“The welfare state as we know it today can no longer be financed by our economy.”

With that single sentence, Chancellor Friedrich Merz broke one of Germany’s and Western Europe’s greatest political taboos, daring to question the welfare state’s sacred status at a time when its economic costs can no longer be ignored.

For decades, Germany was celebrated as Europe’s economic success story. Its postwar Soziale Marktwirtschaft — the social market economy — combined free-market dynamism with a limited welfare for those truly in need, powering West Germany’s rise from postwar devastation into one of the world’s most prosperous nations. 

Today, however, that model is faltering. Germany faces stagnating growth, declining competitiveness, and the heaviest welfare burden in its history — signs that Europe’s economic engine is seizing up under the weight of its own system.

From Economic Miracle to Welfare Trap

Germany’s rise from postwar ruin was built on Ludwig Erhard’s economic vision — a system that balanced free enterprise with a modest social safety net within a competitive framework. By liberalizing prices and trade, stabilizing the currency, and cutting taxes, Erhard unleashed competition, ended inflation, and sparked the so-called Wirtschaftswunder — the “economic miracle” that brought rapid growth, full employment, and rising living standards.

Yet Erhard’s vision of a modest safety net gradually gave way to extensive welfare expansion — proving why the state should never be trusted with the power to engineer social balance through taxpayers’ money. Once governments gain legitimacy to intervene in the economy “for fairness,” intervention rarely stops; it only grows. 

Starting with the 1957 pension reform and continuing through the 1960s and 1970s, successive governments expanded health insurance, education support, family benefits, housing subsidies, and unemployment protection — laying the foundations of one of Europe’s most generous welfare systems. Today, Germany spends 31 percent of its GDP — roughly €1.3 trillion — on social programs, one of the highest levels among OECD countries.

The pension system is the clearest example of this excess, consuming 12 percent of GDP — over twice the share spent in the UK (5.1 percent). As the population ages and the workforce shrinks, the strain on public finances has become unavoidable. In 1962, six workers supported each retiree; today, barely two do, and that number is expected to continue falling in the years ahead. A system built on such demographics cannot last — it can survive only through higher taxes, mounting debt, and growing deficits.

To sustain this model, German employers are paying the price. Under German law, they must cover half of their workers’ insurance contributions, so every welfare expansion directly raises labor costs. Since the pandemic, non-wage labor costs have risen faster than total wages, eating into profits and leaving little room for pay increases. Social security contributions — long stable below 40 percent of salaries — have now climbed to 42.5 percent and are projected to reach 50 percent within a decade. The result is predictable: squeezed employers, fewer hires, smaller raises, and declining competitiveness.

How Welfare Expansion Undermined Germany’s Prosperity 

The economic toll of Germany’s overgrown welfare state is now unmistakable. Once Europe’s growth engine, Germany has become one of its laggards. Since 2017, GDP has grown by just 1.6 percent, compared to 9.5 percent in the rest of the eurozone. By 2023, it had ranked as the world’s worst-performing major economy, shrinking by 0.3 percent and 0.2 percent in two consecutive years — the first contraction since the early 2000s — and continued to slide under the new current government, with GDP falling by 0.3 percent in Q2 2025. 

Nowhere is this decline more apparent than in the automotive sector — the backbone of Germany’s postwar prosperity. Once global pioneers, Volkswagen, Mercedes-Benz, and BMW now lag behind leaner Chinese and American rivals. Soaring labor costs (€62 per hour, compared to €29 in Spain and €20 in Portugal), combined with heavy regulation and rigid labor rules, have eroded competitiveness. A slow transition from combustion engines to EVs has enabled BYD and Tesla, with faster innovation cycles, advanced technology, and competitive pricing, to seize the lead in the industry.

The energy crisis has deepened their woes: the sudden loss of cheap Russian gas, combined with the government’s arguably short-sighted decision to phase out nuclear power, has left German industries paying up to five times more for electricity than their American or Chinese competitors. Weighed down by high costs and slow adaptation to new technologies, automakers have been forced into painful cost-cutting measures, from plant closures to mass layoffs. Since 2019, the industry has already lost 46,000 jobs, and another 186,000 could follow by 2035.

Meanwhile, welfare and debt continue to grow. Germany’s famed fiscal discipline — once anchored in its constitutional “debt brake” — has all but collapsed. Repeatedly suspended since the pandemic, the rule has been bypassed through off-budget funds and “emergency” spending to finance welfare spending and energy subsidies. Now, Berlin plans to borrow €174 billion in 2026, three times the level of two years ago and the second-highest in postwar history — threatening not only its own stability but also the credibility of Europe’s fiscal rules.

At the root of Germany’s malaise lies a dangerous illusion: that generous welfare can coexist with high productivity. When redistribution outpaces wealth creation, prosperity tends to fade. Left unchecked, welfare states expand faster than the economies that fund them, eroding productivity and burdening future generations. Yet reform remains untouchable — aging voters resist cuts, politicians fear backlash, and the young bear the cost of a system that may not survive.Europe is watching closely. If Germany — the continent’s anchor of fiscal discipline and industrial strength — exposes the limits of its oversized welfare state, the European faith in expansive welfare systems could finally collapse. The first step is to end the denial; the next is to rediscover the realism that once fueled the Wirtschaftswunder. Germany once taught Europe how to rebuild prosperity from ruins. Now it must teach Europe how to confront the truth about welfare states — before they collapse under their own weight.

