionist measures falls precipitously. 

All that would be required to repeal the Jones Act is a simple stroke of a pen. With it, Congress and the President could significantly reduce prices for the two million US citizens living in Alaska and Hawaii, not to mention the millions of tourists visiting these states annually. A full repeal would improve the lives of all US citizens around the world by lowering prices and increasing access to goods and services. Finally, it would boost manufacturing jobs in the US. Repealing the Jones Act, also known as the Merchant Marine Act, would accomplish all of this. Reversing a century-old protectionist mistake is a legacy any political leader could be proud of.

Last month, President Donald Trump and Commerce Secretary Howard Lutnick announced that the United States government would be “selling a gold card,” with permanent residency status and a pathway toward US citizenship, in exchange for a five million dollar ($5M) fee paid to the federal government. Although it is still unclear at this point what would be included in the gold card, which replaces the EB-5 visa for immigrant investors, Trump alluded to “green card privileges plus,” allowing gold card holders to build companies, provide jobs, and pay taxes. 

But this gold card would be wildly overpriced, even to people having $5M to spare. Migrant investors can shop around globally among the many competing offers across a citizenship-by-investment (CBI) and residence-by-investment (RBI) landscape. What the Trump administration refers to as a “gold card” is merely what the citizenship and residence investment industry (yes, it’s a real industry) calls “golden visas,” essentially permanent residence visas available for purchase. 

Of course, the United States has been and still is a land of opportunity for millions and has the largest economy by far. But second citizenships (considered more desirable than mere residence visas) can be had for a €500K investment in Portugal, an €700K+ investment in Malta, a €400K real estate investment in Turkey, or for about €250K in various Caribbean Island countries and for even less in Vanuatu and Nauru. While, for many, these locations might not be as attractive locations to live as the United States, holding a passport from some of them open up the ability to live well beyond the passport issuer’s country. For example, a passport from Portugal and Malta allows you to live anywhere within Europe’s Schengen Area, and a passport from, say, Saint Kitts and Nevis, opens up the right to live in other Caribbean Community (“CARICOM”) member nations. 

Beyond the mere right to settle in a country, citizenship implies the right to a passport, which allows for mobility even beyond the passport’s issuing country. And as it turns out, the American passport is hardly the crème de la crème. In terms of visa-free access and other criteria used to measure a passport’s overall strength, its ranking ties with other nations in eighth place. Said another way, if you had a Romanian or Croatian passport, you would be allowed to enter more countries visa-free than with an American passport. If your only present passport was issued by Pakistan or China, an American passport is a step up. But if you are from a European country, the Emirates, Singapore, or a number of other developed nations, chances are, your passport is already more powerful than the privilege the president wants to sell.

Possibly the biggest obstacle to the success of a $5M permanent residence visa to the United States is that, for many, being an American citizen or permanent resident is an enormous net liability (not an asset). As American expatriates (citizens who live outside the United States) will be quick to tell you, the United States taxes its citizens and green card holders wherever they are in the world on their global income — even if they have no intention of ever returning. Even for years when an American does not owe taxes to the IRS, they are still required to file (a time-consuming annual chore with additional accounting costs) as well as file an “FBAR” with the US Treasury’s Financial Crimes Enforcement Network, disclosing foreign bank accounts. 

Americans abroad are also routinely turned away by foreign commercial banks that do not wish to incur the high costs of compliance with the US’s Foreign Account Tax Compliance Act (FACTA), which requires foreign banks to monitor and disclose the financial activities of American citizens to the American government. With all of this, Americans and American permanent residents (“green card holders”) are in many ways, while abroad, treated as second-class citizens thanks to present laws around taxation and reporting. 

To Trump and Lutnick’s credit, both have confirmed that the gold card would exempt investors from taxes on their income sourced from outside the United States, while still taxing income sourced from within. But what happens when a gold card holder nationalizes as an American citizen? With no guarantee that their global income would be secure from the US’s global tax net, the gold card is less attractive. 

While the Trump administration dangles a glorified green card with a $5M price tag in front of wealthy investors, it overlooks the rising number of wealthy Americans who renounce their citizenship each year. Mind you, they must pay a hefty expatriation tax upon renunciation. (In fairness, the United States still remains a net recipient of high net worth individuals — for now). 

(Note: We have Abraham Lincoln to thank for citizenship-based-taxation. Although Eritrea, Hungary and Myanmar have some version of it, in practice, the United States is the only country with enough enforcement power to pull it off). 

