Industrial researchers are sounding the alarm as thousands of AI companies are being eliminated in the wake of the first wave of AI fever sparked by OpenAI.

At the same time, however, prominent tech leaders and Silicon Valley CEOs such as Jensen Huang continue to promote the narrative of China’s technological leadership in AI. While it is understandable that hardware manufacturers may emphasize growth potential in China for commercial reasons, it is more puzzling to see segments of US media and academia amplifying what increasingly resembles a state-driven narrative. This disconnect warrants closer scrutiny — not just of China’s capabilities, but of how narratives around them are constructed and disseminated globally. 

It was the Soviet Union that launched the first artificial satellite Sputnik into space, on October 4, 1957. And then three months later, on January 31, 1958, the US launched the Explorer I, making it the second country in the world that could send a satellite into space. No one cares who was next, especially when the third country was France, and especially when its first satellite wasn’t launched until November 1965 — nearly eight years later. When I asked ChatGPT why this is the case, it put it simply: “History remembers the winner, not the runner-up, let alone the third place.” 

Fewer people remember that in the late 1950s, there was another country obsessed with launching satellites: China.  

At the time, under Mao Zedong, China was one of the poorest countries in the world. Yet my grandfather, who was a team leader in a rural production unit in northern China, recalled how everyone was talking about “launching satellites.” My grandfather was no college graduate or rocket scientist. And of course, they weren’t launching real satellites — they were referring to faking economic data. 

During the Great Leap Forward, “launching a satellite” became a euphemism for exaggerated production figures. If an acre of land supposedly produced 10,000 kg of rice, a satellite had been launched. If a pig farmer claimed he raised a pig the size of a Volvo car, and it made national headlines — another satellite was launched. And the worst part? Everyone believed it. Even Mao himself. 

That’s why, despite widespread famine, Mao refused to believe food shortages existed. Instead, he was more concerned about what to do with China’s “excess” agricultural production. And since China had “plenty” of food, he decided to send free grain to its Communist allies, such as Romania and Albania, even as millions of Chinese starved. That’s exactly what he did in 1960 during the three years of great famine which resulted in the death of approximately 20 to 40 million people.

Fast forward to today. Since DeepSeek CEO Liang Wenfeng was invited to a meeting with China’s Premier Li Qiang earlier this year, its chatbot has been widely talked about and considered a competitor of OpenAI’s ChatGPT. Meanwhile, my French colleagues and American friends kept asking me about Chinese AI products with strange names. And I couldn’t help but think of the Great Leap Forward and its “satellites.”  

As much as I’d wish China could lead in AI, I am not convinced.

Here’s a three-part explanation: 

What Does AI Mean to China? 

AI is a powerful tool, a symbol of technological advancement, and a potential driver of economic growth. But that’s not why China is investing heavily in AI. 

China is betting on AI for one reason: great power competition. 

In Silicon Valley, there’s a concept called FOMO — “Fear of Missing Out.” Investors fear missing the next big opportunity. But in geopolitics, nations fear missing the next big strategic advantage. China develops AI not because of domestic demand, but because the US is doing it. 

The same logic explains many of China’s past industrial pushes. Great power competition is why China developed its nuclear bombs and hydrogen bombs, why China also was blamed for overcapacity in solar panels and infrastructure of 5G telecommunication. In developing nuclear weapons, China was fearful that missing out would be equivalent to dying out. It had to develop its own nuclear weapons to survive in a volatile global environment. Fortunately, when it comes to overproducing solar panels or 5G base stations, what’s at stake is not life or death.  

AI in China is following the same pattern: a copycat breakthrough sparks mass investment, a semi-commercialized product grabs nationalist attention, but in the end: fraud is exposed, resources are wasted, and bubbles burst. 

China Faces Institutional Barriers to AI Leadership

Just like the roaring years of personal computers and the Internet, Silicon Valley tech geniuses, angel investors, and early adopters of cutting edge technology are indispensable in AI development. But many people in the West overlook the institutional environment for developing technology. Silicon Valley’s AI boom was not just about talent, money, or research. It was about a unique institutional environment that fosters risk-taking, open data, and creative destruction. 

China’s biggest obstacles to developing technology have never been a lack of talent or resources, but the lack of a free environment. What holds China back is censorship, a lack of tolerance for failure, and an intrinsic disgust for entrepreneurship.  

Censorship also impedes AI growth. Chatbots such as ChatGPT can draw on 95 percent of the information on the Internet that is English, whereas its Chinese counterparts can only utilize a small portion of the information on the Internet due to the Great Firewall that isolates China from the rest of the world. There are complexities: few Chinese users speak English, the Chinese language is a high-context language, and the Chinese language has been highly polluted because of censorship (for example, there are over 3,000 ways of referring to a political figure without directly naming him). Chinese chatbots are a lot like a middle-aged political prisoner who constantly minces words, dodging sensitive topics, or simply refusing to respond. This environment also restrains the training sources for Chinese chatbots. As people say, garbage in, garbage out. If this is the kind of AI advantage we see in Chinese AI products, I don’t know what kind of intelligence we are talking about.

China has no shortage of technical talent. But AI isn’t just about technical skill — it’s about curiosity, questioning assumptions, and challenging authority. Whereas Silicon Valley thrives on disruption, China’s political culture fears it. Startups need freedom to experiment, but China’s AI strategy is heavily state-directed. 

China develops AI as if it were going through another Great Leap Forward. How do I know? I checked some white papers on AI development, and my oh my, can you believe that China had an AI development roadmap back in 1979? And can you believe that by the end of last year, there were over 4311 leading artificial intelligence enterprises in China? Yes, it is only high-performing Unicorns that lead, but 4,311? I bet most of these companies are not developing AI, just like many solar panel producers in the early 2000s were footwear producers before government subsidies and supportive policies kicked in. 

Therefore, I think China’s AI leadership is highly exaggerated.  

AI’s Application Compared to the Input is Infinitesimal.  

AI will not help China’s economy — it will hurt it. AI is created for a reason, and if that reason is to assist human beings, not surpass human beings, its application is reasonable and acceptable. AI is, at best, human-like in its capabilities, or at worst, a powerful tool like a computer or a calculator, or a self-driving car. AI will, for the foreseeable future, substitute for humans in doing tedious, repetitive, and non-essential tasks. If we use AI in factories, shops, or restaurants, fewer workers, cashiers, or waiters are needed. Good. But we wouldn’t want to use AI in situation rooms, in UN Security Council meetings, or in nuclear weapon facilities.   

In economic history, technological advances have driven higher productivity. The West became wealthy largely due to the Industrial Revolution, while China’s rise was primarily fueled by offshoring and outsourcing of those same functions. The West will need to get by with fewer workers, especially hard laborers, but in China, it is not a desirable thing to replace human labor with AI. China’s population numbers 1.4 billion, over half in cities and mostly without a high school education. At least one third of them need jobs — not high-paying programming jobs, but relatively low-paying, low-tech jobs — to survive.  

Recently, an article made its rounds in Chinese media with a title something like “AI civil servants take office, completing three months’ worth of work in just three days.” The civil servant who wrote this article soon realized the irony and withdrew it. Being a civil servant in China is a relatively fancier job than being a factory worker or a shopkeeper. But any economist will tell you that civil servants don’t create wealth — they live on taxpayer money. And Chinese civil servants spend most of their time not working for taxpayers’ interests, but attending meetings, study sessions, and writing journals listing how they have benefited from those study sessions. By far, the most effective use of AI in China, I dare say, is civil servants using chatbots to write pages and pages of “Party Member Study Notes.”  

Creating jobs, not reducing jobs with AI, is a more urgent issue for the Chinese government. If you’ve visited China, you might discover some very interesting and unfathomable jobs. For example, there are still “elevator operators,” people who press the button in an elevator. There are actually businesses called “Computerized Fortune Telling and Naming Services” (I swear I’m not making this up), where computers are used to predict fortunes or generate names for newborns — likely among the earliest commercial computer applications in China. You can still see such shops in big cities like Beijing or Shanghai. Such odd jobs indicate that the application of technology can be so different than what’s intended for the technology when it’s created. And China simply cannot afford to replace human jobs with AI.  

Shortly after the conclusion of the Two Sessions, the graduation season will arrive. According to forecasts from China’s Ministry of Education, 12.22 million university students are expected to graduate and enter the job market in the spring and summer of 2025. In 2024, China saw 11.79 million university graduates, marking what was already recognized as the “toughest job market in history.” With an even larger number of graduates in 2025, finding employment is expected to be even more challenging than last year. Many of these university graduates are not going to want to do factory jobs, they want to work in offices, but AI can increasingly replace office workers nowadays. Add the university graduates to the already underemployed workforce in China, and any rational decision maker will think twice before embracing AI.  

What Is China’s AI Future?

This round of AI fever might generate one of three scenarios for Chinese AI.  

