​In episode 78 of This Week's Economy, I discuss the need for improvements in patient care, property tax burdens, taxpayer giveaways, protectionism, federal spending, and overfunding public education. Get the show notes at vanceginn.substack.com.

​Join me for Episode 114 of the Let People Prosper Show with John Hendrickson as we discuss the importance of the U.S. Constitution, debate over trade protectionism, outline the pro-growth policies in Iowa, and consider the pros and cons of the “New Right.” He is the Policy Director for Iowans for Tax Relief Foundation.

Subscribe, share, and rate the Let People Prosper Show, and visit vanceginn.com for more insights and vanceginn.substack.com for show notes.

Originally published at Mackinac Center. 

​There is no such thing as price gouging. During crises, we see price signals that help allocate scarce resources to those who need them most.

But some Michigan lawmakers are proposing new laws to prevent "price gouging" during emergencies, an approach that misinterprets how markets work. Suppressing these signals, as the proposed laws intend, will result in shortages and ultimately harm consumers.

For example, after the March 2017 windstorm that left many Michigan residents without power, hotel prices surged from $59 to $400 per night. Critics called this gouging, but the price increase wasn’t about greed — it ensured that limited hotel rooms went to those who urgently needed them rather than being snapped up by people with less immediate needs. Higher prices, in this case, helped ensure resources were available for those who needed them most.

In times of crisis — a hurricane, blizzard, or pandemic — demand for certain goods and services soars while supplies become constrained. In a functioning market, prices rise to reflect these changes. This serves two key purposes. First, it encourages consumers to buy only what they truly need, preventing hoarding. Second, it motivates businesses to increase the quantity supplied, so shortages are only temporary. These price signals are essential in ensuring that goods flow where they are most needed.

The proposed legislation in Michigan, such as SB 954 and SB 955, would cap price increases at 10% during emergencies. While this might sound like a consumer protection measure, it sets the stage for greater problems. Price caps prevent businesses from responding effectively to surges in demand. If prices are kept artificially low, consumers have no reason to limit their purchases, which leads to empty shelves and shortages. The result is that the people most in need may be left without essential goods.

Moreover, these price caps discourage businesses from entering the market. When prices rise, new suppliers are incentivized to meet the demand. But if businesses know that prices are capped, they may decide it’s not worth the effort or cost to increase supply during a crisis. This means fewer goods are available, harming consumers.

Critics often argue that businesses raise prices unfairly during emergencies to exploit consumers. While prices may rise, this doesn’t mean businesses are being greedy. Temporary price hikes are often a natural response to increased costs. Even if a business temporarily becomes the sole supplier of a product, new competitors will eventually enter the market, bringing prices back down. Markets correct themselves quickly when competition is allowed to flourish.

We saw this dynamic play out during the COVID-19 pandemic. Demand for products like hand sanitizer and masks surged, but price controls prevented the market from adjusting. As a result, stores ran out of stock because prices couldn’t rise enough to reflect higher demand. If prices had been allowed to increase, this would have signaled to producers to ramp up production and encouraged new suppliers to enter the market.

But will these proposed laws matter if a company can demonstrate that its costs increase to produce or deliver a good during an emergency? No. The laws create a mechanism where government officials can investigate and second-guess their price and cost increases after the fact and punish the company for perceived abuses. Not many companies will look at Michigan in a temporary crisis and try to find solutions for Michigan residents if they’re going to get dragged through the mud and penalized for their good deeds.

Price caps also limit vulnerable consumers' access to goods. Wealthier or quicker buyers often purchase large quantities when prices are held artificially low, leaving fewer resources for those without. In contrast, when prices rise, consumers think more carefully about what they need, ensuring that goods are more widely available for everyone.

Michigan’s proposed price-gouging laws are based on a misunderstanding of how markets work. Price signals are essential in balancing supply and demand, especially during emergencies. Instead of capping prices, which will only create shortages and inefficiencies, Michigan should trust the market to function effectively. When prices rise during a crisis, they help allocate goods to those who need them most, encourage conservation, and motivate suppliers to increase production.