A Better Incentive for Investment

If the Trump administration really wants to raise investment dollars to pay towards the national debt or anything else, it could do a few things. First, it could increase the value of American citizenship and permanent resident status by doing away with citizenship-based-taxation altogether — for everyone. 

An investor interested in a gold card is likely to want more than just a glorified residence visa. Eventual citizenship is the real prize. But investors know that present tax laws make acquiring American citizenship a permanent tax trap — not only for the investors themselves but also for their children. Children born to American citizens acquire American citizenship themselves, as well as all the tax liabilities that come with it. 

As for taxation on global income, the Trump administration would be right to exclude it (as was announced). But would a gold card holder that later acquires American citizenship still be exempt from taxes on their foreign income? At the moment, it remains unclear. 

As for FBAR and FATCA reporting requirements, both add unnecessary burdens for both Americans and foreign banks. FATCA is a cause of routine discrimination against Americans around the world, which diminishes the value of American citizenship. Axing the requirements for both would boost the value of American citizenship as well as the gold card.

In conclusion, high net worth individuals are able to shop around in a global marketplace for citizenship-by-investment (CBI) and residence-by-investment (RBI). These individuals can – in many ways – obtain much better “bang for their buck” than $5M residency visas, especially for a country that is likely to tax their global income and cause them compliance trouble with foreign banks. 

To his credit, in October 2024, Trump made a campaign promise to Americans living abroad “to end double taxation on our overseas citizens.” But if the Trump administration wants to commoditize golden visas (and a pathway to citizenship) with a hefty price tag, it had better be ready for some long-overdue tax and financial reporting reform. The option to obtain an eventual American citizenship should stand out as an obvious net asset for wealthy investors, not a net liability.

After disappointing readings in November, December, and January, inflation appears to be slowing once again. Could this mark the return to sustainably low price pressures?

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased 0.2 percent in February, after rising 0.5 percent in January. The shelter index alone “rose 0.3 percent in February, accounting for nearly half of the monthly all items increase.” Prices are up 2.8 percent over the past year.

Core inflation, which excludes volatile food and energy prices, also rose 0.2 percent last month. They have risen 3.1 percent over the last year. After widening significantly in 2024:Q3, the gap between headline and core inflation is shrinking. 

Both headline and core inflation have hovered around 3.0 percent annualized for more than a year. Let’s hope the new inflation data indicates reversion to the pre-covid trend, rather than fluctuations around a post-covid trend. 

There’s a world of difference between 2.0 percent trend inflation and 3.0 percent trend inflation. It takes 35 years for prices to double at 2.0 percent, but only 23.3 years for prices to double at 3.0 percent. Investors with capital gains get pushed into higher tax brackets. And the Federal Reserve, which is supposed to keep price growth low and predictable, loses major credibility. To prevent this, central bankers should continue the push to 2.0 percent inflation.

Is monetary policy currently suitable to achieve the 2.0-percent goal? The Fed’s current target range for the federal funds rate is 4.25 to 4.50 percent. Adjusting for inflation using the latest headline CPI figures, the real rate range is 1.45 to 1.70 percent.

As always, we need to compare this to the natural rate of interest, which is the inflation-adjusted price of capital that balances short-term supply against short-term demand. The New York Fed’s estimates put this between 0.80 and 1.31 percent in Q4:2024. Since the lowest estimate for real interest rates in the market exceeds the New York Fed’s highest estimate for the real fed funds rate monetary policy appears to be tight.

Estimates of the natural rate vary, however. The Richmond Fed puts the natural rate of interest between 1.18 and 2.66 percent. That’s a wide range. That the median estimate of 1.89 exceeds the real federal funds rate target suggests monetary policy is loose. Hence, using interest rates to judge the current stance of policy depends crucially on one’s preferred estimate of the natural rate.

We should augment this analysis with money supply data. The M2 money supply is up 3.49 percent from a year ago. The Divisia aggregates, which are broader measures that weight money supply components by their liquidity, have risen between 3.26 and 3.53 percent over the same period. How does this money supply growth compare to money demand?

To proxy the demand to hold money, we can add the most recent real GDP growth and population growth figures. The Bureau of Economic Analysis says real GDP grew at an annual rate of 2.3 percent in Q4:2024. From the Census, we learn that annual population growth in July 2024, the latest data available, was about 1.0 percent. Hence money demand is growing roughly 3.3 percent per year.