President Trump last week ended trade talks with Canada because of an advertisement sponsored by the Ontario government featuring snippets of a 1987 speech Ronald Reagan gave, explaining the dangers of protectionism. The point of the advert was clear: protectionism hurts everyone, including the country imposing the protectionist policies. In response, the Ronald Reagan Presidential Foundation & Institute has said that “the ad misrepresents the Presidential Radio Address, and the Government of Ontario did not seek, nor receive, permission to use and edit the remarks.”

While it is presumably true that the Government of Ontario neither sought nor received permission to use and edit the remarks, the question of whether Reagan’s general view of tariffs and trade was misrepresented isn’t really open for debate. No, the ad uses Reagan’s own words to beautifully capture his principled support for free trade and exchange. Reagan would have approved the overarching message of the ad, even if we must agree with the Foundation that it does strip out some of the nuance and context of his April 25, 1987 “Radio Address to the Nation on Free and Fair Trade.” 

As Reagan emphasized in his address, he supported free trade, advocating for bilateral reductions in trade restrictions where he could and unilateral reductions where he could not.  It is true that under his watch, and to a great extent at his discretion, the US did impose tariffs and other trade restrictions. This has caused scholars like Sheldon Richman, then at the Cato Institute, to refer to Reagan as “the most protectionist president since Herbert Hoover,” Victor Davis Hanson, in 2017 to characterize the actions of President Trump during his first term as “a return to, or a refinement of, Reagan’s and the elder Bush’s principled realism: the acceptance that the United States has to protect its friends and deter its enemies,” and New Right thinkers like Oren Cass to claim Reagan as a “trade protectionist” who “basically started a trade war with Japan,” holding him up as a paragon of “trade restrictions done right.”

In doing so, however, these scholars reveal that they have fundamentally missed the forest for the trees. Ironically, they are the ones misrepresenting Reagan’s thoughts on international trade, not the Canadians.

To understand why, we need to appreciate the context within which Reagan took office in 1981.  The US economy was in a deep economic downturn, with high inflation, rising interest rates, and an overall weak economy still trying to recover from the 1980 recession. If there was any industry that was hurt the most by this, it was the American car industry and its union workers, who were hurt not just by the recession, but by the arrival of cheaper, more fuel-efficient, and higher quality Japanese cars.

Faced with mounting pressures not just from the domestic automakers and their unions, but also a protectionist (and Democrat) Congress poised to enact sweeping protectionist legislation, Reagan had a difficult choice before him.  In his autobiography, he writes, “Although I intended to veto any bill Congress might pass imposing quotas on Japanese cars, I realized the problem wouldn’t go away even if I did.” “The problem” Reagan referred to here was not “Japanese imported cars.” It was the demand for protectionist measures from Congress and the union autoworkers.  

Reagan understood that vetoing any protectionist bills that Congress sent him would only forestall the inevitable and use up valuable political capital in the process.  He understood, however, that he needed to do something, so he established the Auto Task Force.  At a meeting, Vice President George H.W. Bush reportedly said, “We’re all for free enterprise, but would any of us find fault if Japan announced without any request from us that they were going to voluntarily reduce their export of autos to America?” Thus, the idea of voluntary export restraint was born.  Reagan dispatched his trade representative, Bill Brock, to help with discussions.  

This led to a meeting in the Oval Office on March 24th, 1981 with the Japanese foreign minister, where, in Reagan’s words, “I told him that our Republican administration firmly opposed import quotas but that strong sentiment was building in Congress among Democrats to impose them. ‘I don’t know if I’ll be able to stop them,’ I said. ‘But I think if you voluntarily set a limit on your automobile exports to this country, it would probably head off the bills pending in Congress and there wouldn’t be any mandatory quotas.’” In a statement given by then-Vice President Bush on April 8, 1981, he said that the White House is not “suggesting to the Japanese what they should voluntarily do” and that “[The administration wants] to avoid starting down that slippery slope of protectionism.” 

In the end, Japan agreed to voluntarily restrict their exports to the United States, initially for a period of three years, though this was extended several times before finally being lifted in 1994.

One might argue that what Reagan was really doing was strong-arming Japan into reducing their exports by threatening the country with something worse if it did not comply.  This is revisionist history at its finest.  Reagan understood that choice is between actual options, not imagined ones.  By preventing Congress from passing a protectionist import quota, Reagan had deliberately chosen the least protectionist option of the actual options before him, as David Henderson (a member of Reagan’s Council of Economic Advisors) notes. Reagan was committed not to protectionism, but to preventing protectionism precisely because, as he notes in his now-even-more-famous Radio Address, “over the long run such trade barriers hurt every American worker and consumer.”

