Over the past decade, Europe has played a leading role in shaping global climate policy, highlighted by the launch of the European Green Deal in 2019 — Ursula von der Leyen described it as a “man on the moon moment.” The initiative aims to make Europe the world’s first climate-neutral continent by 2050 while fostering innovation and strengthening its industrial base.

Yet several years later, the results are deeply disappointing. Instead of meeting its goals, the Green Deal is increasingly associated with higher energy costs, weakened competitiveness, and growing political backlash. It has deepened divisions within the EU, strained global relations, and increased pressure on households and businesses — raising serious doubts about its feasibility and long-term economic impact.

How Green Ideology Undermines Europe’s Economy

Europe’s economic stagnation points to a deeper structural problem in its energy and climate strategy — one closely tied to the direction set by the European Green Deal. Since its launch, competitiveness has eroded sharply, with soaring energy costs at its core. Electricity prices in Europe are now two to three times higher than in the United States and China, with taxes accounting for nearly a quarter of the total cost.

These outcomes largely stem from policy choices. The EU’s binding targets — net zero by 2050 and a 55-percent emissions reduction by 2030 — have constrained energy supply, despite Europe accounting for only six percent of global emissions. At the same time, phasing out nuclear, restricting gas, and relying on intermittent renewables have weakened energy security and increased price volatility. For industry — where energy can account for up to 30 percent of total production costs — this, combined with carbon pricing, has become a critical constraint, driving firms to scale back, relocate, or shut down, accelerating deindustrialization across the continent.

The automotive industry clearly illustrates these pressures: representing over seven percent of EU GDP and nearly 14 million jobs, the sector is under pressure from the 2035 ban on combustion engines, forcing a rapid shift to electric vehicles despite unresolved technological challenges and market constraints. As Mercedes-Benz CEO Ola Källenius warned, the policy risks driving the sector “full speed into a wall.” The consequences for the sector are already visible: declining production, mounting restructuring, and significant job losses — 86,000 jobs since 2020, with up to 350,000 more at risk by 2035 — while tightening regulations are set to reduce profits by seven to eight percent by 2030, pushing the sector toward losses and eroding Europe’s automotive leadership.

Agriculture has also become one of the Green Deal’s clearest casualties. Stricter rules on emissions, land use, pesticides, and fertilizers are raising costs and increasing yield volatility, hitting small farmers hardest and accelerating consolidation among large agribusinesses. Targets such as cutting pesticide use by 50 percent and expanding organic farming risk significant declines in output, threatening both rural livelihoods and food security. Rather than enabling farmers to innovate and improve productivity, these policies are constraining production — fueling widespread protests and weakening both competitiveness and sustainability. 

Taken together, these pressures are not isolated — they reflect a broader economic burden. The European Commission estimates that the transition will require at least €260 billion in additional investment each year, with total costs reaching up to 12 percent of EU GDP — a burden that is increasingly difficult for the European economy to sustain.

The Green Deal’s Central Planning Problem 

The economic strain is now translating into political backlash. In recent years, opposition to the European Green Deal has surged across the continent — from farmers and industrial groups to voters and political parties. The 2024 EU elections confirmed what was already clear: the once-dominant green consensus is fracturing. In response, Brussels has begun quietly rolling back key elements of the policy — weakening regulations, introducing loopholes, and even avoiding the term “Green Deal” itself. What was presented as a historic transformation is now unraveling.

This backlash reflects a deeper failure. Although the EU allocated $680 billion from 2021 to 2027 — over a third of its budget — the Green Deal has achieved only modest environmental improvements, while imposing a heavy economic burden on households and businesses, who now face higher energy prices, taxes, and regulatory pressure.

The problem is not merely execution — it is structural. The Green Deal relies on centralized planning to manage a complex energy transition, even though policymakers lack the information and incentives to do so effectively. A major flaw is its rejection of technological neutrality. Leading manufacturers support a mix of electric, hybrid, hydrogen, and e-fuels to compete freely and allow efficient solutions to emerge, yet Brussels is enforcing a single pathway — effectively dictating which technologies survive and sidelining industry expertise.

In such a system, the outcomes are predictable: misallocation, distorted competition, and costly failures. These distortions are amplified by Europe’s restrictive regulatory environment, where internal barriers within the EU single market amount to a 44-percent tariff on goods and 110 percent on services, further constraining efficiency and innovation.

Germany illustrates these dynamics clearly. Long regarded as the leader of Europe’s green transition, its Energiewende — expanding renewables while phasing out nuclear — has cost around $800 billion since 2002, yet delivered only modest results and left German industries paying up to five times more for electricity than American competitors. Much of the progress in renewables has been offset by the closure of zero-emission nuclear plants. Estimates suggest that maintaining nuclear capacity could have achieved a 73-percent emissions reduction at half the cost, highlighting the limits of ideologically driven policy.

The comparison with the United States is instructive. In the US, emissions have declined even as the economy more than doubled since 1990 — driven largely by market forces, particularly the shift to cheaper natural gas and the expansion of renewables. This combination reduced emissions without imposing comparable costs. Europe, meanwhile, has pursued a more rigid, policy-driven approach that has raised prices and weakened growth. 

The deeper lesson of the Green Deal is that climate policy cannot succeed when it abandons the principles that made Europe prosperous in the first place: free enterprise, open markets, private innovation, and limited government. Energy transitions cannot be engineered through centralized planning, subsidies, and political mandates. Innovation emerges from competition, experimentation, and market signals — not from governments dictating technological outcomes.

Andrew David Edwards, in Money and the Making of the American Revolution, offers what his publisher describes as “a new interpretation of the American Revolution as a transformative monetary contest.” While many books and articles have examined the monetary arrangements of the American colonies and the financing of the Revolution, Edwards shows a solid command of much of this scholarship as well as the primary sources. While at times his writing can be eloquent, the book is necessarily ponderous and dense. Unfortunately, Edwards’ understanding of the nature of money and finance can be superficial at best.