Price increases during an emergency are a rational marketplace response to changing conditions. By allowing higher prices, Michigan can ensure that goods are available during emergencies as businesses are incentivized to meet demand. Price signals matter for bringing goods to the people who need them. Making them illegal will harm consumers.

​I joined Don Ma on NTD News to discuss whether the Fed should cut interest rates. Don’t miss it!

Originally published at Texans for Fiscal Responsibility. ​

The State of Texas is pouring unprecedented amounts of taxpayer money into public education with little to show for it. 

From the 2014-15 school year, to the 2022-23 school year, total education spending surged 53% to $92.4 billion, while per-student spending jumped 45% to $16,792. That’s far above inflation’s 28.6% increase. Yet, 76% of 8th graders are below proficiency in math, and 75% in reading.

Clearly, more funding hasn’t improved results for Texas children.  

The problem isn’t underfunding, but overfunding and inefficiency in Texas’s government-run, monopoly education system. There’s no competition or incentive to improve outcomes. 

Universal Education Savings Accounts (ESAs) provide a real solution. 

ESAs let parents direct state education dollars (their tax dollars) to the school or educational service of their choice – public, private, homeschooling, or other options. This competition would force all schools to improve, driving innovation, lower prices, and better outcomes.

Allocating about $12,000 per student through ESAs would reduce the total cost of education from $92.4 billion for 5.5 million students to $75.6 billion for 6.3 million school-age children, saving taxpayers at least $16.8 billion. 

If we focus solely on operational expenditures, ESAs could drop to $12,389 per student for the same spending, or less for savings. The savings should be used to reduce school district property taxes and school debt, further relieving taxpayers. 

Twelve states, including Arizona and Florida, already have universal or near-universal ESAs with positive results. Texas should follow suit.

Governor Greg Abbott has an historic opportunity to lead this charge. Universal ESAs would empower parents, improve educational outcomes, and save billions of taxpayer dollars. 
​
It’s time to stop overfunding a broken system. Universal ESAs are the key to transforming education in Texas. Governor Abbott should keep pushing hard for universal school choice and ESA school finance in the next legislative session and lead Texas toward a brighter future.

​In episode 78 of This Week's Economy, I discuss the presidential debate, elevated inflation, overspending on public education, high housing prices, and much more while noting how pro-growth policies are needed to let people prosper. You can find the show notes at vanceginn.substack.com.

Originally published at AIER. ​

Tariffs, often promoted as a tool to protect American jobs and industries, are a hidden tax that disproportionately burdens consumers and producers alike. Both the Trump and Biden administrations have embraced these protectionist policies, and future administrations may likely do the same. But these policies do more harm than good, undermining the very people they are designed to protect.

Recently, protectionist policies have been championed by the Trump-Pence administration, continued by the Biden-Harris administration, and likely doubled down upon by Trump-Vance or Harris-Walz. Tariffs may seem like a good way to shield domestic industries from foreign competition by making imports more expensive, but the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are inevitably passed down to the consumer. When the federal government imposes tariffs, it raises the prices of goods that many American businesses rely on, leading to higher costs. This isn’t just an abstract economic concept — it affects every American who buys a car, electronics, groceries, or other everyday items.

In 2023, the US imported over $3.8 trillion of goods and services while exporting $3.05 trillion. This nearly $7 trillion in trade volume highlights how imports and exports play a role in the US economy, supporting millions of American jobs, but is a relatively small share of the $27.3 trillion economy. While the US ran a current account deficit as imports exceeded exports by $773.4 billion in 2023, this amount doesn’t tell the whole story. 

For instance, the US had significant trade surpluses with regions like South and Central America ($54.9 billion) and countries like the Netherlands ($43.7 billion) and Hong Kong ($23.6 billion). Conversely, it recorded deficits with China ($279.4 billion), the European Union ($208.2 billion), and Mexico ($152.4 billion). Notably, while substantial, trade with China represents only 8.4 percent of the total US international trade volume, even as it accounts for 36 percent of the current account deficit. This deficit and the total trade deficit are met with a capital account surplus, with funds flowing into the US, including investments that help finance the national debt, support lower interest rates, and support capital to businesses.