1. Application of AI is very much limited to certain areas, such as military or economic planning, stimulating another round of discussion about “socialist calculation” and the possibility of planned economy. In the meantime, a skeletal, censored version of AI is commercialized for the consumer market, isolated from the outside world, and heavily censored. How heavily? That is a top secret since officially, there is no censorship in China at all.  
2. Regulations catch up, and AI is banned in labor-intensive industries to protect jobs. Discussions of whether a company should still be forced to pay into state pensions when they replace workers with AI or robots is already underway. It’s ridiculous, but it is happening.
3. China treats AI like the Apollo Program — a political prestige project. The actual mechanics of AI are at least successful enough to bridge the hype until China moves on to its next ‘global leadership’ project (perhaps Mars exploration, just because the Americans are pursuing it) But AI will not be heavily put to use in schools, government agencies, or factories, as its appearance, rather than its functionality, will be paramount.  

True, China might be charging ahead in areas such as computer vision, facial recognition, and AI surveillance. Yes, Chinese companies such as Alibaba and Tencent have integrated AI deeply into daily life via e-commerce and fintech. And sure, China has heavily invested in AI talent and chips. But China is not going to lead in AI, because its powerful institutions do not allow it to lead, only to follow.

Medicare has become one of the most expensive and inefficient federal programs in history, projected to cost over $1.1 trillion in 2025. Its costs are growing faster than inflation and wages, contributing mightily to our $36 trillion national debt. Worse, it delivers this mountain of spending through a bureaucratic system that incentivizes fraud, waste, overtreatment, and poor health.

There’s a simple, bold alternative. Let states opt out of Medicare as it exists today and pay their share of Medicare funds directly to seniors, as a direct cash transfer, alongside Social Security. Instead of government price-setting and provider payments, seniors could purchase health insurance and care in open, competitive markets. The result would be lower costs, healthier people, and vastly less fraud.

A System Built to Overspend

Medicare pays providers through the Medicare Physician Fee Schedule — a price list of over 10,000 services largely determined by the American Medical Association (AMA). A committee of 32 doctors, known as the RUC, meets behind closed doors to decide how much should be reimbursed. This is not a competitive marketplace — it’s a medical cartel. And the consequences of cartel price-setting are exactly what economists would predict: rising prices, distorted incentives, and rampant waste.

Medicare fraud is especially staggering. The Government Accountability Office (GAO) has labeled Medicare a “high-risk” program for over three decades, with “serious vulnerabilities to waste, fraud, abuse, or mismanagement.” In Miami, a Medicare Fraud Strike Force once visited 1,600 businesses that had billed Medicare for equipment — only to find that nearly a third didn’t even exist. Over 10 percent of Medicare’s entire budget — more than $60 billion every year — is lost to fraud, waste, and improper payments.

Imagine if that money were in the hands of seniors, not bureaucrats. Fraud would plummet overnight.

Misaligned Incentives Lead to Disease

Medicare also discourages healthy behavior. Under its rules, seniors’ premiums aren’t affected by whether they exercise daily or smoke two packs a day. Insurance companies can’t offer lower rates for better health. Americans now suffer skyrocketing rates of obesity, type 2 diabetes, and heart disease — behavioral choices contribute significantly to outsized medical costs.

Before Medicare, insurers could price policies based on risk, charging each individual a premium that reflected their expected medical costs. That gave individuals strong financial incentives to stay healthy. Today, people with chronic disease pay no more than those who take care of themselves, removing one of the most powerful motivators for good health.

Medicare’s bureaucracy is slow to adopt new medical knowledge, and often blocks access to innovative treatments. Getting a new treatment covered as “reasonable and necessary” by Medicare can take years — 16 years, in the case of one lifesaving alternative to coronary bypass surgery. But how many lives — and how many billions of dollars — were lost to preventable surgery, unnecessary stents, and symptom-managing drugs in the meantime? 

Overpriced and Overprescribed

The current system also encourages overtreatment. Doctors and hospitals are paid based on volume of services, not results. Want to implant a heart stent that’s been proven ineffective for stable coronary artery disease? Medicare will pay. Want to teach a patient how to reverse heart disease with diet and exercise? You’ll be lucky to break even.

Studies have shown that stents don’t prevent heart attacks or prolong life in most patients. But Medicare still incentivizes them because the pricing formula hasn’t been updated to reflect current science — or because doing so would reduce provider income. As a result, millions of unnecessary stents have been implanted in the last two decades. 

Even doctors estimate that up to 20 percent of care, including prescribed medication, is unnecessary, and admit physicians are more likely to prescribe unnecessary procedures when they’re reimbursed more. Doctors also tend to steer patients toward specialists and newer, higher-cost treatments, because primary care and long-established treatments are routinely underreimbursed. Both over- and under-utilization of care harm patients and drive up costs. 

The Alternative: Pay Seniors, Not Providers

Instead of paying hospitals and providers, we should pay the seniors themselves. Divide the projected $1.1 trillion Medicare budget by the 68.5 million beneficiaries, and each senior could receive over $1,350 per month in cash. That’s more than $32,000 a year for a married couple — enough to buy catastrophic insurance and shop wisely for care.

Seniors could choose their own coverage and care — even abroad. They could save unspent funds for future care or pass them on. Medical providers would compete for their business, driving down prices and improving service. Innovation would flourish.

A pilot state could prove the concept. Let one state adopt the cash option, allow insurers to price based on risk, and let markets work. The outcomes — lower costs, healthier seniors, fewer fraud cases — would sell themselves.

What About the Sick?

Critics argue that markets would leave the sick behind. But the opposite is more likely. A competitive system would reduce waste, freeing up resources to help those who truly need it. Insurance companies would be motivated to find and promote lifestyle programs that prevent or reverse chronic illness. Risk pools or supplemental aid could protect the uninsurable more generously than our current system does.

Health care was never meant to be a federal responsibility. The Constitution delegates no such power to Washington, and the Tenth Amendment reserves unenumerated powers to the states and the people. Letting states test free-market reforms not only honors our federalist system — it empowers local innovation.

As Milton Friedman argued, the best way to help people is to give them money, not services. People spend their own money more wisely than bureaucrats ever will. Medicare should follow the model of Social Security: give the funds to individuals, and let them choose how to spend it.

A Win for Everyone

This is a solution conservatives can embrace, taxpayers can afford, and seniors can love. It puts money in the hands of patients, not middlemen. It restores incentives for health. It slashes fraud and waste. And it opens the door to 50 experiments in delivering better care at lower cost.

America’s seniors deserve more than rationed care and bureaucratic bungling. They deserve freedom — and the power to manage their own health.

It’s time to pay them, not the providers.

President Trump recently signed the GENIUS Act into law, establishing a comprehensive regulatory framework for stablecoin issuance. Much of the celebration surrounding its passage has focused on what appears to be a remarkable policy reversal by the US government. While it’s true that many politicians have embraced cryptocurrency (or have been replaced in office by those who have), the Act’s passage is not purely based on the promise of the underlying technology. That stablecoins function as a form of financial repression is at least as important, given the rising, and increasingly unsustainable, national debt.

According to the Congressional Budget Office‘s January report, the US debt-to-GDP ratio is approximately 100 percent and is expected to reach 118 percent over the next ten years. This level of debt is not unprecedented. The US experienced similar levels following the Second World War. In fact, history is replete with examples of high levels of government debt. What makes the current US debt situation particularly concerning is that it is not the result of war — and nearly every projection suggests the debt will continue to grow.

If one examines historical debt-to-GDP ratios in advanced economies, a pattern emerges. A prolonged period of war tends to cause a rapid increase in debt. Following the war, military spending declines and the debt-to-GDP ratio gradually and slowly falls over time. This pattern makes sense. For much of modern history, national defense was the state’s primary expenditure. Wars are extremely costly, both in human and monetary terms. Rather than covering the monetary cost with sufficiently higher taxes during the war, governments tend to borrow in order to spread the burden of taxation over time. A prolonged war therefore leads to a rapid growth in debt, followed by a gradual decline.

The recent history of the United States and other modern states is quite different. Expenditures on social safety net programs have dominated the budget in the postwar period, exceeding national defense. Furthermore, the dramatic increase in US government debt combined with the significant rise in interest rates in recent years have resulted in the US paying more in interest on the debt than it does on national defense. This is not sustainable.

To address its growing debt problem, the US government has four broad policy options:

• broad-based tax increases
• entitlement reform
• allowing inflation to erode the debt’s real value
• financial repression.

In the current political climate, the first two options are largely off the table. Members of both major political parties claim to be better stewards of entitlement programs and those discussing higher taxes often confine such taxes to the “wealthy.”

Since the debt is owed in nominal terms, one way to reduce the debt would be to issue more dollars to buy it back. This would lead to higher inflation. Although technically not a default, higher inflation would effectively reduce the real (inflation-adjusted) repayment lenders receive. 

It would be difficult for the US government to intentionally engineer a higher rate of inflation. The 1951 Federal Reserve-Treasury Accord separated the roles of debt management and monetary policy. A policy to deliberately inflate away the value of the debt would require that the Federal Reserve relinquish its independence.

That said, even an independent Federal Reserve could end up effectively monetizing the debt. Should debt continue on its unsustainable path, for example, concerns about the ability of the government to repay might lead to volatility in the bond market. The Federal Reserve would likely respond by acting as a buyer of last resort, expanding its balance sheet and ultimately causing higher inflation. Still, there is probably some limit to how much the Fed would monetize the debt, so long as it maintains its independence.

