I hope you enjoy the 31st “This Week’s Economy” episode! Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours. I would appreciate it if you would also rate and review my podcast!

Today, I cover:

• National: Economic uncertainty from dysfunction in Congress: home sales slide to the slowest since 2010, and Fed Chairman Jerome Powell indicates extended pause in interest rate hikes (click on graphic below to watch my interview on Fox Business)
  
• States: Texas continues to debate passing Universal School Choice, and data on California and New York's spending shows that increased state spending: does not necessarily decrease poverty or improve schools, and;
  

• Other: Recap of last week's excellent podcast with guest Ben Murrey from Independence Institute discussing the importance of maintaining Colorado's Taxpayer's Bill of Rights; and a sneak peek of my upcoming podcast episode with special guest Texas State Representative Brian Harrison.
  

​A year after the Supreme Court struck down President Biden’s student loan forgiveness plan, he presented a new scheme to the Department of Education on Tuesday. While it is less aggressive than the prior plan, this proposal would cost hundreds of billions of taxpayer dollars, doing more harm than good. 

As the legendary economist Milton Friedman noted, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” 

Higher education in America is costly, and this “forgiveness” would make it worse. 

Signing up for potentially life-long student loans at a young age is too normalized. At the same time, not enough borrowers can secure jobs that offer adequate financial support to pay off these massive loans upon graduation or leaving college. These issues demand serious attention. But “erasing” student loans, as well-intentioned as it may be, is not the panacea Americans have been led to believe.

Upon closer examination, the President’s forgiveness plan creates winners and losers, ultimately benefiting higher-income earners the most. In reality, this plan amounts to wealth redistribution. To quote another top economist, Thomas Sowell described this clearly: “There are no solutions, only trade-offs.” 

Forgiving student loans is not the end of the road but the beginning of a trade-off for a rising federal fiscal crisis and soaring college tuition. 

When the federal government uses taxpayer funds to give student loans, it charges an interest rate to account for the cost of the loan. To say that all borrowers no longer have to pay would mean taxpayers lose along with those who pay for it and those who have been paying or have paid off their student loans.

According to the Committee for a Responsible Federal Budget, student debt forgiveness could cost at least $360 billion. 
Let’s consider that there will be 168 million tax returns filed this year. A simple calculation suggests that student loan forgiveness could add around $2,000 yearly in taxes per taxpayer, based on the CRFB’s central estimate. 

Clearly, nothing is free, and the burden of student loan forgiveness will be shifted to taxpayers.

One notable feature of this plan is that forgiveness is unavailable to individuals earning over $125,000 annually. In practice, this means that six-figure earners could have their debts partially paid off by lower-income tax filers who might not have even pursued higher education. This skewed allocation of resources is a sharp departure from progressive policy.
Data show that half of Americans are already frustrated with “Bidenomics.” 

Inflation remains high, affordable housing is a distant dream, and wages fail to keep up with soaring inflation. Introducing the potential of an additional $2,000 annual tax burden at least for those already struggling, mainly to subsidize high-income earners, adds insult to injury.

Furthermore, it’s vital to recognize that the burden of unpaid student loans should not fall on low-income earners or Americans who did not attend college. Incentives play a crucial role in influencing markets. 

By removing the incentive for student loan borrowers to repay their debts, we may encourage more individuals to pursue higher education and accumulate debt without the intention of paying it back. After all, why would they when it can be written off through higher taxes for everyone?

The ripple effect of this plan could be far-reaching. 

It may make college more accessible for some, opening the floodgates for students and the need for universities to expand and hire more staff, leading to even higher college tuition. This perverse incentive will set a precedent that will create a cycle of soaring tuition, which would counteract the original goal of making higher education more affordable.

While the intention behind President Biden’s student loan forgiveness may appear noble (in likelihood, it is a rent-seeking move), the results may prove detrimental to our nation’s economic stability and fairness. And if the debt is monetized, more inflation will result.

Forgiving student loans will exacerbate existing problems, with the brunt of the burden falling on lower-income Americans. Instead of improving the situation, it will likely create an intricate web of financial consequences, indirectly affecting the very people it aims to help. But that is the result of most government programs with good intentions.

Originally published at Econlib. 

Check out the highlights from my recent segment on Fox Business.