Building upon the earlier contention of historian Joseph Albert Ernst that British restrictions on colonial paper money were a major grievance leading to the Revolution, Edwards goes further. He contends that the colonies and the mother country had fundamentally distinct monetary systems, and the resulting war was primarily a conflict over money rather than taxes. Moreover, because Americans had to ultimately abandon their reliance on the Continental currency and instead turn to foreign loans in specie (gold and silver coins) and create the Bank of North America, they won their independence only at the cost of losing control over their money. Edwards then finds conflict over the appropriate monetary system still lingering domestically into the Confederation period until its final settlement embodied in the Constitution. 

Overlaying this narrative is Edwards’ open hostility to capitalism. In recounting the history, Edwards suggests he is unveiling a self-interested monetary motive for going to war, undermining Bernard Bailyn’s ideological approach to the Revolution’s initiation. He does not seem to consider the possibility that both motivations could have been at play.

In the book’s introduction, entitled “The Burning Question,” Edwards makes much of the fact that colonial paper money — called “bills of credit” — was issued temporarily, usually in anticipation of future taxes that would retire them. This, he claims, makes the colonial monetary system entirely different from that of Britain. Edwards is correct that, during the colonial period, there were many other ways of making exchanges: direct credit, as well as barter and simple commodity exchanges, such as wampum, rice, or tobacco. But bills of credit still could and often did serve all those functions, and as Edwards mentions, colonial governments issued bills of credit to make temporary loans, earning interest against real estate. Only bills that could easily be re-spent on goods and services, like dollars today, would have been accepted.

That bills of credit were retired and burned did not make them unique, as Edwards contends. Colonial governments did often issue bills of credit to finance transitory wartime expenditures, but sometimes, future taxes were insufficient to retire and burn all bills in a particular issuance. And even when taxes were sufficient, new bills were issued. Pennsylvania, which consistently maintained the purchasing power of its bills of credit, always made overlapping issues, keeping some bills continually in circulation from 1725 until the Revolution’s outbreak. Retiring the bills of credit, then, was not a feature limiting their use but analogous to the US Treasury retiring worn dollar bills and replacing them with new ones.

Edwards also seems not fully aware of specie’s role as the unit of account in colonial America. True, gold and silver coins were not widely used for domestic exchanges within the colonies. Britain’s mercantilist Navigation Acts had discouraged the importation of English coins into the colonies. What coins the colonists did obtain from trade with the West Indies and southern Europe were often exported to purchase British goods. Nonetheless, nearly all colonial bills of credit were denominated in pounds, shillings, and pence. Although the market value of the bills often declined below their printed specie value while in circulation, the bills tended to be anchored to that value upon retirement. This does make bills of credit very different from US dollars and other fiat currencies today, in which there is no distinction between the unit of account and the medium of exchange; they are identical. But this also makes the colonial monetary system more similar to that existing in Britain at the time, in which the market value of many different coins in circulation could and often did depreciate with respect to their face value, including through physical clipping and defacing.

Of course, just as today a US dollar is different from a Canadian dollar, a Massachusetts pound was different from a British pound, and both were different from a Virginia pound. The colonies overvalued coins relative to their metallic value in Britain in a feeble effort to encourage their importation. But bills of credit were never intended to entirely displace specie. They were designed as convenient substitutes for specie. Admittedly, bills of credit issued in the Massachusetts Bay Colony in 1690 were the first paper money in the West, while in Britain, taxes were paid primarily with coins. But another similarity between Britain and the colonies is that merchants on both sides of the Atlantic extensively relied on bills of exchange. Not to be confused with bills of credit, bills of exchange were genuine credit instruments, with the holder of the bill owing a debt to the issuer at some future date. They could be traded before their maturity and pass through several hands. Sometimes their final settlement was specified as colonial bills of credit or even commodities such as tobacco, but nearly all the bills of exchange used in foreign trade were sterling silver bills, in which the issuer could demand repayment in specie.

The British government did impose restrictions on colonial bills of credit in a series of Currency Acts. Here again, Edwards omits or downplays a critical detail. The first Currency Act was passed in 1751 and applied only to the New England colonies. It did not prohibit bills of credit, something Edwards points out. But he leaves out the most important restriction stated explicitly in the 1751 act: “no Paper Currency, or Bills of Credit, of any Kind or Denomination … shall be a legal Tender in Payment of any private Bargains, Contracts, Debts, Dues or Demands whatsoever.” When the colonies did make their bills of credit legal tender, it allowed debtors to legally pay off debts even with bills that had depreciated. This benefitted debtors at the expense of creditors. Edwards does briefly allude to legal tender subsequently, off and on, and mentions it with respect to the Currency Act of 1764, extending to all the colonies similar restrictions to those in the 1751 act. But rather than showing any sympathy for creditors, Edwards instead exclusively treats these acts as onerous limitations on the colonies.

When the Continental Congress first authorized the issue of the Continental currency in June 1775, it adopted as the bill’s unit of account the Spanish silver dollar, the most common coin available within the colonies. Congress voted to retire the Continentals through taxation from November 1779 through November 1782, at which point Congress expected the war to be over. But since Congress had no authority to tax, the tax withdrawals were allotted among the united colonies based on their population. Edwards covers this well, with one caveat. Each bill had printed on it: “This bill entitles the bearer to receive . . . Spanish milled dollars, or the value thereof in gold or silver.” Congress also provided that if a state did not collect enough bills through taxation or other means to meet its requisition quota, it could substitute specie for its quota, which would then be available for private citizens to redeem bills at the Continental Treasury beginning in 1779. 

Edwards labels these last two features as “a contradiction” causing “confusion,” because they allegedly constituted a major and unfortunate, albeit perhaps necessary, deviation from how previously colonial bills of credit had worked.