Another example is Reagan’s 1987 imposition of tariffs to stop the Japanese from dumping semiconductors into the US market, which was the occasion of the radio address that the Canadian advertisement drew from. But even in this instance, Reagan attempted to use tariffs as a scaffold, not as a sledgehammer. Reagan accused Japan of violating their agreement in the US-Japan semiconductor trade agreement and placed a 100 percent tariff on specific goods to limit the adverse effects on American consumers. These targeted tariffs were used as a last resort, aimed at forcing compliance with an existing trade deal. As they started to have their intended effect, Reagan was able to reduce them, first in June of 1987 (two months after they were imposed) and then again in November (six months after they were imposed); they were eliminated entirely in 1991. Still, the tariffs harmed US consumers and did little to improve US industrial competitiveness. The use of tariffs to force a country to honor its previous obligations was a dangerous tactic, and Reagan was deeply aware of the consequences if the Japanese responded in kind. The fortieth president understood that trade wars hurt everyone involved and free trade was the ideal. The trade principles and policies of President Trump — easily the most protectionist president since Herbert Hoover — couldn’t be further from Reagan’s. Trump is imposing massive and sweeping tariffs on our allies, whereas Reagan bemoaned targeted tariffs to force compliance with an existing trade deal. 

We can debate whether Reagan compromised his principles when he supported measures like voluntary export restraints or semiconductor tariffs. But we cannot honestly debate what those principles were. As Reagan himself said, “imposing such tariffs or trade barriers and restrictions of any kind are steps [he is] loath to take.”

Reagan was a free-trade advocate through and through. As America revisits trade policy in 2025, we should remember his true legacy — using every tool available to preserve and expand free trade, not to abandon it.

On Wednesday, the Federal Reserve lowered its federal funds target range by 25 basis points, to 3.75–4.0 percent, its second cut in as many meetings. The move came as no surprise to markets, which had largely anticipated another reduction despite inflation remaining stubbornly high. Two officials dissented in opposite directions: Governor Stephen Miran favored a larger 50-basis-point cut, while Kansas City Fed President Jeffrey Schmid preferred to hold rates steady.

At his post-meeting press conference, Fed Chair Jerome Powell reiterated that policymakers face challenges on both sides of the central bank’s dual mandate that calls for a “balanced approach.” Although the government shutdown has delayed the release of official labor market data, the available evidence suggests that hiring has slowed and conditions continue to soften even as inflation remains above the Fed’s two-percent target.

Still, Powell said economic activity is expanding at a moderate pace. Gross domestic product grew 1.6 percent in the first half of the year, but data released before the shutdown indicate that growth may be running somewhat stronger than expected, driven by resilient consumer spending and steady business investment. He cautioned that the shutdown will temporarily weigh on output but added that any drag should reverse once the government reopens.

Job gains, Powell noted, have slowed noticeably in recent months as labor-force growth weakens, reflecting lower immigration and participation. Labor demand has also softened, with both hiring and layoffs remaining low. Surveys show that households see fewer job opportunities and firms report less difficulty finding workers — both of which are signs of a cooling labor market. In short, he noted, “the downside risks to employment appear to have risen in recent months,” which is why the Fed decided “to take another step toward a more neutral policy stance.” 

Powell acknowledged that inflation remains above the Fed’s two-percent goal. He said overall and core Personal Consumption Expenditures (PCE) inflation was running around 2.8 percent through September — slightly higher than earlier in the year — as goods prices have picked up while services inflation continues to ease. Short-term inflation expectations have risen this year, amid new tariffs, but longer-term expectations remain anchored near two percent.

Powell observed that “higher tariffs are pushing up prices in some categories of goods, resulting in higher overall inflation,” but described the effect as primarily a one-time increase in the price level rather than a lasting source of inflation. Even so, he warned that these cost pressures could persist longer than expected and said that the Fed would adjust policy if necessary to keep inflation under control.

The Fed now faces a “challenging situation” with “no risk-free path for policy,” Powell emphasized. Inflation risks remain tilted to the upside, while risks to employment have grown on the downside. Tightening policy too much could further weaken the labor market, but easing too quickly might reignite inflation pressures. Consistent with its framework, the Fed is taking what Powell called a balanced approach to managing both sides of its mandate. With the labor market softening, he said, the balance of risks has shifted, prompting the committee to take another step toward a more neutral policy stance.

The Fed, Powell added, remains well positioned to respond swiftly to new economic developments. Policymakers will continue to be guided by incoming data and the evolving balance of risks when setting the stance of monetary policy. The central bank still faces uncertainty on both sides of its mandate, and committee members hold sharply differing views about the path ahead. Powell stressed that policy is not on a preset course, and that “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”

Alongside its rate cut, the Fed announced it will end the runoff of its balance sheet on December 1, concluding more than three years of quantitative tightening. Powell said the move reflects the Fed’s “long-stated plan…to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions.” He pointed to tightening financial conditions in short-term funding markets. The decision, Powell noted, represents the “next phase of our normalization plans” that is designed to preserve stability rather than to signal a new policy direction.

The Fed’s latest moves reveal a central bank struggling to navigate competing risks with imperfect tools. The dual mandate practically requires monetary policymakers to treat rising prices and falling employment as opposing problems rather than considering the extent to which the movements in prices and employment are consistent with the underlying fundamentals. A nominal GDP target would collapse the false distinction between the two sides of the mandate, allowing the Fed to stabilize demand directly and let prices and employment adjust naturally. Such an approach would reduce the need for fine-tuning and spare policymakers from having to choose — again and again — between fighting inflation and protecting jobs.

Thirty years ago, Congress failed by just one vote to send to the states a constitutional amendment requiring a balanced budget. Today, federal debt held by the public stands at $29 trillion. As a percentage of the economy, it has doubled since 1996. When you add in other liabilities for federal employee pensions and health care, not even including the entitlement programs of Social Security and Medicare, the federal government’s liabilities extend to $45.5 trillion.

