There is no more important international relationship than that between the United States and People’s Republic of China. At stake is not just the present but the future, especially relations between rising generations in both nations. The Trump administration has put this at risk by targeting Chinese students.

Relations between the two countries have declined sharply since controversies over COVID and battles over trade during the first Trump administration. Security concerns, highlighted by Beijing’s pressure on Taiwan, raised fear of actual conflict. Ties seemed close to rupture in April when President Donald Trump launched a dramatic assault against Chinese commerce, but the two governments drew back from the brink after talks in May, agreeing to reduce the debilitating tariffs imposed by both sides. Observers expressed cautious optimism about the two governments stabilizing their relations. Trump even described the relationship as “important” and said he was ready to travel to China to meet President Xi Jinping.

However, at May’s end the administration declared war on the 277,000 Chinese students, down nearly 100,000 pre-Covid, attending US universities, and the many more hoping to come to America in the future. Secretary of State Marco Rubio announced: “Under President Trump’s leadership, the US State Department will work with the Department of Homeland Security to aggressively revoke visas for Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields. We will also revise visa criteria to enhance scrutiny of all future visa applications from the People’s Republic of China and Hong Kong.”

Trump downplayed the significance of his administration’s plans, but the Chinese government denounced Washington for “unjustly” barring students based on “the pretext of ideology and national security.” Chinese students have seen the administration’s ruthless immigration enforcement elsewhere and many applying to study in America were distraught. 

Reported The New York Times: “In the hours after the Trump administration announced that it would begin ‘aggressively’ revoking the visas of Chinese students, the line to apply for new visas at the United States Embassy in Beijing still stretched down the block on Thursday. But for many of the hopefuls — including some who walked out of the embassy with their visa applications approved — any celebration was laced with a mix of anxiety and helplessness.”

The administration’s campaign will discourage Chinese students from even considering America. An 18-year-old whose application was approved observed that “in the future, if I can avoid going to the United States to study, I will. They make people too scared.”

The new restrictions will compound the administration’s previous decision to deport critics of Israel’s Gaza war and more recent plan to review visa applicants’ social media accounts. Reported Reuters: “The US administration ordered its missions abroad to stop scheduling new appointments for student and exchange visitor visa applicants as the State Department prepared to expand social media vetting of foreign students.”

Even students from US allies are at risk. Some South Korean applicants have been unable to schedule interviews. One who was studying in America and had hoped to find work after graduation worried about the future.

“I think what is now the United States is a lot different than the United States in the past,” he lamented. 

Students are the most obvious victims of the Trump administration’s escalating war against foreigners, irrespective of their home country. However, in the long-term the most significant victim will be the US. The economic benefits of hosting foreign students are obvious. Taking advantage of this revenue inflow is ever more important after Trump began imposing massive taxes on trade.

Education autarky will be costly in other ways. Reported the Association of American Universities: “International students, scientists and engineers help drive cutting-edge research and development, fill job openings in critical STEM fields, advance national security and bolster the US economy by generating new domestic startups and businesses.” Other nations’ universities are already preparing to take advantage of Washington’s act of educational seppuku. Unfortunately, the administration is closing America’s door precisely when many disillusioned young Chinese want to go abroad.

Most Chinese PhD students want to remain in America. Beijing, though criticizing Washington, may actually welcome the administration’s move, since the PRC is attempting to attract well-educated Chinese home. Reported The Washington Post: “Over the past two decades, China has ramped up efforts to lure home students and scholars educated abroad. Known as haigui, or ‘sea turtles,’ these returnees are prized as vital assets in Beijing’s push for industrial and technological dominance.” Beijing is even approaching non-ethnic Chinese scholars. Driving Chinese home proved costly in the past — as the Eisenhower administration discovered after it deported Qian Xuesen, who became the celebrated “father” of the Mao regime’s missile and space programs.

America’s gains from hosting foreign students go far beyond financial and technological. For decades, much of its international influence came from its attraction to people from around the world. For some the US offered seemingly unbounded economic opportunity; for others, human liberty, especially freedom of speech and democratic governance were paramount. The result was a steady flow of students from around the world, many coming for high school as well as university.

They often end up as America’s best friends. For years I’ve participated in a summer economic education program at a Chinese university. We avoid politics for obvious reasons, but many students hope to study in America. They would enrich the lives of those they meet and befriend. Some would adopt the US as their own, contributing to their adopted nation. Others would return to their homelands, changed and revitalized. Zichen Wang, a research fellow at China’s Center for China and Globalization who studied in America (and who I’ve met) told CNN: “Many of China’s officials, entrepreneurs, and scientists — especially those who played key roles during the era of reform and opening-up — received their training in the US.”

Of course, there are legitimate concerns about admitting people who might encourage violence or engage in espionage. However, that does not justify anything approaching a ban. Even law enforcement admits that the number of problematic students remains low and Rubio offered no evidence of significant threats. Yet, noted the Washington Post, experience indicates that “the rules are applied opaquely and — in some instances — indiscriminately.” And elsewhere the administration has failed to tailor its immigration restrictions to address genuine problems. Indeed, membership in the Chinese Communist Party or associated organizations doesn’t necessarily reflect anything sinister. Even Beijing recognizes that many people join the party for career advancement rather than out of ideological commitment and has stepped up efforts at political indoctrination in response. Accepting party members as students also allows Americans to engage the PRC’s future rulers.

Now more than ever Americans should connect with the Chinese people, maintaining communication, contact, and cooperation even as the two governments increasingly confront one another. Rubio’s visa announcement cements his ironic role as the administration’s chief isolationist, seeking to wall Americans off from the world contrary to their values and interests. Confronting the Beijing government is a significant but necessary challenge. However, Chinese and Americans together will suffer from needless US barriers to entry.

To listen to some people, you’d think that America had been run by economists — and specifically free-market economists — for the last fifty years or so. Of course, this isn’t really true, as any glance at the ever-climbing nature of federal spending or regulations would show you, but whatever influence economists might have had is being jettisoned in favor of what my late friend, the British economist David Henderson, called “Do It Yourself Economics.” 