So, the money supply is growing about as fast as money demand. Broadly, that suggests neutral policy. But neutral policy corresponds most closely to non-accelerating inflation. We still want price pressures to ease. 

There’s no good reason to settle for 3.0 percent inflation. The evidence suggests that the Fed must tighten further to hit its 2.0-percent target. Whether it will tighten sufficiently or let inflation settle in above target remains to be seen.

AIER’s proprietary Everyday Price Index (EPI) gained moderately in February 2025, continuing a climb that began in November 2024. The index rose by 0.51 percent to 292.4, its highest level on record.

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

Amid the EPI’s twenty-four constituents, 17 rose, two were unchanged, and five declined on a month-over-month basis. Purchase and rental of video, residential telephone services, and cable satellite prices saw the largest gains in price. The largest declines came in postage and delivery services, intracity transportation, and housekeeping supply. 

Also on March 12, 2025, the US Bureau of Labor Statistics (BLS) released its February 2025 Consumer Price Index (CPI) data. The month-to-month headline CPI number rose by 0.2 percent, slightly less than the 0.3 increase surveyed. The core month-to-month CPI number saw the same change: up 0.2 percent, higher than the predicted 0.3 percent increase. 

In February, the shelter index increased by 0.3 percent, which represented nearly half of the overall rise in the all-items index but was offset by airline fares (down 4.0 percent) and gasoline prices (down 1.0 percent). Despite lower gasoline costs, the broader energy index edged up 0.2 percent owing to increases in electricity (1.0 percent) and natural gas (2.5 percent). Food prices rose 0.2 percent, driven up by an 0.4-percent increase in the cost of dining out, while grocery prices remained flat as declines across most categories were negated by gains in others.

Of particular note, egg prices surged 10.4 percent, pushing the meats, poultry, fish, and eggs index up 1.6 percent, while beef prices surged 2.4 percent. Cereal and bakery product prices rebounded after a January decline, rising 0.4 percent. Restaurant prices continued to trend higher with full-service and limited-service meal costs both up 0.4 percent and 0.3 percent, respectively.

Excluding food and energy, core inflation rose 0.2 percent in February, half of the 0.4 percent increase in January. Shelter costs continued their steady climb, with both rent and owners’ equivalent rent rising 0.3 percent; prices of lodging away from home increased by 0.2 percent. Medical care costs nudged up 0.3 percent, driven by a 0.4 percent increase in physician services, while hospital services saw only a marginal 0.1 percent uptick. Prescription drug prices remained unchanged. Prices for used cars and trucks rose 0.9 percent, while household furnishings and recreation posted gains of 0.4 percent and 0.3 percent, respectively. Other categories, including apparel, personal care, and motor vehicle insurance, also saw price increases. In contrast, airline fares fell sharply by 4.0 percent, erasing a January uptick, and new vehicle prices dipped 0.1 percent.

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

The headline CPI reading came in at 2.9 percent on a year-over-year basis, exceeding expectations of a 2.8 percent rise. Year-over-year core CPI also rose slightly more than forecast as well, with a 3.2 percent rise from February 2024 to February 2025.

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

Over the twelve months the cost of food at home increased by 1.9 percent, with notable variation across the categories. Meat, poultry, fish, and egg prices surged 7.7 percent, driven by a staggering 58.8-percent rise in egg prices owing to the largest avian flu outbreak in recorded history. Nonalcoholic beverages saw a 2.1 percent increase, while dairy and related products rose 0.8 percent. Cereal and bakery product prices climbed up 0.3 percent. Other food at home registered a slight 0.1 percent gain. By contrast, fruit and vegetable prices declined by 0.2 percent. 

Dining out became more expensive over the past twelve months, with the food away from home index climbing 3.7 percent year-over-year as full-service and limited-service meal costs rose a similar 3.7 percent and 3.5 percent simultaneously.

Energy prices declined slightly over the past 12 months, with the overall energy index falling 0.2 percent. Gasoline prices dropped 3.1 percent and fuel oil saw a steeper decline of 5.1 percent. Those decreases, anticipated owing to the recent decline in world oil prices, were offset by higher household energy costs: electricity prices rose 2.5 percent and natural gas prices were up 6.0 percent. Shelter costs climbed 4.2 percent, notching its slowest annual increase since December 2021. Other categories posted notable gains since February 2024, including motor vehicle insurance (11.1 percent), education (3.7 percent), medical care (2.9 percent), and recreation (1.8 percent).