The federal government’s financial position is dire by any measure. Even adding assets (cash, inventory, loans receivable, and equipment, but not federal land) leaves them at a net worth of negative $40 trillion. Future Social Security and Medicare shortfalls for those already alive amount to over $65 trillion. So the unfunded future obligations of the federal government come to over $800,000 per US household.

A balanced budget amendment (BBA) would require Congress to stabilize the federal debt. Since Congress won’t voluntarily do it, it might be the only option to prevent massive tax increases and inflation within the next 30 years. But Congress repeatedly fails to take action. Why?

The main reason is that Democrats oppose it. The last time the House voted on a BBA, it won a majority, but not the two-thirds needed to advance a constitutional amendment. Democrats voted against it, 178 to six.

The Democrats might have been right to oppose it. The law would have required a balanced budget every year, unless Congress waived it by a three-fifths vote of each House or by a joint resolution that the provisions of the BBA would not apply during a military conflict. It also would have required a three-fifths vote to raise the debt ceiling.

Since there is no hope that Congress could manage to balance the budget in a single year (the just-closed fiscal year’s deficit is projected to have been $1.9 trillion), this amendment would have effectively required a bipartisan three-fifths vote to pass a budget every year. Sound familiar? As of this writing, Senate Democrats cannot agree with Republicans to pass a continuing resolution, which requires a three-fifths vote, and as a result, the government is shut down.

A better BBA would eliminate shutdowns and build in enough flexibility to make it unnecessary to override its provisions. Rep. Jodey Arrington’s 2024 resolution would have done some of this, but it never got a vote. It would have limited spending to the prior-three-year average of revenue plus population and inflation, built in a 10-year gradual closure of the deficit after ratification, and required a two-thirds vote for override.

Switzerland’s debt brake is an even better idea to adapt. It allows expenditures to equal no more than the revenues that would be expected from trend GDP. In other words, deficits are allowed during times of recession, and surpluses are expected during times of peak growth.

A flexible debt brake is more likely to be honored than a strict, every-year balanced budget rule. And one of the counterintuitive insights of rational-choice political science is that a higher-spending “reversion point” makes political actors less likely to vote for higher spending. For example, if we eliminated government shutdowns and simply legislated that whenever a budget fails to pass, the previous year’s budgeted expenditures would carry on, then defeating a budget would be a more tolerable option. The decisive voter in Congress would be less likely to acquiesce to high spending as the price to pay to avoid an intolerable shutdown.

Most Democrats are true believers in Keynesian aggregate demand management through fiscal policy. The debate among economists about the effectiveness of fiscal versus monetary policy goes on, but there is no need to resolve that debate for all time in the Constitution. A cyclically adjusted balanced budget amendment would address the concerns of the pro-fiscal stimulus camp while not foreclosing the possibility of even stricter fiscal rectitude if there is a congressional majority for it. Thus, a Swiss debt brake-type proposal could get the bipartisan support needed to advance a constitutional amendment.

It’s well past time for Congress to get serious about controlling runaway federal debt. A well-crafted, flexible balanced budget amendment to the US Constitution could finally get bipartisan support, end shutdowns, and set a hard limit on the federal government’s fiscal profligacy.

When a sharply lower price per gallon pops up at local gasoline pumps, it can induce a momentary cognitive dissonance. I mean, where is inflation? During the first 10 months of President Donald Trump’s second term, the price of oil has slid markedly. It is now, in mid-October, around $57 per barrel, down from about $70 in late July — a drop of roughly 20 percent in three months. It is the lowest in almost five years: that is, since Trump ended his first term and Biden took over. What lies behind this decline? Has the administration’s “Drill, baby, drill” approach resupplied starved markets — or do global forces get some of the credit?

From day one, the second Trump administration moved to reverse climate-oriented policies and promote fossil-fuel production. On January 20, 2025, Trump signed executive orders lifting restrictions on oil and gas development in Alaska’s Arctic National Wildlife Refuge and expediting liquefied natural gas (LNG) infrastructure approvals. A companion order directed agencies to halt or review clean-energy initiatives and accelerate oil-and-gas permitting. Observers called the early rollbacks as sweeping as those of his first term, extending to federal-land leasing, emissions limits, and pipeline construction. Polling by Pew Research Center showed a partisan divide: 57 percent of Republicans favored expanded drilling on federal lands, compared with 9 percent of Democrats.

By contrast, the Biden administration (2021–2024) emphasized carbon reduction and tighter regulation of fossil-fuel production while subsidizing renewable energy and electric vehicles. Biden did not halt all drilling — the momentum of US output remained high — but his regulatory regime was more restrictive. The return to Trump represented a decisive pivot back to fossil-fuel liberalization. Experts caution that US policy alone cannot control prices in a global market. One Brookings Institution analyst stated the obvious: the United States is not the world. “Oil is priced internationally … US actions alone will not have such a large impact.”