International trade provides mutually beneficial exchanges between people in different countries, supporting peace and prosperity.

The Real Economic Impact of Tariffs
Proponents of tariffs often argue they are necessary to rebuild America’s manufacturing sector, but the problem isn’t foreign competition — it’s at home. US manufacturers’ core issues stem from excessive government spending, high taxes, inflated minimum wages, overregulation, and a lack of right-to-work laws. Instead of addressing these root causes, tariffs exacerbate the problems by acting as an additional tax on American businesses and consumers.

When tariffs are imposed, the costs of imported goods rise. These goods are finished products, raw materials, and components that American producers rely on in their supply chains. This increased cost of production ripples through the economy, making American goods more expensive both domestically and internationally and hurting US businesses’ ability to compete.

Take, for example, the tariffs on steel, which were implemented to protect US steel producers. While they may have helped some steel manufacturers, they raised costs for industries that depend on steel, such as the automotive and construction sectors. These industries were forced to pass on these costs to consumers, making American-made goods more expensive and less competitive. Rather than revitalizing manufacturing, these tariffs hinder growth, slow job creation, and harm consumers.

Moreover, tariffs fail to address the real reasons behind the loss of manufacturing jobs. Automation and technological advances have displaced many jobs, allowing US manufacturing output to reach record highs with fewer workers. The Rust Belt’s loss of manufacturing jobs is less about foreign competition and more about the evolving nature of the global economy, tariffs do nothing to solve these domestic challenges.

When tariffs increase, they tax what we purchase from other countries. This tax directly affects producers and consumers who rely on foreign goods. The process reduces the demand for foreign currencies to purchase foreign goods while raising demand for the dollar, especially when the federal government runs deficits that result in higher interest rates. This results in an appreciated dollar by roughly the size of the tariff itself. This currency appreciation helps keep the cost of the taxed goods from rising too quickly, but it simultaneously disrupts the supply chain and other factors of production. As the dollar appreciates, US exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the goal of balancing or reducing the trade deficit with the targeted country or others.

Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This creates direct costs and increases economic and political uncertainty — something businesses dread when planning for the future. Although tariffs don’t directly cause inflation — an issue controlled by the Federal Reserve’s monetary policy — they raise prices on specific goods through the added tax. These increased costs can ripple through the supply chain, affecting many products. International trade is complex, and protectionist measures like tariffs only exacerbate the complexities, worsening the situation.

The current account deficit with other countries is balanced by a capital account surplus, where foreign savings flow into the US, helping finance our national debt and keeping interest rates lower than they would otherwise be. However, the flow of funds is slowing as some countries shift away from the US dollar, opting for gold and other assets. This trend poses a risk to the US economy by potentially restricting our ability to trade with other countries and raising the cost of borrowing as interest rates rise. This shift from the dollar, known as de-dollarization, underscores the importance of maintaining strong international trade relationships and avoiding protectionist policies alienating trading partners. As global confidence in the US dollar wanes, the economic benefits of foreign investment could diminish, leading to higher costs for Americans.

Tariffs Worsen Broader Problems at Home
As noted above, the broader economic problems facing the US stem from high taxes, overregulation, and government policies that make it more expensive for businesses to operate. Tariffs worsen these problems by raising costs for American businesses and consumers. By taxing imports, tariffs increase the prices of goods that US producers need to remain competitive. This adds to the burdens already imposed by high taxes and government mandates, effectively taxing Americans twice — once through tariffs and again through the costs of domestic overregulation.