February’s CPI report highlights weakening consumer demand for discretionary goods, and disinflation in tariff-sensitive categories (automobiles, home furnishings, and apparel) appears to have stalled – perhaps because of price pressures generated by above-average inventory stocking activity in advance of anticipated levies. 

Looking ahead, maintaining downward inflation momentum may prove difficult, particularly in the goods sector. Seasonal factors could push new-car prices higher, and tariffs scheduled for April 2nd — most particularly on auto parts from Canada and Mexico — pose an additional risk. Core services inflation is likely to decelerate further in the second quarter owing to slackening consumer demand, although the impact may be moderated by BLS changes to the weight given to housing in the overall index. At present, by the end of 2025 headline CPI is projected to hover around 2.7 percent, with core inflation slowing to 2.8 percent. 

Despite somewhat softer consumer price data, market expectations for Federal Reserve rate cuts have moderated with less than one cut now priced in for June and roughly 68 basis points of cuts anticipated for the full year. While tariffs on Canadian, Mexican, and Chinese imports are likely to result in a one-time upward price adjustment, the potential for reciprocal tariffs to escalate into a pattern of one-upmanship among a broader set of US trading partners could generate inflation-like pressures in various goods. Tariffs are unlikely to be benign, but their impact on the current disinflationary trend — whether as a further drag or a more challenging setback to progress already made — remains to be seen.

What, exactly, has DOGE found so far in its investigation of Social Security? For the most part we don’t know. But Elon Musk has posted several jaw-dropping items on X that were not what they seemed at first.  

Contrary to the programming assumption made by DOGE investigators, for example, the Social Security Administration does not send checks to everyone who qualifies for benefits, is over full retirement age, and is not coded as being dead. This led to the erroneous report that millions of people who are 100 or older – most who would presumably be dead – are receiving checks. The actual number is about 44,000.  

This number is plausible since it means that about 1 out of 10,000 Americans is both 100 or older and receives a Social Security benefit check. This comports with a related fact from the Social Security Administration’s data set, which is that those over the age of 100 comprise about .1 percent of those who receive Social Security benefits. 

In short, some of what looks like news isn’t.  

Now, some good news.  

Given early mistakes, it is good news that DOGE has no authority beyond having access to data, investigating, and then reporting what it finds to the president. It is the president, or Congress, that will change the Social Security program, not DOGE. Executive orders or acts of Congress  will be transparent policy changes. Both the president and Congress understand that unless there is a very good reason to make any change to Social Security, there will be a very high political price to pay. 

For those concerned that DOGE investigators will have access to private data, there’s more good news. Social Security data is not secret, it is confidential. It is common for even low-level employees in the federal government to have access to confidential data. Those in DOGE who have such access are special federal employees bound by all the rules binding others who currently work in the Social Security Administration. 

Here’s more good news. According to the May 2024 Social Security Trust Fund Report, the unfunded liability for the Social Security Program is 22.6 trillion over the next 75 years. To put this number in perspective, the US GDP for fiscal year ending 2023 was 27.4 trillion. Addressing fraud and waste will shrink the size of this underfunding problem.  

It is impossible for the federal government to eliminate the budget deficit by cutting non-entitlement spending, because these other budgets, even added up, are too small relative to entitlement budget shortfalls. For fiscal year ending 2023, for example, mandatory spending (mostly entitlements) was over twice as much as discretionary spending (3.8 trillion versus 1.7 trillion).   

This is why researchers like me harp on the need for entitlement reform. But if any significant percentage of the unfunded liability crisis is, itself, rooted in fraud and waste in the entitlement programs themselves, then maybe reforms need not be as drastic as we previously thought.  

Now some bad news.  

We are very far from being able to reliably estimate the savings to Social Security, so it is premature to think we are out of the woods. The budget hole is very deep: 22.6 trillion dollars over the next 75 years. No serious scholar I know of believes there could possibly be enough fraud and waste to cover the budget shortfalls by only eliminating that. It is therefore imperative that DOGE-related optimism not slow down needed reforms to entitlement. Such reforms are necessary if the federal government is to keep its promises to future generations. The most likely outcome is that it will shrink a very large problem, which is excellent, but the problem that remains will still be large.  