But Edwards’ supposition is not strictly true. On occasion, some colonies did redeem their bills with specie, notably Massachusetts when it revalued its currency in 1750 after King George’s War. And the bills New York issued in 1774 promised on their face to be “payable on Demand” for specie. Most other colonial bills explicitly stated the bills should “pass current.” Edwards is again exaggerating the uniqueness of colonial paper money, having failed to recognize the extent to which the pound, however defined, provided a genuine unit of account within the colonies. His confusion is clearest when he complains that Congress, after issuing the Continental currency, “rather than issuing traditional legal tender laws, which made money, by law, pass at face value in payment of a public or private debt, Congress decreed that its ‘dollars’ should pass as if they were gold and silver, leaving the actual tender laws to the states.” This is a distinction without much of a difference. Trying to make the Continentals equivalent to coins is exactly what the colonial legal tender laws were designed to do for bills of credit. 

Despite Edwards’ weak grasp of monetary theory, much of the book is an excellent and informative narrative, displaying deep research and original insights. Any work that covers such a long span of time faces an inevitable trade-off between offering a broad summary of events or detailed specifics. Money and the Making of the American Revolution is heavily weighted toward the latter. As Edwards explains in the introduction, “I decided, wherever possible, to let the analysis emerge from the story itself, as told by the historical actors” so that the book “tells its story through the lives of individuals rather than through statistics or broad social surveys.” While this requires a certain selectivity, among the score of those whose lives are woven throughout the narrative are Thomas Paine, John Dickinson, Benjamin Franklin, Pelatiah Webster, and Robert Morris.

Edwards’ account also goes into extensive detail about what was going on in Britain during this period, unveiling a lot about the politics, motives, and players responsible for the Parliamentary acts that brought on the Revolution. His chapter on the Stamp Act is one of the book’s best, persuasively arguing that the severity of the colonists’ reaction to the Act owed to its provision that taxes had to be paid exclusively with scarce specie. He concludes that, without that requirement, colonial resistance would have been more muted. The Stamp Act in turn helped stiffen opposition to the Townshend duties, passed after the Stamp Act was repealed, despite the fact that these taxes fell mainly on merchants who had easier access to specie. And when dealing with the Tea Act, Edwards interweaves a long account of British East India Company’s depredations that were ultimately responsible for that act. When the book gets to the beginning of the war, Edwards gives an exceedingly complete account of the bills of credit initially issued by the individual colonies before Congress authorized the Continental currency.

Given Edwards’ fixation on the fact that Congress initially offered to redeem the Continentals with silver dollars, it is surprising that he never brings up the important detail that Congress in March 1780 had instituted a currency reform that officially devalued the Continental at 40 to 1 for a specie dollar. By ignoring this, Edwards makes Congress’s steadily increasing requisitions on the states for Continental bills appear to be a greater burden than they were. The Continental’s depreciation and devaluation actually made it easier for the states to start meeting those requisitions. Edwards’ observation that the war’s burden upon the population was steadily increasing is correct, but not primarily from heavy state taxation, as he suggests. Other factors were involved, including the Continental’s depreciation. Direct state taxation would not significantly increase until after the war was over, as the states tried to pay down their own wartime borrowing.

Edwards is not a fan of Robert Morris, who was appointed by Congress to the new post of Superintendent of Finance in February 1781. He credits Morris with bringing about a “sea change” in American finance, and to an extent that is correct. After all, the collapse of the Continental currency had made it necessary to find other ways to pay for the war. Although the French had been assisting since 1776 with modest subsidies and then a loan, only after France and the United States began negotiating a treaty of alliance, signed in 1778, did the French loans become more substantial. Edwards says little about their financial contribution, only detailing the later negotiations. Edwards gives greater attention to Morris’s creation of the Bank of North America. Yet here again he displays another misunderstanding of finance, asserting that “the bank could have used its specie … to multiply the means of payment by issuing more notes than the gold and silver it had in its vault, but it did not.” In fact, rarely if ever have banks held 100 percent specie reserves. The Bank of North America certainly never did, even during its initial capitalization. In fact, the bank’s specie reserves were critically low at its opening in January 1782 and during the recession of 1784-1785.

In summary, Edwards’ thesis that the United States lost a war over money with the British hinges on misconceptions about how different their monetary systems were. But this does not mean that Money and the Making of the American Revolution is not worth reading. Scholars will still find much that is interesting and informative.

The United States–Mexico–Canada Agreement is an established trade policy agreement among the US, Mexico and Canada, implemented in 2020 with a mandatory review after six years. As that review unfolds, its chances of being extended seem increasingly bleak. 

A failure to renew USMCA will mean disrupting the highly interconnected North American food system where, for example, Canadian wheat can be ground into flour in the US, shipped back to Canada to be baked into pastries or bread, which can then be sold in either country. Many Canadian feeder cattle are finished in US feedlots, or finished in Canada, then sold to US processors, and sold back to either Canadian or US further processors or retailers.

Farmers, consumers and food companies will bear the costs. Several US agricultural organizations clearly recognize this.

A better approach is to evaluate what’s working well for all North Americans, what’s not, and needs to change.

Agrifood products currently trade with few restrictions, reducing supply shocks and price volatility. Canada’s short growing season provides demand during the prolonged seasons of southern US horticultural industries. Food and feed grains, whose prices in both countries are discovered on the Chicago Mercantile Exchange, trade back and forth as needed. Regional crop yields are often inversely related, partly owing to weather phenomena. When yields are low in Canada, and high in the US, Canada buys more, thereby relieving downward pressure on US prices. Similarly, when Canadian yields are high and US yields lag, Canadian foodstuffs are rerouted to meet that demand, reducing upward price pressure.

Relatively free trade in basic food ingredients is always good risk management, but particularly so under extreme circumstances. Beef prices are currently high. History shows the highest prices occur when ranchers keep females to build their breeding herds, reducing the number available to be processed into beef. Two recent USDA reports show that hold-back hadn’t started. When it finally occurs, we will see much higher meat prices. Canada has heaps of grassland and exports more beef and cattle than it uses for its population and it’s cheaper to import than Brazilian or Argentine beef. Stopping exports to the US with high tariffs will drive American prices even higher, while Canada looks to Asia to sell its extra beef. 