That leaves financial repression. Financial repression is defined as a formal requirement by the government that certain financial institutions purchase government debt. The government might prevent certain financial institutions from holding any financial assets other than government debt. Alternatively, the government could require financial institutions to hold a specific fraction of assets in US Treasury securities. The effect of such policies is to increase the demand for the government’s debt, which weakens the tendency for rising debt issuance to lead to higher borrowing costs.

Enter the GENIUS Act.

Stablecoins are digital dollars, similar to the digital dollars in traditional bank accounts. Both are claims to a physical dollar issued by the financial institution. Whereas the digital dollars in one’s bank account reside on a ledger controlled by the financial institution and are transferred over the payment rails of the traditional financial system, stablecoins reside (and are transferred) on the blockchains of various cryptocurrency projects.

Stablecoin issuers are financial intermediaries. One deposits a dollar to receive a stablecoin. The issuer sets a fraction of the dollars it receives aside to meet redemption requests, and uses the remaining fraction to buy interest-earning assets. This is where the financial repression comes in. The GENIUS Act requires that these stablecoin issuers hold their assets in cash, short-term US Treasury securities, or as reserve balances at the Federal Reserve.

The hope is that stablecoins will expand global access to dollars. The issuers will then invest a fraction of those dollars into US government debt. To the extent that these stablecoin holders were not previously holding dollars or dollar-denominated assets, the new policy could significantly increase the demand for US government debt and keep borrowing costs down. 

This isn’t mere happenstance. A number of current and former members of Congress are on record arguing that stablecoins expand the reach of the US dollar globally, reinforcing dollar dominance, while also creating a growing, passive demand for US government debt.

In short, the GENIUS Act may look like a forward-looking regulatory framework for a new technology — and it is. But it is also a clear step toward a modern form of financial repression, which appears to be the government’s favored strategy for managing its increasingly unsustainable debt.

For all of living memory in the US, the decision of how to educate one’s children was easy.

It is largely taken for granted: when Johnny or Jenny turn five, they’re enrolled in kindergarten at the local public school. After five or six years at the assigned elementary, they’re bussed slightly farther to a regional middle and consolidated high school. If they do tolerably well in academics, they’ll be routed into SAT prep and meet with a guidance counselor about college.

There are choices involved, but they’re all peripheral ones. Should we buy a house in this district or that one? Should we enroll Emma in half-day or full-day kindergarten? Does Brett need an SAT tutor? How much summer reading should we insist on at home?

For 90 percent of American families, the biggest decision — how an individual child should be educated — is made by default. Most of us attended public school, and we all turned out fine.

But have we really? Public schools have been quietly failing well-meaning parents for generations.

• Only 31 percent of American 4th graders read at or above grade level
• Only 28 percent of American 8th graders can complete grade level math
• 54 percent of American adults read at or below a 6th-grade level – a trend that’s been stable for decades

The idea that Junior can go to public school and be “just fine” may not be as surefire as we thought.

The default consensus is at last unraveling, and the conscientious parent has begun to ask: Should I send my kids to public school at all? 

The Quiet Failure of the Public School System

Public school wasn’t widely adopted across America until the 1920s, but within a generation, it was a core part of the American dream. Think of the 1950s cultural milieu – World War II veteran father driving off to work in his Chevrolet Bel Air, supporting his family on a single income while his wife kept house in her apron and bouffant while Dick and Jane walked themselves back and forth to school each day, books in hand. 

In those short decades, the government-run school became a staple of American identity. In only the most remote corners of the country did the one-room schoolhouse still exist; bells and textbooks, homeroom and homecoming, school band and dances and plays had become as American as the moon landing and apple pie.

Older generations, many of whom had grown up without the advantages of a youth set aside for learning, extolled the importance of formal schooling, in both the preparation for life and the development of the self: I didn’t get to go past eighth grade, but my Bobby’s going all the way to college.

It was a utopian dream. Education for everyone, provided equally and fairly by the state, with recess and lunch programs to fuel the body while stern-but-fair teachers molded the mind.

But even from the very early days, there were cracks in the veneer. 

In the 1950s, Rudolph Fleisch wrote a scathing critique of the American education system in his book Why Johnny Can’t Read, exposing the American literacy crisis that was already plaguing our society and undermining our future.

In the 1980s, the Reagan administration published A Nation At Risk, a landmark paper exposing America’s poor academic outcomes as a national security crisis. Its message was ominous: if we don’t fix American educational outcomes, they’ll become a threat to our future. The paper caused waves, but nothing in the system actually changed.

In the 1990s, John Taylor Gatto wrote his startling resignation letter from New York City Public Schools in the pages of the Wall Street Journal after being awarded Teacher of the Year – twice. In “I Quit, I Think,” and later in The Seven Lesson Schoolteacher, he confessed that he felt he was harming children by subjecting them to the public school curriculum. His books developed a passionate following, but the system carried on.

In the early 2000s, No Child Left Behind legislation was conceived to address what we’d by then been talking about for decades: public schools were deeply and fundamentally failing our children, and Americans faced a crisis of academic performance. The program’s enormous funding and resources didn’t change much, as measured by test scores, and its biggest lesson was that throwing money at our education problems doesn’t seem to make much difference.

And so, generation after generation, public schools failed to effectively deliver on their directive to educate the youth of one of the wealthiest and most powerful nations on the globe.

But no one particularly seemed to care – at least, not enough to create real change.

The Rise of Public School Alternatives

Finally, in the era of the internet, the momentum started to shift. Until the 1970s, homeschooling was largely unheard of (and in many states, illegal) but by the 2010s, it had become a part of the national lexicon. In 2015, there were well over 1.5 million homeschoolers in America, and slowly rising  — enough to make a noticeable shift (~5 percent) in the ratio of American students enrolled in public K-12 programs.

Education entrepreneurship — for many years relegated to small mom-and-pop-style alternative schools, where it existed at all — began expanding. The momentum gathered slowly: Montessori schools in America doubled between 1990 and 2000 to over 3000, with hundreds of Waldorf schools right behind. Student-led programs like Acton Academy began to emerge in the 2000s; privately managed charter schools gained traction; online schools rode the wave of home internet access. As public schools became increasingly mired in standardized testing and national curricular standards, parents began searching for the exits.

Investors, seeing this widespread market for alternatives, backed innovative projects, and a generation of VC-backed education programs was born: Prenda, Primer, Synthesis, Guidepost Montessori, Alpha School. They focused on supporting new founders in making franchise-like programs available nationwide.

Alongside these broad-scope strategies, the microschool movement emerged. Fueled by frustrated teachers and disillusioned parents, hundreds of tiny, independent learning centers flickered to life and began to expand.

Outcomes for these schools and students are promising, but schools still struggle against the Goliath of public school as a cultural norm. The familiarity bias is hard to sway – public school was just fine for me; of course it’s good enough for my kids.

The End of School is Just the Beginning

The response to COVID-19 and the school shutdowns that followed accelerated the search for alternatives to “default” government schools. The pandemic was the breaking point for many parents, where they finally saw what was happening up close – not the statistics, not the reports, but the actual instruction occurring inside their kids’ classrooms when school came home via Zoom during the lockdowns.

This was perhaps one of the silver linings of the pandemic: when parents saw what school had really become (not at all what they remember) they wanted out. 

Public school enrollment numbers dropped sharply and observers expect the decline will continue, with millions more children freed in coming years. Meanwhile, the ranks of homeschoolers swelled, as did the enrollments of alternative programs; everything from Montessori schools to innovative programs like Prenda and Synthesis saw a spike. At the height of 2020 closures, as many as six million kids were being homeschooled — not just doing public school at home, but intentionally going through a curriculum sourced or designed by their parents.

In the five years since, things have slowly stabilized, but the surge in school alternatives can’t be stopped. The balance has shifted. As of the 2024-2025 school year, only 49.4 million students are enrolled in public school, while estimates of the number of homeschoolers in America range anywhere from 3-5 million – which, on the high end, is one in nine American kids. 

Fully 60 percent of families looked for schooling alternatives last year. One in eight parents now say they expect to homeschool their kids. The tide is turning.

The New Fight for School Choice

Funding is starting to catch up to the student exodus. Seventeen states now have universal school choice programs, and sixteen more help at least some families afford alternatives. These vouchers empower parents to choose for private school (ranging from $6,000 to $10,000 depending on the state), lessening the financial barrier to an alternative education.
Parents know that default schools have delivered decades of disappointment. Government-run schools were like the post office or the DMV… We went, we sent our kids, we trudged on, because what choice was there?

But now education has become a marketplace. The drab monopoly on teaching children has been challenged, and parents see an increasing variety of exciting answers popping up. Finally, parents can treat school not as an eventuality, but as a thoughtful consumer:  “Is public school actually the best fit for my child?” And if not, even more enticingly, “what kind of education would serve him better?”

The Province of Ontario passed a controversial piece of legislation in early June that allows the government to create Special Economic Zones (SEZs) in certain designated regions, among other things. Known as Bill 5, which is called the Protect Ontario by Unleashing Our Economy Act, the legislation aims to remove regulatory hurdles to economic development in specific parts of the province.