Henderson’s concept was developed during his time at Her Majesty’s Treasury and at the Organization for Economic Cooperation and Development, where he was Chief Economist, after keen observation of the actions of political actors across the developed world. He describes “Do It Yourself Economics” (DIYE) as “economic policies [that] have been influenced or decided by firmly held intuitive economic ideas and beliefs which owe little or nothing to economic textbooks or treatises, or to the evidence of economic history.” 

He also pointed out that the “leading ideas and beliefs that go to make up DIYE are sincerely held, and voiced with conviction, by political leaders, top civil servants, chief executives of corporations, general secretaries of trade unions, well known journalists and commentators, eminent religious persons, senior judges, and established professors across the whole range of academic disciplines (not excluding economics itself). That is why they have to be taken seriously as an influence on events.” In other words, DIYE is like an endemic intellectual disease. One must ensure regular inoculation against its spread. 

That’s because DIYE has a long record of leading good intentions into bad outcomes. Henderson gives as examples that profit-seeking is questionable, that the state has a role in any cross-border transaction, and that goods and services can be ranked in order of importance. Each of these beliefs is contradicted by economic thinking, yet their persistence gives rein to interventionist governments and to restrictions on freedom. What characterizes them is a reliance on central direction and even collectivism. 

What free market economists might actually have done well over the past few decades is hold back some of the worst excesses of this tendency for a while. Adam Smith told us that the economic world is governed by largely unseen forces like incentives, prices, and information that rarely coincide with our instincts, and recognizing those forces might have helped put a brake on instinctive politics. Yet today those forces are dismissed as inconvenient, and intuition is heralded over analysis. 

We see this most obviously in the return of mercantilist thinking. We are told by no less a figure than the President of the United States that a trade deficit is a bad thing and represents unfairness, and that reducing that deficit through the tool of tariffs will bring back jobs. Many, if not most, people agree with this.  

Yet economic thinking tells us otherwise. It tells us that we get substantial value for that deficit, that tariffs will do little to reduce deficits and may indeed increase them, and that tariffs kill jobs as well as create them. The objections of economists to the administration’s tariff policies are, however, dismissed as “free market fundamentalism” or worse.  

While the reaction of markets to the policies seems to have induced continuous pauses and resets in the policy, the direction of the policy remains towards much higher tariffs, despite predictions of price rises, job losses, and supply shortages. Although DIYE could never be properly described as dogmatic (it is too instinctual for that), it does seem that blind adherence to it in this case veers closer to fundamentalism than any careful warnings of empirical economic analysts. 

Yet the problem is not confined to the administration. In New York, a prominent mayoral candidate is calling for rent control and freezes. The DIYE idea is that this will make housing more affordable for everyone and prevent displacement of poor households from their neighborhoods. Yet nearly all economists, from left to right, agree that rent control leads to housing shortages, reduces investment in maintenance, hurts newcomers, and makes housing less affordable in the long run. One Swedish socialist economist once said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city except for bombing.” 

Just as with tariffs, the careful collection of evidence on the effects of rent control and its analysis are quickly forgotten when a prominent, charismatic individual emerges to champion the DIYE idea. The ill effects of the policy are easily predicted, yet economists share the pain of Cassandra when they make those predictions — always right, always disbelieved. 

We do not want for examples. Inflation has been blamed by politicians of both parties on corporate greed — and price controls are the DIYE solution. Yet economists know that inflation is caused by monetary policy, as too much money chases too few goods. Price controls lead to shortages instead. We learned this painfully in the 1970s, yet the lesson is already forgotten.  

In this case, the DIYE diagnosis of “greedflation” doesn’t even stand up to a moment’s thought. If prices rising are the result of corporate greed, aren’t falling prices the result of corporate generosity? Economic pushback does not have to include complex econometric analysis. Simply applying the economic way of thinking can be enough to cause those tempted by DIYE to think again. 

Another bipartisan example is the idea of industrial policy — that requirements of domestic sourcing and government-led reshoring can lead to more jobs, higher wages, and prosperity for all. This can be portrayed as a patriotic policy, a pro-labor policy, or even a pro-environment policy; all three were present in the glut of spending bills at the end of the Biden administration. 

Yet economics again should have given pause. These measures, whether “buy American!” or a “green new deal,” raise costs, reduce competitiveness, and, like tariffs, invite retaliation abroad. The economic literature finds government industrial policy to be largely inefficient. When we learned that lesson in the last century, rules were put in place to require rigorous cost-benefit analysis and the like, but over time those were diluted and then eventually ignored or dropped entirely. 

Back on the left, another example from the Biden administration was student debt cancellation. The DIYE idea was that college graduates were earning decent wages but this was all going into paying off student debt, so canceling it would free up their resources to boost economic growth, to the benefit of all. 

Economic thinking said otherwise. Cancellation would be a classic example of dispersed costs and concentrated benefits. The people who benefited were those already doing reasonably well, while those without college degrees (or those who had them but had paid off debt in accordance with the terms they agreed to) would see no benefit. As an economic stimulus, it would be poorly targeted. 

DIYE remains influential because it conforms closely to political instincts and moral intuitions. Moreover, its tenets are sincerely held, often by people of high status whose affirmation gives the ideas an authority (or even sanctity, when professed by religious leaders) that is hard to counter. Thus, economists might be dismissed as bean counters, people who know “the price of everything and the value of nothing,” or even followers of “the dismal science.” 

In a polarized and populist climate, the ideas of DIYE often provide a more powerful narrative than textbook economics. This makes them even more potent and, respectively, harder to counter. 

Economists must therefore have their own stories to deploy alongside their models and theories. For every rust belt town where a factory has closed, they must point to a Spartanburg, South Carolina, where trade has opened new opportunities. For every family staying in their home thanks to a rent cap, they should point to the unseen family kept out of the neighborhood, or the apartment closed for rent as unaffordable to the landlord. 