Has the “Drill, baby, drill” attitude itself caused the price slide? Not yet, at least. The expected surge in rigs has not had time to materialize; Inside Climate News reported in July that “Trump promised a drilling boom. The new rigs haven’t …” Actual infrastructure responses always take time. And undeniably, oil prices reflect a global market. The International Energy Agency (IEA) estimates a worldwide surplus of some two million barrels per day so far in 2025, potentially rising to four million next year. The US Energy Information Administration (EIA) projects Brent crude averaging about $62 a barrel in late 2025 and $52 in 2026 as inventories build. Reuters summed it up on October 17: “Oil prices set for weekly loss … after the IEA forecast a growing glut and US–China trade tensions.”

But one pundit’s “glut” is another man’s return to freer-market production that brings down prices for consumers. When scarcity is politically engineered, abundance looks like loss of control. The term “glut” implies waste, but it signifies that producers are finally freer to meet demand without artificial ceilings. In industry terms, a “glut” means daily production exceeding demand by roughly one to two million barrels — a surplus sufficient to swell inventories and push futures into contango, but hardly a collapse. It is the market’s way of re-establishing balance once production is allowed to breathe again.

The international context underscores the point. OPEC and its allies (OPEC+) are raising output by roughly 1.4 million barrels per day this year. Exports from the Middle East reached two-and-a-half-year highs in September. Russia, despite sanctions and infrastructure risks, continues significant exports, while Venezuela, Libya, and Nigeria have added supply. China’s crude imports fell to their lowest level since January, reflecting weaker industrial demand and a pause in stockpiling. Altogether, rising supply and softening demand have pushed futures markets into contango — a classic signal of near-term oversupply.

For drivers, homeowners, and businesses dependent upon power supplies, cheaper oil is welcome; lower gasoline and heating costs boost disposable income and ease upward pressure on prices caused by huge Fed money supply increases. This is how markets are supposed to work: as competition expands, prices fall to the benefit of every consumer. What some pundits call “market pain” is simply the end of protected pricing. Producers don’t welcome lower prices, but for how long have we read about galloping profits of “Big Oil” as a side effect of the war on fossil fuels? The Wall Street Journal recently warned that “lower oil prices are severely affecting the domestic oil industry, which is already struggling with job losses and shrinking profits.” Even so, ExxonMobil, Chevron, and Shell are reporting profit margins still above their 2015–2019 averages — evidence of normalization, not collapse. Goldman Sachs expects prices to decline through 2026 because of excess supply and weak demand. Market analysts see the drop as signaling a broader economic slowdown linked to US–China trade tensions. Gulf stock markets have also softened on the weak oil price outlook.

And that amounts to what? For the four Biden years, competition in the oil industry was suppressed by attacks on fracking, restrictions on drilling permits, and the blocking of major supply pipelines — not to mention the moral denunciation of fossil fuels as planetary doom. When Washington throttled new leases and raised compliance costs, small independents were forced out. What survived were the giants, protected by scale and legal muscle — and applauded as “responsible corporate citizens.” Now, in America at least, competition is unleashed again, price competition is back, and “Big Oil” profits are reverting to market norms. As Shale Magazine editor Ronald Rapier said, “It’s an irony that when Democrats are in there and they’re putting in policies to shift away from oil and gas, which causes the price to go up, that is more profitable for the oil and gas industry.” Ironic that suppressing supply drives up prices so existing companies profit?

Environmentalist voices, unsurprisingly, are raising alarms of a different kind. PBS reported that market forces (rising prices) could undercut the administration’s plans to increase the use of fossil fuels, but Trump plans to roll back climate regulations, end clean-energy incentives, and promote fossil fuels. Climate-policy groups condemn the agenda as “a dream for polluters and a nightmare for America.” Cheaper fuel may slow investment in renewables and electric vehicles, reducing momentum toward emissions targets.

And that is where we are just 10 months into Trump’s second term. His policies reinforce a pro-fossil-fuel trend that is increasing US supply and could continue over time. It is early days, so the administration’s commitment is consistent with lower prices, but not yet the dominant cause. There is speculation that a $60 per barrel price, slightly higher than now, might represent current market equilibrium. Should oil fall below $60 for long, some producers may curtail output — the CEO of TotalEnergies has already warned that non-OPEC supply would decline at that threshold.

Energy abundance, however, is not an anomaly. It happens when government stops treating energy as a sin. Trump’s policy did not “distort” the market; it let the market remember what freedom feels like. Consumers enjoy cheaper fuel, producers face genuine competition (but fewer accusations of “obscene profits”), and environmentalists, as ever, lament lost momentum.

It must be added that if this is good news, it is not all good. Free market policies are doing their job, but the Trump tariffs are not free market and are a headwind.  The Federal Reserve Bank of Dallas’s quarterly survey of oil and gas producers reported that one-third of respondents thought that higher tariffs on steel imports might result in drilling fewer wells. And three-fourth said tariffs raised the cost of drilling and completing new wells. 

Mr. Trump is not notable for articulating consistent principles and clear policies. As long as that is the case, results will be mixed and the case for free-market measures will be vulnerable to a confusion of the benefits of partial economic freedom with the damage from continued partial controls. Such confusion always advantages the side with the weakest arguments. 

Once upon a midnight dreary, while I pondered, weak and weary,
Over many a quaint and curious chart of fiscal lore — 
While I nodded, nearly napping, suddenly there came a tapping,
As of markets softly rapping, rapping at my ledger’s door.
“’Tis the Fed,” I muttered, “tapping at my nation’s door — 
Only MMT, nothing more.”