“We need to get rid of unnecessary red tape, make it easier for companies to invest, to hire and to grow, and that’s exactly what Bill 5 is going to do,” said Vic Fedeli, Minister of Economic Development, Jobs and Trade. The legislation was brought forward by Premier Doug Ford’s Progressive Conservative Party, which was re-elected to a third consecutive majority government earlier this year.

While this legislation is the first of its kind in Canada, the idea of governments creating special zones with relaxed regulations to attract investment is nothing new. The Ford government points to countries like Singapore, South Korea, Poland, and Panama, which have experimented with SEZs in recent decades.

Part of the justification for this move is the threat that Trump’s tariffs pose to the Canadian economy. If Canada can strengthen its economy through selective deregulation, Ford reasons, then the damage that might come from the trade war can be mitigated. In particular, the idea is to use SEZs to speed up major resource and infrastructure projects, such as mining initiatives in the Ring of Fire — a rich mineral deposit in northern Ontario — and a possible tunnel under Highway 401 through Toronto to help with traffic congestion.

A Three-Pronged Pushback

The pushback on Bill 5 has predominantly come from three main groups: First Nations leaders, environmentalists, and labor unions. “Essentially, the cabinet could give corporations a free pass to circumvent all sorts of important protections,” said Anaïs Bussières McNicoll, a director of the Canadian Civil Liberties Association.

First Nations leaders have been especially vocal opponents of this legislation, arguing that it infringes on their treaty rights.

“The breathing lands are within the peatlands, the muskeg in Treaty Nine territory, where the Ring of Fire is proposed, and already over 30,000 claims have been staked without the consent of any Indigenous communities,” says Kerrie Blaise, legal counsel for Friends of the Attawapiskat River.

At a Queen’s Park rally outside the Ontario legislature in late May, protestors pushed back directly against Ford’s rhetoric, chanting “Indigenous rights are not red tape.”

Environmental groups, meanwhile, are raising concerns about the government relaxing environmental protection laws. “Bill 5 would, if passed, deal a body blow to the environment and hopes for energy sovereignty in Ontario,” said the group Environmental Defence in a statement before the bill was passed. “This Bill represents a direct attack on species at risk, clean and healthy communities, clean energy and the rights of Indigenous peoples.”

Labor unions have echoed these sentiments, adding that worker protections are also weakened with this legislation. “Existing Ontario labour law won’t apply in these special economic zones,” noted CUPE Ontario President Fred Hahn. “Under the cloak of an impending economic crisis and the guise of fighting tariffs, Doug Ford plans on delivering workers to the wild west of working conditions, all to the benefit of big business.”

While the concerns of these three groups seem overstated, many Ontarians are sympathetic to the general points that are being made. There is widespread fear that relaxing regulations, even only slightly, could allow large corporations to run roughshod over Indigenous people, the environment, and workers.

But while those concerns are worth taking seriously, the other side of the trade-off also needs to be weighed: the threat of a stagnating economy.

Unleashing the Entire Economy

The Ford government has made an interesting admission with the introduction of the SEZ law: the regulations that they themselves have been maintaining have been detrimental to the economy. In other words, they are explicitly recognizing that there is a trade-off between regulation and economic growth.

What this means, plainly, is that slow economic growth is really a policy choice; it is not simply unavoidable bad luck. The government is fully aware that they are putting a sizable check on our well-being, that with their mountains of regulations and lengthy permitting schemes they are holding us back from more affordable groceries, healthcare, housing, better education, and so on — and their justification for this notable hindrance on public welfare boils down to “well, sorry, we had other priorities.”

Just how much of an impact do regulations have? It’s hard to measure, but there’s no doubt it’s significant. “Most Ontarians would be surprised by the magnitude, scope, and costs of the province’s regulatory burden,” write researchers Charles Lammam and Sean Speer in a 2018 policy report for Ontario 360. “The Ontario government’s own count, which was performed back in 2012, pegs the number of regulatory requirements on businesses and individuals at over 386,000. According to one analyst, that number is twice as many as the next closest province.”

Lammam and Speer cite a 2018 report from the Canadian Federation of Independent Business (CFIB), which put the cost of government regulation in Ontario for 2017 at $15 billion, the highest of all the provinces both in absolute terms and on a per-business basis (which provides a more apples-to-apples comparison between different-sized provinces). According to the latest CFIB report, that number had risen to $20.4 billion in 2024.

Here’s another way to think about it: if the government is bragging about all the economic benefits that will result from relaxing just a few regulations in a few designated zones in the province, why wouldn’t they unleash trillions in growth by relaxing a lot of regulations in the entire province?

What if we unleashed the entire Ontario economy, and not just a tiny percentage of it?

To be sure, this doesn’t mean companies should be allowed to do whatever they want. Protections for legitimate property rights and enforcement of contracts are an important part of a free market, so those should never be on the table.

But we need to start questioning just how much special interest groups should be allowed to hold the economy back. Whether it’s Indigenous groups, environmentalists, labor unions, or some other body, these groups always want more privileges, more power, more special legal protections at the expense of others — which often come in the form of economic restrictions. And as sympathetic as their case may sound, there has to come a point where freedom and economic welfare are simply deemed too important to give up. Everyone in these groups is entitled to their property rights, but special favors from the government should be viewed with considerable suspicion.

And to those who point out that giving a company an SEZ is itself a special favor from the government, my response is simply: I agree, and let’s fix that by extending the deregulation to the entire province.

President Trump’s Secretary of Health and Human Services (HHS), Robert F. Kennedy Jr., has drawn criticism for his desire to remove fluoride from the water supply. 

According to PBS, the American Dental Association president said, “When government officials like Secretary Kennedy stand behind the commentary of misinformation and distrust peer-reviewed research, it is injurious to public health.” 

Similarly, headlines out of outlets like Politico say that “Dentists are struggling to counter [Kennedy] on fluoride.”

Much of the recent criticism cites a new study estimating a sharp rise in cavities if fluoride were removed. But the enamel-strengthening mineral is not added to water supplies in most of the world, and even countries that had done so stopped when fluoride toothpaste became commonplace. 

To understand the relative merits of removing fluoride from the water, we’ll need to review some of the arguments from science, then discuss how markets adjudicate competing claims.

The Fluoride Controversy

There are upsides and downsides to the use of fluoride. Fluoridation tends to improve dental health, especially in children. That’s why fluoride is used in toothpaste and dental cleanings. If it helps in these scenarios, why wouldn’t it help when included in water?

The problem is, fluoride also has downsides. Several studies in recent years have found negative relationships between fluoride intake and infant IQ. These are peer-reviewed articles in highly regarded journals, so the research cannot be summarily dismissed as inconclusive. 

IQ isn’t the only worry with fluoride. Parneet Singh Sohi, a pediatric dentist writing for The Wall Street Journal, argues that, although targeted use of fluoride is beneficial, there are clear scientific downsides. For example:

An expanding body of research has associated chronic ingestion with skeletal fluorosis, diminished bone resilience and elevated fracture risk. These findings are no longer theoretical abstractions: Geriatric and adolescent fracture rates are surging, and orthopedic practices in numerous regions have reported exponential growth, suggesting a possible link to cumulative fluoride burden.

He argues that while water fluoridation may have made sense in an era before widespread access to toothpaste, it’s no longer necessary in the US. 

In short, experts are split. So how should we adjudicate this issue when experts disagree? Well, that’s where the benefits of markets shine.

Markets Allow for Individual Values

Scientific research indicates both costs and benefits to fluoride, and the value of each is subjective.

Political processes often allow us only an all-or-nothing result. If 51 percent of people vote for (or against) fluoride in the municipal water, then their decision is imposed on the other 49.

Markets, however, allow for more granularity. If individuals believe fluoride will be good for themselves or their children, they have the option of buying fluoride and frequently using it in the form of toothpaste, rinses, and dental cleanings. Those willing to take the risk of lower IQ are free to buy and use it. 

But if someone else thinks even a slight possibility of lower mental functioning is worth avoiding — and is willing to take the risk of more cavities — it makes sense to let them run that tradeoff.

Sometimes the provision of goods from the government is argued on the basis of what economists call positive externalities. If an individual purchasing a good benefits his neighbor somewhat, but he doesn’t get to absorb the benefit himself, this may result in him purchasing less than he would otherwise. 

You can stretch almost any example to have externalities, but in the case of fluoride, externalities seem small. If someone chooses to buy fluoride, she personally receives the benefit of cleaner teeth, but the positive externalities of her pearly white smile are negligible.

Some might argue that fluoride is beneficial because it helps prevent the negative externality of people delaying dental care and leaving the public to cover the cost. While that’s possible in theory, the numbers tell a different story. Americans make over 155 million emergency room visits each year, but only about two million — just over one percent — are dental-related, and even fewer go unpaid. Dental spending is a relatively small piece of the broader US healthcare puzzle. To the extent that costs of quasi-socialist dental care are imposed on taxpayers, that’s a separate issue from whether fluoride should be imposed on us instead.