Ideally, these stories should appeal to the same values that the DIYE proponent purports to serve. A critique of green industrial policy will do no good if the critic seems not to care about the environment; an appeal to halt tariff policy will have no appeal if it fails to acknowledge the values of patriotism that motivate the mercantilist. 

Sometimes, stopping a DIYE policy once will be impossible. But stopping it from happening again is more within reach. Even just delaying a harmful program by injecting a quantum of doubt can be valuable. As Ronald Coase said, an economist who “is able to postpone by a week a government program which wastes $100 million a year (what I consider a modest success) has, by his action, earned his salary for the whole of his life.” In the face of the DIYE onslaught, then, free market economists may need to adopt a Fabian approach. This may disappoint those of us who think of ourselves as radicals or revolutionaries, but it may be the surest way to win this battle for freedom.

In his novel Ignorance, the late Milan Kundera called nostalgia “the suffering caused by an unappeased yearning to return.”

Nostalgia is a powerful force, particularly so today. 

For years, Hollywood has tapped into our desire to return to the past to cash in. Though Disney’s 2025 flop Snow White shows the formula is far from foolproof, reboots, sequels, and “requels” have dominated at the box office the last two decades: Batman Begins (2005) Transformers (2007) Mad Max: Fury Road (2015), Rise of the Planet of the Apes (2011) Spider-Man: Homecoming (2017), Star Trek (2009), Jurassic World (2015), It: Chapter One (2017), Halloween (2018). 

I could go on, and this list doesn’t even include Disney’s live-action remakes of hits like Aladdin and The Lion King. It’s not just movies, though. 

Take a look around and you’ll see that 1980s and ’90s fashion cycles are back. Driven by Gen Z and Millennial interest in “vintage cool” mom jeans, crop tops,and bucket hats. Even mullets are in again, as are retro sneakers and brands like Abercrombie & Fitch. And while ​Taylor Swift’s “Eras Tour” set a record with its $2.2 billion ticket sales over two years, most of the top-selling tours in recent years were dominated by legacy acts like Metallica, The Rolling Stones, and Elton John, whose  “Farewell Yellow Brick Road” tour in 2023 banked a not-too-shabby $939 million in gross sales.

Unsurprisingly, nostalgia has also infiltrated our politics and economic policies. The renaissance of American protectionism has confused many, but it’s a phenomenon some saw coming. 

A decade ago, the late economist Steve Horowitz quipped that left-wing politicians had been bewitched by “nostalgia for the economy of the 1950s.” But he added that a Republican upstart appeared intent on stealing from the Democrats’ populist playbook. 

“It is more than a little ironic,” Horowitz wrote, “that modern progressives are nostalgic for the very economy that GOP front-runner Donald Trump would appear to want to create.”

Horowitz wrote these words in the summer of 2015 when Trump’s candidacy was still considered a joke by the experts. (A panel of 538 experts pegged his odds of winning the GOP nomination at “2 percent, 0 percent and minus-10 percent, respectively.”) But he secured the GOP nomination in 2016 by breaking from the party’s traditional platform — most notably by opposing immigration and free trade. 

Trump’s rise was puzzling. America’s open economy had created new jobs, lifted millions into higher-paying work, and delivered cheaper goods and services to households across the country. Yet Trump’s populist message, centered on economic nationalism, won him both the nomination and the presidency — largely by tapping into a widespread longing to return to a supposed manufacturing Golden Age.

Trump framed his trade agenda as a matter of economic fairness. If other countries use tariffs and trade barriers to boost their industries, why shouldn’t America? But the underlying goal was more ambitious. 

“Jobs and factories will come roaring back into our country,” Trump promised on “Liberation Day,” as he announced tariffs that shocked global markets. “We will supercharge our domestic industrial base.”

It’s a vision that appeals to Americans, who have visions of their grandfathers toting lunch buckets to smokestack-studded plants of the 1940s and ‘50s — a supposedly simpler time when work was steady, dignity came with a paycheck, and the factory floor looked and felt like home. 

The appeal of “nostalgianomics” is not new.

In his 2009 paper, titled “Paul Krugman’s Nostalgianomics,” Cato scholar Brink Lindsey critiqued the Nobel Prize-winning economist Paul Krugman’s perspective on the rise of income inequality in the United States since the 1970s

“Krugman looks back to the America of his boyhood and sees a society that combined energetic, activist government management of economic affairs with vigorous growth and converging incomes,” Lindsey wrote. “Entranced by that vista, he imagines a Golden Age — not just of economic performance, but of economic policies and social norms as well.”

Trump’s policies with nostalgia for an economy of the past. 

In his 2009 paper “Paul Krugman’s Nostalgianomics,” Cato scholar Brink Lindsey critiqued Nobel Prize-winning economist Paul Krugman’s romanticized view of mid-twentieth-century America. “Krugman looks back to the America of his boyhood and sees a society that combined energetic, activist government management of economic affairs with vigorous growth and converging incomes,” Lindsey wrote. “Entranced by that vista, he imagines a Golden Age — not just of economic performance, but of economic policies and social norms as well.”

Lindsey called this view a case of “ideologically motivated nostalgia,” accusing Krugman and other progressive leaders of cherry-picking history to paint the postwar era as a model of enlightened policymaking and social harmony. Whether through stronger labor unions (Krugman), trade protectionism (Nancy Pelosi), or expanded labor regulation (Hillary Clinton), the common thread was a belief that shielding Americans from the free market could restore that imagined past.

Trump’s own protectionist formula is slightly different, it combines a hostility toward immigration with his disdain of trade and love of tariffs. Regardless, the formula has worked with voters who have long been skeptical about the benefits of free trade and immigration. 

Americans were lukewarm on NAFTA when it was ratified in 1993 and remained so during Trump’s first term. Many still long for the economy of the 1950s — even though wealth per person has quadrupled since the Truman days, in large part because of global trade. 

It would be a mistake to blame the resurgence of protectionism purely on nostalgia. Other forces are at work, too. 

