In August 1969, President Richard Nixon called Christopher DeMuth into his office for a new assignment. DeMuth, a recent Harvard graduate, had been working for Daniel Moynihan and had introduced Moynihan to Nixon. The meeting’s ostensible purpose was to begin assembling the 1970 State of the Union address. But Nixon had something else on his mind.

“Chris,” declared Nixon, “I think that in the 1970s, the nature of domestic politics in America is going to change.” American politics, Nixon continued, had been dominated by traditional economic questions, such as bargaining between businesses and labor unions. But Nixon anticipated that quality of life concerns were going to become more important. And Nixon predicted that environmental policy was about to become a major political issue. DeMuth remembered being baffled. “I majored in government at Harvard,” he told me in an interview earlier this month. “I was a pretty sophisticated person. But I didn’t know what he was talking about.”

Nixon’s conversation with DeMuth set in motion the events that led to the creation of the Environmental Protection Agency in 1970. Its creation was bipartisan. Senator Barry Goldwater supported Nixon’s initiative, and that same year, Governor Ronald Reagan signed the California Environmental Quality Act, modeled on federal legislation Nixon had signed. But the honeymoon period didn’t last long. For many conservatives, the creation of the EPA is now one of the blackest of black marks against the Nixon administration. It was an expansion of federal powers that bulldozed limited government, an engine of economically destructive regulations, and an unconstitutional delegation of power.

Conservative criticisms of the EPA are not wrong. But the agency isn’t going anywhere. As in many other areas of policy today, the real challenge is how best to take advantage of a situation in which the structure of the federal government veers wildly from the rails laid down by the Constitution. It’s only possible to pursue sound environmental policy once we understand the shape of our political environment. With this in mind, it’s essential to understand the political circumstances that led to the creation of EPA, and how Nixon perceived it could protect the quality of American life.

The Long Great Society

The EPA emerged from the political conditions set by Nixon’s predecessors. From the early 1960s onwards, the most important change to the American state came from what political scientist Matt Grossmann calls the “long Great Society:” the networks of politicians, policy analysts, academics, foundations, and community organizations that collaborated to expand the scope and responsibilities of the federal government. The most effective politicians leveraged these networks—and were in turn leveraged by them—to pass landmark legislation. Civil rights legislation represents an obvious example, but these networks also collaborated to meet the demands of the burgeoning environmental movement.

In 1962, Rachel Carson published Silent Spring. The book galvanized 14,000 academics and other managerial professionals—the long Great Society’s battalions—to focus on environmental protection. Senator Ed Muskie, dubbed “Mr. Clean,” became the political figurehead. Muskie was a consummate progressive as well as a talented manager of legislative projects. From 1963 to 1969, he shepherded five pieces of environmental legislation through Congress.

These bills helped consolidate a new definition of American federalism. The federal government didn’t need to run all of environmental policy, but it would deputize the states to perform certain tasks, providing federal funds and grants to the states for air control and water treatment programs. Federal enforcement and oversight over environmental questions were exercised across a variety of different departments. The Department of the Interior was responsible for water quality, the FDA for toxic foods, and the Department of Agriculture for pesticides.

Nixon sympathized with many of these initiatives. DeMuth told me that Nixon “had this idea of a moderate, everyday environmentalism. It wasn’t anti-capitalist or anti-growth or a stalking horse for greater government control of the economy. He just thought that air and water pollution had gotten seriously out of hand and become a legitimate, important public issue.” Nixon also brought the concerns of a mid-twentieth century Californian conservationist to the White House. Nixon had grown up appreciating public nature parks, but as a poor Californian, he lamented that there were few public parks available that families of modest means could visit and enjoy.

It also annoyed Nixon that the Johnson administration had enjoyed making grand announcements about opening new federal parks but avoided actually funding them, mainly to preserve the illusion that continuing the Vietnam War and the Great Society were within America’s means. In Nixon, Americans had a moderate environmentalist as president who wanted to fix these and other funding issues—in early working groups, DeMuth noted that the EPA was called the EFA, the “Environmental Financing Agency,” on the basis that its main purpose would be to invest in cleaning up nature.

There was a lot of cleaning up to do. In 1969, 40% of public water systems in the U.S. failed to meet basic health standards. “Most days” in August of 1969 in Washington D.C., DeMuth told me, “the horizon would have been brown, dark brown.” Falling in the Potomac River meant a trip to the hospital because the water was so filthy. One study at the time noted serious air pollution in 212 metropolitan areas with over 50,000 people. Smog events in New York City and elsewhere contributed to excess deaths. The Cuyahoga River Fire in Ohio was one of several flareups in the late 1960s that captured public attention, and in January 1969 came the Santa Barbara oil spill, just after Nixon took office.

Still, DeMuth was right to be surprised by Nixon’s predictions of an imminent environmental movement. A private White House poll from 1969 indicated that only 1% of the public thought that the environment was the most important issue facing the new president. But if that changed—as Nixon anticipated it would—then he would have little say on the future of environmental policy. With progressives firmly in control of Congress, and with the engine of the long Great Society mobilizing congressmen for more environmental regulation, an organized mass movement would force the president to yield to them. Moreover, Congress had granted Nixon a limited time to reorganize Cabinet agencies. Nixon had a narrow window in which to try and reshape the political environment to the advantage of the president, which, if handled well, would ensure that the executive branch could steer environmental policy. The solution, formally sketched out in the Ash Commission, was to embrace the “administrative presidency.” This would centralize the executive branch into agencies that could be run by appointees who were loyal to the president and could be easily supervised by him, and would use existing statutory discretion as the basis for administrative action rather than campaign for further legislation.

Nixon ordered DeMuth to spearhead an interagency task force designed to organize environmental regulations into a single agency. He provided two instructions. The first was to avoid Muskie—he “will go too far,” said Nixon. “He’ll come up with a bill that would close down American industry. I will not do that.” The second was to exclude the Secretary of Commerce, Maurice Stans, from the task force. “If Maury hears what we’re up to, he’s going to have all his businessman pals all over the West Wing here, all over the White House, and we’re never going to get anything done because they’re going to hate what we’re going to come up with,” Nixon warned. But if business lobbyists or the secretary directed their wrath at DeMuth, Nixon would intervene. “He looked me right in the eye,” Demuth recalled, and said “‘Chris, I will protect you.’ Which he did.”

As far as winning the battle of public opinion, the EPA was a success. A few months after Nixon gave DeMuth his marching orders, Nixon’s intuitions were vindicated. Environmentalism blossomed into a mass movement. Activists organized the first Earth Day, scheduled for April 22, 1970; timed to coincide with university spring breaks, it drew 20 million Americans out to demonstrate. This initiative was cheered on across the political spectrum, and Nixon was ready to do his part. Shortly after Earth Day, he announced the creation of the EPA. It was operational by the end of the year.

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After Limited Government

The EPA was also an environmental success. It helped bring massive quality of life improvements to Americans. Lead was eliminated from car emissions, as well as sulfur dioxide, which was a key contributor to smog. From 1980-2024, the percentage of sulfur dioxide found in air quality measures has dropped by 95%. Air quality is exponentially better than it was in the 1960s, with demonstrable health benefits.

But as a strategy to contest a political environment defined by progressives, the EPA was a failure. New statutes followed in short succession—the 1970 Clean Air Act, the 1972 Pesticide Control Act, the 1972 Ocean Dumping Act, the 1972 Clean Water Act, and the 1973 Endangered Species Act. These removed much of presidential discretion. Nixon ended up in budgetary battles over how much funding environmental programs should receive, and lost those fights. His veto of the 1972 Clean Water Act failed, and his use of the impoundment authority to withhold funds was eventually struck down as a statutory violation in Train v. City of New York (1975). These were Nixon’s Aspern-Essling and Leipzig before the Waterloo of Watergate. Defeated by his enemies, Nixon’s envisioned administrative presidency never came to fruition.