The beauty of markets is that individuals can weigh costs and benefits themselves and make judgments according to their values. Since the natural sciences are value-free, there will never be a study to confirm people ought to use fluoride. Given this ambiguity, we should allow people to purchase fluoride if they want it. Let’s stop treating fluoride as the default. Rather, let’s encourage individuals to take responsibility for their own health.

[T]he most significant and enduring material legacy of the Great Awokenings has been the proliferation of what I have taken to calling ‘social justice sinecures’ — well-remunerated symbolic capitalist jobs explicitly oriented around helping organizations conspicuously conform with the latest fads in social justice signaling (thereby reducing their vulnerability to subsequent attacks by frustrated elites and elite aspirants).

That is from Musa al-Gharbi’s stinging post-mortem of our most recent national craze of social justice warriors fashioning themselves as the Woke. If you are old enough to recall when the Soviet Union collapsed, you will recall people coming out of the woodwork to declare that the USSR was never truly a communist state and thus the communist paradise is still a viable goal. Al-Gharbi is here to tell us something quite similar. We Have Never Been Woke is the title. The subtitle: The Cultural Contradictions of a New Elite. Al-Gharbi documents that what we all just lived through was bad, but he insists we shouldn’t blame the Left for the actions of a large set of self-serving bureaucrats.  

Who is Woke? 

As a work of cultural taxonomy, al-Gharbi’s book is impressive. The center of his argument is that Wokeness was a handy bit of cultural capital (“demonstrating oneself as interesting, cool, sophisticated, charismatic, charming and so on”) for “symbolic capitalists,” who are: 

professionals who traffic in symbols and rhetoric, images and narratives, data and analysis, ideas and abstraction (as opposed to workers engaged in manual forms of labor tied to physical goods and services). For instance, people who work in fields like education, science, tech, finance, media[,] law, consulting, administration, and public policy are overwhelmingly symbolic capitalists. If you’re reading this book [or this book review], there’s a strong chance you’re a symbolic capitalist. I am, myself, a symbolic capitalist. 

We have always had symbolic capitalists. Think of Michael Novak’s description of Democratic Capitalism dividing power between political, economic, and moral-cultural realms. Al-Gharbi’s “symbolic capitalists” are equivalent to Novak’s leaders in the moral-cultural order. 

Symbolic capitalists are elites in a constant struggle for power and prestige with elites in the political and economic realms. They know with absolute certainty that they, unlike everyone else, could wield wealth and power without being corrupted by it. The weapon of the symbolic capitalists is words, and thus their primary base is industries whose primary traffic is in words, most obviously education and journalism. Periodically, those industries are captured by a subset of the Left, which al-Gharbi notes is likely to “skew young, white, highly educated, and urban-dwelling and to hail from relatively advantaged backgrounds.” 

We Have Never Been Woke is an extended examination of “how liberals exploit social justice advocacy to make themselves feel good.” 

The most recent wave is the fourth Great Awokening, following similar phenomena in the mid-1930s, the late 1960s, and the early 1990s. The similarities of these movements indicate their source. (It isn’t Trump.) Symbolic capitalists need patronage to provide their incomes. As the number of symbolic capitalists rises, the need for greater levels of patronage inexorably increases. Eventually, a crisis hits in which the possibilities for patronage are no longer sufficient to support the symbolic capitalist class. That crisis generates the Woke movement; symbolic capitalists wield their weapon of words to demand that society increase its support for symbolic capitalists. It is a fight for the survival of the ability to remain a symbolic capitalist and avoid the fate of having to find another occupation. 

It should come as no surprise that the Woke are pursuing their own self-interest. It perfectly explains why the primary practical changes demanded by the Woke are more jobs in the DEI Industrial Complex. But, as al-Gharbi notes, material interests are not the only motivation. As many studies have shown, symbolic capitalists have particularly high levels of depression and anxiety and suffer from imposter syndrome. As a result, symbolic capitalists are also “seeking ideal interests, like convincing themselves and others that they are good people who deserve what they have (while their opponents are bad people who deserve to have bad things happen to them).” 

The way self-interest shapes the agenda of symbolic capitalists is perfectly illustrated in the example al-Gharbi uses to open the book. After Trump was elected in 2016, many students at Columbia University were so upset that they wanted time off from their academic studies. Their trauma arose from the idea that under Trump, the poor and downtrodden would be crushed by the elites. But, as al-Gharbi points out, Columbia students are the elite. Moreover, while the students needed time off to manage their pain, there was no similar demand for time off for all the people who do the physical work at the university, the very people whom the Columbia elite said were their main concern. Similarly, when COVID-19 hit, the symbolic capitalists demanded that people should be forced to work at home, while increasing their use of Amazon, DoorDash, and other services provided by relatively poor members of society who cannot work from home and still earn an income. 

The Current Wokeness Craze 

This is clearly a strange state of affairs. How did our recent bout of Wokeness arise? In the first two decades of the 21st century, the number of people with a bachelor’s degree increased by 22 million. But the number of jobs requiring a college education only increased by 10 million. The recession arising from the financial crisis of 2008 was the breaking point. Suddenly, there was also a surge in the number of people seeking jobs in law, government, journalism, and academia, while the number of jobs in all those areas was nowhere near high enough to meet the new supply of workers. People who wanted jobs in the symbolic capitalist realm were incurring large amounts of debt with lower prospects for lucrative employment. The opening salvo of the modern Woke Movement was Occupy Wall Street, five years before Trump was elected. Recall that the complaint was about “the top one percent” of wealth, thus conveniently lumping together someone who aspired to be at the 95th percentile and someone at the 5th percentile as being equally disadvantaged. 

The rhetorical focus, though, quickly moved away from talking about income directly. Instead, the symbolic capitalists of this era “ended up settling on culture and institutions of cultural production as the most important fronts in the struggle. That is, symbolic capitalists identified themselves, their institutions, and outputs — not the workers, not the business owners — as central agents in creating a better world.” It is on the metastasizing of this aspect of the Woke that al-Gharbi unleashes his most scathing critique. 

The most potent rhetorical device in the symbolic capitalists’ quiver has been defending the victims of societal oppression. Being a victim seems undesirable, yet symbolic capitalists have been the most eager to identify themselves as victims. The goal is to acquire what al-Gharbi defines as “totemic capital”: “the epistemic and moral authority afforded to an individual on the basis of bearing one or more of these totems — that is, on the basis of claimed or perceived membership in a historically marginalized or disadvantaged group.” 

The difference between reality and the rhetoric of the symbolic capitalists is nowhere more obvious than in admissions to elite colleges, the most obvious gatekeepers to becoming one of society’s elites. The rhetoric from elite colleges is that they are seeking to help the disadvantaged. The reality? 

A recent study analyzing college admissions essays found that students from families with household incomes of over $100,000 per year were significantly more likely to tell stories about overcoming challenges related to physical disability, mental health, or discrimination and harassment on the basis of their race, gender, or sexuality than students from lower-income backgrounds. That is, the people most likely to tell dramatic stories of overcoming totemic adversity — and the people best positioned to profit from these stories — are people who are well-off. Rather than helping give needy people a leg up, a preference for tales of striving in the face of adversity tends to stack the deck in favor of elites. While claiming the existence of massive discrimination against assorted groups is endemic in society, symbolic capitalists are the most likely to claim that being a member of such groups is central to their identity, and the most likely to reap the rewards from programs designed to mitigate the harm caused by their status. 

Notice, however, that in defining their own flourishing within the “system” as a means of increasing their capacity to help the desperate and vulnerable, symbolic capitalists provided themselves with a powerful justification for climbing as high up the ladder as they could and accumulating more and more into their own hands: the more resources they controlled, and the more institutional clout they wielded, the more they would be theoretically able to accomplish on behalf of the needy and vulnerable (and the less capital would be in the hands of the “bad” elites). 

“Doing well” was redefined as a means of “doing good.”

Whither the Left? 

The most common explanation of Trump’s reelection is that Americans were revolting against the power and excesses of the symbolic capitalists. Al-Gharbi’s book thus comes across as a post-mortem of a movement that failed. But al-Gharbi wants to rescue Leftism from the rubble. We were never actually Woke, he asserts. What everyone perceived as Leftism run amok was really just a bunch of elite white liberals trying to amass power in cushy jobs where they can wield words and accusations to gain even more wealth and influence. Al-Gharbi ends with a clarion call to the Left to remember the disadvantaged in society. He would clearly prefer a world in which good, old-fashioned socialists pushed the hypocritical Woke movement out of political discourse. 

I wish I shared his optimism that the Left can be so easily divided. From where I sit, the Trump reelection has merely hardened the rhetoric of the Left’s symbolic capitalists. They may have been on the losing side of a national election and they may have lost ground in the battleground of corporate DEI offices, but their stranglehold on their fortresses in academia and other such places shows no sign of loosening. Moreover, it isn’t at all clear that the Democratic Party is now less likely to embrace exactly the sort of rhetoric al-Gharbi skewers in this book. While We Have Never Been Woke is framed as examining a movement from the recent past, it may sadly also be an excellent guidebook to understanding the near future. 