Rather than addressing the domestic policy environment that has hindered US competitiveness for decades, tariffs only complicate matters. US companies struggle with excessively high corporate taxes, incentivizing them to move operations overseas. Before the Tax Cuts and Jobs Act of 2017, the US had the highest corporate tax rate in the developed world. While the Act lowered the federal corporate tax rate to 21 percent, proposals to raise it to 28 percent would once again make US companies less competitive globally.

Like Texas, right-to-work states in the South have demonstrated how pro-growth policies can attract manufacturing jobs by creating a business-friendly environment. These states have attracted jobs lost from the Rust Belt by fostering lower taxes and fewer regulations. On the other hand, tariffs stifle economic growth by driving up costs, making it harder for these states to sustain their competitive advantage.

In sum, tariffs don’t solve American businesses’ real issues — they make them worse. Instead of protectionist measures, the US needs to focus on reducing domestic costs by lowering taxes, cutting red tape, and fostering an environment that encourages innovation and growth.

Protectionism: A Failed Policy
The economic data between 2016 and 2021 highlight the failure of protectionist policies, including raising tariffs that began in 2017. 

Consider that global manufacturing output was $14.1 trillion in 2016, with China leading at $4 trillion and the US following at $2.3 trillion. In 2021, it rose to $16 trillion, with China’s part increasing to $4.9 trillion and the US’s to $2.5 trillion. Global manufacturing output grew by 13.5 percent. While China’s manufacturing surged by 22.5 percent, the US had a more modest increase of 8.7 percent. Of course, this period had significant initial and retaliatory tariffs between these countries and lockdowns in response to a global pandemic.

Since 2017, the Trump and Biden administrations have imposed $79 billion in tariffs as part of protectionist policies meant to shield domestic industries. Despite these efforts, global manufacturing continued to grow, and the economic pie expanded — but China captured a larger slice, increasing its share from 28.3 percent to 30 percent. The US trade deficit with China continued to widen, undermining the asserted goal of protectionism. Meanwhile, US manufacturers struggle with higher production costs, passed down to American consumers through increased prices on specific goods.

The Case for Free Trade
The US should abandon protectionism and embrace free trade policies that foster innovation, improve efficiency, and lower costs for consumers and businesses. When countries engage in free trade, all parties benefit from the specialization of labor and resources. Protectionist measures like tariffs distort markets, raise costs, and create uncertainty, hurting American consumers and producers.

Free trade doesn’t mean ignoring unfair trade practices by bad actors like China. However, the best way to address these challenges is not through blanket tariffs but by expanding trade with allies and non-hostile nations. For example, the Trans-Pacific Partnership (TPP) offered an opportunity to strengthen economic ties with 12 countries, pressuring China to play by the rules or risk losing access to major markets. Unfortunately, withdrawing from the TPP in 2017 was a missed opportunity to enhance American competitiveness while holding China accountable.

Conclusion
Tariffs are not the right tool to address the challenges facing American industries. They are a tax on imports, raising costs for consumers and producers while failing to tackle the real issues at home: excessive government spending, high taxes, overregulation, and outdated domestic policies hinder US competitiveness. By embracing free-market solutions — eliminating tariffs, reducing spending, reforming taxes, and cutting regulations — the US can create an environment where American businesses can thrive without relying on harmful protectionist measures. The path forward lies in pro-growth free trade efforts — unilaterally or through agreements with other countries — and domestic reforms, not in tariffs that hurt those they aim to protect.

Originally published at Pelican Institute. 

​Louisiana’s economy, deeply reliant on global trade, faces unique challenges under the weight of federal tariffs. As recent protectionist policies continue to gain traction, Louisiana finds itself vulnerable to the unintended consequences of these measures, which often do more harm than good. While these tariffs are marketed to protect American industries, they act as a hidden tax that burdens consumers and producers, ultimately stifling economic growth and prosperity.

At first glance, tariffs might seem like a tool to bolster domestic industries by making imported goods more expensive and less competitive. However, the reality is starkly different. Tariffs are taxes on imports; like all taxes, the costs are passed down to consumers and businesses. When the federal government imposes tariffs, it raises the prices of goods that Louisiana’s industries rely on, leading to higher production costs. This isn’t just an abstract economic concept—it affects every Louisianan who buys a car, electronics, or even groceries.