Moreover, the statutes underwriting EPA authority marked a regulatory revolution that was more significant even than the New Deal. It’s common for conservatives to see the modern administrative state as one long outgrowth from Woodrow Wilson’s brain, but DeMuth makes a convincing case that this overrates the influence of ideas and underrates the effects of legal and institutional changes. What happened in the 1970s was of a different order than what happened in the 1930s. The 5-member New Deal agencies, such as the Securities and Exchange Commission, had narrow regulatory mandates. They operated as limited negotiations of corporate cartels, adjudicating claims, issuing licenses, and handling litigation. The statutes governing the EPA were strong enough to strip presidential funding discretion, especially when coupled with the 1974 Impoundment Act. But Congress delegated much of its own power to legislate to agencies.

So in 1972, it fell not to Congress but to the EPA to decide how to regulate the bane of Silent Spring, DDT. Congressmen didn’t have to be held accountable for the decision. Those who supported the prohibitions on DDT in the United States could cheer on the EPA and secure the applause of environmental activists; those who did not support it could protest, securing applause from agribusiness. The EPA was the capstone of the long Great Society’s political revolution, bringing Congress to its present pitiful state. Congressional activity became theater, as Congressmen preferred to perform for sure rewards from established constituencies rather than enact controversial decisions themselves. In the meantime, the often-arbitrary decisions of administrative agencies are shielded from legislative scrutiny and bad rules get entrenched. The 1970s saw the explosion of new regulations across American life.

It’s for this reason that movement conservatives treat the Environmental Protection Agency as Exhibit A of the catastrophic growth of the administrative state, an engine for economically destructive regulations that defies the precepts of constitutional government. They’re right. Not only is such sweeping delegation at odds with Article I, the EPA’s vast regulatory purview cuts deep into the affairs of the states. It makes a mockery of Article I section I of the constitution and punctures James Madison’s promise that the powers the Constitution delegates to the federal government “are few and defined…exercised principally on external objects” such as war and peace.

But there’s no pathway to abolish the EPA. Nor does the proposal to turn the EPA into a 5-member New Deal-style bipartisan commission—officially in the 2016 Republican platform and intended to slow down a progressive president attempting to control the agency—stand any chance of getting through Congress. Moreover, this proposal harkens back to a vanished political environment. It was the product of a defensive mindset that aims to cordon off the damage the EPA can do rather than to think proactively about sensible environmental policy. Instead of dreaming up structures to limit the EPA’s power that will never pass legislative muster, it’s time to develop fresh strategies to take advantage of the post-2016 political environment.

In the past decade, the Supreme Court has removed key obstacles that stood in the way of the operation of the unitary executive. These changes make it easier to run the administrative presidency that Nixon was denied and to deploy the resources of the EPA effectively. In this new political environment, what would a sensible environmental policy look like?

A Quality-of-Life Agenda

We are living in the end times of the climate change apocalypse. In the 2024 election, only 36% of Democrats ranked climate change as “extremely important,” along with a mere 5% of Republicans. Growing indifference to climate alarmism is even clearer in exit polls from battleground states in 2024, which show that only 2% of voters ranked “climate change and the environment” as the most important issue. As in the White House private polls of 1969, voters do not regard the environment as the most important issue facing the president. While the Democratic Party elites would undoubtedly revert to zeroing out carbon emissions were they to regain power, they won’t campaign on it.

But the waning of climate alarmism should not be mistaken for public indifference to environmental issues. Nixon’s political intuition of 1969 remains correct: voters prioritize the same quality of life issues that resonate with the older conservationist movement. This kind of conservationism—maintaining public parks and natural spaces, expecting visiting foreigners to contribute to this maintenance, protecting farmland, securing hunting and fishing rights integral to maintaining a healthy ecosystem—have become right-coded issues. The MAHA movement’s interest in removing endocrine disruptors in the water supply mirrors the 1960s concern with the effects of DDT on humans.

The present controversy around data centers also shows that the concerns of Americans today align with those of the early environmental movement, not that preoccupied by eliminating CO2. Popular opposition to data centers is often characterized as fear of AI taking jobs. But according to May 2026 polling, most opposition is tied to environmental and quality of life concerns. 50% of people who are opposed to data centers in their area cite its effects on natural resources (such as water) as their main reason for opposition, 22% raise quality-of-life concerns, and another 16% are concerned about pollution. By comparison, 15% cite higher utility bills as the reason for opposition. Other polls (albeit industry-aligned ones) suggest that the opinion on data centers shifts when voters are reassured that those centers recycle water and do not affect clean water supply in the area.

Chris Barnard, the president of the American Conservation Coalition, has proposed letting tech companies build on contaminated Brownfield and Superfund sites in exchange for them cleaning up the land. In July, the Trump administration issued an executive order on data centers, which also directed the EPA to identify Brownfield Sites and Superfund Sites that could be used to build such projects. Those sites would need to be cleaned up, but the tech companies could pay the bill for it. To secure a stable legal environment, Congress would need to follow up on these executive orders by extending Good Samaritan liability protections to companies taking charge of the cleanup. This would ensure they are not sued for pollution they did not create.

The EPA also has the tools to place restrictions on potentially harmful substances and endocrine disruptors in the water, such as atrazine, glyphosate, PFAS, and surplus estrogen. And the agency can also make it easier for local and state authorities to practice sensible forest management. More national and state parks exist since Nixon’s childhood. But massive wildfires—brought about by many state governments effectively outlawing the controlled burns that prevent the buildup of flammable underbrush—have ravaged these parks, rendering many of them unusable each season. One such legislative initiative presently under deliberation in the Senate, the Fix Our Forests Act, makes it easier for the EPA to collaborate with local authorities and approve prescribed burns.

Conservatives should pursue deregulation where appropriate. Removing inept environmental regulations that block reindustrialization should be a priority, as well as those that hinder oil and gas development and nuclear energy development. The Trump administration is exactly right to turn to a hitherto seldom-used provision of the 1970 Clean Air Act. Section 112 grants a facility a two-year exemption from following standards for national security purposes. This should be used extensively in energy and manufacturing, then to reconstruct strategic sectors, such as commercial shipbuilding. And conservatives should take advantage of the rare moments where they control the presidency and both houses of Congress to ban via the Congressional Review Act the zero-emissions standards that Californian progressives have tried to impose on the whole country.

But deregulation isn’t enough. The American public’s spurning of “climate emergency” chatter is a breath of fresh air. It provides a generational opportunity to chart a new course on environmental policy. We can still muse over how to get the structure of the federal government back on its constitutional rails. In the meantime, the train is running on a new track. The structure of the administrative presidency provides the EPA with the tools to enact a conservation agenda that demonstrates how reindustrialization is compatible with protecting natural spaces and human flourishing.

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In his speech to the European Parliament yesterday, the Canadian prime minister acknowledged that “sovereignty and openness are now difficult to reconcile,” but also argued that “deepening and widening our relationship will strengthen our sovereignty.” This seems… undertheorized. The Wall Street Journal’s overview of the bizarre gambit captures its incoherence well:

“Wouldn’t it be lovely if Canada was the 28th state of the European Union rather than the 51st state of the United States?” asked Finnish President Alexander Stubb, who speaks regularly with Carney.

I have been sympathetic to Canadian complaints that President Trump’s constant efforts to insult their country are inappropriate and unhelpful. At the same time, Carney’s determination to elevate himself to some anti-Trump hero of the globalist pearl-clutchers is at this point obviously causing far more harm to our northern friends.

• As the Financial Times, which rather better understands the EU, reports on consecutive days: EU capitals rebuff Mark Carney’s ‘unique alliance’ with Canada and Why Mark Carney’s romance with Europe can only go so far.

• Canada also faces the awkward problem that 70% of its exports go to the United States and only 6% go to the EU, notes Peter Harrell. And it’s unclear what Canada could hope to gain anyway, notes Nicholas Phillips. For instance, “there’s nothing to gain on competitiveness: regulatory alignment can only go in one direction, toward the EU, which is a proven formula for economic stagnation.”