Former Office of Management and Budget chief economist Vance Ginn and Slatestone Wealth chief market strategist Kenny Polcari analyze how the Middle East conflict and House speaker standstill impact markets.

Full segment on Fox Business here. 

​Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours.
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You can find direct links to follow my work at the buttons at the end of this post. I would appreciate it if you would also rate and review my podcast!

​Ben (bio) and I discuss:

• What he learned about the transactional nature of relationships on Capitol Hill during his seven years working in D.C. alongside U.S. Sen. Ted Cruz (R-TX).
  
• What Republicans can learn from Democrats about collaborating together for the greater good.
  
• How Colorado's Proposition HH is on the ballot now would reduce tax refunds, further weaken the Taxpayer's Bill of Rights (TABOR), and do little to reduce property taxes.
  
• Why legislators should instead pass Sustainable Colorado Budgets and use surpluses to reduce and eliminate total income taxes.
  

​Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours.

You can find direct links to follow my work at the buttons at the end of this post. I would appreciate it if you would also rate and review my podcast!

​Today, I cover:

• National: The unfortunate human and economic costs of the Hamas-Israel war, Republicans nominate new US House speaker, latest CPI report shows that inflation remains high:
  • And will until the Fed cuts its balance sheet and Congress spends less, and real average weekly earnings decline:
• States: Texas began a special session this week in efforts to tackle School Choice, vaccine mandates by businesses, and border security, and the Legislature is considering a large education funding increase which should be rejected and just pass Universal School Choice
  
• Other: I appreciated the opportunity to speak as a keynote speaker at East Texans for Liberty meeting. Please reach out to me if you’d like for me to speak at your event.
  • Don't miss my other latest outreach efforts with an interview on the Cato Daily Podcast, new commentary published by American Institute for Economic Research on Hong Kong's declining economic freedom, and recent essay at Online Library of Liberty on what Homer taught us about the perils of big government.

​Highlights

• We need more free-market capitalism in America, which is the best way to let people prosper.
• Big government policies in D.C. have resulted in a dire economic situation for Americans.
• Find out how and what to do about it in this economic brief.

​Overview

• Government failures drove the “shutdown recession” and the stagflationary period over the last few years that has plagued Americans, with more inflationary and recessionary problems coming.
• To overcome these government failures, there should be pro-growth policies of less spending by Congress, less regulation by the Biden administration, and less money printing by the Fed.

Labor Market
​The Bureau of Labor Statistics recently released its U.S. jobs report for April 2023, which was another mixed report with some strengths but many weaknesses.

• The establishment survey is the most reported. It shows there were +336,000 net nonfarm jobs added in August to 156.9 million employees, which has increased by +3.2 million over the last year and +4.5 million since February 2020. However, there continue to be large revisions for previous months as the data used for seasonal adjustments are from the last few years when there was substantial volatility in the labor market. Over the last month, there were +263,000 jobs added in the private sector and +70,000 jobs added in the government sector. Most of the private sector jobs were added in the sectors of leisure and hospitality (+96,000) and private education and health services (+70,000), which are low-paid jobs and dominated by government-related jobs. But both information and transportation and warehousing have lost jobs over the last year. There is also a concern with more part-time jobs and not as much of an increase in full-time jobs.
• The household survey increased by just +86,000 jobs in August to 161.6 million employed. There have been declines in net employment in three of the last 12 months for a total increase of +2.7 million since October 2022 and +2.8 million since February 2020, which is well below the jobs added in the establishment survey for many reasons. The official U3 unemployment rate remained at 3.8%, and the broader U6 underutilization rate declined to 7.0%. Since February 2020, the prime-age (25-54 years old) employment-population ratio is up by 0.3-percentage point to 80.8%, the prime-age labor force participation rate was 0.5-percentage at 83.5%, and the total labor-force participation rate was 0.5-percentage-point lower at 62.8% with millions of people out of the labor force holding the U3 rate artificially low.

Economic Growth
The U.S. Bureau of Economic Analysis recently released the third estimate for economic output for Q2:2023.

• Table 1 provides data over time for real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment.