Minimizing trade restrictions also helped manage risk around avian influenza, which has had greater effect in the US. Canada doesn’t normally export turkey meat to the US, but currently it is, thereby alleviating some of the upward price pressure caused by culling.

Finally, the US has a very limited natural endowment of potash, which is essential for crop growth. The US imports 90 percent of its requirements, of which more than 80 percent is from the province of Saskatchewan. The next three largest suppliers are Russia, Belarus, and China. With USMCA, American farmers got Canadian potash at the same prices as farmers in other countries. It’s working well. A threatened US tariff on it would put American farmers at the mercy of less-friendly countries.

The US, and other countries, have long complained about Canada’s supply management system for dairy (the Hub). It allows Canadian producers of dairy (and poultry) to avoid Canada’s Competition Act by colluding to control supply and prices.

Supplemented by high tariffs and tight tariff quotas on imports, the Hub works to keep foreign dairy products out of the Canadian market. It also raises prices for dairy in Canada (giving dairy and poultry producers an advantage over other farmers in buying or renting land, thereby driving up land and financing costs for everyone) and makes access to foreign markets for other Canadian products more difficult.

A major barrier to reforming Canada’s supply management is that the US dairy sector is even more protected than Canada’s. Its dairy prices and imports are “managed” by a different mechanism than Canada’s that is even more effective keeping foreign products out. The US wants more access to Canada’s dairy market; that access needs to go both ways. Lower trade barriers can be phased in over time so farms and processing companies can adjust slowly, but both countries must agree on an equitable way to do so.

The food and agricultural regulatory framework is also overdue for reworking. Both countries have constructed regulatory hoops that protect their markets while raising costs to farmers and food companies in both. Both are experiencing increased criticism of their red tape. For example, the Canadian Federation of Independent Business recently published a survey reporting 70 percent of Canadian agribusinesses discourage the next generation from staying in farming because of red tape and regulation.

Finding ways to reduce and rationalize the two food regulation systems could materially improve the competitiveness of agrifood sectors in both nations.

Focusing on the things that need to change and leaving alone the things that are working would put resources in the right places. Leaders of the two countries have a clear choice: continue to improve conditions for their farmers, consumers, and food companies, or pull the rug out from under them with short-sighted protectionism.

Three years after the disaster in East Palestine, Ohio, Congress has brought back the Railway Safety Act. It’s also focused on the wrong priorities.

The issue isn’t whether Washington can add another loud rail-safety mandate. It’s whether the bill steers investment toward the technologies and operational improvements that are actually, quietly, reducing risk.

On that test, too much of the act falls short. Three pieces of research — two new ones offering a broad insight about the economics of shipping, and an older one laying out the implications for safety — explain why.

In the first new study, Bentley Coffey, Pietro Peretto and I develop an economic growth model that treats transportation not as a side sector but as part of the innovation process itself. In most growth models, goods move to market as if by magic. In the real economy, they do not. Most everything you consume was shipped at least once, if not multiple times. Manufacturers can improve products and processes, but if getting goods to customers is too expensive, the gains from innovation eventually hit a wall.

The flip side is encouraging. When innovation includes transportation, growth becomes self-reinforcing. Better transportation expands markets and raises the return to manufacturing innovation. Better manufacturing raises the value of improving transportation. 

Policies that raise transportation costs therefore do more than burden one industry. They slow the spread of innovation through the whole economy. And that includes innovations that increase safety, like autopilot did for commercial aviation in the 1980s.

A companion paper asks what regulation does to that process in the real world. Using decades of data across air, rail, truck and water freight, we find that regulatory accumulation functions like a compounding tax on moving goods. It lowers labor productivity in every freight mode.

When it comes to the railroads Congress is targeting with this bill, more regulation also significantly depresses fuel and capital productivity. In our simulations, a five percent increase in rail regulatory restrictions caused rail unit costs to rise by 2.3 percent and rail volumes to fall by 4.1 percent in the first year alone. And because productivity growth is slower, the damage does not disappear in year two. It persists and compounds.

Crucially, these higher transportation costs do not simply reshuffle freight from one mode to another. The pie gets smaller. Total freight activity falls. That means policymakers should be even more cautious than usual about adding regulation to rail and other freight modes. The costs do not stay inside the targeted sector. They ripple through supply chains and the broader economy.

My earlier study with Jerry Ellig helps explain why all of this matters for safety as well as growth.

Ellig and I found that the Staggers Act, which removed some economic regulations of US railroads, was associated with improved railroad safety. Meanwhile, subsequent expansions in safety regulation made only marginal contributions to safety once railroads were freer to allocate capital. Accidents fell from more than 11,000 in 1978 to 1,867 in 2013 even as revenue ton-miles doubled.

The most plausible reason is also the most intuitive one. Railroads with healthier finances and more operational flexibility could invest more in track, equipment, maintenance, and technology.

Taken together, these papers point to an uncomfortable conclusion for supporters of the Railway Safety Act: safety and productivity are often complements, not tradeoffs.

The same investments that make railroads more efficient — better defect detection, better track and equipment, better logistics, more reliable operations — also make them safer. And any policies that siphon resources into compliance-heavy mandates leave less capital for those safety-enhancing investments.

That should shape how Congress thinks about this bill. Some parts of the act move in the right direction. Its defect-detection provisions (especially the requirement for risk-based plans for hot-bearing and related detection systems) are closer to what modern research would recommend. So are measures that improve hazardous-material information and emergency response. Those provisions target identifiable failure modes and improve the underlying system. 

Other provisions look like mere theater: visible, politically attractive, and not connected to actual risk reduction. The bill’s blanket two-person crew mandate is the clearest example. No sound evidence justifies it, as the Federal Railroad Administration itself admitted in 2016 when it could not “provide reliable or conclusive statistical data to suggest whether one-person crew operations are generally safer or less safe than multiple-person crew operations.” And there’s a reason for that: When railroads make changes to operations, such as reducing crew size on specific routes, they evaluate the overall system’s safety. When they reduce crew size, it is because they made investments in other safety layers, such as positive train control, that permit the same or even better safety performance with a smaller crew.