Yet nostalgianomics plays a large role, and its growing influence would seem to stem from a sense that there is something deeply wrong in America, something politicians must fix.

To be fair, there is indeed a great many things wrong in America today: public education in many cities is failing by every measurable standard; drug overdose deaths have reached historic highs; marriage and birth rates are declining; and rising numbers of young people are detached from both work and community. Throw in a growing (and deserved) distrust in institutions — from government and media to higher education — and it’s understandable that Americans feel agitated and untethered. 

These problems, however, do not stem from global trade, which has benefited both Americans and their trading partners. 

To continue prospering, Americans must confront some uncomfortable truths — starting with the notion that assembling widgets on a factory line isn’t inherently more meaningful than making lattes in a café, writing code, or designing marketing campaigns.

They must also recognize certain truths about manufacturing. Despite the narrative US manufacturing has been “hollowed out” by trade agreements, capacity has increased more than 50 percent since NAFTA was signed and remains at near-historic highs. 

While it’s true that manufacturing jobs as a percentage of over nonfarm employment has declined substantially, the rate of the decline has slowed significantly since China became a member of the World Trade Organization in 2001. Moreover, the decline in manufacturing jobs has far less to do with trade than with technological advancements that have automated production and increased output with fewer workers — much as they did with farming, which once employed a third of the workforce but now requires less than 2 percent to feed the nation.

Whether Americans are willing to accept these realities is unclear. A reccent Cato poll found that 80 percent of Americans say the country “would be better off if more people worked in manufacturing.” Yet the same poll found that just 25 percent of Americans say they themselves would be better off working in a factory job.

“America would be better off if more people worked in manufacturing.”

• 80% of Americans agree
• 20% disagree

“I would be better off if I worked in a factory.”

• 25% of Americans agree
• 73% disagree
• 2% currently work in a factory

👉🏻 https://t.co/ycnHVZ1gT1 pic.twitter.com/4NXb0GLK5L

— Frank Luntz (@FrankLuntz) April 13, 2025

The poll reveals a telling disconnect between the romanticized idea of manufacturing and its present-day realities, beginning with the fact that industrial jobs don’t pay nearly as well as people think. This demonstrates a serious challenge to policymakers.

Economists have struggled to counter nostalgianomics precisely because its appeal is rooted more in psychology than economics. It offers a comforting narrative: that America once had an economic system that worked for everyone — and with the right top-down policies, it can again.

In a world increasingly steeped in nihilism and searching for greater meaning and purpose, that’s a message that resonates with a lot of people — even if it’s false.

Disinflation is no longer a blip, but a trend. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased 0.1 percent in May, down from 0.2 percent in April. The annual rate of change of 2.4 percent was almost identical to April’s and slightly lower than March’s. 

Core inflation, which excludes volatile food and energy prices, also rose 0.1 percent last month. It has risen 2.8 percent over the past year.

As with previous months, shelter prices pulled up the average. “The index for shelter rose 0.3 percent in May and was the primary factor in the all items monthly increase,” the BLS noted. Much (if not all) of the excess shelter inflation can be attributed to measurement error: the shelter index lags market rents. As a result, the index for shelter tends to overestimate the rise in actual shelter prices during the later phase of a tightening cycle. 

Ongoing disinflation presents a challenge for central bankers. Monetary policy passively tightens when inflation slows down. That’s because a given market (nominal) rate of interest corresponds to a higher real (inflation-adjusted) rate of interest when prices rise less quickly.

The current target range for the federal funds rate is 4.25 to 4.50 percent. Adjusting for inflation using the 12-month headline inflation figure yields a real interest rate range of 1.85 to 2.10 percent. If we use the annualized three-month figure (0.8 percent) instead, the range becomes 3.45 to 3.70 percent.

Fed estimates for the natural rate of interest — the real interest rate that equilibrates supply and demand in short-term capital markets — suggest monetary policy is currently tight. The New York Fed estimates the natural rate of interest was between 0.78 and 1.37 percent in 2025:Q1. The Richmond Fed’s median estimate for the same quarter is 1.76 percent. Inflation-adjusted market rates are higher than these estimates using the year-over-year price data, and much higher than these estimates using the annualized three-month data. This certainly looks like restrictive monetary conditions.

We must also consult monetary data. If the money supply is growing faster than money demand, monetary policy is loose; if slower, tight.

The M2 money supply is growing 4.45 percent per year. Broader measures of the money supply, which are liquidity-weighted, are growing between 3.99 and 4.03 percent per year. Money demand, which we estimate by adding population growth (1 percent according to the most recent census figures to real GDP growth (2.06 percent in 2025:Q1), is growing about 3.06 percent per year. It looks like monetary policy is loose because the money supply is growing faster than money demand. 

But remember, the first quarter’s GDP figures were artificially low because of a one-time import spike. A better estimate would incorporate expectations for 2025:Q2. The Wall Street Journal’s average forecast is 0.8 percent next quarter, 0.6 percent in the third quarter, and 1.1 percent in the fourth quarter. Hence it is likely the US economy is currently growing much faster than the 2025:Q1 figure would suggest. Higher real GDP growth means higher money demand growth. We are probably close to neutral, as measured by money supply and money demand.

The new CPI data reinforces recent Personal Consumption Price Index (PCEPI) data: inflation is falling, which makes monetary policy tighter. The Federal Open Market Committee (FOMC) next meets June 17-18, but they are unlikely to loosen policy. FOMC members have indicated they will keep the fed funds target range where it is. Tight money will continue for a while longer.

Restrictive monetary policy is appropriate in some sense. Inflation has been higher than the Fed’s two-percent target for three years. Furthermore, there is a worrying trend that inflation is settling into the 2.25-2.50 percent range. That would be unacceptable. The Fed cannot permit a long-run inflation rate that exceeds its target between 12.5 and 25 percent without losing major credibility.

Yet FOMC members must also worry about the opposite prospect: keeping money too tight for too long risks a recession. Prices, including those embedded in contracts, likely reflect the higher-than-average inflation rates we’ve experienced for the past three years. Should total spending on goods and services prove insufficient to justify those higher prices (due to excessive monetary tightening), the result might be reduced production and rising unemployment.