​The latest indicator of this concern is U.S. real GDP was revised lower to just a 2.1% increase last quarter. Moreover, previous quarters were revised lower and there continue to be indications of a recession in early 2022 from two consecutive quarters of declining economic activity and relatively weak thereafter. Another measure of economic activity is the real average of GDP and GDI which accounts for domestic production and income. It increased by just 1.4% to $22.1 trillion. This important measure has declined in half of the last six quarters, increasing this value by only 1.2% since the first quarter of 2022, which is likely when the recession started.
​
Meanwhile, the federal budget deficit is growing faster because of overspending and declining tax collections from a weak economy (See Figure 2). The national debt has ballooned to $33.5 trillion, and net interest payments on the debt will soon be a top federal expenditure of at least $1 trillion. Adding to these fiscal challenges are other large, unnecessary expenditures of taxpayer money.

​The Fed has monetized, or printed, much of the new debt to keep interest rates artificially lower than where the market would have them. This created higher inflation as there was too much money chasing too few goods and services. And this has been exacerbated as production has been overregulated and overtaxed and workers have been given too many handouts. The Fed will need to cut its balance sheet (total assets over time) more aggressively if it is to stop manipulating markets (see this for types of assets on its balance sheet) and persistently tame inflation.
​
The current annual inflation rate of the consumer price index (CPI) has been cooling since a peak of +9.1% in June 2022 but remains elevated at 3.7% in September 2023, which remains too high as are other key measures of inflation. Just as inflation is always and everywhere a monetary phenomenon, deficits and taxes are always and everywhere a spending problem. David Boaz at Cato Institute has noted how this problem is from both Republicans and Democrats (See Figure 3).

​In order to get control of this fiscal crisis which is contributing to a monetary crisis, the U.S. needs a fiscal rule like the Responsible American Budget (RAB) with a maximum spending limit based on the rate of population growth plus inflation. This was recently released as part of Americans for Tax Reform’s Sustainable Budget Project. If Congress had followed this approach from 2003 to 2022, Figure 4 shows tax receipts, spending, and spending adjusted for only population growth plus chained-CPI inflation. Instead of an (updated) $19.0 trillion national debt increase, there could have been only a $500 billion debt increase for a $18.5 trillion swing in a positive direction that would have substantially reduced the cost of this debt to Americans. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2023 “Blueprint to Save America.” And to top this off, the Federal Reserve should follow a monetary rule so that the costly discretion stops creating booms and busts.

​Bottom Line
​The stagflationary destruction will continue given the “zombie economy” and the unraveling of the banking sector which will hit main street hard. Instead of passing massive spending bills, the path forward should include pro-growth policies that shrink government rather than big-government, progressive policies. It’s time for a limited government with sound fiscal and monetary policy that provides more opportunities for people to work and have more paths out of poverty.

Recommendations:

• Set a pro-growth policy path with less spending, regulating, and taxing at all levels of government, which includes return-to-work policies.

• Reject new spending packages that America cannot afford nor needs; pass the RAB instead.
• Impose a strict monetary rule with the Fed having a much smaller balance sheet and a much higher federal funds rate target until we End the Fed.

This was originally posted at Texans for Fiscal Responsibility. 

​Today, I'm joined on episode 65 of the "Let People Prosper Show" by Alexandra (Lexi) Hudson, writer, speaker, and founder of Civic Renaissance. 

​Lexi (bio) and I discuss:

• Why respecting human dignity is paramount for civil societies and how America has gotten away from it;
  
• How to show genuine respect and tolerance in our politically correct culture and the importance of honoring public discourse; and
  
• The perils of "tone policing" and more principles for living civilly are detailed in her new book, "The Soul of Civility."
  
• Don’t miss her no-charge online summit on 10/9!
  

Please subscribe to my work on your favorite platform, follow me on social media, share my work, and like or leave a 5-star rating to help me spread this message to the masses!

Originally published at Texans for Fiscal Responsibility.

​Texas Gov. Greg Abbott (R) is again promoting what could be universal school choice during the third special session in Texas that starts on Oct. 9th. That would be among the best actions Texas can make, the other being eliminating property taxes. 

School choice expert Corey DeAngelis recently noted, “Education funding is meant for educating children, not for protecting a particular institution. It’s time for Texas to fund students, not systems.”

In the Texas Legislature’s regular session this year, several school choice bills were proposed, but all died. State Sen. Brandon Creighton (R-Conroe) had the best case for education savings accounts (ESA) in Senate Bill 8, and it passed the Senate with an 18-13 vote. But it died in the House Public Education Committee, where other school choice bills have died in previous sessions. 