Modern Monetary Theory (MMT) emerged like a laboratory experiment equal in ambition and madness. MMT is the idea that governments and central banks can print money and flood the economy with their respective currency without consequences, as long as the velocity of cash in circulation remains under control. In 2019, the theory had begun to seep into the political mainstream as a means to pay for large government expenditures, such as The Green New Deal, by potential 2028 presidential candidate Alexandria Ocasio-Cortez. 

The brainchild of Stephanie Kelton, advisor to the Bernie Sanders 2016 presidential campaign, MMT underlines the idea that, unlike a household, the government can disregard its budget entirely. In a TED Talk on October 21, 2021, Kelton stated, “The federal government is fundamentally different, unlike the rest of us, Congress never has to check the balance in its bank account to figure out whether; it can afford to spend more. As the issuer of the currency, the federal government can never run out of money, it can afford to buy whatever is available and for sale in its own currency.” 

During the onset of government lockdowns prohibiting commerce and the pursuit of happiness, MMT saw the light of day. From spring 2020 to winter 2021, the federal government dispersed $931 billion directly to individuals in the form of stimulus checks found under the CARES Act of 2020 and the American Rescue Plan of 2021. This sum far outweighs the stimulus payments of the 2008 banking crisis ($108 billion) and the 2001 Dot-com Bubble ($36 billion). The Mises Institute reports the Federal Reserve’s balance sheet more than doubled between 2020 and 2022, from $4 trillion to $9 trillion. Within two years, the money supply measured as M2 grew roughly 40 percent. In retrospect from 2000 to 2019, the money supply grew annually by six percent. The scale of that monetary experiment, printing dollars into a politically frozen economy remains an unprecedented act of monetary expansion.

Like the phrase, “two weeks to flatten the curve,” the new economic catchphrase in circulation was “transitory inflation.” Just like the political phrase, the economic term “transitory inflation” was anything but short. The government was aware that increasing the money supply would consequentially increase inflation; however this would pass, and the average American need not worry. By 2021, then–Secretary for the Department of Treasury, Janet Yellen stated, “I really doubt we’re going to see an inflationary cycle, although I will say that all the economists in the administration are watching that very closely.” Just a year later, in 2022, the inflation rate peaked at nine percent. In 2024, researchers at MIT discovered that, “42 percent of inflation could be attributed to government spending.” 

By its own doctrine, the Federal Reserve claims a dual mandate: “ two goals of price stability and maximum sustainable employment.” Price stability is measured yearly by the Price Index for Personal Consumption Expenditures and should not drastically exceed the bounds of two percent. As of August 2025, inflation remains at 2.9 percent following a steady trend of roughly two years during which inflation has hovered around three percent. In other words, everything has become more expensive since the cash injections from 2020. Doubt is rising as to whether the Federal Reserve will even defend its once sacred two percent target, given the late dominance of three percent. 

The fiscal burden incurred within the last five years has not ended. Consumers struggle to read their economic landscape, muddled by the government and Fed alike. The Consumer Sentiment Index which ranges from 0 to 200, recorded on October 3, sits at 55. Since the beginning of the year, the dollar has decreased in value by 11 percent and could lose another 10 percent by 2026. Over the past three years, the dollar has lost nearly half of its purchasing power relative to gold and 8.4 percent when compared to goods and services. Speaking of gold, the precious metal has been hitting record highs of over $4000 per ounce, roughly a 33-percent increase since last year. Not alone in the climb, Bitcoin has risen from its 2020 value of under $10,000 to over $100,000. All that stimulus money has been moved away from dollars and into alternatives such as gold or Bitcoin.

The fundamental flaw of Modern Monetary Theory reminds us that money is a tool and prices are signals. Currencies are chosen not because the government deems them valuable, but because people place value in them. The chaotic years since 2020 have shown a depreciating currency as a consequence of devaluing the dollar. The resonating inflation, a tax without legislation, has not been transitory, but has perhaps redefined the standard of the Federal Reserve. Five years later, the experiment’s echoes remain in higher prices, fragile confidence, and a central bank trapped between denial and political dependence. MMT promised prosperity without pain, yet it left Americans haunted by the creature it awakened in 2020. The true monster was never the money itself, but the belief that we could summon and command it without consequence.

Fresh out of university and looking for a career in public policy, I interviewed for a job in the Conservative Research Department of the British Conservative Party. At the time, Margaret Thatcher, the Prime Minister, was concerned about the prevalence of soccer hooliganism and had proposed a national identity card scheme for soccer fans as a way of curtailing the problem. I was asked to provide arguments to justify this intrusion. I could not and sputtered a half-hearted response. I did not get the job (nor did Michael Gove, future Cabinet Minister and current editor of The Spectator, but a chap named David Cameron did). It soon appeared that the rest of the Conservative Party and the public at large agreed with me. The identity scheme faltered and was withdrawn from consideration. 

Today, however, the British public is told that every one of them – football supporter or not – is to have a “BritCard” identity app on their phone. This would be a constitutional innovation of the worst sort, fundamentally altering the relationship between the citizen and the state, upending the traditional British concept of rights, and will probably pave the way for a complementary abrogation of liberty, a central bank digital currency (CBDC.) It is pretty much commonplace in the United Kingdom today to say that “Britain is finished,” but if His Majesty’s Government gets away with this, that may finally be right. 