The new studies sharpen that point. Even when the safety benefit of a staffing mandate is uncertain, the cost is not. In this industry, higher labor and compliance costs mean less money for wayside detectors, acoustic bearing monitors, predictive maintenance, track renewal, and other investments that directly target accidents and actually improve safety.

The same logic may apply to the bill’s more prescriptive inspection mandates, including designated inspection locations and extra daily locomotive inspections. Of course inspections matter — as long as they are needed inspections and Congress is not just mandating a process. Without strong evidence of a safety payoff, it may satisfy Washington’s taste for visible action while undermining the capital deepening and technological upgrading that have historically delivered both better performance and better safety.

Not all rail safety regulation is misguided, but the burden of proof should be much higher than what Congress usually assumes. If transportation is a system-wide input into growth, and if regulatory accumulation’s effects on growth compound over time, lawmakers should favor rules tightly tied to actual performance and that preserve room for investment and innovation. They should be skeptical of prescriptive mandates that raise the cost of moving freight without comparable evidence of benefit.

The Railway Safety Act is mostly the latter — regulations that would impose costs without improving safety.  If it passes, these new studies indicate that the economic and safety consequences will be much larger than the compliance costs imposed on railroads.

At the end of April, New York City Mayor Zohran Mamdani proposed delaying pension plan contributions to help close the Big Apple’s budget deficit.  

The problem is that while delaying pension payments could free up $1 billion in the short term, the budget gap is $5.4 billion. This flawed strategy highlights a much larger problem: the Big Apple’s biggest budget pains are self-inflicted. 

Kicking the can down the road on mandatory pension contributions still leaves a massive hole in the budget while hurting public employees (many of whom helped propel Mamdani into office) and placing greater burdens on New York’s shrinking tax base. 

If Mamdani does not make the spending fixes on his own terms, markets will force him to do it when the City can no longer find willing investors.  

Why Pensions Matter  

A pension liability represents a financial retirement benefit promised to a public employee. Unlike Social Security, these benefits are prefunded: when a public employee retires, the plan should have on hand the total amount needed to purchase a lifetime annuity on that employee’s behalf. 

Pensions are funded through contributions from public employees and taxpayers, as well as investment returns. Public employee contributions are tied to a fixed percentage of payroll, so when investment returns come up short, taxpayers are compelled to cover funding gaps. These benefits are calculated using a formula, including a public employee’s final average salary.  

In most states, including New York, public employees can also use overtime and unused sick days to increase their final average salary. This practice, known as pension spiking, often results in pension payments that exceed the salaries public employees received while working.  

Publicly promised benefits have legal protections that vary state to state. New York guarantees public pension benefits through the New York State Constitution, as well as other state statutes and legal precedents that include pensions as part of a contractual relationship between employers and employees. Benefits can only be revoked if a potential beneficiary is convicted of a felony.  

In other words, these promises are rock-solid. The strength of those promises, however, also means that spending on pensions gets priority over other expenditures, including other public services that are deemed “core government functions.” That means taxpayers see higher tax burdens while the government becomes more bloated and ineffective. 

The only way New York State can change pension benefits without a constitutional amendment is by changing the benefits offered to future hires, which gave rise to the tier system. One’s tier is determined by when one was hired. The more recent the hire, the more the employee must pay into the system and the later they can retire. 

This has not stopped unfunded liabilities from growing. Public pension liabilities matter because they are one of the largest sources of long-term debt that state and municipal governments face. Massive pension liabilities are a leading contributor to recent fiscal crises, including those experienced by Detroit, Puerto Rico, and municipal bankruptcies across California. 

Currently, New York City owes over $40 billion in pension benefits not covered by current assets. That is just under $4,600 per person and a larger liability than the Empire State’s aggregated average of $2,681 per person and the national average of $1,475 per person.  

That burden will fall on a shrinking number of taxpayers, who cannot seem to escape New York fast enough. The city lost thousands of residents across all income levels in 2025, and New York State is on track to have a decade of population decline. 

Now, public employees throughout the Empire State are pressuring state officials to roll back the Tier 6 reforms in 2012, which would promise greater benefits from a city that is increasingly unprepared to pay for them. 

Back to the 70s? A Familiar Fiscal Pattern

In late April, Mamdani declared a fiscal emergency due to structural budget deficits. While his administration inherited a fiscal mess, his own ambitious spending plans only dig New York deeper into the fiscal hole. 

Many are quick to compare Mamdani’s New York to Mayor John Lindsay, whose similar spendthrift approach led to the 1975 fiscal crisis under his successor, former city controller Abraham Beame.  

While New York City is not currently in 1975, it may be in 1965. Much like Mayor Mamdani, Mayor Lindsay positioned himself as an outside urban reformer who grew government during a period of rising welfare costs, labor pressure, middle-class flight, crime, and weakening fiscal discipline. He also blamed his predecessor, Mayor Robert Wagner, for leaving him with massive budget deficits.  

Much like today, markets were skeptical of New York City’s ability to pay its debts. Unlike today, however, the Big Apple does not appear to be as dependent on short-term bonds as it was before the 1975 crisis. The recent pension contribution deferment, however, resembles the same attitude of short-term debt to cover current spending. This time, however, the city is effectively borrowing against the retirement security of public employees (who were, again, among Mamdani’s top campaign supporters) while leaving the bill to future taxpayers. 

Economist John Phelan notes that the crisis occurred when the city could not find a willing underwriter, a securities broker or dealer that purchases bonds to resell to investors, for its bonds. This is because news emerged that the city did not have the tax receipts necessary to cover the proposed debt. 