Creighton’s proposal sought to establish an ESA program, the gold standard for school choice already adopted by ten states. 

ESAs provide parents with funds for each child, which can be used for various approved education-related and approved expenses. These expenses include traditional public schools, private school tuition, homeschooling materials, tutoring services, and more. They aren’t the derogatory word of “vouchers” thrown around by anti-school choice folks. Vouchers move funds from a government school to another school. 

ESAs, on the other hand, provide funds to parents for them to use for their kids, which is why they have been determined to work well within our constitutional system and provide accountability by parents on how they use the funds. This market-based, limited-government approach provides a productive path to achieving the goal of improving student outcomes at the least cost to taxpayers.

But naysayers in the education system and supposed religious freedom advocacy groups are raising the alarm against school choice.

Clay Robinson, spokesperson of the Texas Parent Teacher Association, recently asserted, “The more money you have to spend on private schools, the less you have to spend on public schools,” echoing a widely-held concern among rural voters. These arguments, however, are based on misleading premises. 

In reality, government schools wouldn’t have less spending on it unless parents chose to send their kids elsewhere because those schools didn’t meet their kids’ unique needs. This should be a concern for government school proponents, but this isn’t something that they want to address. Instead, proponents just want more funding for a flawed monopoly system. More funding should be rejected, as there is more being spent on government schools in Texas than ever before with dire outcomes.

And rural school districts and their advocates who have long been the barrier to getting school choice passed have nothing to worry about. If there aren’t any other options for students, then they will continue to attend government schools. But I wonder if they know that, when there is competition in the marketplace, other options pop up meeting the demand; which would be a great outcome for families and teachers.

ESAs can address a pressing issue of quality teachers. Texas teacher salaries are reported to lag behind the national average, which doesn’t account for the lower cost of living in Texas compared with many other states. 

However, this could contribute to a teacher shortage statewide, along with other concerns by teachers of the problems at government schools, including a large increase in funding to administrators rather than teachers. Only about 20% of every dollar going to the classroom goes to the teacher, so government schools should correct this failure before receiving any additional funding. 

The current government-run monopoly schooling system isn’t helping educators even as the system has received at least 16% in inflation-adjusted spending per student since 2002. 

Teachers in many states where government schools hold a monopoly have little to no negotiating power as they are stuck in the state’s pay schedule based on tenure and other limited factors. Moreover, lower-income families often find themselves trapped within government-run schools determined by district lines. And all of this is at a huge cost to taxpayers, threatening people of losing their homes from exorbitant property taxes, and declining student outcomes.

ESAs, while not a silver bullet, substantially expand educational options, directing tax dollars to parents to do what’s best for their kids rather than to a bureaucratic, failing schooling system.

States that have embraced universal school choice with ESAs are fostering competitive education markets, driving innovation, and achieving notable improvements in educational outcomes. Parents gain the power to choose the best educational options for their children, while teachers benefit from more professional opportunities and negotiating power.

So, is the current government school system truly the best option for Texas? The answer will become apparent if we implement universal school choice for all children. Otherwise, the Lone Star State risks falling behind other states prioritizing educational freedom and student achievement.

America’s system of free-market federalism, when allowed to function, reveals what works and what fails, resulting in a more prosperous society over time. Education deserves the same opportunities for experimentation and innovation. 

School choice has the potential to break the government-run schooling monopoly that stifles innovation and keeps costs high with declining outcomes. Equal funding to parents, who are taxpayers, for their kids, can reveal which schooling options truly earn parental support, thereby incentivizing educators and administrators to innovate and provide our children with the education they deserve.

As the third special legislative session starts, the Texas Legislature must prioritize responsible stewardship of taxpayer funds and embrace the transformative potential of universal school choice. It’s time for Texas to lead the way, empowering parents, nurturing educational freedom, and ensuring our children have the brightest possible future. Anything less would be a disappointment, and worse, a tragedy for the future of the bright young minds of tomorrow.

​Thank you for listening to the 29th episode of "This Week's Economy," where I briefly recap and share my insights on key economic and policy news.