• And then there’s the question of who would ever look to the EU as a functional example of strengthened sovereignty through deeper and wider relationships. Its inability to address the China wave now crushing its own industrial base is a glaring weakness (and contrasts helpfully with the sort of robust confrontation the Trump administration is insisting on for USMCA).

Speaking of which: Imports of Chinese autos into Europe continue to skyrocket. The latest plan? EU asks China to voluntarily limit car exports (Financial Times). “Brussels is seeking a commitment from Beijing to restrict sales of China-made hybrid vehicles to about 15 per cent of the EU market compared with more than a third today.” Good luck. Meanwhile, in the real world, “President Xi has called for China to make its advanced manufacturing sector ‘bigger and stronger’ and strengthen control over ‌key industrial supply chains, official news agency Xinhua said Thursday” (Reuters). Oh, and Michael Pettis points out that “China has unveiled a sweeping five-year plan for its electronic information manufacturing sector, aiming to boost the industry’s annual revenue beyond 30 trillion yuan ($4.5 trillion) by 2030.” (For reference, the combined value of the entire global consumer electronics and semiconductor markets is today around $3 trillion.)

There is no economic future for Canada in a free-trade zone unable to protect itself from China, which will in turn mean its own goods will face increasingly robust exclusion from the American market. The longer it pretends otherwise, the less leverage it will have when it comes back to the USMCA table, and the funnier President Trump’s jokes will become.

In other USMCA news, U.S. Pressures Mexico to Box Out China’s AI Hardware Exports (Wall Street Journal). “Mexico and the U.S. are discussing the so-called rules of origin proposal as part of negotiations around revising the U.S.-Mexico-Canada Agreement… In addition to AI equipment, the U.S. could also propose rules to lower Chinese content and increase North American components for a litany of consumer products, such as medical equipment. While cars, auto parts and high-end computer chips are subject to tariffs from the Trump administration, more commonplace semiconductors used in the AI buildout can enter the U.S. largely tariff-free.”

Keeping Chinese supply chains out of North America is the core of the USMCA renegotiation and, further underscoring Canada’s strangely unreasonable position, Mexico seems perfectly comfortable going along with it. Peter Harrell has more on the importance of reworking rules of origin. I also wrote about this in the Financial Times last year: “A USMCA premised on balanced trade and the exclusion of non-market economies would represent a revolution in trade law and international relations”

GOOD, BAD, and UGLY READS FOR YOUR WEEKEND

Good: The Federal Government Subsidizes Professional Daycare. It’s Time To Fund The Family. (Leah Sargeant in The Daily Wire.)

Following nicely on last week’s discussion in TRE about the Day Care Dustup, Sargeant writes: “In 2022, Governor Spencer Cox of Utah petitioned the Biden administration for exactly this kind of flexibility. Cox cited surveys of Utah residents that found 81% of them preferred to have a child too young for school watched by a parent or guardian. Cox was frustrated that a program intended to help poor families rise made that help contingent on overriding their better judgment about their children’s needs.”

Bad: Republicans’ Familiar Fight Over Big Government (Matthew Continetti in the Wall Street Journal.)

Continetti’s framing of the day care debate is another reminder of why the Wall Street Journal’s editorial page has ceased to be a serious source of policy commentary: “Limited-government conservatives point out the potential cost of the program, its perverse incentives (that $9,000 vanishes as soon as dad gets a raise) and its reliance on social engineering.”

The potential cost of the program is… $0. There is no proposal to appropriate any additional funding.

The perverse incentives… already exist in the program, which, again, is not being expanded. The description of the perverse incentives is also incorrect. The $9,000 does not vanish as soon as dad gets a raise.

The social engineering is… reduced if the program becomes more neutral in its treatment of different family arrangements. Just imagine the counterfactual. If existing law made both family structures eligible and someone came along and said “we should provide subsidies only to people who put their children in paid day care,” would that be less social engineering?

Continetti quotes Doug Holtz-Eakin making the same mistake: “Who works or does not work; who takes care of a child; or who takes a child to childcare is the family’s business. It is certainly not the place of the federal government to put its thumb on the scale using taxpayer dollars.” Which policy puts a thumb on the scale—the one that makes eligibility dependent on who works or does not work and who takes care of a child, or the one that does not?

(And of course, note that these same conservatives are fine with “social engineering” and “who works or does not work” when the subject is work requirements. It’s hard to make sense of these objections, except as opposition to the idea of providing support to families raising kids. That’s an objection they’re entitled to have… but perhaps not an effective one. They seem awfully determined not to focus on it.)

Ugly: Worried About Your College Kid? Now You Can Hire a Local Mom. (New York Times). Submitted without comment:

“Sometimes people think that we’re coddling students,” Horwitz said, “and I just don’t think that anything could be further from the truth. … Horwitz, for her part, brings students balloons on their birthdays and chicken soup when they’re sick, sits with them in the emergency room and picks up their prescriptions if they’re busy. She bakes homemade challah, coordinates with the bedbug exterminator, texts photos and updates to faraway parents and doles out recommendations on the best local doctors and landlords.

HERE COMES XI

President Xi Jinping arrives in Washington next week for yet another summit with President Trump. On the agenda? Who knows. Will anything be accomplished? Probably not. And here’s hoping not. To quote the conclusion of my Financial Times column on the May summit: “The best plausible result is simply no deal, beyond efforts to smooth any decoupling that might proceed, giving the US time to come to its own terms with the irreconcilable differences of its great-power competitor. Only then can we hope to succeed in one of the decoupled spheres towards which the world now hurtles, whether we like it or not.”

Perhaps the biggest question on the table is how long the two sides will extend their “truth,” with the U.S. postponing its blacklisting of Chinese firms and China promising to keep supplying critical minerals (a promise it’s already not keeping). The shorter the truce the better, lest U.S. firms relax on getting alternative sources of critical minerals online as quickly as possible.

Discouragingly, President Trump continues to insist on floating the idea of having Chinese automakers set up plants in the United States. This week he told Fox News, “if China wanted to come in, and open a plant to build their cars here, I’d be okay with it — Japan does it — but they hire our people. The big thing is they hire our people, they use our people.” Encouragingly, his cabinet sees things differently.

• As noted last week, Transportation Secretary Sean Duffy has just sent an angry letter to Ford, warning it against “intertwining its future with Chinese state-backed enterprises” and choosing “to deepen operational dependencies on strategic competitors.” Those warnings would apply to welcoming Chinese manufacturers into the U.S. market.

• Earlier this year, Treasury Secretary Scott Bessent discussed the issue at a Semafor event:

Ben Smith: “There are people in China who would like to have one of the outcomes of these talks be some form of joint-venture, BYD factory setting up in the United States. Is that on the table?”

Scott Bessent: “I think we’re going to maybe end up with two boards, a board of trade and maybe a board of investment. I’m not sure — we have a 100% tariff on Chinese EVs, and there is a rule to do with autonomous-driving cars that they cannot have foreign components or Chinese components.”

Ben Smith: “Just to be clear, you don’t like the idea of a BYD factory in the US: American workers, Chinese investment?”

Scott Bessent: “There are things; I would think maybe the auto-industry isn’t one of them…”

While Ford pursues its China partnership, General Motors is working on developing its own batteries and supply chains:

“We’re developing a supply chain such that, two years from now, three years from now, it will be domestic,” Kurt Kelty, GM vice president of battery and sustainability, told CNBC during an exclusive interview. “That’s what we’re aiming for — when we get into market, we’ve got a domestic source for that.”

And blueberry grower Driscoll’s is getting its own lesson in what happens when you go to China. The Wall Street Journal tells the all-too-familiar tale:

About 15 years ago, executives from U.S. fruit grower Driscoll’s went to China with a goal of turning blueberries into that country’s next big food trend. The California company dispatched one of its experts to scout farmland in southwestern China’s Yunnan province, contracted with global blueberry-genetics firms to lock up the best varieties and brought in high-tech growing technologies to mass produce a fruit few Chinese people then ate. By 2020, it was cranking out thousands of tons of blueberries for Chinese supermarkets. Then it became the latest U.S. company to encounter the buzzsaw of Chinese competition.