Aside from Thatcher’s flirtation, ID cards have a troubled history in the UK. They were introduced during the Second World War but were retained afterwards by the socialist Attlee government. By 1950, there was growing disquiet that the police were demanding to see ID cards during any routine stop. Things came to a head when a Liberal Party activist named Harry Willcock was stopped for speeding in North London. On being asked to produce his card, Willcock refused, responding with British understatement, “I am a Liberal, and I am against this sort of thing.” He further refused to produce his card at a police station and was therefore prosecuted under the wartime act. 

The case was initially heard by local justices, who disagreed with Willcock that the law had expired as the emergency had expired, but refused to punish him, giving him an “absolute discharge.” The case proceeded to the King’s Bench division of the High Court to decide the point of law over whether the law was still valid and was unusually heard before a bench of seven judges, including the Lord Chief Justice, Lord Goddard. While the Court found that the law remained in effect, no costs were awarded against Willcock, which is usually the case in such circumstances, and Lord Goddard wrote the following: 

“To use Acts of Parliament passed for particular purposes in wartime when the war is a thing of the past—except for the technicality that a state of war exists—tends to turn law-abiding subjects into lawbreakers, which is a most undesirable state of affairs. Further, in this country we have always prided ourselves on the good feeling that exists between the police and the public, and such action tends to make the people resentful of the acts of the police, and inclines them to obstruct the police instead of assisting them.” 

Lord Goddard’s first warning does not just apply to wartime laws, but to any state of emergency – something I have discussed here before in another context. Emergency powers can easily turn the otherwise law-abiding into lawbreakers. However, the current Labour government is not claiming wartime powers or even a particular state of emergency, but to change the law in perpetuity. 

That makes Goddard’s second warning the more pertinent. It has always been the case that British police have their authority through the consent of the public. As Sir Robert Peel’s principles put it, “the police are the public and the public are the police.” Police officers are simply members of the public “paid to give full-time attention to duties which are incumbent on every citizen in the interests of community welfare and existence.” The basis of policing is therefore mutual trust. 

Mandatory ID changes that relationship. Trust is eroded when verification is required. Citizens are no longer partners in maintaining order but potential suspects. This is especially the case when the lack of ID itself becomes a crime, or at least an enforcement action. The message is that citizens are not the state but subservient to it, a message that should repel any freedom-loving people. 

This was indeed the reason for the breakdown of the post-war ID mandate. Willcock went on to champion abolition within the Liberal Party, but as he was part of the out-of-favor free trade wing of the party, he made little headway (how history rhymes!), leaving the door open to the Conservatives, who campaigned on “setting the people free” against the Labour government that wished to retain it, and won. Willcock, who became a personal hero of mine as I researched this essay, died suddenly shortly after the repeal bill was passed, with the last word on his lips reportedly being, “Freedom.” 

As I said, Thatcher’s flirtation with cards for football supporters that doomed my job prospects didn’t last much longer, and isn’t even mentioned in her memoir, The Downing Street Years. So, it was left to a Labour government under Tony Blair to try again. This time, a law entitled the Identity Cards Act of 2006 established a National Identity Register that would enable the issuing of ID cards. The government set about compiling the register, which included details like name, gender, date of birth, address, previous addresses, legal status for residency and so on. 

The law was initially popular, reaching 80 percent public support, but enough people were incensed by the law for a mass pressure group to form called No2ID, campaigning against what it called “the database state.” This was backed up by academic research at the London School of Economics, which disputed the government’s rationales for the move, such as a rising threat of identity theft and international obligations, neither of which were found to have much weight. 

No2ID’s campaign director said, “Our strategy was simple: To reach and engage those people who would rather go to prison than have an ID card…In reaching those people, we knew we’d get many more who were less committed, and educate millions. And if we got even just a handful of them, we’d be a force to reckon with.” They were indeed. It was the first act of the newly elected coalition Conservative-Liberal Democrat government in 2010 to repeal the Act. 

Yet bad ideas never die (see also: socialism.) The current Labour government of Sir Keir Starmer has seized on current dissatisfaction with high levels of immigration to launch his bid for Digital IDs. This misses the target. Unlike in the USA, most popular discontent is not with illegal immigration, but with legal immigration – specifically the high rates of asylum seekers and those who came legally during the so-called “Boriswave” after Brexit. 

Moreover, the real concern of those who oppose the scheme is not so much what the initial justification is but the likely mission creep. As suggested above, the introduction of mandatory ID cards fundamentally alters the relationship between the citizen and the state. The state becomes the gatekeeper of functions rather than their guarantor – and the number of functions likely to be affected is immense: welfare, banking, travel, medical records and services, even voting. Leviathan turns out not to be a Lovecraftian monster from the deep, but something made up of ones and zeroes. 

The most likely next step is perhaps the most pernicious. Digital ID becomes the obverse side of digital currency. The Bank of England has already floated the idea of a programmable digital pound, where programmability means the ability not just to monitor but to stop purchases. Given that regulations aimed at reducing childhood obesity have already led pubs and shops to stop offering free refills of hot chocolate, among other sugary drinks, it is easy to see how regulators would jump at the chance to use Digital IDs and currency to prevent purchases they disapprove of. Britain’s nanny state could make China’s social credit scheme look junior league by comparison. Thus, the introduction of Digital ID cards may be the most important constitutional question the UK has faced in generations, more important perhaps than Brexit. No2ID no longer has a presence even on the web. If it cannot be reorganized, then Britain’s reputation as the home of a freedom-loving people may forever be lost. It is only a short step from “Papers please” to “Computer says no.”