In the waning days of the Biden administration, this crisis was worsened by almost 200 billion dollars over the next ten years with the Social Security Fairness Act. In short, an unfair outcome had been detected in 1983, it had been addressed with an alteration to the computation of monthly benefits, and now that alteration has been removed to allow the highest-income people in the program to enjoy the most generous replacement rates which were meant for the lowest-income people in the program. It is very concerning that this incredibly low-hanging fruit has not been seized upon by DOGE. If President Trump leads an effort to repeal Section 3 of this act, it would not constitute his “touching Social Security.” It would not allow a last-minute change to the program that came after the president’s pledge, a change that undermines the program’s ability to keep its promises.  

Let’s finish with one last bit of good news. It turns out that two modest reforms that will not reduce what people are expecting to receive from Social Security can close well over 80 percent of the funding gap over the next 75 years. 

Even if DOGE is only modestly successful at removing waste and fraud, these two modest reforms could conceivably close the gap completely.  

In short, the reforms are to first, no longer use wage growth data to index prior earnings in the computation of average monthly earnings (this is the first step in computing the amount of monthly Social Security checks) and second, to use a chain-weighted CPI index for the adjustment of future benefits payments to more accurately account for inflation.  

This would be an incredible gift to the present and future citizens of America.

In 2009-10, I was invited to dozens of speaking opportunities, as well as lots of radio and television appearances, because of my association with the “Tea Party.” Though now increasingly out of fashion, the informal moniker “Tea Party” referred to a loose confederation of citizens and political candidates who were concerned about the size of government, and especially about the federal debt.

In retrospect, it appears that all that energy (in the movement) and optimism (at least for me) was misplaced. As has been noted, regretfully or snidely, the stated purpose of reducing government spending has not only not been achieved, but has failed on a scale that is hard to imagine from the vantage point of the summer of 2009.

There is a fundamental problem of discipline, and incentives, in the political process of democracies. It has often been commented on, but appears to have no solution. The problem is that there are three considerations that, when taken together, force an impossible choice.

1.  Voters say they don’t like government spending, but in fact they do, and will support candidates who increase government spending.

2.  Voters say they want lower taxes, and in fact they do, and will support candidates who reduce taxes.

3.  Voters say they want smaller annual fiscal deficits, and less overall debt, but in fact they don’t care at all, particularly if smaller deficits require reducing government spending (see #1) or higher taxes (see #2).

Since our elected officials aren’t official unless they are (re)elected, these three considerations suggest a potential for a corrupt bargain, and that’s just what has happened. Democrats have specialized in increasing government spending as a way to buy votes, and blame “low Republican taxes” for increased deficits. The Republicans have specialized in tax cuts as a way to buy votes, and blame “high Democrat spending” for increased deficits.

It is useful to establish some terminology.

A deficit is an annual shortfall of revenue, compared to spending. The difference is financed by borrowing, or “selling” US Treasury bonds. The reason investors are willing to buy bonds is that they are “discounted”: a $1,000 bond is sold at a price of $909.09; it will be worth $1,000 in a year, implying a 10% interest value, or rate of return. Treasury bonds are “auctioned” to ensure that the government pays the lowest rate to finance the deficit.

The opposite of a deficit is a surplus, where revenue exceeds spending.

Over time, the sum of the accumulated deficits and surpluses is the debt, or the total amount owed to bondholders.

Since mature bonds are constantly being retired, and new spending is constantly going out, the debt is always changing. In principle, if the old debt is being paid off by surpluses, which allow the debt to be retired, then the debt can shrink. But if there are consistent deficits, that maturing debt must be paid by selling new bonds. The problem is obvious: to pay the old bond, including the interest from the “discount,” the full amount must be borrowed. But then that amount must again be paid back, again plus interest, and so on.

There is another way to “pay” for deficits by issuing zero-interest bonds of a particular type: currency. The attraction of this method of financing is obvious, since no interest must be paid. The Federal Reserve Open Market Desk at the New York Fed need do nothing more than buy outstanding existing federal bonds, using newly “printed” dollars. (Of course, actual paper currency makes up less than 5 percent of the money supply, so these are really electronic rather than physical dollars.)

An overall increase in the price level caused by an expansion in the money supply, or the total amount of currency, is called inflation.

It’s easy to see why the “zero-coupon bonds” (dollars) are so attractive, from the perspective of politicians. If you sell actual bonds to finance the deficit, you have to pay interest. But if you just create new money and use it to buy bonds, then you ‘save’ twice: you pay no interest, and inflation reduces the real value of the debt to be repaid.

Of course, all of this was true in 2009 and 2010, when the push to reduce the debt was a key plank of Tea Party politics. The question is, what happened?