I would not want to be a central banker right now. Top Fed decision makers have some difficult times ahead. But they wouldn’t be in this situation if they hadn’t bowed to fiscal pressures during the coronavirus pandemic. Today’s frustrating policy tradeoffs reflect yesterday’s short-sighted deviation from sound policy. Until we change how the Fed works at a fundamental level, it will continue to find itself in pickles like this.

AIER’s Everyday Price Index (EPI) posted a 0.18 percent rise in May 2025, reaching 294.3. The index has now recorded six straight months of increases.

Of the twenty-four components making up the EPI, 13 recorded price increases from April to May, while two remained unchanged and nine declined. The most significant upward contributions came from recreational reading materials, tobacco and smoking products, and admissions to movies, theaters, and concerts. On the downside, the largest month-to-month decreases were observed in motor fuel, audio discs, tapes and other media, and intracity transportation services.

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

Also on June 11, 2025, the US Bureau of Labor Statistics (BLS) released its May 2025 Consumer Price Index (CPI) data. Both the month-to-month headline CPI and core month-to-month CPI number increased by 0.1 percent, less than the 0.3 percent increase forecast for core inflation and the 0.2 percent projected for the headline number.

May 2025 US CPI headline and core month-over-month (2015 – present)

In May 2025, the all-items Consumer Price Index rose 0.1 percent, driven primarily by a 0.3 percent increase in shelter costs. The food index advanced 0.3 percent, with both food at home and food away from home rising by the same amount. Within food at home, gains were led by cereals and bakery products (+1.1 percent), other food at home (+0.7 percent), and fruits and vegetables (+0.3 percent), while declines were seen in meats, poultry, fish, and eggs (-0.4 percent), nonalcoholic beverages (-0.3 percent), and dairy products (-0.1 percent). The energy index declined 1.0 percent, reflecting a 2.6 percent drop in gasoline prices and a 1.0 percent decrease in natural gas, partially offset by a 0.9 percent increase in electricity costs.

Excluding food and energy, the core index also rose 0.1 percent in May, following a 0.2 percent gain in April. Shelter continued to rise, with owners’ equivalent rent and rent of primary residence both up 0.3 percent, while lodging away from home edged down 0.1 percent. Medical care increased 0.3 percent, supported by hospital services (+0.4 percent) and prescription drugs (+0.6 percent), though physicians’ services fell 0.3 percent. Additional increases were observed in motor vehicle insurance (+0.7 percent), household furnishings (+0.3 percent), personal care (+0.5 percent), and education (+0.3 percent). Offsetting these gains were declines in airline fares (-2.7 percent), used cars and trucks (-0.5 percent), new vehicles (-0.3 percent), and apparel (-0.4 percent).

For the 12 months ending in May 2025, the headline Consumer Price Index increased 2.4 percent, meeting the consensus forecast. The core CPI year-over-year rose 2.8 percent, lower than the 2.9 percent forecast.

May 2025 US CPI headline and core year-over-year (2015 – present)

Over the last year food prices advanced 2.9 percent, with food at home rising 2.2 percent and food away from home up 3.8 percent. Within food at home, the largest increases were in meats, poultry, fish, and eggs (+6.1 percent), driven heavily by a 41.5 percent surge in egg prices. Nonalcoholic beverages rose 3.1 percent, dairy products increased 1.7 percent, other food at home rose 1.4 percent, and cereals and bakery products edged up 1.0 percent, while fruits and vegetables declined 0.5 percent over the year. The energy index fell 3.5 percent year-over-year, with gasoline down 12.0 percent and fuel oil down 8.6 percent, offset in part by increases in natural gas (+15.3 percent) and electricity (+4.5 percent).

Excluding food and energy, the core CPI rose 2.8 percent over the past 12 months. Shelter costs advanced 3.9 percent year-over-year, remaining the largest contributor to core inflation. Other notable annual increases were seen in motor vehicle insurance (+7.0 percent), medical care (+2.5 percent), household furnishings and operations (+2.7 percent), and recreation (+1.8 percent).

US consumer inflation continued to moderate in May, with both headline and core measures undershooting expectations for the fourth consecutive month. Yet beneath the surface, inflation pressures are highly bifurcated. Evidence of tariff pass-through persists in categories heavily exposed to Chinese imports — including appliances, household equipment, toys, and certain electronics — but these gains were offset by widespread disinflation elsewhere. Durable goods prices remained weak, with both new and used car prices declining by 0.3 and 0.5 percent respectively. Services inflation decelerated to 0.2 percent, led by further declines in airfares and hotel rates, as consumer discretionary spending shows signs of softening amid growing income uncertainty. Diffusion measures reflect this divergence: while 41 percent of core categories saw price declines in May, the share of categories rising at an annualized pace above 4 percent climbed to 40 percent, underscoring a complex and uneven inflation backdrop.

Looking ahead, the disinflationary momentum raises the likelihood that the Federal Reserve will remain patient in the near term but face growing pressure to ease policy later this year. Market participants now assign a roughly 75 percent probability of a Fed rate cut by September, as softer inflation prints coincide with early signs of labor market cooling and still-elevated consumer price sensitivities. While temporary trade agreements between the US and China have eased some tariff-related price pressures, risks remain: additional tariff escalations could eventually feed through more forcefully into consumer prices, particularly if inventory buffers shrink. Firms including Walmart, Target, and major automakers have already signaled the likelihood of higher prices ahead. For now, however, the balance of risks continues to tilt toward a gradual disinflation narrative: one that leaves policymakers cautious but not yet compelled to act aggressively.

It comes as no surprise that divorce is harmful for children. Most would likely highlight the emotional strain imposed on children from the loss of normal relations between parents, but harmful effects can be economic. Dividing the family into two households means lower incomes and financially costly negotiations, which could impact children over the long term.