As tales of blueberry fortunes spread, Chinese entrepreneurs rapidly built farms of their own. They adopted high-tech growing techniques similar to Driscoll’s, even allegedly copying greenhouse designs used by farmers growing for Driscoll’s. They also swiped the company’s patent-protected varieties, a Chinese court has ruled. State banks fed the rush, offering a special category of loans for blueberry growers.

Production in China has shot up 25-fold since 2010. In 2021, China overtook the U.S. as the world’s top blueberry grower, and by 2025 its annual production was double what it was in the U.S. For Chinese consumers, it was a blueberry bonanza. Prices dropped so low—often $3 or less for a 9-ounce container—that state media trumpeted an era of “blueberry freedom,” in which even ordinary people can gorge on a once-exotic fruit. For just about everyone in the blueberry business, though, it has been a knife fight, plagued by intellectual-property theft and tanking profits.

It’s OK, though. China may do that on a truly critical product like blueberries, but I’m sure they want Jensen Huang to succeed with advanced AI chips in their market for as long as possible.

But making Jensen look serious by comparison, China’s trade diplomats are complaining at the WTO that departing from its most-favored nation principles would lead to “power-based trade relations” and protectionism.

And a final item: Congress just passed the first new tariff authority since the 1970s, giving the president authority to level tariffs on importers of Russian oil and gas (Wall Street Journal). Guess who, per PunchBowl’s Andrew Desiderio, is the number one target? China.

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REPLACING CHINA

New data from the JPMorganChase Institute shows that small- and mid-sized firms have shifted their mix of spend from international to domestic payments since imposition of tariffs last year. One interesting question: to what extent does declining international spend reflect a tariff-induced shift toward domestic sources of supply, and to what extent does it reflect declining prices on imports as foreign sellers absorb part of the tariff cost? Presumably, the answer to some extent is “both.”

The industrial policy drumbeat proceeds apace.

Former Australian Prime Minister Scott Morrison writes in the Wall Street Journal that China Overplayed Its Hand on Critical Minerals:

The virtue of the Trump administration’s measures is that they can’t be easily reversed by China’s market manipulation. Floor price and durable offtake agreements boost resilience and provide guardrails for Western participants and tie in end users. These measures change the economics, enabling Western competitors to challenge China’s dominance. Counterintuitively, we have China to thank for it.

• Progress: Elmet Group wins $2 billion US tungsten stockpile contract (Reuters). The U.S. takes a particularly large equity stake of nearly 20%.

• Progress: US aims to issue deep-sea mining permits within months, Interior Secretary Burgum says (Reuters).

Though not progress everywhere. On the defense front, Pentagon Sees Strategic Inventory Munitions Shortfalls, IG Says (Bloomberg). And, the Iran war is raising doubts over Trump’s “America First” foreign investment goal (Peterson Institute). Pledges from Gulf states represented the majority of the investment commitments secured by the Trump administration in its first year. Enthusiasm and capacity for following through is, er, waning.

AI AND THE LABOR MARKET

Who wants to see a robot pick cherry tomatoes? That would replace “jobs Americans won’t do,” of course. Nonetheless, More U.S. Workers Fear Losing Their Jobs to Technology according to Gallup. The share has has risen substantially, to more than 25%, in the past year.

This is presumably about AI, and there the Center for State Labor Innovation had a very good piece by MIT’s Thomas Kochan on potential avenues for worker influence on AI deployment. This is a theme I emphasized in my recent New York Times essay, arguing:

As for the threat these models pose to the job market, greater worker power is the strongest defense. So long as management alone gets to choose the tools it deploys, it will always prefer those that decrease or eliminate the need for actual human employees, with all their tiresome expectations of living wages and basic respect and so on, or that at least minimize their autonomy and keep them closely monitored. But if workers must also approve the use of these models, that equation would flip on its head. Management would have to find approaches that make workers’ jobs better; A.I. companies would have to develop tools that they could expect workers to approve.

That essay also discussed legal liability for A.I. labs, which is now squarely on the front burner. I wrote:

Lawmakers at both the state and federal levels should make the developers and deployers of A.I. strictly liable for harms that they cause. Where so-called agentic A.I. is acting autonomously, it should be treated as an agent of whoever provides and whoever controls it, leaving them liable just as employers are for their employees, including criminally liable if the agents commit crimes. The concept of an “attractive nuisance” should also apply.

Andrew Ross Sorkin headlines today’s DealBook, The A.I. Industry’s New Worry: ‘Liability Exposure’. Yeah, no kidding. Sorkin focuses on tort liability if models run amok. That’s an obvious worry.

But the labs may already be on the hook for potentially trillions of dollars of liability, it seems to me, given the harm they are already causing. One good example is the damage to public education, where effects of the rampant cheating and cognitive offloading are undermining schools in ways that may make COVID look like child’s play. Look at what’s happening even at an elite and tech-capable university like MIT, which just published an in-depth report that Alex Veremeyenko summarizes:

Study groups are disappearing. Office hours are emptying out. Problem sets and take-home exams no longer prove anything, because AI can produce credible solutions to almost any written assignment in the undergraduate curriculum. Students who lean on chatbots lose mastery and confidence, and some slip into what the report calls cognitive surrender, reaching for AI at the first hint of struggle.

Meanwhile, the hacking capabilities of the models now being released are imposing enormous costs on all of the institutions across society that must upgrade their own tools and revise their own processes in response. Who should pay for that? So far, the labs are imposing far more cost on society than they are providing benefit. Future uses of the technology will hopefully provide benefits far in excess of costs, but that is no defense against the costs in the meantime. The labs need to proceed in a way that avoids those costs, or else expect that the first claim on that future wealth will go to those who are bearing them.

YOUR BAD TWEET OF THE WEEK

It would be too easy to just pick a David Sacks tweet every week, or a Jensen Huang quote every week, but seeing as we’re already talking about AI liability, and we have David Sacks quoting Jensen Huang, let’s take a moment to appreciate:

It’s not clear if Jensen and David are saying that robust tort liability solves for the market failure, or that there is no market failure and the profit-maximizing strategy is always to prioritize safety. The latter would be… untrue. The former might be true in theory, but it’s safe to assume that if anyone ever tries to hold these companies liable, the same tech leaders will be arguing that’s unfair. Tech leaders like David Sacks. Who rejects tort liability for Meta: “I think in the case of social networking, it’s much more unclear what the harms are and what the benefits are. And I think it’s much more subjective and it’s much more of a personal choice for adults and also for parents. … You said, the harms of this are immense and well known and understood. If that’s the case, then let’s just ban it for under 13 or under 16 or whatever it is.” So no tort liability, or if there would be tort liability then we need new laws and regulations.

It’s quite the shell game: oppose regulation because the market will fix it, or count on liability to fix the market; then when that doesn’t work, oppose the liability and say we should have regulated.

Enjoy the weekend!

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Further reading:

• “Reclaiming Environmental Policy from the Left,” Chris Barnard, Commonplace

• “Against Climate Piety,” Taylor Myers, Commonplace

• “What Does the Science of Climate Change Tell Us?,” Joseph Majkut, Commonplace

Editor’s Note: This is the third in a three-part series on how the Right should think about environmental and climate policy. Read Chris Barnard on Reclaiming Environmental Policy from the Left and Joseph Majkut on What the Science of Climate Change Really Tells Us.

What should we do about climate change? That question could alternatively be framed as one of two others: how should we limit rising global temperatures, or how should we protect the people and places a warmer world puts at risk? The first matters only as a means to the second. Yet for 30 years, mainstream climate policy has treated that means as an end in itself. Europe’s recent summer shows the cost of this confusion.