​Today, I cover:

1) National: No government shut down as Congress passes a continuing resolution budget, House Speaker Kevin McCarthy kicked out with a new speaker to be voted in next Wednesday, presidential candidate Nikki Haley bashes excessive government spending and signs Taxpayer Protection Pledge as all candidates should, and latest jobs report reveals overall weakness;

2) States: Americans for Tax Reform released its Sustainable Budget Project for states that I helped author and Texas will have another special legislative session this Monday to discuss passing Universal School Choice; and

3) Other: My latest op-eds, including one published by The Wall Street Journal with Grover Norquist on the national and state spending problems, and another published by The Daily Caller on why the FTC suing Amazon over antitrust concerns is a waste of time and taxpayer dollars.

Please subscribe to my work on your favorite platform, follow me on social media, share my work, and like or leave a 5-star rating to help me spread this message to the masses!

In the tapestry of human history, one recurring thread stands out – the need for limited power in leadership. 

As far back as the 7th century B.C., Homer explored this theme with remarkable insight in his timeless epic, "The Iliad." In modern-day America, where today’s leaders often assume too much power, Homer's lessons about the imperfections of inflated authority offer valuable insights. Recognizing the perils of excessive control, he creatively described what could be key to combating pressing issues today.

In "The Iliad," the gods of ancient Greece held dominion over justice and politics, not wholly unlike today's political leaders. Yet, Homer masterfully portrayed the limitations and imperfections of these gods, revealing that even the mightiest beings are not immune to human-like foibles.

These divine beings often acted out of self-interest. They were susceptible to basing actions on desires or petty grievances, making them appear more human than celestial. For instance, Zeus, the king of the gods, is reluctant to help the Trojans because of his disapproving wife, Hera, who strongly favors the Greeks. Zeus acts to maintain harmony, which is seen in Book IV of "The Iliad," when he contemplates helping the Trojans in battle but ultimately refrains from directly interfering. His hesitation reflects his complex role as the ruler of the gods, the upholder of fate, and his desire to manage the divine politics within Mount Olympus.

When not hoping to maintain marital harmony as Zeus did, the other gods often behaved out of concern for personal honor, which was highly valued in ancient Greece. The discord between Agamemnon and Achilles exemplifies this theme. 

As the leader of the Achaean forces, Agamemnon believed he deserved the highest prize, Briseis, and was willing to oppress Achilles, a crucial warrior in the Trojan battle, to claim her. Achilles, in turn, prioritized his claim to Briseis over aiding the war efforts. Both placed their honor and pursuit of what they believed was rightfully owed to them above the collective well-being, jeopardizing the battle’s victory.

In one instance, Apollo admitted that his intervention wasn't driven by compassion for the Trojans but by a desire to protect his favored hero, Hector. This acknowledgment underscores the willingness of the gods to manipulate events for personal gain as opposed to the greater good.

The parallel between the gods of "The Iliad" and contemporary leadership is their susceptibility to act in self-interest. While the gods may seem all-powerful, their actions often reveal a profound concern for their agendas and favored heroes.

Although not as strong a principle today, personal honor preservation reveals itself in modern leaders through rent-seeking behavior. We see elected officials sometimes prioritize their agendas, party interests, or re-election prospects over the welfare of their nations and citizens. Just as Zeus was more concerned with appeasing influential people, politicians may succumb to surrounding pressure, foregoing long-term goals of improving the country.  

Today's America faces numerous challenges, from mounting national debts to housing affordability, inflation, and stagnant wages. These issues often stem from government overreach and misguided policies, reminiscent of the interference of the gods in "The Iliad." It is crucial to recognize that unchecked government power can lead to a loss of personal liberties and economic prosperity.

In contemplating the lessons from Homer's "The Iliad," we discover that unchecked power carries inherent risks, whether in the hands of gods or modern leaders. Pursuing self-interest, personal glory, and re-election can overshadow the well-being of nations, leaving citizens to bear the consequences of misguided decisions. We must limit government power, embrace free markets, and prioritize the greater good derived from individual gain to mitigate these risks.

As the characters in Homer's epic grappled with the consequences of self-interested gods, we, too, must seek to promote paths that seek to empower the people and limit the government as our forefathers intended. 

By doing so, we can create a world where the lessons of "The Iliad" guide us toward better governance and a brighter future. In heeding these ancient warnings, we can navigate the complexities of contemporary leadership and secure a more prosperous future for all.​​

Originally published by Online Library of Liberty's Banned Books series.