Louisiana’s Trade Profile

In 2023, Louisiana exported over $122 billion worth of goods, making it the 3rd largest exporter among U.S. states. The state’s top exports included liquefied natural gas (LNG) at $22.2 billion, light petroleum distillates at $16.3 billion, and soybeans at $14.4 billion. These exports underscore Louisiana’s significant role in global energy and agricultural markets. On the import side, Louisiana purchased $38.2 billion of goods from foreign countries, ranking as the 24th largest importer among U.S. states. The top imports included petroleum oils ($5.78 billion), light petroleum distillates ($4.63 billion), and copper cathodes ($1.31 billion). This robust trade activity highlights imports’ critical role in supporting Louisiana’s industries, particularly in energy production and manufacturing.

Despite this impressive trade performance, Louisiana faces a substantial trade deficit driven by the high volume of imports relative to exports. The state’s reliance on imported petroleum and other raw materials exposes it to the direct impact of federal tariffs, which increase the cost of these essential goods. While a trade deficit is often considered a detriment to an economy, these imports are important to the production process and consumers who desire the goods. What’s more important is that the total trade volume in Louisiana is $160 billion with other countries to satisfy the needs and wants of Louisianans. Recall that people trade, not countries or states, so they trade only when both parties mutually benefit.

The Economics Behind Tariffs

When tariffs increase, they tax the goods Louisiana imports, impacting both producers and consumers who depend on these foreign products. This tax reduces demand for foreign currencies while increasing demand for the U.S. dollar, especially when federal deficits drive interest rates higher. This dynamic results in an appreciated dollar, which, while keeping the cost of taxed goods from rising too quickly, also disrupts supply chains and other production factors.

As the dollar appreciates, U.S. exports become more expensive for foreign buyers, leading to fewer exports and more imports. This dynamic undermines the questionable goal of balancing or reducing the trade deficit with the targeted country or others. Moreover, foreign countries often respond with retaliatory tariffs, raising costs for their producers and consumers while driving a wedge between trade relationships. This scenario is particularly detrimental to Louisiana, where trade is crucial to the state’s economic health.

Although tariffs don’t directly cause inflation—an issue controlled by the Federal Reserve’s monetary policy—they raise prices on specific goods through the added tax. These increased costs ripple through the supply chain, affecting many products. As highlighted by the Tax Foundation, tariffs can also reduce economic output, lower wages, and lead to job losses in affected industries, further illustrating the negative impacts of such policies.

Navigating Federal Uncertainty with Fiscal Conservatism

Given the federal uncertainty and the complexities of international trade, Louisiana must focus on improving its competitiveness to navigate these challenges effectively. The state should consider pro-growth policies of spending less, cutting taxes, and supporting a workforce for careers that align education and training programs with the needs of key industries. This will help Louisiana develop a skilled workforce that attracts businesses and supports existing industries. A well-trained workforce is critical to maintaining the state’s competitive edge, which will be helped by the recent passage of the LA GATOR Scholarship Program to empower parents with school choice.

Another vital step is reducing regulatory burdens at the state level. By streamlining regulations, Louisiana can offset some of the negative impacts of federal tariffs, fostering a more business-friendly environment that encourages investment and job creation. Moreover, promoting Louisiana’s status as a right-to-work state helps maintain its competitive advantage. The flexibility offered by right-to-work laws is attractive to businesses, particularly those looking for a more favorable labor environment. Diversifying trade relationships is also essential. While trade with major economies like China is significant, Louisiana must continue to expand its exports to other regions and countries. By doing so, the state can reduce reliance on any single market, mitigating the risks associated with global trade tensions.