June and July 2026 were the hottest such period on record in Western Europe. Copernicus—the European Union’s climate service, not the sixteenth-century astronomer—puts the two months at 5 degrees Fahrenheit above the 1991–2020 average. While the tallies are still provisional, it seems that at least 35,000 excess deaths will be attributed to the heat. The deaths were primarily among the elderly, either alone in their homes or in care facilities. In Spain, 96% of the deaths were men and women over 65.

Of course, heat waves are not new, and they have always killed the old and the vulnerable. The New York heat wave of 1896 killed 1,500 people in ten days, more than the Great Chicago Fire, while a young police commissioner named Theodore Roosevelt handed out ice in the tenements.

But there are good reasons to expect more frequent and more extreme heat waves. Driven in significant part by rising atmospheric carbon dioxide, the average global surface temperature is now roughly 2.5 degrees Fahrenheit warmer than before industrialization. While that is not enough to raise the average temperature across most of the world to a dangerous point, it is a significant shift in the mean. And when the mean moves, the tail moves with it, so extreme temperatures that used to be rare become common.

The Intergovernmental Panel on Climate Change accordingly projected increases in hot extremes as “very likely” in 2007 and “virtually certain” in 2021. In March 2024, the European Environment Agency declared that “heat is the gravest and most urgent climate risk driver for human health” and predicted more deaths among “the elderly and people living in poorly built dwellings … or with inadequate access to cooling.” This summer, then, wasn’t a surprise.

What Money Can Buy

Europe cannot be accused of unwillingness to spend money on climate. Since 2007 the EU and its member states have committed on the order of two trillion euros to climate: €216 billion from the 2014–2020 EU budget, €658 billion from the 2021–2027 budget, plus roughly €700 billion in national subsidies to solar and wind, not to mention carbon prices, early nuclear and coal retirements, and fracking bans. Nearly all of this money went to what is called climate mitigation: the reduction of carbon emissions with the intention of slowing warming.

Emissions did fall. Between 1990 and 2024, the EU cut its total greenhouse gas emissions by more than a third, and its share of the world total fell from 15.1% to just 5.9%. But no one in Brussels ever thought the Green Deal would cool a European July, certainly not in our lifetimes. Run the EU’s original Paris pledge—a 40% cut by 2030, held for the rest of the century—through the standard climate model used in IPCC reports and the optimistic result is a 0.095 degrees Fahrenheit reduction in projected temperature rise by 2100, a quarter to a half of the year-to-year natural variability in the global average. In the shorter term the change is undetectable.

There was something that would have helped, however, and it is in 90% of American homes: air conditioning. In the United States, expected deaths from extreme heat fell about 75% over the twentieth century even as temperatures climbed. Residential air conditioning explains essentially the entire decline.

Across Europe, by contrast, air conditioning reaches only about 19% of homes. If European air conditioning coverage among the old had been raised from one household in five to nine in ten, it is likely around 60% of heat deaths, or about 21,000 of the 35,000 who died this summer, would have been prevented.

Installing all that AC would be expensive, but hardly impossible. To get a split unit installed in Europe costs around €1,000 to €1,500. The EU has 99 million people over 65 and nearly 28 million over 80. Installing a split unit in every household with a resident over 80, plus every care home, comes to roughly 14 million units and €15 to €20 billion. Covering every household with a resident over 65 would run €50 to €75 billion. That’s a lot of money, but it is only about one year of what Europe pays in subsidies to solar and wind.

Why didn’t Europe do it? Ask Europeans and most answer that the reason they haven’t bought an air conditioner is cost. Two decades of climate policy have driven electricity costs to as much as double or triple American levels, which makes running an air conditioner expensive. Other policy choices have added obstacles of their own. The EU’s F-gas regulation is phasing out the refrigerants used in the cheapest units. And running an AC unit through an August evening requires firm generating capacity, which Europe has spent the last 20 years retiring, largely in pursuit of its climate and anti-nuclear goals.

While many individuals might not have the resources to buy AC, Europe’s climate bureaucracy certainly does. An air conditioning program would have been a fraction of the cost of the overall climate program and far more effective. So why didn’t climate leadership pay?

The answer is that Europe’s governments, national and local, did not merely fail to buy air conditioners; they actively discouraged them as bad for the climate. In June 2024 ADEME, France’s environment agency, formally declared air conditioning a solution of last resort whose use should be limited as much as possible. At the peak of the heat waves in late June, the city of Ghent discouraged its citizens from using air conditioners to beat the heat, saying “the best air-conditioner is a tree” and suggesting anyone who was too hot should instead request a free tree to plant outside their house.

Seeing Like a Commission

How can we account for this? The same institutions that called heat the gravest and most urgent climate risk to human health, and that were willing to spend two trillion euros to mitigate this risk, were unwilling to spend, and in places openly hostile to spending, a fraction of that on a program that would have met the risk head-on.

Contrary to the conservative caricature, most climate bureaucrats are not radical “degrowth communists.” But they are bureaucrats. As the political scientist James C. Scott argued in Seeing Like a State, the logic of governmental control rests on perception: the unavoidable administrative propensity to favor a single legible measure over the tangled reality it stands for.

Scott’s paradigmatic example was eighteenth-century German scientific forestry, which reduced the forest to a single figure, the annual yield of commercial timber, and then rebuilt the forest to match it: old growth cleared, underbrush stripped. The first rotation was a triumph, and yields went up. The later rotations came in 20 to 30% below it, because the monoculture had stripped out the soil fungi and insect life the number could not see. Germans have a word for the worst cases: Waldsterben, forest death.

Global mean surface temperature is the most legible number ever devised: a single figure for the whole planet, reportable to the hundredth of a degree. But the number by itself doesn’t mean much. Press anyone who cares about climate change on why the number matters and within a sentence the subject has changed to heat deaths, flooded towns, dying reefs, or farmland turning to dust. Most people love people and places, animals and plants, and fear what a warmer climate might do to them. The temperature is just a proxy.

However much the rhetoric around climate change focuses on specific changes or outcomes, there’s only one number that the state apparatus can see and compare, so that number is what it manages. An air conditioner in a care home does nothing for that number, so by the only measure Brussels has, it is bad climate policy.

Call this fixation climate piety: the treating of temperature as the good itself rather than the proxy it is. Climate piety accepts harm to people and places so long as the temperature improves. Thus, a program that reduces the temperature while the people it was meant to protect die counts as a success, while one that saves them but raises temperature looks like surrender.

Europeans are easy to pick on from our 72-degree homes stateside, but they are not alone in this. The same error occurs wherever safety, conservation, or anything else we care about is subordinated to a carbon metric. Consider a case that brings us back to the forest. California worries that a warming, drying climate will worsen wildfires in the Sierra Nevada, which a century of fire suppression has left choked with small trees. Yet the same groups that call wildfire a climate emergency have sued to stop the Forest Service from thinning the Plumas National Forest—one of the few things that would meaningfully reduce fire risk—in part because thinning “would severely reduce forest carbon storage and increase carbon emissions into the atmosphere.” The German foresters at least had the excuse that their bill came due 80 years later.

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Energy Is Different

Such absurdities alone, however, are not sufficient to reject the effort to manage global temperatures. Scott’s critique is devastating to high-modernist claims of bureaucratic omnicompetence, but there are many areas where the benefits of large-scale governmental action offset the inevitable distortions.

The example best loved by many climate pietists is the Montreal Protocol, the 1987 treaty that set out to eliminate the chlorofluorocarbons eating the ozone layer. It worked: Global CFC production fell 99% and the ozone hole began to recover. Montreal is a triumph of technocratic capitalism, but it worked only because CFCs were a niche chemical and DuPont, the lead producer, had already identified possible substitutes it could sell instead. As a result, the public kept their refrigeration without any enforced scarcity or imposed reduction in the standard of living.