Some argue that bad relations between still-married parents would have the same (or worse) negative impact. By this reasoning, the negative outcomes of divorce are based on the underlying issues that cause the divorce rather than the divorce itself.

A new paper for the National Bureau of Economic Research (NBER) by economists Andrew C. Johnston, Maggie R. Jones & Nolan G. Pope helps adjudicate the question of whether divorce itself is harmful, or if the detrimental effects are merely the result of unhappy parents.

Let’s look at their results.

The Immediate Damage of Divorce

To account for the damage of divorce, the authors highlight several negative changes caused by divorce. First, divorce increases the distance between parents, with the average distance being 100 miles. This limits children’s access to their parents. 

Second, household income falls with the division of the household. This decline in income isn’t made up for by child support. The authors state, “combined, these increases [child support and welfare] in non-taxable income offset less than 10 percent of the drop in average household income.”

As a result of being unable to pool familial resources, parents work more and therefore see children less. They “find that mothers work 8 percent more hours after divorce, and fathers work 16 percent more after divorce.”

Finally, children tend to be relocated, which can be destabilizing, and is made worse by the fact that “divorcing families also move to lower-quality neighborhoods.”

The authors also examine the results of these changes, and they find two additional negative impacts of divorce: increased teen birth rates and increased mortality. These results indicate the immediate economic downside of divorce and how that can negatively impact children, but how do things shake out in the long term?

Long-Term Impacts

Where this new study shines is in examining the long-term impacts of divorce. In order to do this, the authors essentially compare the outcomes of children who are from the same families, but who have different amounts of time being exposed to the divorce.

If two parents got divorced, for example, when their oldest was 15 and their youngest was 5, the oldest would only experience the post-divorce life as a child for 3 years, whereas the youngest would face it for 13 years. 

The results are clear. When parents get divorced when children are younger, those children grow up to have lower incomes, on average. By age 25, someone whose parents got divorced before age six will have approximately $2,500 less annual income (or a nine to 13 percent reduction). The older a child is when the divorce occurs, the less negative the effect becomes. In other words, divorce at early ages means worse long-term outcomes.

Similarly, early childhood divorce increases mortality, and the effect diminishes with age. The same trend holds for increases in teen birth. The results about teen birth and incarceration are particularly alarming:

Experiencing a divorce at an early age increases children’s risk of teen birth by roughly 60 percent, while also elevating risks of incarceration and mortality by approximately 40 and 45 percent, respectively.

In analyzing what about the divorce in particular causes these outcomes, the authors find resource reductions drive a large part of the change in earnings, and the change in neighborhood quality drives the increased incarceration effect.

In other divorce impact studies, critics have a wide lane for critique. When statistics show children of divorce do worse, critics could always argue that there is a selection issue going on. For example, you could say, “It isn’t that divorce has negative impacts, it’s that the people who are more likely to get divorced are going to have other traits or behaviors which impact their children’s outcomes regardless.”

Johnston, Jones, and Pope, however, sidestep this critique by comparing children within the same families. If the thing causing the negative impact wasn’t the divorce itself, the divorce shouldn’t make children in the same family have worse outcomes. But it does. This implies that the divorce itself really is a cause of many of the issues, rather than some hidden underlying factor, as critics like to suggest.

These results shouldn’t be surprising. Parenting is a long-term, team project. Early in childhood, parents make plans and establish routines. These plans and routines lay the foundation for the rest of the child’s life. Like any joint project, whether in family, business, or politics, plans are made because the planning process adds value. Scrapping plans is akin to removing an essential part of the foundation.

When divorce occurs, this foundation crumbles at least in part, if not entirely. Laying a new foundation may not be impossible, but it does tend to be expensive, and this research suggests that children bear much of the cost.

The budget reconciliation legislation recently passed by the House of Representatives, better known as the “One Big Beautiful Bill,” contains several provisions that will benefit taxpayers, but there are opportunities for the Senate to make it even better.

The Senate should remove, for example, a provision in the House bill that would end the longstanding de minimis exemption that waives tariffs for low-cost imports.  

The United States has maintained some form of exemption for low-cost imports for over 100 years. Prior to 1938, the Treasury Department allowed local Customs officials to waive tariffs if they determined that collecting duties on low-value imports would be an inefficient use of federal resources. 

Congress enacted a formal exemption in 1938. The exemption was increased several times over the years. Most recently, in 2016, Congress passed the Trade Facilitation and Trade Enforcement Act, which increased the exemption from tariffs for low-value imports from $200 to $800. This made imports subject to the same rules as the $800 personal exemption for goods Americans bring back when traveling internationally. The legislation projected that increasing the exemption would provide significant economic benefits to businesses and consumers in the United States.

Since then, the Senate has resisted efforts to reduce the exemption for affordable imports. For example, former Finance Committee Chairman Chuck Grassley (R-IA) opposed efforts to reduce the level in implementing legislation for the US-Mexico-Canada Agreement (USMCA), writing that such a change would be contrary to congressional intent. 

When the exemption was increased to $800, no one could have expected the subsequent growth in low-cost imports. The number of goods entering under de minimis status surged from 139 million shipments in 2015 to nearly 1.4 billion in 2024. 

However, most of this growth was unrelated to the increase in the tariff exemption. The average value of a de minimis package in 2023 was just $54, much lower than the current $800 exemption but also much lower than the previous $200 exemption. This is why opponents of de minimis in the House proposed eliminating it instead of just returning it to the previous level. 

Sadly, some opponents of the exemption for low-cost imports have exploited the fentanyl crisis to support their position. For example, the National Council of Textile Organizations says the de minimis exemption impedes the fight against fentanyl trafficking. 

But the Drug Enforcement Administration’s 2025 National Drug Threat Assessment doesn’t contain a single reference to de minimis as a contributor to the fentanyl problem. Requiring the government to devote additional resources to assessing duties on 1.4 billion low-value packages could even divert resources that would be put to better use stopping fentanyl at the US-Mexico border. In any case, all imports, regardless of value, remain subject to US narcotics laws.