On the debt side, it’s pretty clear what happened: there was an orgy of deficits, accumulating a total debt that is nothing short of staggering. Expressed as a percent of US GDP, to account for scale, public debt went from less than 60 percent of GDP in 2000 to more than 120 percent of GDP in 2024.

Numbers this size seem cartoonish, but for context this works out to an unsecured obligation of well over $100,000 per man, woman, and child now alive in the US.

Fortunately, the current administration in Washington has promised to address the debt, or at least the rate of growth of the deficit. Less fortunately, this promise shows little prospect of being carried out. The current GOP budget, even if it is passed with no amendments or increases, actually increases the deficit, and will expand the debt by even more than the Biden budget inflated government borrowing in the previous year. 

None of this is going to change until voters press members of Congress either to cut spending sharply, or to raise taxes. We are living far beyond our means, and — as I have argued before, back in 2009, when it seemed that people were listening — that is daft. Because Deficits Are Future Taxes (DAFT).

In the 1990s, Time magazine ran a famous story about “The Committee to Save the World” with a picture of Robert Rubin, Alan Greenspan, and Lawrence Summers on the cover. At the time, the enormous hedge fund, Long-Term Capital Management (LTCM), found itself on the losing end of a trade in the Russian Ruble. Its impending bankruptcy threatened the stability of the whole financial system – and so these officials worked to cobble together a rescue package from Wall Street and avert disaster.

When it comes to the advocates of ESG in the world of finance, we find just the opposite: The committee to destroy the world economy. They have actively colluded to drive the global world economy into the ground. Andy Puzder’s book: A Tyranny for the Good of its Victims: The Ugly Truth about Stakeholder Capitalism exposes the destructive tendencies and the reckless hubris of ESG’s biggest advocates.

You may have heard about Larry Fink and Blackrock pushing ESG. You’ve heard right. Puzder makes it crystal clear that, yes, Larry Fink is in fact the bad guy behind the ESG curtain. But he didn’t act alone. Other prominent investors and officials joined Fink’s crusade – folks like Michael Bloomberg who chaired the Sustainability Accounting Standards Board and Mark Carney, former governor of the Bank of England and the Bank of Canada, who strong-armed financial institutions to sign onto the Glasgow Net-Zero Alliances. 

Carney and Bloomberg are big players in financial markets, so their full-throated advocacy for ESG reporting, goals, and commitments should not be ignored. And of course we shouldn’t leave out Klaus Schwab, the long-time advocate, father even, of stakeholder capitalism. These men self-consciously assumed the role of conductors and directors of the investment community’s (and corporate America’s) forced march to net zero and diversity requirements.

Fink, through his massive asset management firm Blackrock, almost single-handedly imposed his ESG agenda on corporate America. With trillions of dollars of assets under their management, Blackrock was (and still is) the largest single shareholder of most Fortune 500 companies. Through investor “engagement” and the threat of voting against board recommendations, Fink had huge influence in corporate boardrooms. And he wasn’t shy about using his influence. He wrote annual letters to CEOs “suggesting” they should prioritize net zero, diversity, and sustainability.

Puzder savors the irony of this radical investor activism being perpetrated by the CEO of a firm specializing in passive investment products. How could an asset manager know the right policies and goals for thousands of companies across dozens of industries? Also, by what right can Blackrock vote the shares they manage on behalf of their clients when those clients have not given their approval?

One challenge of assessing ESG policy is sifting through the jargon of ESG. Fink and others use financial terminology like “risk” and “opportunity” and “value” to justify pushing ESG; yet they could never quite show that ESG investing would yield the best return to their clients. For a few years, ESG fund returns looked pretty good because they were often heavily weighted in technology stocks. But when the stock market correction came in 2022 and 2023, ESG investing took it on the chin. While the S&P 500 index fell by 14.8 percent in 2022, Blackrock’s major ESG S&P 500 index fell over 22 percent.

Meanwhile, Puzder points out that the “S&P 500 energy sector index rose 54 percent.” The poor financial performance of ESG funds and portfolios poured cold water on the delusion that the entire global economy was undergoing a profound energy transition. It also undermined Fink’s prominent claim, echoed by the SEC under the Biden administration, that “climate risk is financial risk.”

With the claim that ESG promotes superior financial returns significantly weakened, Fink was less able to resist pressure and litigation. Eventually, Fink dropped the term ESG altogether – though it had been a linchpin of his directives to business executives and a key piece of Blackrock’s investment offerings. Furthermore, he didn’t even write a letter to CEOs in 2024.