Greenhouse gases are a different beast entirely. According to the IPCC, stopping the global warming trend would require the world to get to net-zero global greenhouse gas emissions. Reversing it would require something beyond that. And about three-quarters of global greenhouse gas emissions come from energy use: burning coal, oil, and gas to make electricity, move goods and people, heat buildings, and run industry. To reduce global mean temperature in a meaningful way, you must first observe, measure, regulate, and rebuild the energy system of the entire world. There is no off-the-shelf alternative waiting in the wings—not wind, not solar, not geothermal, not hydro, not solid-state batteries, not biofuels, not even nuclear—that can be deployed at scale and on the timeline necessary to achieve net-zero emissions by 2050.

This is where EU-style climate policy meets its biggest problem: Energy is not one good among many but the thing people use to get everything else they care about.

Consider people first. The inverse relationship between energy and poverty is one of the best-demonstrated correlations in economics. Energy builds and powers the things that keep weather from killing you. A century ago, natural disasters killed hundreds of thousands of people in a typical year and millions in a bad one. Today they kill tens of thousands, and per capita death rates have declined by more than 90%. This is not because natural disasters have become rarer. It is because we became rich enough to build the things that keep us safe: buildings, roads, irrigation, air conditioning.

Our environment, the places and creatures we care about, is protected the same way. While early industrialization fouls everything it touches, the pattern eventually reverses because an energy-rich society can afford not to wreck the place. Economists call this the environmental Kuznets curve. Between 1970 and 2024, emissions of America’s six principal air pollutants fell 79% while GDP rose 338% and energy use rose by more than 40%. Lead has fallen 99% since 1990. And American rivers no longer catch fire. The relationship between man and nature after the industrial revolution has many complexities, but—with the greatest possible respect to Tolkien, Hopkins, and Wendell Berry—the persistent claim that economic and technological development leads to ecological collapse is false.

And once people have seen the safety energy buys, they will not be talked out of it. Robert Bryce calls this the iron law of electricity: “people, businesses, and countries will do whatever they have to do to get the electricity they need.” Put that law together with the record above and the standard mitigation plans fail twice over. A policy that works by making energy scarce or dear will be refused by anyone with the option of refusing, and thus cannot move the global total. Where scarcity is not refused, it raises the vulnerability of the very people and places it was meant to protect. Either failure alone would sink a program this ambitious. Mainstream climate policy has both.

Look at what the consensus program asks for instead. The IPCC’s pathways to holding warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) require “rapid and far-reaching transitions in energy, land, urban and infrastructure … and industrial systems” with “no documented historic precedent for their scale,” with virtually every scenario requiring less energy than the world would otherwise have used. And for what? By Bjørn Lomborg’s projections, every Paris pledge on earth, sustained for 75 years, yields a global average temperature just 0.31 degrees Fahrenheit cooler.

A Realist Climate Policy

If the global mitigation program offers only enforced scarcity in exchange for a fraction of a degree, what should a realist policy offer instead? For decades U.S. politics has oscillated between two positions.

The first judges the climate program ineffective and ruinous and concludes the science must be wrong, as if an absurd prescription discredited the diagnosis. There is plenty to argue about in climate science, but its core observations—that greenhouse gases increase radiative forcing and that global temperatures have risen—are very well demonstrated. The second accepts the evidence and concludes it must accept the program attached to it, with some trimming: Paris-style targets, carbon budgets, urgent forced scarcity. Conservatives who reject the first option generally prefer a less astringent version of the second, but the disagreements are about speed and regulatory mechanism, not ultimate goals, and sooner or later that version runs headlong into every peril of rebuilding the world’s energy system.

Both positions have accepted the premise of climate piety: that the temperature is the thing that matters. They differ only over whether it is moving.

The better approach is to reject the target, not the science. Thinkers on the New Right have already suggested as much in another context. A fixation on maximizing GDP turned out to be entirely compatible with hollowed-out towns, men leaving the workforce, the destruction of the family, and many other social ills. The useful response was to ask what GDP had been standing in for and whether those underlying goods were still being delivered. Global mean temperature is the GDP of climate policy, and requires the same treatment.

Subsidiarity is the old name for this cure. Authority belongs at the level competent to exercise it, because that is where the knowledge and the consequences sit together. The harms of a changing climate are always experienced intensely locally, as harms to a particular people or environment, and it is local and national leaders that are best positioned to identify and address them. A city that buys air conditioners for its care homes or a forest service that thins aggressively to reduce fire load will know within two summers whether its policy is working. A global Commission that buys a fraction of a degree in 2100 can never know anything.

This is not to say short-term fixes never create long-term problems; anyone who watches the national deficit knows that sometimes the choice is between a livable, self-imposed austerity now and a market-imposed catastrophe later. It’s possible that climate change poses such a risk. But whether it does or not, the pietists’ solutions are not only politically unachievable but self-defeating: for every good we actually care about—human wellbeing, environmental quality—the cure is worse than the disease.

Because projecting outcomes 75 years out is a fool’s errand, the most rational hedge against climate risk at the national scale is to seek to maximize energy abundance. Power is a near-universal adapter to problems in the material world. It is far more likely that an energy-rich society in 2100 will possess the industrial capacity to manage extreme weather, engineer carbon removal, or deploy energy systems we have not yet invented than that we will be able to enforce the scarcity current policies require.

It is no coincidence that neither of the two largest decarbonizations in American history was driven by climate policy. The first was the nuclear buildout that began in the 1960s, which was built on the promise of cheap baseload power. The second was natural gas displacing coal after the shale revolution. In the 2010s this transition did roughly twice as much for power-sector emissions as wind and solar combined. For both, carbon fell as a byproduct of cheaper power. American emissions now run more than a billion tons a year below their peak in the early 2000s—the largest absolute decline of any country—with no national carbon price and electricity at a third to a half the European price. And crucially, neither transition could have been predicted by a central planner decades earlier.

We should have policies for helping people live in a changing environment. And we should have policies that protect our environment from a shifting climate, just as we already protect air quality and waterways and fight habitat loss and invasive species. A climate policy that instead focuses on the single number of global mean temperature isn’t just a distraction; it is destructive of the very goods it was designed to protect. If that is what climate policy means, then we don’t need it.

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Editor’s Note: This is the second in a three-part series on how the Right should think about environmental and climate policy. Read Chris Barnard on Reclaiming Environmental Policy from the Left and Taylor Myers’s Against Climate Piety.

More than a decade ago, the world’s governments negotiated and signed the Paris Climate Agreement, committing to hold global warming well below 2 degrees Celsius. In the following years, climate had immense cultural power. Greta Thunberg emerged. Fortune 500 companies established net-zero plans. The U.S. got the Inflation Reduction Act.

Then the pendulum swung back. President Donald Trump returned to the Oval Office, speaking of green energy as a “scam” and carbon footprints as a “hoax” and on all matters of international policy emphasizing bilateral engagement and power over globalism and cooperation. The technology companies that had been at the forefront of net-zero pledges and green leadership discovered the importance of all-of-the-above power to their visions for artificial intelligence and began quietly postponing or removing their targets. On the left side of the political spectrum, rising concerns about inflation and cost pushed climate lower down in the stated priorities of voters and stump speeches of politicians.

The moment is ripe for a reset on the politics of climate change and for conservatives especially to chart a course that acknowledges and addresses the real challenges in plausible ways. So what should we think about climate change as we enter a post-peak climate era? If it is neither an apocalypse nor a hoax, what will hold up as a durable view of climate change? And how does it project onto the concerns and priorities of the right-of-center’s emerging coalition?

A Solid Foundation

As the politics and economics of climate careened over the past ten years, the physics carried on regardless. In 2015, the year the Paris Climate Agreement was adopted, the world emitted 41.2 gigatonnes of carbon dioxide. By 2025, emissions had risen only 2.4%, to 42.2 gigatonnes, because falling emissions from land use offset increasing emissions from fossil fuels. But slow growth in annual emissions is not rapid decline, let alone net-zero, so carbon dioxide kept accumulating in the atmosphere, going from 399 to 426 parts per million. Global temperature kept rising too, from about 1.1 degrees Celsius above the 1850–1900 average in 2015, to 1.4 degrees above it in 2025.