The recent passage of the Senate’s GENIUS Act and House’s upcoming “Crypto Week” mark a seismic shift in the financial world. The bill, which passed by a 68–30 vote, establishes a federal regulatory framework for stablecoins, including reserve requirements, issuer disclosures, and consumer protections. This legislation lays the groundwork for the US financial system to break free from the monopoly that banks have long had on money, creating room for innovation and competition in financial services. 

Central to this transition is the adoption of stablecoins, cryptocurrencies designed to maintain a stable value by pegging them to a reserve asset. Stablecoins offer a stable medium of exchange and a store of value while enabling smoother digital transactions and wider blockchain adoption. 

But why will Bitcoiners, who have long championed a decentralized, non-sovereign form of money, benefit from stablecoin legislation? After all, stablecoins are issued by private companies and are pegged to a government-issued fiat currency.  

The rise of stablecoins does not diminish the value or importance of Bitcoin or other cryptocurrencies. In fact, the two complement each other. 

Regulatory clarity in this space allows crypto entrepreneurs to price risk, threatens the monopoly banks have on money, and creates additional demand for dollars.  

To many crypto entrepreneurs, any legislation is better than no legislation. The crypto world is currently suffering from a type of regulatory uncertainty paralysis. This was a central focus of May’s Bitcoin Conference, the world’s largest Bitcoin meeting, which featured speeches from JD Vance, Michael Saylor, and Donald Trump Jr. Many crypto leaders supported the passage of crypto regulations to set the groundwork for more formal rules of the road in their industry.  

Codifying crypto regulations, to which the Senate’s GENIUS Act and House’s STABLE Act are central, allows entrepreneurs to confidently price risk in the crypto industry. The legislation can always be modified in the future, but having some clear regulatory structure encourages entrepreneurs to confidently make investments in this explosive industry.  

As of now, banks effectively decide who gets access to capital and on what terms through their dominant control of checking accounts, savings accounts, and loans. The rise of stablecoins, however, offers a way out of this centralized system. Stablecoins enable individuals and businesses to bypass traditional banking by facilitating direct, peer-to-peer transactions on decentralized blockchain networks, eliminating banking intermediaries.  

With their price stability pegged to an asset, global accessibility (anyone with an internet connection can access them), and integration with smart contracts on the blockchain, stablecoins provide a cost-effective and efficient alternative to traditional financial systems. 

Adoption of stablecoins diminishes banks’ exclusive ability to control the money supply. As people and businesses use stablecoins, they are no longer contributing to the banks’ bottom line in the form of fees, loans, or deposits. Stablecoins can replace financial instruments like checking accounts, which is the most profitable part of a bank’s balance sheet. By creating a more efficient and transparent way to handle transactions, stablecoins lower the overall costs of financial services, threatening to upend the stranglehold banks have on money.  

As more people adopt stablecoins globally, the demand for US dollars and treasuries will rise. The magnitude of this increase in demand is unknown; however, more demand, on net, lowers bond yields and makes it easier to add to the US debt. If Bitcoiners’ belief that the government has little self-control over fiscal policy holds true, they will benefit from the rise of stablecoins. The more demand there is for US dollars, the more the government will be encouraged to print and borrow to meet that demand. This could lead to inflationary pressures, which would, in turn, increase the value of cryptocurrencies, particularly Bitcoin, as a hedge against inflation. 

The broad acceptance of stablecoins paves the way for more regulatory clarity within the broader crypto space. With clear rules for stablecoin issuance and use, businesses and consumers will have greater confidence in using stablecoins for everyday transactions. For Bitcoiners, regulatory clarity around stablecoin will help ensure that the entire crypto ecosystem has a fair shot at competing with traditional finance. 

The future of crypto is evolving, and stablecoins are an important part of that evolution. 

“Can you, ChatGPT, live without fossil fuels?” 

“Great question — and the honest answer is no.” 

AI is expanding rapidly — from casual consumers using ChatGPT or Grok “because it’s fun” to businesses leveraging its power to save Israeli bee populations or combat American sex traffickers. It’s hard to even wrap your head around the amount of energy required to satiate the curiosity of 5 billion people. Let’s use Business Energy UK’s explanation of the mechanics of AI energy usage: “Every time you prompt Midjourney or ChatGPT to generate an image, an explanation or an email, the host company’s servers run thousands of calculations to deliver the goods. This process uses vast amounts of energy. To keep the servers from overheating, water systems are often used to absorb the heat and carry it off to cooling towers to evaporate.”

One ChatGPT-generated email uses enough energy to power 14 LED bulbs for an hour — and enough water to fill a bottle, just to cool the servers — according to a recent study by The Washington Post and the University of California. Seem pedestrian? Consider this analysis, again from Business Energy: ChatGPT uses four times the energy needed to put on and televise the Super Bowl every week. In a month: enough to charge more than a third of a million cars. In a year: more than the energy consumption of 117 countries. Again — that’s just ChatGPT.

The scope of AI’s energy demand has significant implications for environmentalists’ dreams of hitting net-zero, especially when you consider the factors at play. First, the rapidly expanding growth of AI usage in both the private and public sectors, evidenced by all the usage data you just read about. Second, the increasing importance of AI dominance in our national security debates, requiring further innovation and energy usage, a trend that the Trump administration is laudably embracing. Thirdly, neither of those trends shows signs of reversing anytime soon.

Take those three issues, and you start to see why the madness of net-zero is being rejected so strongly. There are, quite simply, unprecedented energy questions being asked of the world. And it turns out that “what if we made less energy” isn’t a serious answer. Or an answer at all. 

The rise of AI, and its corresponding mammoth energy demands, highlights a truth that only becomes more obvious by the day: the net-zero coalition really never had workable solutions to the end of fossil fuels. There are many reasons for this, including that many of their demands were foisted by activists on companies that actually know how to manage and create energy (for a perfect example, see the entire saga of ExxonMobil vs. nuisance corporate activists incensed by the company’s audacity to do business in oil and gas). 

Demands that were half-heartedly capitulated to (as was the case for many net-zero commitments) can be easily discarded — BlackRock’s exit from the Net Zero Asset Managers (NZAM) initiatives is no great mystery unless you believe that most American companies seriously want less energy at their disposal. They don’t. Neither do most Americans. At most, the country is split evenly on whether energy reduction policies help the economy, and a majority aren’t on board with a fossil fuel phaseout. Why should they be, especially as AI continues to shape the world’s industries? All one has to do is look around to see that AI, barring some true cataclysmic setback, is here to stay, and its energy demands aren’t going anywhere. 

American leadership on AI is a crucial priority, in ordinary business and the defense industry alike. Building a pathway to that leadership relies on rejecting much of the overregulation dogma that’s come out of Europe. Perhaps it’s no accident that it involves rejecting much of Europe’s anti-energy dogma, too. These things go hand-in-hand. As former national security advisor Klon Kitchen notes, “Washington has been hesitant to challenge European regulatory overreach in the tech sector. That must change. The AI era is not one in which the US can afford to be reactive.”  

He’s right — and the implications of this regarding how we view energy production has become clear. This isn’t just about ChatGPT loading correctly tomorrow morning — it’s about ensuring that the free world is at the forefront of one of the most dramatic reorderings of industry in the history of our species. AI’s transformative power rests upon several large pillars, one of which is fossil fuels. Until we build a better pillar, we’re insane to consider kicking away the one that’s holding up the house right now.

AIER’s Business Conditions Monthly indicators for May 2025 point to tentative stabilization in the US economy, though underlying signals remain mixed. The Leading Indicator climbed 25 points to 63, reversing two months of declines and suggesting a modest improvement in forward-looking conditions. While still below its early-2024 highs, this rebound offers a potential early sign of firming momentum heading into the second half of the year. The stabilization may have been aided by the temporary suspension of the so-called reciprocal tariffs introduced on April 2, which had weighed on business sentiment and input costs.

The Roughly Coincident Indicator remained unchanged at 50 for the second consecutive month. This flat reading reflects a lack of clear direction in real-time economic measures, with neither widespread contraction nor convincing strength evident across the data. Meanwhile, the Lagging Indicator fell 33 points to 42, giving back all of April’s gains and reinforcing the notion that trailing metrics are beginning to match to the broader slowdown. As usual, such delayed movement in backward-looking data is consistent with late-cycle dynamics and underscores the need for caution despite the recent uptick in leading trends.

LEADING INDICATOR (63)

The Leading Indicator jumped sharply to 63 in May, driven by broad-based improvements across forward-looking indicators. Nine of the twelve components registered gains, marking a decisive shift from the contractionary readings seen in recent months.

Stock prices led the way, with the Conference Board’s 500 Common Stocks Index climbing 8.2 percent, while debit balances in margin accounts surged 8.3 percent — both reflecting renewed investor risk appetite in the wake of the “Liberation Day” market crash. Initial jobless claims fell 2.9 percent, and the University of Michigan’s Consumer Expectations Index rose 1.3 percent, pointing to improved labor conditions and household sentiment. Manufacturers’ new orders for nondefense capital goods excluding aircraft grew by 1.4 percent, and new orders for consumer goods ticked up 0.2 percent. Average weekly hours in manufacturing were unchanged, signaling a pause in deterioration. Among the declining components of the index, new housing starts dropped 9.8 percent, retail sales declined 0.9 percent, and heavy truck sales fell 1.5 percent — indicating pockets of weakness in consumer and industrial demand. The inventory-to-sales ratio rose slightly by 0.7 percent, and the yield curve remained inverted, with the 1-year to 10-year Treasury spread narrowing further by 5.1 percent. Despite these headwinds, the improvement across most leading indicators suggests a potential turning point in forward economic momentum.