Puzder highlights the many state governments and think tanks involved in rolling back ESG. “The Resistance,” as he calls it, scored all kinds of wins in 2023 and 2024 – withdrawing billions of dollars from Blackrock’s management, pressuring insurance companies and banks to withdraw from international “alliances,’ and separating state business and funds from banks that were actively working to undermine key industries in the state. Many companies also began rolling back their DEI policies in response to pressure from activists like Robby Starbuck, increased legal liability, letters from state officials, and, of course, the new Trump administration.

The ESG debate still rages on shareholder meetings and proxy (shareholder voting) contests. Although the “Big Three” asset managers (BlackRock, Vanguard, and State Street) have scaled back their pro-ESG votes, they continue to support ESG initiatives. Even more problematic are the two proxy advisory firms: Institutional Shareholder Services and Glass-Lewis. These companies don’t seem to have budged from their position recommending that shareholders support every pro-ESG proposal. 

Though awareness and activism in proxy-voting has increased, the recommendations of the proxy advisory firms remain the default for trillions of dollars of capital. Compounding the problem, these proxy advisors are privately owned and in foreign hands. They also do not have the same legal fiduciary duties to act solely in the long-term financial interest of their customers. That means they are relatively insulated from public feedback and public pressure.

The broader message of Puzder’s book, though, is that free market capitalism brings prosperity while stakeholder capitalism and other forms of collectivism destroy wealth. He sprinkles anecdotes and comments about the nature of economic development throughout the book – talking about the industrial revolution, Hong Kong, China, the Soviet Union, and global GDP growth. The “war on profit” he accuses Fink and his allies of is bad for investors, retirees, and the economy.

Puzder points out that restricting fossil fuel development, which drives up energy prices, doesn’t affect wealthy elites nearly as much as it affects the poor:

The net-zero ‘transition’ is a classic example of a luxury champagne-socialist belief. Larry Fink and his friends have the luxury to push for policies that drive energy prices through the roof because they can and will afford to ride in limousines, yachts, and private jets no matter how high prices get. Their wealth walls them off from the concerns of their inferiors – concerns like paying the rent, staying warm, buying food, or filling up the tank.

The very real costs of the ESG agenda cannot be undone. Fields of expensive and inefficient wind turbines will stand as a testament to a government-engineered renewable energy craze. The diminished economic clout of Europe may never be reversed. And people around the world must adapt to higher electricity prices.

The cultural damage, particularly in the United States, of DEI and other Social initiatives is profound. Of course, companies like Disney, Target, and Budweiser paid a steep price for their social activism – a point Puzder spends a good deal of time making. But DEI, and its sibling identity politics, has increased hostility and polarization more broadly. And they have raised the stakes of “winning” political power. They have also reduced Americans’ trust in business and other institutions and have unjustly cast a shadow, as affirmative action did, over the qualifications of women and minorities in corporate America.

The tide has certainly gone out on ESG – leaving thousands of people employed by the ESG industrial complex (analysts, compliance, diversity officers, etc.) scrambling. But Puzder warns market advocates not to declare victory or to relax yet. He argues the past decade of debate over ESG is only the most recent episode in the struggle between collectivists who desire power and everyone else who wants to live a peaceful and prosperous life. 

This perennial struggle will never end because neither side can be fully defeated, and so neither can one side ever fully win. The US, though, has “economic freedom and individual liberty….[as] essential parts of our national DNA.” Let’s hope that DNA holds true and that the body politic becomes increasingly immune to the collectivist virus, which has most recently taken the form of ESG.

Me: “Hey Siri! Write me an essay on artificial intelligence showing how the USA., China and the European Union interact with AI.”

Siri: “Ok! The USA innovates AI, the Chinese replicates AI, and the EU regulates AI.” 

Siri was introduced to the Iphone 4 in 2011 as a digital assistant. Long forgotten in today’s high speed AI models and algorithms, Siri was the slower stepping stone of Artificial Intelligence breakthroughs. Artificial Intelligence advances the technological frontier as we journey forward into the twenty-first century. Indeed, the global landscape for artificial intelligence (AI) is being shaped by three dominant forces: the United States, China, and the European Union. Each of these economic powerhouses has taken a distinct approach to AI. 

Siri was not branded as AI, but rather a digital assistant. Siri told jokes, reported on the weather, and at best could make a phone call. Apple didn’t even invent Siri, rather acquired the firm for $200 million. Yet, this digital assistant was for the longest time the closest representation of artificial intelligence. 