None of this should surprise anyone. Even most prominent skeptics, like the authors of the 2025 report commissioned by the Trump administration’s Department of Energy, accept the basic physics. Carbon dioxide added to the atmosphere at industrial volumes accumulates and traps heat that would otherwise escape to space. That heat warms the upper ocean and increases temperatures at the surface. Increased ocean heat and melting of land ice cause sea levels to rise. Changes in the climate become noticeable to us as subtle shifts in temperature and precipitation, seasons arriving early or late, changes in the surrounding ecosystem, and weather extremes.

The much more meaningful debate is not about whether these things are happening, but about what it all means for human societies. (While it is a proxy measure of overall risk, no one experiences global surface temperature.) This debate invokes at least three interesting questions: how much today’s warming is showing up in regional climate trends, how much more warming we should anticipate, and how extreme weather events can be understood in the context of climate change. Recent scientific advances give us new insights into each of these, but there is still much to learn.

This is the context in which the next generation of conservative leaders will be the first to deal with significant climate change as a fact, not a forecast. It will be with them for their entire careers. Our evolving scientific picture of climate change will come from weather and climate records stretching further into the past, new kinds of observations in the present, better modeling tools for the future, and simply more time to observe the emergence of climate signals and their tangible effects on ecosystems and communities in the United States and around the world. The policy landscape will be shaped by not only the impacts of changes in the climate, but also by the ways in which societies respond and by the emergence of new technologies for both altering the trajectory of emissions and adapting to new climate realities.

Global climate records now show the fingerprints of warming in different phenomena around much of the world. The IPCC, in its most recent assessment report, documents warming trends over all land regions, even as natural variability adds substantial variance to local trends. And the highest temperature extremes have become more intense and frequent, almost everywhere, since the 1950s. Scientists are highly confident that these changes are attributable to human influence.

But confidence in detecting trends and attributing them to human influence degrades across heavy precipitation events; drought trends are heterogeneous and not attributable to human activity with great confidence. For hurricanes, tornadoes, and other severe storms there is even less confidence in trends or their relationship to climate change.

In general, a fair summary of the evidence is that for well-observed phenomena, like surface temperature or heavy rainfall, with a clear relationship to warming, our multidecadal observations are consistent with human influence overcoming natural variability over long time periods and extremes increasing. For regions that are sampled more sparsely, or phenomena with a higher noise-to-signal ratio, we will need to observe them longer to understand the magnitude of the climate signal or improve dynamical understanding using models and observations together.

But for Climate

For those who can’t wait, we also have new techniques that attempt to understand the role climate change has in influencing particular extreme events. When the climate is changing and disaster strikes, it is natural to ask whether that disaster was somehow “caused” by climate change. For scientists and policymakers acting in good faith, answering that question helps develop a more accurate picture of the problem, how it may be getting worse, and what preparations we should be making to respond to it. It may, at some point, give some weight to how liability is assigned by courts or adaptation funding is distributed by society.

But how we ask this question is extremely important. It is easy to get the analysis wrong by discounting the role that meteorology plays. As meteorologist Theodore Shepherd explained in a clear 2016 review of climate attribution methods, “if a weather or climate event is truly extreme in the present climate, then perforce it requires unusual meteorological conditions, which means that climate change is at most a contributing factor.”

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Scientists have two ways to probe climate as a contributing factor, both of which have entered media coverage of extreme weather events. One asks a probabilistic question: How much more likely is a particular event (e.g., a temperature record over a particular area) amid global warming? The answer involves using historical records and computer simulations to estimate the likelihood of such an event in both a changed and a preindustrial climate.

The findings are less about the specific event, and more about events of that nature. The other question is: How has the changed climate affected the specific event in question? Here, scientists try to understand what a similar event would have looked like in the preindustrial climate. This is sometimes called the storyline approach, where the story is the specific meteorological details of the event.

These methods offer ways to test the intuition of scientists about real weather extremes. In late June and early July of 2021, a persistent high-pressure ridge, or heat dome, set up over the Pacific Northwest and an extraordinary heat wave affected the area from Oregon to British Columbia. For six days, it shattered temperature records across the region and hundreds died from heat-related causes, in an area where such high, and persistently high, temperatures were well outside of experience and many live without air conditioning. Scientists have studied its connection to climate change using multiple approaches.

This specific event was created by a rare combination of meteorological factors, a strong high-pressure ridge created the conditions for extreme heat, which occurred on top of higher average temperatures in the region from global warming. Probabilistic analyses showed that climate change increased the likelihood of such an event by at least 8-fold to more than 100-fold. One standout example found that such an event had effectively zero probability of occurring in the preindustrial climate. The enormous range in these assessments reflects how hard it is to estimate probabilities of events at the tail of the historical record. Estimates of the effect on the temperature of the event are more clustered. A recent review paper documents how multiple methodologies have found a positive influence, roughly 1-2 degrees Celsius of an anomaly that exceeded 15 degrees, of climate change on the temperature magnitude of the event.

Multiple studies have investigated and found some positive influence of climate change in other extreme events. Attribution studies found climate likely increased the heavy rainfall that accompanied Hurricane Helene in North Carolina and surrounding regions in 2024. The extensive fires that struck Los Angeles in 2025 illustrate how the causal chain can become messy, though. Studies do detect a positive influence of climate on the event’s likelihood, but while climate change likely contributed to underlying aridity, it would not have played a role in the heavy winds or land practices that preceded disaster.

These event attribution studies will become more common for extreme, or damaging, weather events. They can be produced quickly, and often are reported before peer review. As the Pacific Northwest heatwave example shows, when multiple methods converge on a positive attribution, the finding should probably carry some weight even if you have to be careful about accepting the results from a single study. I expect that as climate change proceeds and the climate thus departs further from a preindustrial counterfactual, the influence will become more detectable across a variety of extreme events and more easily identified. This will be used to cast blame, but can also be used to inform how communities and society adapt to ongoing change.

We May Still Be Surprised

One positive development, insofar as less climate change is better, has been that our central estimates for future climate change should probably be revised downward. Mostly, that is because the high-end warmings that scientists regularly analyzed about ten to 20 years ago, driven by high emissions throughout the twenty-first century, now appear to be somewhere between unlikely and impossible. At one time, the upper end of mainstream climate projections extended well into 4 to 6 degrees Celsius of warming by the end of this century, which, models suggest, would have wrought enormous real-world damage. Current energy and policy trends now point toward 2.5 or 3 degrees. Damages and risks are commonly modeled as increasing steeply with more warming, so this is already a better-than-previously-expected outcome for the climate (which is independent of the physical response to emissions).

But we should maintain a wide range for plausible outcomes and prepare for the possibility of being surprised. Emissions trajectories are subject to deep uncertainty, the physical climate response is still developing, and whatever change occurs in the climate will then be mediated through unpredictable economic, social, and political institutions.

Over the past decade, the pace of warming surprised some keen observers and appeared to accelerate, though not yet outside the range of expectation provided by climate models. The reasons for that apparent acceleration are being actively studied (as was the apparent pause in warming from 1998 to 2012), but no single driver has emerged. Some blame it on the El Niño, variability which would have no bearing on climate. Some think it is a result of factories in East Asia and global shipping fleets cutting aerosol emissions, which in the strongest version of the argument would indicate higher climate sensitivity to carbon-dioxide emissions. Others are more measured, not yet ready to draw solid conclusions as to whether climate projections require revision. We will have to see.

Long-Term Thinking

Climate change asks us to think over long time scales. But the pace of human-driven warming is compressing a large global change into a century. Changing weather patterns and extreme events are already causing adjustment costs and damages and will do more. Adaptation will help, but it is not free. For some communities, these costs will erode livelihoods and well-being, and may force migration. Are we prepared for large-scale managed retreats in the United States? Thankfully, American wealth, geographical diversity, and moderate climates may leave us better prepared than many around the world. But wealthy countries can still suffer serious disruption from narrowly concentrated costs, even if they appear entirely manageable in aggregate.