The Municipal Assistance Corporation (MAC) was created in 1975 after New York City lost access to credit markets. It served as an emergency financing vehicle, issuing bonds backed by state-controlled revenue streams to help the city meet obligations while forcing budget discipline. MAC also helped shift control away from ordinary city politics and toward state-supervised fiscal management. Although MAC itself was dissolved after its bonds were retired, its legacy remains.  

New York’s post-crisis guardrails now include the Financial Control Board, balanced-budget rules, limits on short-term borrowing, quarterly monitoring, and four-year financial plans. Those guardrails are weaker than direct crisis control, but they can still tighten if conditions deteriorate. 

Mayor Mamdani has already shown a willingness to pressure Albany for additional taxing authority. He pounced on the governor’s approved pied-à-terre tax on secondary residences, prompting the departure of Ken Griffin and other business-owners from New York. The recent budget deal reached in Albany further highlights the city’s ability to bully the rest of the Empire State into going along with the city’s desired policies.

While Mamdani’s New York still has willing investors, the past still provides a stark warning. If these recurring promises grow faster than revenues and if higher taxes accelerate outmigration of businesses and high-income residents, today’s structural gaps could harden into a deeper fiscal crisis.  

Has the Big Apple Gone Rotten? 

New York City still has much to recommend it to residents and investors, but the warning signs are increasingly difficult to ignore. New York’s future depends on whether its leaders can impose discipline before markets do it for them. If officials continue to squeeze a shrinking tax base, rely on pension gimmicks, and use short-term fixes to close long-term gaps, the city risks repeating the very mistakes that once pushed it to the brink of collapse.

Across the United States, people are fleeing “Blue States” with their high taxes, spending, and regulatory burdens, for “Red States” which offer greater economic freedom.

Rather than heed this lesson, several “Blue States” — and some which are only pale blue — are doubling down, offering even more of their losing formula. Minnesota is one of these states. 

Ope, Just Gonna Tax Ya There

Minnesotans are some of the most heavily taxed citizens in the United States.

The Land of 10,000 Lakes has the sixth highest top rate of state personal income tax and this rate kicks in at a relatively low level of income; only Oregon has a higher rate that kicks in at a lower level. And Minnesota doesn’t just tax “the rich” heavily; for 2025, the average-earning, single-filing Minnesotan handed over a share of their wages to the state government in income tax greater than in 43 out of 50 other states. Altogether, Minnesota’s per capita tax burden ranks eight out of 50 states. 

These high taxes are necessary to fund a level of General Fund spending which is higher, in per capita terms, than in 45 other states. Minnesota exemplifies exactly the “Blue State” policies that Americans are fleeing. 

Minnesota’s Proposed Wealth Tax 

Yet, even with taxes high and rising, spending has outpaced them. Minnesota’s state government has spent more than it has collected in revenue in every year since 2024 and is forecast to continue doing so until at least 2029. 

To help plug this gap, Minnesota’s Democrats have introduced a bill to enact a state wealth tax. This proposal would establish a one-percent tax on all “taxable wealth” over $10 million, with “taxable wealth” comprising the sum of a taxpayer’s real or personal, tangible or intangible property located in Minnesota, minus the sum of all debts and financial obligations owed by the taxpayer.  

The state’s Revenue Department estimates that the tax would hit about 5,600 people annually and raise $288.3 million in Fiscal Year 2027, or 0.8 percent of total revenues, with that number increasing by about $2 million annually in subsequent years. 

Let me be clear: Minnesota’s wealth tax will not raise $288 million.  

For starters, that estimate doesn’t include the cost of administering the tax. The liability would be calculated in the same manner as for the federal estate tax, but, unlike the estate tax — a state version of which Minnesota already has — it will be assessed annually. The usual problems of valuing certain assets such as “fine art, wine, antique cars, jewelry, and other collectibles [where] there is often not a liquid market that can be referenced for valuation purposes” will be greatly multiplied, as will the difficulties in valuing intangible assets, like patents and copyrights. The authors of the bill have no idea how much this will cost.  

More importantly, the estimate assumes that nobody responds to avoid the tax. This is highly unlikely, and there are several options open to those wishing to avoid it.  

Those Minnesotans targeted might move. This is often dismissed as a “myth.” However, a 2020 paper published by the American Economic Association suggests otherwise.

The paper found “growing evidence” that taxes influence where people live — within and across countries — adding another efficiency cost policymakers must consider.

More specifically: “This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions.”   

Minnesota’s proposed wealth tax would provide a strong incentive to move. Someone with $11 million “taxable wealth” yielding a return of five percent would see a 16.8 percent increase in their total tax bill which, in Minnesota, includes a “Net Investment Income Tax” on top of the high personal income tax. And this hike would be larger if the return fell; by 27.9 percent at a return of three percent.  

Those Minnesotans targeted don’t even have to move to avoid paying this tax. They could keep reported wealth just below that $10 million threshold by liquidating their investments to finance consumption spending. This would reduce savings, which, in an open economy, might be offset by increased foreign capital inflows, resulting in a  larger trade deficit and/or  lower long-run economic growth. 

Either way, the effect is the same: the base of the wealth tax shrinks. 

Recent events in Washington State, which has proposed a one percent tax on tradable net worth above $250 million, reveal the problem with state projections from wealth taxes. State economists had projected $3.2 billion in new revenues from the tax. But as the Tax Foundation’s Cristina Enache wrote, “$1.44 billion, almost 45 percent, would have been collected from Jeff Bezos.” Unfortunately for state lawmakers, the Amazon founder had other ideas. He moved to Florida, taking nearly half of that estimated revenue with him.

Bezos may be exceptionally wealthy, but the phenomenon applies everywhere. In California, for example, the base of the proposed wealth tax comprises just 200 people — out of a population of nearly 40 million. Many of these individuals will likely exercise the power of exit, as Bezos did. 

This is why most jurisdictions that had wealth taxes have ditched them. Thirteen OECD countries imposed wealth taxes in 1965, but only three did as of 2025. 