Other critics disparagingly refer to the de minimis exemption as a “loophole.” That’s like calling the standard deduction for income taxes a loophole. The de minimis exemption is not a loophole but a policy specifically designed to benefit not just consumers but also manufacturers who rely on affordable imported inputs to produce goods in the United States. 

While many critics of the exemption have focused on Chinese imports, notably, the House bill would impose tariffs on low-cost goods from all countries, not just China. Economist Christine McDaniel estimates that this change could cost Americans $47 billion a year, and economists Pablo Fajgelbaum and Amit Khandelwal found that low-income households would be harmed the most. 

Increasing tariffs on imports from our allies is unwise. And, for those concerned about cheap imports from China, there are ways to reduce reliance on de minimis that don’t involve a big tax increase. For starters, Congress could eliminate tariffs on clothing. The average US tariff on clothing is 14.6 percent. This high tariff encourages consumers to purchase clothing directly instead of from traditional retailers, whose goods are subject to US clothing tariffs. 

Regarding his plans to encourage US manufacturing, President Trump recently observed, “I’m not looking to make T-shirts, to be honest. I’m not looking to make socks.” Getting rid of our clothing tariffs would save families billions and reduce the use of de minimis. 

The Trump Administration has made it a priority to tackle waste, fraud, and abuse. In particular, the DOGE effort focused on getting rid of waste in federal programs and shrinking the federal workforce. 

Terminating the de minimis exemption would undermine President Trump’s efforts to shrink the administrative state. According to Oxford Economics, the cost of limiting the de minimis exemption would be greater than increased revenues generated and would require the government to hire additional workers to assess duties on millions of additional packages. 

The Senate should improve One Big Beautiful Bill by removing the House’s proposal to terminate the de minimis exemption. That would be beautiful for consumers!

Reference to the Republican Party’s three greatest presidents can serve as a tool with which to judge and anticipate the still unsettled course of antitrust enforcement in the second Trump administration. Trumpian antitrusters have professed their intent to break from policies of the Biden appointees Lina Khan and Jonathan Kanter. However, the 47th president’s enforcement resembles the central planning of the 46th far more than his administration would likely care to confess. 

The administration is still young, however, just beginning its fourth month. Time remains for the Federal Trade Commission (FTC) and the Department of Justice (DOJ)’s Antitrust Division to unscramble themselves and ground policy in the sensible, pro-competitive, and constrained theories of regulation propounded for decades by antitrusters of both parties. The Trump administration can restore the balance that prevailed until the revolutions during the Biden years. It is, to invoke Ronald Reagan, a time for choosing.

Fresh off four years of standing athwart Khan and Kanter, some might find it odd that conservatives have begun mimicking their erstwhile nemeses. Indeed, Trump officials have begun to borrow talking points from their Democratic predecessors. Inexplicably, the Trump FTC and DOJ chose to retain the Biden-era joint merger guidelines. That guidance, breaking with decades-old policies, aimed to subject more mergers and acquisitions to the government’s veto. 

FTC Chair Andrew Ferguson justified the capitulation to Khan and Kanter’s arch-progressive guidelines as a boon for regulatory “stability,” arguing that “The wholesale rescission and reworking of guidelines is time consuming and expensive.” This resembles arguing against putting out a recently ignited fire that is burning down a beautiful old home. Dousing the flames and rebuilding would certainly require time, money, and manpower, yet it remains nonetheless preferable to allowing the blaze to continue. If the FTC seeks stability, it should pivot to the proven, economically sound M&A approach that obtained for decades until renegade progressive activists upended it less than 18 months past.

Moreover, Ferguson kept the Biden-era premerger notification rules, wrapping regulatory red tape around every attempt at M&A — not just the less than 2 percent (as of 2021) that attract additional scrutiny. “These rules will increase the hours needed to prepare filings from 37 hours to 144 hours per filing, and yield approximately $350 million in additional labor costs” (or worse), notes Jessica Melugin of the Competitive Enterprise Institute. Lina Khan’s tenure in government was short and widely panned — not to mention fraught with courtroom defeats — but Ferguson has undertaken to perpetuate her legacy.

“If we could first know where we are, and whither we are tending, we could better judge what to do, and how to do it,” Abraham Lincoln said in 1858. Gaining the same knowledge will clarify the causes of conservatives’ strange drift towards progressive antitrust and uncover better remedies to their diagnoses. 

In large degree, the right’s subjugation of its traditional free-market philosophies to quasi-progressive antitrust ideology springs from a distrust of the perceived progressivism of corporate America. “I think monopoly can be as dangerous in many ways as big government,” Ferguson stated. This distrust becomes particularly acute with respect to the tech sector, whose history of stifling non-liberal speech has rightfully angered many conservatives. Indeed, Trump FTC and DOJ have elected to continue outstanding cases against Big Tech companies, including Amazon, Apple, Google (twice), and Meta.

Attempting to tie content moderation (in some cases) to market power, the FTC in February began an inquiry into “tech censorship.” But this inquiry, in seeking to micromanage the content moderation of private platforms, defies clear Supreme Court precedents affirming a First Amendment right to editorial discretion for online platforms. The FTC’s case against Meta, Ferguson said, “is about addressing the power of Meta and making sure that the situation we had in 2020 can never arise again.” Likewise, Trump’s antitrust chief at the DOJ, Gail Slater recently defended the case against Google Search partially on speech grounds, saying, “You know what is dangerous? The threat Google presents to our freedom of speech.” 

Antitrust is a narrow tool designed to serve a narrow economic function, not to promote conservative speech or to wage a broader culture war. To safeguard free speech online, conservatives ought to begin by ending all attempts to influence private platforms’ content policies. Biden’s jawboning of social media should be succeeded by restraint, not by Trumpian jawboning or quixotic bids to shatter disfavored companies. Already, the market has begun to reshape itself after the censorial excesses of recent years. Notably, Elon Musk purchased Twitter, and in January, Meta overhauled its content-moderation policies.