ROUGHLY COINCIDENT INDICATOR (50)

The Roughly Coincident Indicator held steady at 50 in May 2025, extending its streak of neutral readings and signaling an economy still searching for directional momentum. As in prior months, the underlying components remained mixed, with three indicators rising and three declining.

Conference Board Consumer Confidence Present Situation rose a strong 3.4 percent, suggesting households are feeling somewhat more secure about current conditions. Manufacturing and trade sales edged up 0.2 percent, and nonfarm payrolls posted a modest 0.1 percent gain — both hinting at continued, if modest, economic activity. Offsetting these improvements, personal income less transfer payments slipped 0.1 percent, while industrial production contracted by 0.2 percent. The labor force participation rate also moved lower, falling 0.3 percent, a sign that labor supply may be weakening slightly. Overall, the data continue to reflect a stalled expansion: one with enough strength to prevent decline but insufficient momentum to signal a sustained upswing.

LAGGING INDICATOR (42)

The Lagging Indicator fell to 42 in May, down sharply from 75 in April, as four of the six underlying indicators registered declines — marking a clear reversal from last month’s strength.

The most significant shift came from the average duration of unemployment, which dropped 6.0 percent — typically a positive sign, though sharp changes in this metric can also reflect volatility in labor force dynamics. Commercial paper yields declined 0.5 percent, and nonresidential private construction spending slipped 0.4 percent, indicating some tightening in credit conditions and a modest pullback in capital outlays. CPI excluding food and energy was flat year-over-year, offering no inflation surprise but also no added disinflationary momentum. Manufacturing and trade inventories remained unchanged, and commercial and industrial loans rose a modest 0.6 percent. On balance, the lagging data point to emerging soft spots in credit and investment, consistent with a maturing economic slowdown.

The recent trajectory of AIER’s Business Conditions indicators reveals a landscape marked by fragility, intermittent relief, and deepening divergences beneath the surface. After a brief surge in optimism in late 2024 — driven by November’s election results and the anticipation of business-friendly policy reversals — the Leading and Coincident Indicators both spiked. But the sharp collapse of the Lagging Indicator in December underscored that foundational pressures in credit, cost structures, and long-duration unemployment were already asserting themselves.

Following President Trump’s inauguration in January, the Leading Indicator began a steady slide, falling from 54 in both January and February to a low of 38 in April. That deterioration reflected rising anxiety around the administration’s aggressive trade and industrial policies, particularly the proposed implementation of immense tariffs beginning in early April. Coincident indicators flattened out at a neutral 50 in March and April, while the Lagging Index — more sensitive to trailing effects like credit usage and commercial construction — unexpectedly rebounded, suggesting the delayed momentum of late-cycle activity.

May, however, has brought a sharp counterpoint. The Leading Indicator jumping to 63 marks the strongest monthly gain since mid-2023, a rebound coinciding with the temporary suspension of the tariff platform on May 3. This offered a reprieve for investor sentiment and forward-looking components such as stock prices, jobless claims, and new orders. Yet that burst of optimism remains uneven: the Roughly Coincident Indicator held flat at 50 for the third straight month, suggesting current activity remains stagnant, while the Lagging Index slumped again to 42 — its third sharp swing in as many months.

Taken together, the data suggest the economy may be attempting to bottom out and reestablish momentum, but any recovery remains fragile and conditional. May’s leading improvement may prove temporary unless supported by firmer labor participation, industrial output, and consistent policy clarity. The last six months reflect an environment in flux — where volatility, rather than direction, remains the dominant economic feature.

DISCUSSION, June – July 2025

June’s inflation data painted a nuanced picture of crosscurrents in pricing pressures, with core CPI coming in soft but signaling the onset of more widespread tariff pass-through. While core CPI rose just 0.23 percent, annualized metrics nudged higher and diffusion indexes showed more categories experiencing price increases, especially among tariffed goods like appliances, sporting equipment, and furniture. Used and new vehicles, hotels, and discretionary services like air travel posted notable price declines, reflecting weakening demand as consumers grow more cautious amid softening labor markets and shakier income expectations. Services inflation was mixed, with medical prices rising and shelter costs remaining stable. Though headline CPI rose to 2.7 percent year-over-year largely due to base effects, tariff-related inflation contributed visibly for the first time, particularly in core goods categories. However, the broader inflation environment remains notably more subdued than during the pandemic-era spike, with many tariff-affected goods still priced well below year-ago levels thanks in part to China’s export deflation.

Producer price data for June 2025 reinforced this mixed narrative. Headline and core PPI were both flat in June, with services costs declining, driven by steep drops in accommodation and airline services. Goods inflation excluding food and energy rose 0.3 percent, reflecting restrained but growing pass-through from trade policy. Still, wholesale margins were stable, suggesting manufacturers and retailers are treading cautiously in raising prices, likely constrained by soft demand and high inventories. With June’s core PCE expected (July 26th) to come in at 0.3 to 0.34 percent — elevated, but not alarmingly so — markets are bracing for inflation to stay sticky through summer. For now, the Federal Reserve appears set to hold rates steady at its upcoming July (29th – 30th) meeting, citing uncertainty from fluctuating trade policy and inconsistent inflation signals. While President Trump is likely to increase pressure on the Fed to cut, officials appear inclined to wait until year-end — likely December — before delivering any easing, particularly given that current inflation metrics are not materially more dovish than when the Fed last cut in 2024.

Recent business activity data from ISM surveys showed signs of modest resilience in services and policy-driven noise in manufacturing, underscoring the economy’s sensitivity to shifting trade conditions. The ISM Services PMI edged back into expansion at 50.8, buoyed by a rebound in new orders and business activity as firms raced to front-run tariff implementation delays. However, customer hesitation and elevated input costs weighed on employment, which slipped back into contraction at 47.2, echoing broader hiring softness across the economy. The prices-paid index remained high at 67.5, underscoring persistent cost pressures in service industries, with several respondents reporting suppliers “testing” price increases amid tariff uncertainty. On the manufacturing side, the ISM headline index rose to 49.0 due to stronger production and inventory management, but the fundamentals — new orders, employment, and backlog — continued to weaken. Firms appear to be stockpiling inputs in reaction to evolving tariff policy rather than true demand growth. Employment fell further, while the prices-paid subindex accelerated to 69.7, pointing to rising input costs even as demand softens.

Regional data provided an early look into July and hinted at further inflationary tension building beneath the surface. The Philadelphia Fed’s manufacturing survey, which often leads national ISM trends, surged unexpectedly, with all major categories — new orders, shipments, and employment — snapping back into expansion. Most strikingly, forward-looking price expectations soared, with the index for prices paid over the next six months hitting 75.3, the highest since early 2022, indicating that firms widely expect inflationary pressure to intensify through year-end. A similar tone came from the Empire State survey, reinforcing the idea that July’s ISM Manufacturing PMI could push above the neutral 50 level. Together, these reports signal that even as headline inflation metrics remain contained for now, underlying price pressures are re-emerging, especially in goods. For the Fed, this complicates the picture: easing price momentum in services offers some relief, but tariff-fueled cost acceleration and renewed pricing pressure in manufacturing suggest a wait-and-see approach remains prudent. Policymakers are therefore likely to stay on hold in July, with a cautious eye toward wage softness, tariff pass-through, and the risk of reacceleration in the back half of 2025.

The May-to-June labor market narrative reflects a transition from surface-level resilience to underlying softening, particularly in private services. While June’s unemployment rate declined unexpectedly to 4.12 percent, this was driven by labor force exits, not a genuine strengthening in employment. Payroll growth beat expectations at 147,000, but that figure was inflated by the BLS’s birth-death model, which likely overstated business formation-driven job gains. Adjusted for that, underlying job growth may be closer to 70,000 per month. Private payrolls added only 74,000, weighed down by losses in professional and business services and sharp slowdowns in education and health sectors, the latter partly due to canceled federal contracts. Meanwhile, average hourly earnings rose just 0.2 percent and the average workweek fell to 34.2 hours, resulting in a near-zero gain in aggregate labor income. The U-2 unemployment rate (layoffs) ticked down slightly, but the duration of unemployment rose to 23 weeks, and continuing claims have steadily increased, suggesting it’s becoming harder for displaced workers to find new jobs. These dynamics imply a labor market no longer a source of strength for consumption and increasingly vulnerable to policy-driven shocks.