Conclusion

Tariffs, while intended to protect American industries, ultimately function as a tax that harms consumers and producers. For Louisiana, where the economy is deeply integrated with global trade, the negative effects of tariffs are particularly severe. Louisiana must embrace fiscal conservatism, improve competitiveness, and address the real domestic issues hindering growth to secure the state’s economic future. By doing so, Louisiana can ensure that its industries remain competitive, its economy is resilient, and its citizens are prosperous in a global economy.

Originally published at Texans for Fiscal Responsibility. 

​Texas at the Crossroads: Sustaining Leadership Amid New Challenges

Texas has long been at the forefront of job creation in the U.S., consistently outpacing other states, particularly since the COVID lockdowns. However, recent data from the Bureau of Labor Statistics (BLS) signal that even Texas, a state known for its economic resilience, is not immune to broader economic challenges. In June and July 2024, Texas experienced back-to-back job losses, with a decrease of 9,100 jobs in June before Hurricane Beryl and another 14,500 in July in the month it hit, raising the unemployment rate to 4.1%. 

These figures reflect a critical moment for Texas, where reaffirming its commitment to pro-growth policies is essential.

Texas vs. Other Major States: A Comparative Analysis

Despite these setbacks, red-state Texas remains a powerhouse but faces stiff competition from other states, particularly the other large red-state Florida, where 21,800 jobs were added in July, demonstrating the strength of its pro-growth policies. While the blue states of California and New York often struggle with robust job creation under high taxes and burdensome regulations, they gained 21,100 and 41,400 jobs, respectively, in July. Florida boasts a year-over-year job growth rate of 2.4% compared with Texas’ 1.9% and blue states of California’s 1.6% and New York’s 2.0%. 

Texas and Florida have led the nation in job creation since the COVID lockdowns, a testament to the power of low taxes, limited government, and a business-friendly environment. However, Texas’ recent job losses, particularly in the private sector, indicate that it cannot afford to be complacent. The state must double down on the principles that made it successful and push forward with bold reforms to maintain its edge.

The Path Forward: Policy Recommendations

Cut Government Spending: The Texas Legislature’s recent 32% increase in appropriations of state funds, the largest in the state’s history, is unsustainable. Texas must prioritize cutting government spending in the next session, targeting wasteful programs and agencies. Implementing universal school choice through education savings accounts could replace the existing school finance formulas, reducing the burden on taxpayers while empowering parents and improving educational outcomes.
Revamp the Tax System: The growing dissatisfaction with property taxes in Texas signals the need for a significant overhaul. Transitioning to a more efficient tax system by capping government spending and using surpluses to phase out property taxes by state and local governments over the next decade is a bold but necessary step. This shift would relieve taxpayers and bolster economic growth by removing one of the most significant barriers to investment and homeownership.
Reinforce Limited Government: Texas must recommit to the principles of limited government. Reducing regulatory burdens and tightening state and local government spending are crucial. Strengthening constitutional and statutory spending limits, aligned with the taxpayers’ ability to pay, will ensure fiscal responsibility and long-term economic stability.
Maintaining Leadership in a Competitive Landscape

Texas has been a beacon of economic freedom, fostering an environment where businesses and individuals can thrive. However, the state must innovate and adapt to remain at the forefront of job creation and economic growth. By strengthening its pro-growth policies, cutting unnecessary government spending, and revamping its tax system, Texas can maintain and enhance its position as an economic powerhouse.

As other states accelerate their economic reforms, Texas must lead by example. The comparison with states like Florida underscores the importance of aggressive, pro-growth strategies. While states like California and New York continue to falter under progressive policies, Texas has the opportunity—and the responsibility—to champion policies that ensure prosperity and freedom for its citizens. 

The path is clear: Texas must reject progressive fiscal policies and instead embrace reforms that promote growth, safeguard economic freedom, and provide a bulwark against the economic challenges of our times.

​Join me for Episode 113 of the Let People Prosper Show with Stacy Blakeley, who is CEO of The Policy Circle, as we discuss her policy work to advance women in their careers with more economic freedom, which also advances men’s careers.

Subscribe, share, and rate the Let People Prosper Show, and visit vanceginn.com for more insights.