Compounding Policy Effects 

Let us stick with the comparison of estate taxes and wealth taxes a moment longer. A 2023 paper by economists Enrico Moretti and Daniel J. Wilson looked at “the effect of taxes on the locational choices of wealthy individuals by examining the geographical sensitivity of the Forbes 400 richest Americans to state estate taxes.” 

First, they found that “their residential choices are highly sensitive to these taxes, as 35 percent of local billionaires leave states with an estate tax. This tax-induced mobility causes a large reduction in the aggregate tax base.” 

Second, they found that “the revenue benefit of an estate tax exceeds the cost for the vast majority of states.” But Minnesota is not among this majority. Moretti and Wilson found that “the benefits of having [an estate tax] exceed the costs in all but three high-[Personal Income Tax] states: Hawaii, Minnesota, and Oregon.” 

There is a trade-off: You can have a high rate of estate or wealth taxation or a high top rate of income tax, but you can’t have both. Given this, another proposal from Minnesota’s Democrats, to impose a new, top, fifth income tax bracket of 11.45 percent on income above $600,000 (single) or $1,000,000 (joint) is fiscal masochism. 

During the last century, economists were provided with two incredible natural experiments: the division of Germany and the Korean Peninsula into countries with diametrically opposed economic models. The results were clear. America’s Blue States seem intent on running the experiment again.

“Spirit in the Sky” may be a song about departure, but Spirit Airlines’ demise was no natural passing. It is a warning about a government that first broke the market’s legs, then offered it a wheelchair. Washington blocked the private merger that could have kept Spirit’s planes, workers, routes, and customers inside a functioning carrier. Then, after the damage was done, Washington even considered whether taxpayers should help clean up the mess. 

Spirit was not a luxury airline. It was often mocked for its fees, cramped seats, and bare-bones service. That was precisely the point. Spirit served price-sensitive travelers who cared less about comfort than access. For many students and working families, Spirit helped make flying possible. It filled a niche that larger airlines had little incentive to serve with the same price discipline. 

On Saturday, May 2, 2026, Spirit CEO Dave Davis said, “For more than 30 years, Spirit Airlines has played a pioneering role in making travel more accessible and bringing people together while driving affordability across the industry.” The airline at its peak operated hundreds of daily flights and employed about 17,000 people. Although rising oil prices following the onset of the Iran conflict may have delivered the final blow, the fight to keep Spirit flying had been underway long before then.

In 2024, JetBlue and Spirit called off their $3.8 billion merger after a federal judge blocked the deal on antitrust grounds. Reuters reported that the merger would have created the fifth-largest airline in the United States, but the Biden administration argued that it would harm consumers by reducing competition and raising ticket prices. JetBlue paid Spirit a $69 million termination fee. But the failed merger left Spirit in a difficult position, with analysts already discussing bankruptcy risk. 

Senator Elizabeth Warren celebrated the government’s position at the time. On March 5, 2024, she wrote that she had warned for months that a JetBlue-Spirit merger would have led to “fewer flights and higher fares,” adding that DOJ and DOT were right to fight airline consolidation. She called it “a Biden win for flyers.” 

Roughly two years later, Spirit’s exit has left fewer low-cost flights, fewer ultra-low-cost seats, and a thinner market for consumers who once relied on its model. 

Warren’s argument, like the DOJ’s, rested on a fragile assumption. The government compared the merger to an idealized world in which Spirit remained an independent, viable low-cost competitor. The realistic comparison was different: merger, bankruptcy, liquidation, or bailout. A weak airline does not become competitive because regulators insist it remain independent. A grounded airline does not discipline fares. A bankrupt airline does not serve consumers. 

Both Noah Gould and Tarnell Brown reached the same basic conclusion: Spirit’s consolidation into JetBlue threatened the largest airlines more than it threatened consumers. The real threat was not that JetBlue-Spirit would dominate the market, but that it could create a stronger fifth competitor against Delta, American, Southwest, and United. Even after acquiring Spirit, JetBlue would not have become dominant. The court found that the merged carrier would have become the nation’s fifth-largest airline with 10.2 percent of the domestic market. That is not dominance. It is scale enough to challenge dominance. If the purpose of antitrust law is to protect competition rather than competitors, why should the government prohibit a smaller airline from scaling up to challenge entrenched incumbents? 

This also explains why Delta or American did not buy Spirit. Their absence does not prove Spirit was worthless. It suggests Spirit made strategic sense for JetBlue in a way it did not for the giants. Delta, American, United, and Southwest already have national networks, major hubs, international routes, corporate travel customers, loyalty programs, and enormous scale. JetBlue needed Spirit to become a more serious national competitor. The Big Four did not need Spirit to become national competitors. They already were. 

In fact, the absence of a Big Four bid strengthens the case for the JetBlue merger. Why would a dominant airline buy Spirit’s debt, leases, labor obligations, and business-model problems if it could wait for distress and compete for its passengers, pilots, aircraft, gates, or routes later? The larger airlines did not need to acquire Spirit to benefit from its disappearance. They only needed to wait for Spirit to exit the market. 

Now that the crash landing has occurred, the consumer-protection case looks upside down. The merger was blocked because regulators claimed it might mean fewer flights and higher fares. Yet Spirit’s collapse produced canceled flights, stranded passengers, fewer ultra-low-cost seats, and less pressure on the remaining airlines. AP reported that United, Delta, JetBlue, and Southwest offered $200 one-way flights for passengers holding Spirit ticket confirmations. Other airlines also said they would help stranded Spirit employees and give them preferential employment applications.

This market failure is a direct result of government meddling in the airline industry. Had the JetBlue deal been allowed, Spirit’s customers may not have been left facing a sudden wind-down, disappearing customer service, and emergency rebooking. The Spirit brand may have disappeared, but its aircraft, workers, routes, and customers could have been integrated into a functioning carrier. Instead, the government chose antitrust purity, and passengers were left with the consequences. 