Just four years after Siri’s debut in 2015, Openai was founded by eleven tech pioneers including Elon Musk & Sam Altman. In 2019 Microsoft invested one billion dollars into OpenAI and has since invested 13 billion dollars. Since then ChatGPT has had 4 major overhauls and become a household name with 123 million daily active users. Most recently, OpenAI has been valued at 340 billion dollars.

OpenAI isn’t the only AI firm either. In 2023 Google introduced its AI, Gemini. In that same year, Microsoft launched Copilot and tech titan Elon Musk’s firm xAI released his AI, Grok. Grok is the only AI designed to have witty humor, “an AI assistant with a twist of humor and a dash of rebellion.”

While US AI firms continue their race for dominance, the battle is no longer confined to Silicon Valley. The rise of international competitors, particularly from China, has introduced new threats to the American leadership. This became evident when Chinese AI firm DeepSeek shocked the US stock market and AI world.

January 20th, 2025 saw not one, but two inaugurations. As Donald Trump was sworn into office as the 47th President of the USA, Chinese firm DeepSeek entered the AI ring with its model called R1. The foreign firm sent US tech stocks tumbling, as the Nasdaq index fell 3 percent. DeepSeek claims its artificial intelligence only costs roughly $5 million, “Assuming the rental price of the H800 GPU is $2 per GPU hour, our total training costs amount to only $5.576M.” 

How DeepSeek managed to create R1 with this little sum and within two years is perplexing given OpenAI needed millions of dollars and years of preparation.

OpenAI claims DeepSeek stole from them. “We are aware of and reviewing indications that DeepSeek may have inappropriately distilled our models, and will share information as we know more. We take aggressive, proactive countermeasures to protect our technology and will continue working closely with the US government to protect the most capable models being built here.” 

Indeed, there is a history of Chinese firms stealing intellectual property from US firms. The Center for Strategic & International Studies indicates, “We found so many instances of reported Chinese cyber espionage – 104 in the last ten years.”

Beyond allegations of intellectual property theft, DeepSeek has also faced international scrutiny. Several nations, including South Korea, Italy, and Taiwan have banned the app citing privacy concerns and the firm’s questionable adherence to data protection laws. In addition to this, DeepSeek responds with blunt ignorance concerning the facts surrounding Tiananmen Square in 1989, Hong Kong’s reincorporation in 2019, and Taiwan’s sovereignty.

In between the US and China lies the European Union. The EU consists of 27 nations, roughly 450 million people, and is home to 15 percent of the world’s GDP. Their technological contribution to the AI field is zero. In typical EU fashion, instead of competing and investing in AI, the bloc chose regulation, introducing the AI Act in 2023—the same year many US AI firms were founded.

The AI Act was created to limit risk. “To ensure safe and trustworthy AI, the AI Act puts in place rules for providers of such models. This includes transparency and copyright-related rules. For models that may carry systemic risks, providers should assess and mitigate these risks.”

Instead of focusing on the future, the EU prioritizes saving the planet’s priorities by limiting plastic consumption. This is not a new approach, during the age of the internet, the EU was trying to figure out how to regulate the curvature and quality of bananas in 1994. 

By prioritizing risk limitation over market-driven growth, the EU risks further widening the economic gap between itself and the US. The consequences of ignoring economic growth have already begun to materialize. The European Center for International Political Economy writes, “The ranking of GDP per capita in 14 EU member states, which together represented 89 percent of EU GDP, was lower in 2021 than in 2000.” Moreover ECIPE claims, “the prosperity gap between the average American and European in 2035 will be as big as between the average European and Indian today.” Fighting the future by enacting AI laws before even having an AI firm isn’t progress but regression.

The willingness to take risks and embrace new markets has long been a defining trait of American innovation. Just as Google, OpenAI, and xAI have shaped the modern AI industry, history has shown that bold entrepreneurs can redefine entire industries. This same dynamic played out when the Wright Brothers pioneered flight in 1903 or when atomic energy was first applied in 1951. Today the US makes up roughly 25 percent of world GDP. This is not by accident, but rather by invention and intuition of markets not yet exploited.

The trajectory of AI development will not be determined by regulation or replication, but by the entrepreneurial spirit that drives innovation forward. As history has shown, nations that embrace risk, competition, and discovery will lead the next technological revolution, while those that prioritize control and restriction will fall behind. In the end, the future of AI will belong to those who dare to create, rather than those who merely imitate or regulate.