The howls of disapproval from the cowboy-hat demographic have been loud this week, and for good reason. President Trump has announced plans to quadruple the import quota of Argentine beef to “bring beef prices down” at the grocery aisle. It was accompanied by a characteristically Trumpian broadside on Truth Social:

“The Cattle Ranchers, who I love, don’t understand that the only reason they are doing so well, for the first time in decades, is because I put Tariffs on cattle coming into the United States,” Trump said on Truth Social on Wednesday. “If it weren’t for me, they would be doing just as they’ve done for the past 20 years — Terrible! It would be nice if they would understand that, but they also have to get their prices down, because the consumer is a very big factor in my thinking, also!”

In a single post he managed to both praise and insult the very people who embody the mythos of American self-reliance. You don’t talk down to cowmen — as a rule they’re damn sensitive to being told their fortunes hinge on the beneficence of a politician. As an example of the pitfalls of dabbling in command economics, you can’t conjure a better case study.

Ranchers are no fools — they know that prosperity in a tenuous sector doesn’t come from tariffs, subsidies, or decrees. It comes from hard work and resilient management in the face of fickle weather and shifting markets. When a big-city billionaire — even one they’ve largely endorsed — tells them “you’re doing well because of me,” the reflexive response is basically what I heard from a cowboy buddy in Arizona: “Gaslight us harder, Mr. President.”

Trump is right: cattle prices have been astonishingly high the past few seasons, for a variety of extremely complicated factors mostly having to do with the size of the national cow herd. But Trump is laughably off base to attribute the recent high prices to his tariffs, which to the extent they had any effect at all, were applied long after the rise in cattle prices.

Trump’s maneuvering reflects the deepest problems of a command economy — you simply can’t foresee the knock-on effects of various market manipulations. Once you start tinkering — raising tariffs to curry favor with domestic producers, then slashing them to win over consumers, or allocating tariff revenues to those who are harmed by the tariffs — you trap yourself in the same contradictory logic that doomed the old Soviet planners. Every knob you twist sends vibrations through a market ecosystem too vastly complex to predict.

Take beef, which is a deceptively “simple” product. It isn’t. Its price is the result of feedlot margins, grazing leases, rail freight rates, hide buyer availability, veterinarian fees, hay producer margins, and farm credit, and a kaleidoscope of other factors. Like many industries, it is also heavily influenced by government regulations, including tariffs. Price signals ripple through this vast and interconnected network like nerve signals in a living body. Interference with one aspect risks numbing the whole. Beef, as a product of the modern integrated global market is no more “simple” than a semiconductor, and managing its price is a fool’s errand.

Ranchers can no more unilaterally “get their prices down” than they could unilaterally get their prices up over the 20 years when they were doing “Terrible.” Cow-calf producers (the foundational unit of the beef complex) take 400-600 pound calves to sale and pretty much take whatever price is being offered by the “buyers” (usually background/stocker/feedlot representatives). Those prices have, for decades, been marginal at best and were often lower than the input costs. In the absence of a vigorous small-scale meat processing complex (regulated largely out of existence), the options were limited. That has changed recently with the higher prices that come with lower inventories, and many ranchers are regaining some solvency lost over preceding years, but they all know it’s out of their control. Like the rain, they take it when they can get it.

Still, ranchers are right to feel whiplash. One day, they’re told tariffs are patriotic; the next day, they’re scolded for high prices. They are pawns in a political game that treats them alternately as mascots and villains. The message from Washington — sometimes in the same sentence — is: We love you, but you’re doing it wrong. This is the cultural insult buried at the heart of Trump’s missive. Rural America has long sensed that its independence is something to be managed, not respected. Trump insists that cowmen owe their good fortune to his tariff policy, but by doing so he adopts the same paternalism that ranchers despise in bureaucrats from either party. Whether the diktat comes from a Manhattan boardroom or the White House, it still smells like the city: clueless and smug, all at the same time.

The kind of economic nationalism Trump has unleashed pretends to restore dignity to the producers and manufacturers forgotten by globalization. But true dignity never comes from protection — it comes from freedom. Give ranchers open access to world markets, stable rules, reduced regulations, and the assurance that government won’t yank the reins every election cycle, and they’ll take care of the rest. The West was not won on quota systems.

What’s galling about this latest announcement isn’t just the inconsistency; it’s the presumption that prosperity can be engineered by presidential decree. Beef markets, like any living system, balance themselves through millions of daily decisions — when to calve, when to sell, when (or if) to buy feed, when to hold back heifers. That’s the invisible hand at work, and it’s far smarter than any White House staffer with a spreadsheet.

Politicians often say they “love” the rancher, the farmer, the working man. But love, in economics as in life, is best revealed by respectful restraint. Don’t interfere. Don’t pretend to know better. Don’t weaponize one group against another in the name of populist sympathy. Ronald Reagan, the cowboy president, said the nine most terrifying words one could hear was “I’m from the government and I’m here to help.” As the cattle industry turns its back on Trump’s meddling, he is about to learn the political perils of a command economy as well. The best thing Washington could do for the beef industry is to stop helping it.