The Trump administration’s reported bailout interest only completes the irony. The National News Desk reported that Trump said his administration had given Spirit Airlines a “final proposal” as the carrier considered ceasing operations, amid debate over a possible taxpayer-backed rescue. But that would have been the wrong response. JetBlue would have risked private capital. A bailout would risk taxpayer capital. Spirit did not need Washington to become its owner. It needed Washington to stop blocking its buyer. 

Using American money to rescue Spirit after blocking private capital would be especially absurd because the US government cannot even manage its own balance sheet. The Congressional Budget Office projects a $1.9 trillion federal deficit in fiscal year 2026, rising to $3.1 trillion by 2036. It also projects debt held by the public rising from 101 percent of GDP in 2026 to 120 percent in 2036. A government running chronic deficits should not pretend to be a disciplined capital allocator for failed airlines, especially after the same government denied a private merger. Washington helped create the problem it later claimed only public intervention could solve. 

Washington’s meddling in airline markets is not an isolated episode. It is the latest example of a broader interventionist turn across American industry. In semiconductors, Washington has become a shareholder, with the US government taking a 10 percent equity stake in Intel by converting public grants into stock. In steel, the same logic appears through governance rather than equity. The US government secured veto power over key US Steel decisions as part of Nippon Steel’s takeover, including a non-economic golden share and presidential authority to name a board member. 

In chips, government becomes shareholder; in steel, government becomes veto holder; in airlines, government blocks a private merger and then considers taxpayer-funded public rescue. That is not neutral regulation. It is government inserting itself directly into corporate decision-making.  

Spirit should not be saved by taxpayers. But it should have been allowed to seek survival through private capital. The tragedy is not that the government refused to rescue Spirit at the end. The tragedy is that the government helped block the market’s rescue before the end came. From JetBlue and Spirit to Intel and US Steel, the lesson is clear: when government enters the market as planner, owner, veto-holder, or rescuer, it does not make firms stronger. It makes capitalism weaker. Spirit Airlines did not need Washington to buy it. It needed Washington to let capitalism work.

The notion that artificial intelligence at full bloom might eliminate the need for money reflects a deep confusion about what money is and does. Money is not merely a barter-avoiding convenience layered onto an otherwise frictionless world. It is a solution to fundamental problems of exchange, profound difficulties in coordination, and comparison of alternatives under scarcity. Even in a hypothetical future defined by extraordinary productivity gains and broadly collapsing prices, those underlying problems do not disappear. Instead they change form, and for as long as scarcity, tradeoffs, and uncertainty persist in any domain, so too will the need for money.

To begin with the most basic point: scarcity is not abolished by abundance. It is displaced. AI may dramatically reduce the cost of producing many goods and services, particularly those that are digital or easily replicable. But large swaths of economic life remain governed by constraints vastly beyond the power of computation. Land is fixed. Location is inherently scarce. Prime real estate in places like New York City or Tokyo will not become abundant simply because construction costs fall precipitously. The same holds for proximity to infrastructure, culture, or social networks. These are rival, excludable goods, and in such conditions, exchange requires a mechanism for allocating access. Money remains the most efficient one yet developed.

Time is another irreducible constraint. Human attention, especially in its highest-value forms, cannot and will not scale infinitely. The time of a skilled surgeon, an experienced trial lawyer, or a sought-after performer remains finite, tentative, and rivalrous. Even if AI were to augment their capabilities, it does not eliminate the fact that their attention must be allocated among competing uses. The same applies to live experiences: concerts, events, one-on-one advisory relationships, and so on, where presence itself is scarce. In such contexts, prices are not a relic — they are a reflection of incontrovertible limitations.

In fact, abundance often amplifies the importance of scarcity. As mass-produced goods become ever cheaper, a premium will shift toward what cannot be easily replicated. Consider status goods, fixed positional assets, and signals of taste. Luxury brands, rare collectibles, and authenticated works derive value precisely from their limited supply and provenance. If AI floods the world with high-quality substitutes, the value of the original or source item may increase, not decrease. Money, in this sense, becomes a way of expressing relative preference over increasingly differentiated manifestations of scarcity.

Physical systems themselves impose limits. Energy, for example, may become cheaper on average, but it inexorably faces capacity constraints, especially during peak demand periods. The same is true of certain materials, bandwidth, and computational resources in periods of congestion. Even highly advanced systems must allocate finite capacity across competing uses, and money prices remain an extraordinarily efficient, indeed elegant, way of doing so. Without them, the hallmarks of rationing — queues, quotas, and administrative fiat — appear, none of which eliminate, but rather contend with and obscure, scarcity.

The unavoidable force of uncertainty is perhaps the most decisive argument against the obsolescence of money. Risk does not vanish amid colossal gains in productivity and output; if anything, complex, tightly coupled systems generate new forms of it. An explosion of goods and services will tax resources, time, and human capital, which will in turn generate new forms of insurance, hedging, and credit to transfer and price risk. Those functions require not just a medium of exchange, but a unit of account to operate effectively. The idea that AI could eliminate uncertainty is as implausible as the idea that it could eliminate time. 

Institutional realities reinforce the former point. Anywhere one finds government or governance, excludability inevitably follows. Property rights, regulatory approvals, access to bespoke networks, and enforcement mechanisms all create domains in which access is controlled. Money is readily suited to become (or, in fact, continue to be) the means by which access is negotiated, transferred, or prioritized. In a world inundated by output, trust and verification become more valuable. Certification, auditing, and reputation systems all rely on mechanisms of exchange that presuppose some form of monetary unit.

Money also plays a central role in coordinating urgency and priority. When resources are scarce in time versus in quantity (faster service, guaranteed delivery, dedicated capacity) money allows individuals to signal how much they value immediacy relative to others. Absent money such decisions do not disappear; they are made through other, often less transparent means.

An AI-driven deflationary boom would likely compress the prices of many goods and services. Perhaps dramatically so. But that would not, and could not, eliminate the need for money. It would shift the domain in which prices and calculations operate toward the non-replicable, capacity-limited, and institutionally governed. 

Money does not disappear in the face of abundance; it instead follows scarcity wherever it emerges.