Calvin Coolidge’s maxim, “If you see 10 troubles coming down the road, you can be sure 9 will go in the ditch and you have only one to battle with,” should guide antitrust enforcers. Market churn and creative destruction generally demonstrate the myopia of panicked assumptions that some firm has secured an unshakable market share or has gained too much power to be left alone. Running up the road to take the offensive against every far-off trouble cannot but damage the economy. Technocrats — whether of the right or of the left — cannot know enough, or foresee well enough, to plan an economy. Worse, doing so erodes the economic freedoms and property rights embedded in the American philosophy of justice and government. 

For Trump’s antitrusters, it is, indeed, a time for choosing.

Xi Jinping China’s long standing and presumably long-term leader, well known for his use of political purges to centralize power, and ensure his ongoing position within the Chinese Leadership.  In each of his previous terms he has launched at least one major campaign that has radically changed the make-up of China’s political establishment. Recently, The Economist reported that another removal of senior key officials, this time in the military is underway. This purge likely includes General He Weidong, one of two vice-chairmen of the Central Military Commission, who had been rapidly elevated by Xi, and was viewed as an increasingly important figure in the PLA.  His seeming removal comes after key defence ministry officials Wei Fenghe and Li Shangfu were removed with little explanation last year.  A key theme of Xi’s purges is that they serve a dual purpose. There is strong evidence that they remove truly corrupt individuals but also provide cover for eliminating political rivals in the process. Xi loyalists now dominate virtually every segment of Chinese public life and many of his hand-picked comrades are the ones being targeted in the latest round of ousters. 

The Chinese Communist Party (CCP) is notoriously opaque, but one thing is abundantly clear: Xi’s most recent round of purges, especially at this stage in his political career, show that China’s strongman leader views his position as potentially insecure where rivals, even seemingly loyal ones become increasingly problematic. On the one hand, these purges likely signal that Xi believes that the People’s Liberation Army (PLA) must be reformed, and strong evidence suggests that some of those displaced are being removed for just that reason. However, it is likely that many of the high profile officers being targeted are for political reasons, including Xi’s broader policy failures. Targeting them serves to remind the military if it were to be called on to shore up his political legitimacy, what he expects. 

The PLA’s Role in Politics 

The role of the Chinese military varies substantially from the role armed forces play in a Western style democracy. In countries like the US, the military operates as a function of the executive branch of government and reports to elected civilian leadership. However, in China, and in most, if not all Communist regimes, the military is an arm of the Communist Party and its loyalties belong to the Party, not necessarily the Chinese state. PLA soldiers spend much of their time reading political theory and taking loyalty oaths all the while high-level decisions are supervised by Party Commissars. 

The reasons for this dynamic are inherent to the revolutionary origins of the People’s Republic of China, and the nature of the CCP as being the all encompassing arm of power. As a result, in addition to the traditional role of a military, protecting the country, and advancing foreign policy goals, the PLA’s core mission also involves ensuring the CCP’s continued hold on power. As a result, leadership in the PLA is contingent upon Party loyalty and until recently, the leadership in the Party was often composed of top military leaders. Over time, however, the presence of large numbers of military officials in political leadership has declined, as the CCP has shifted away from a revolutionary movement to one that must govern rather than engage in perpetual revolution. As a result, more traditional civilian elites have emerged as the primary leaders of the Party. 

Placing Xi’s Purge in Context 

After over a decade in power and consistent purges, Xi has likely removed most of the political rivals that held power prior to his term. In late 2022, Xi achieved complete political centralization by pushing out all dissenting voices in China’s top governing bodies, the Politburo, and the Politburo Standing Committee, and replacing them with staunch loyalists. The most recent purges have been of party leaders who are Xi’s personal appointments but who have built their own power bases. 

Guoguang Wu, Senior Fellow at the Asia Society Policy Institute, provides an insightful explanation for this seemingly strange behavior. Wu compares Xi’s conduct to Joseph Stalin, who famously ran continuous purges throughout his tenure as leader of the Soviet Union. These purges enforced discipline and kept political leadership in line, especially after major policy failures, such as the use of forced agriculture collectivization that subsequently led to a massive famine, all while ensuring alternate power centers did not develop.

Although the PLA has certainly been plagued by corruption scandals, the most recent round of purges likely serve a dual purpose, both anti corruption as well as enforcing political discipline in the face of numerous challenges confronting the CCP’s hold on power. The Chinese economy has been facing significant headwinds with annual GDP growth below expectations and the recent round of American tariffs have exacerbated those headwinds and we see greater social unrest as a result. Xi has recently suffered a number of major policy failures, including the near collapse of the Chinese housing market, the disaster of his Zero-Covid response to the pandemic, and his chaotic attempt to reign in large tech firms with aggressive law enforcement during his “Common Prosperity” campaign. These policies have not only failed in reaching their objectives but harmed the credibility of the Chinese government to deliver competent solutions, and placed Xi in a more vulnerable position.

Xi likely targeted the military, not just officials in the departments directly responsible for these initiatives, because it is an essential tool to remaining in power if he were ever directly challenged. Furthermore, removing particular officials who were directly responsible for these policies would be an admission of failure by Xi, and further undermine his credibility. Indeed, some of the top proponents of his Zero Covid policy, such as the mayor of Shanghai, Li Qiang, who famously shut down a city of over 30 million people, were elevated to the highest levels of political leadership as a reward. Instead removing top military officials creates an air of fear within the broader party ranks to dissuade dissent without implying to backtrack on a particular policy. 

Given the nature of Xi’s military purge and the growing challenges facing China from slowing economic growth, geopolitical rebalancing, demographic decline, and the limitations of the Chinese political model, one should expect the purges like this to continue long into the future. Unless Xi’s grand schemes, such as his moonshot-style industrial policy agendas, succeed, one can expect the CCP general secretary to consistently resort to mass sackings to maintain his hold on power and order within the CCP. If this trend is not mitigated, one could expect the entire Chinese political and bureaucratic apparatus to be turned into anxious yes-men, drastically limiting Xi’s access to impartial opinions and competent subordinates.