Incoming data through mid-July reinforced the message of a fragile labor backdrop. Initial jobless claims again fell unexpectedly, but this reflected seasonal noise tied to auto retooling, not a genuine improvement. Continuing claims — a better barometer of reemployment difficulty — continued their upward creep, consistent with rising average unemployment durations and stagnating weekly earnings. Job openings in May rose to 7.77 million, largely due to a surge in leisure and hospitality, likely in anticipation of Trump administration immigration policy shifts, while other sectors showed mixed hiring trends. Quits and layoffs remained stable, but hiring slowed in sectors like healthcare and manufacturing, and the vacancies-to-unemployed ratio ticked up to just 1.1 — well below its 2022 peak. The ISM’s manufacturing employment index fell again in June, consistent with regional Fed surveys showing weaker headcount and reduced hours. Together, these data point to a labor market that is loosening gradually beneath the surface, supporting the Fed’s patient stance. While headline payrolls remain positive, Fed officials are likely to focus on stagnant income growth, shrinking workweeks, and deteriorating reemployment prospects — factors that argue for caution rather than urgency in monetary policy adjustments.

Consumer sentiment improved modestly in early July, buoyed by rising stock prices and improved personal balance sheets, though the gains were uneven and politically polarized. The University of Michigan’s preliminary reading showed sentiment rising to 61.8 from 60.7, with respondents more optimistic about current and future conditions, particularly around vehicle and housing purchases. Inflation expectations also eased, with one-year and long-run projections falling to 4.4 percent and 3.6 percent, respectively — though Fed officials have emphasized more subdued market-based expectations. However, sentiment among Democrats slipped, likely in response to the Trump administration’s recent wave of tariff announcements and the passage of the One Big Beautiful Bill Act, widening the partisan gap in consumer views to a striking 37-point spread. In contrast, small-business sentiment continued to soften in June, with the National Federation of Independent Business (NFIB) optimism index slipping slightly to 98.6. Business owners cited poor sales, weak hiring plans, and a reluctance to invest in inventories: interestingly, despite relatively low concern over tariffs. Taxes remained their top reported problem, though that concern is likely to abate following the passage of the Trump administration’s “One Big Beautiful Bill.”. In sum, while consumers are cautiously more upbeat thanks to asset gains and easing inflation fears, small businesses are growing more defensive, signaling divergent sentiment paths and an overall environment of heightened economic uncertainty.

June’s retail sales rose a better-than-expected 0.6 percent, marking a broad-based rebound from May’s sharp 0.9 percent decline and reflecting strength in categories like motor vehicles, building materials, and general merchandise. However, the gain is difficult to interpret cleanly, as rising prices — particularly in tariff-impacted goods — likely inflated nominal sales, blurring the line between real demand and price pass-through. Electronics and furniture sales, which are among the categories most exposed to tariffs, fell modestly, reinforcing that price-sensitive discretionary demand is faltering even as nominal totals rise. The control group, used to estimate real consumption in GDP, rose 0.5 percent, though downward revisions to prior months suggest that second-quarter real consumer spending may undershoot current forecasts. Meanwhile, sales at bars and restaurants rebounded but remained below their three-month average, aligning with consumer sentiment surveys showing improved balance-sheet optimism but weaker income-related confidence, particularly among Democrats reacting to tariff news. The divergence between modestly stronger spending and weakening small-business sentiment — combined with evidence of slowing job growth and shorter workweeks — suggests the consumer is still spending but increasingly selective, and likely vulnerable to further price shocks. This dynamic is consistent with June’s CPI report, which showed mild core inflation overall but rising prices in tariff-sensitive categories, suggesting the apparent consumption resilience may prove short-lived.

The July 2025 Beige Book depicted a modestly improving economy, with overall activity characterized as having “increased slightly” — a meaningful upgrade from the prior report’s “slight decline.” Labor markets also showed mild improvement, though hiring remained cautious amid rigid policy uncertainty. While inflation was broadly stable, all 12 districts reported tariff-related input cost pressures, with many firms either raising prices or absorbing costs through compressed margins. Notably, the report highlighted expectations for elevated cost pressures through late summer, suggesting that tariff-driven inflation risks are mounting even before the latest rounds of duties take effect. Taken together, the Beige Book reinforces the Fed’s wait-and-see posture, as officials monitor whether rising input costs spill over into faster consumer price inflation in the months ahead.

Industrial production surprised to the upside in June, rising 0.3 percent on the back of a 2.8 percent surge in utilities output, which was powered by a 3.5 percent increase in electricity generation amid seasonal demand. Manufacturing output edged up 0.1 percent, reflecting weak momentum: production of durable goods was flat, and consumer durables declined due to a sharp 4.6 percent drop in motor vehicle output, which alone shaved 14 basis points off the headline. Notably, the largest utilization increases were in petroleum and coal products (up 2.4 points to 90.7 percent) and aerospace manufacturing (up 1.2 points to 74.8 percent), likely tied to summer energy consumption and ongoing defense or aviation activity. In contrast, electrical equipment (-2.1 points to 79.0 percent) and motor vehicles (-2 points to 69.3 percent) saw the steepest declines, consistent with tariff-induced price effects and softening demand in big-ticket goods. Total capacity utilization inched up to 77.6 percent from 77.5 percent, but underlying factory momentum remains mixed. The data suggest that while headline numbers are buoyed by non-manufacturing components, the core of the USindustrial base is still grappling with uneven demand, persistent trade policy uncertainty, and selective sectoral weakness.

In the US monetary policy hemisphere, Federal Reserve officials are increasingly divided over the path of interest rates, with most citing tariffs as a key inflation risk despite soft June CPI and PPI data. While a minority view tariffs as a one-time price shock, the majority believe they could drive more persistent inflation — especially as core PCE, the Fed’s preferred measure, is tracking at a hot 0.30 percent month over month and 2.75 percent year over year. Ten of 19 FOMC members now project at least two rate cuts by year-end, but seven foresee none at all, reflecting uncertainty over how tariffs will filter through prices and demand. Despite President Trump’s public pressure and growing criticism (which now includes politicized scrutiny of a $2.5 billion Fed building renovation, while the Fed sits on massive operating losses), policymakers maintained rates at 4.25–4.50 percent at the June meeting and signaled a cautious approach ahead. Some officials, like Governors Waller and Bowman, have opened the door to a cut as early as this month, but most favor waiting to assess the durability of tariff-driven inflation. Recent data suggest pass-through effects are intensifying in goods like furnishings, apparel, and recreational equipment, with further upside risks tied to the August 1 tariff hike. Labor markets remain stable but not accelerating, giving the Fed cover to remain on hold. Until clearer evidence emerges on how deeply tariffs are embedding into prices, the central bank appears poised to stay patient — with September shaping up as the next meeting for possible action.

And on the fiscal side, in a feat that at one point seemed doubtful, Trump’s “One Big Beautiful Bill” was signed into law on July 4, marking a sweeping fiscal package that combines permanent extensions of the 2017 tax cuts with deep spending cuts and a massive increase in defense and immigration funding. Though pitched as a pro-growth plan, the bill is projected to add between $3.4 trillion and $6 trillion to the federal deficit over the next decade, depending on accounting assumptions, pushing USdebt from 100 percent to as high as 130 percent of GDP by 2034. While the White House projects a GDP boost of up to 5.2 percent from the combined effects of tax cuts, deregulation, and tariff revenues, most independent analysts warn the bill’s fiscal imbalance will likely raise long-term borrowing costs, erode investor confidence, and potentially constrain monetary policy flexibility. The Federal Reserve, already facing internal division over the inflationary impact of tariffs and eyeing hot core PCE inflation prints, now must navigate a landscape in which fiscal expansion could counteract disinflationary pressures and delay rate cuts. With June’s inflation data showing tariff pass-through and upward momentum in core services, the Fed remains in wait-and-see mode — complicating Trump’s calls for immediate rate relief. In the short term, economic growth may benefit from stimulus effects, but elevated deficits, policy uncertainty, and rate rigidity pose serious medium-term risks. Ultimately, the bill has intensified the clash between expansive fiscal policy and cautious monetary stewardship, heightening the stakes for both inflation management and future financial stability.

Last month we characterized the growth path as a balancing act on a narrow ledge. Although passage of the One Big Beautiful Bill removes some uncertainty, the recent jawboning about higher average US tariffs on global imports, extra duties on BRICS nation imports for continuing to explore dedollarization, and a 50 percent tariff on imported copper — despite the US being a decade or more away from resource independence — bring us to the same conclusion. While growth may receive a near-term lift from the bill’s stimulus effects and a modest uptick in consumer sentiment, the combination of mounting trade friction, rising input costs, and a gradually weakening labor market suggests that any expansion will be uneven and fragile. Inflation pressures remain a central concern, with tariff pass-through increasingly visible in goods categories and forward-looking manufacturing surveys pointing to renewed cost acceleration. The Federal Reserve, navigating internal division and politically charged scrutiny, is likely to maintain a cautious stance through summer, awaiting clearer evidence of either embedded inflation or labor market deterioration. Meanwhile, equity markets near all-time highs reflect optimism that may prove overstretched if inflation re-asserts or monetary easing is delayed. The resulting divergence between buoyant asset prices and tepid-to-deteriorating real-economy indicators underscores how precarious current conditions are. Barring a major positive shock, the second half of 2025 is likely to remain marked by policy-driven crosscurrents, narrow growth margins, and elevated downside risks.

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ROUGHLY COINCIDENT INDICATORS

LAGGING INDICATORS

CAPITAL MARKET PERFORMANCE