Readers of Commonplace are familiar with the challenges of rapidly adapting to economic forces. The displacement that came from the China Shock is barely perceptible in aggregate GDP and employment data, but it affected millions of people and those people were far less mobile than economic models tended to assume. Deindustrialization rippled through the nation with enormous effects for not only our economic vitality, but also our national security. The forces surrounding climate change may not be so different; the world gets richer and must accept some diffuse costs. Those may be modest overall, but cause all manner of unpredictable effects with which policymakers must cope. In the case of the China Shock, our faith in a growing pie served us poorly. We’ll need to do better on climate.

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Editor’s Note: This is the first in a three-part series on how the Right should think about environmental and climate policy. Read Joseph Majkut on What the Science of Climate Change Really Looks Like and Taylor Myers’s Against Climate Piety.

Nearly two decades of modern climate politics has produced one durable result: Most Americans stopped listening. Conservatives now have an opportunity to build something better.

The coalition that centered climate change as the crisis worth organizing over no longer commands the electorate. There is little to show for the billions of dollars and a decade of their near-total institutional capture. Even among Democrats, climate change now ranks near the bottom of priorities voters want solved by Washington. The era of the climate hawk is over, leaving behind it a vacuum.

The autopsy of this era of environmentalism is often misdiagnosed by conservatives. Climate change is not an invented problem, and saying so costs us nothing. All the same, the climate alarmists took a real problem, wildly exaggerated it, poorly explained it, and answered it with policies that many Americans didn’t want.

Climate politics became hopelessly abstract. Nobody can visualize a carbon emission, intuitively understands what “parts per million” means, or has any clue why 2050 is the deadline by which we are supposed to have fixed everything. The “facts” given were frequently, substantively, wrong. Consider extreme examples like RCP8.5, a worst-case climate scenario that assumed the world would burn five times its proven coal reserves. Despite its detachment from reality, many environmentalists treated it as the business-as-usual forecast, and the alarmism trickled into large swaths of journalism, litigation, and policy-making.

What voters did see on climate came in the form of personal costs and sacrifices. Climate policy arrived on the doorstep of the average household in the form of a tax, a ban, or a lecture. Carbon taxes, mandates phasing out the internal combustion engine, or bans on gas stoves are all deeply unpopular. Predictably, 68% of Americans told pollsters they wouldn’t even pay $10 a month to fight climate change. All the while, activists shut down emissions-free nuclear plants, blocked forest management projects, and fought LNG terminals whose product displaces coal in Asia and dirtier Russian gas in Europe. Each one of these decisions, made by people who claimed to be fighting emissions, raised them.

It’s clear that something went awry. What can we replace it with?

The Conservative Conservation Instinct

In spite of, or perhaps because of the collapse of climate politics, classic conservation issues are as popular as ever.

My organization’s own polling emphasizes this. Eighty-one percent of voters support an agenda organized around clean air, clean water, and beautiful places. The pollution of drinking water has been the top environmental concern every year since 2001. This gap only grows among younger voters. Fully 59% of voters aged 18-35 prioritize clean water, and 41% prioritize air quality, while their concern about climate change plummets to 24%. Climate change no longer has a grip on voters’ attention, but they still clearly care about tangible conservation issues.

This becomes evident in the environmental fights that attract the most attention. When Senator Mike Lee’s (R-UT) public lands sale provision surfaced last year, the fiercest objections came from hunters and anglers within his own coalition. County-by-county resistance to data center siting looks similar, and Gallup now finds 46% of Americans worry a great deal about their environmental impact, more than say the same about climate change.

It is clear, then, that conservatives should grasp this opportunity to pivot the conversation away from a singular focus on climate change and abstract, impersonal issues like parts-per-million or far-away ice caps, to a more holistic environmental vision that personalizes these issues for the everyday American.

This approach captures a deeply conservation-minded instinct among conservatives. The angler who keeps an eye on fish populations and creek pollution, the rancher for whom water and topsoil are part of his bottom line, or the duck hunter who doesn’t need a climate model to tell him migration patterns are shifting.

This is fertile ground for conservatives. The attachment to place that comes naturally to Americans is deeply grounded in the conservative intellectual tradition. Theodore Roosevelt and Gifford Pinchot gave this idea of intergenerational responsibility a tangible expression through the principle of wise use, the common-sense and human-centered philosophy that our land should be stewarded toward the greatest good for the greatest number over the longest time.

All of these ideas form the basis of a distinctly conservative conservation ethic, one that now begs to be synthesized into a coherent governing philosophy for the modern era: call it abundance conservation.

Environmentalists have constantly preached that economic development is inherently antagonistic to environmental health. This is false on the merits. Research shows a clear, long-term correlation between economic prosperity and environmental conservation. Economists call this the Environmental Kuznets Curve: As economies grow, they initially degrade their environments (think of the Industrial Revolution, for example), but once they reach a certain stage of development, the relationship inverts and additional economic growth leads to greater environmental outcomes, either through innovation that reduces pollution or enhances efficiency, or through higher disposable income to spend on ecological goods like national parks.

We can and must advance an approach to stewardship that reflects this reality: increasing both human prosperity and the long-term productivity of our natural resources through wise use, technological innovation, and policies that treat human flourishing as the goal rather than the problem.

Take, for example, a forest in New England. The Left’s preservationist approach would demand fencing it off in the name of “protection.” A purely extractionary approach, in contrast, would log it flat with no regard for its ecological or inherent value. Abundance conservation would result in a more creative approach with a forester marking the stand, a logger taking the white pine while leaving the sugar maple, and allowing the landowner to lease tapping rights to a local sugar maker.

This serves human needs, but it also serves the deer and turkey with diversified habitat, the fuel load comes down, and local families keep a productive forest for hunting, syrup production, and their daily enjoyment. Every party’s material stake in the forest being healthy in 50 years is internalized. Properly ordered, economy and ecology reinforce one another—a central concept of wise-use policy.

Abundance conservation isn’t confined to a single forest. The same principles that shape it apply across conservation, resource management, and even climate. Ultimately, it is a framework for trade-offs rather than a way of pretending that they don’t exist.

Of course, downsides exist. Energy development won’t magically stop having an environmental impact—which is as true for carbon-emitting fossil fuels as it is for land- and material-intensive renewable resources. Many important and good projects will have harms that we might have to more or less tolerate for economic or geopolitical reasons: critical mineral mining that scars the landscape, transmission lines that cut through ranchlands and forests, nuclear plants that have to store their waste on-site.

The point of abundance conservation is not to deny these trade-offs or downsides, but to make sense of them in a framework that seeks to maximize human flourishing—which sometimes errs on the side of development, and sometimes on the side of conservation. Most importantly, these trade-offs should exist in a market structure that incentivizes positive-sum trade (for example, a community negotiating a settlement with a hyperscaler to allow data center development in exchange for investment in the local grid, water-saving technology, and lower property taxes for residents), rewards innovation, and empowers the local decision-makers who will bear the brunt or reap the reward.

The strongest argument against this approach is that human flourishing is elastic enough a concept to theoretically justify anything. Frameworks that promise to weigh competing priorities have the propensity to fall on the extractive side more often than not. That’s obviously not the intention, but it’s worth being upfront about. A helpful way to address that dynamic is by incorporating certain checks and balances that give serious consideration to the environmental side of any given question: community engagement, common-sense subsidiarity to states and localities, doing policy via legislation rather than court cases or administrative power, carving out certain absolute exemptions (e.g. National Parks), and the like.

No instance of environmental policy can or should exist in a vacuum. We should instead invite a healthy tension with energy prices, wages, industrial capacity, and national security in order to build durable policies and politics.

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Realigning the Environmental Agenda

If conservatives seek to lead the next era of environmental policy, we must invite that policy into the foundation of the New Right’s agenda rather than relegating it as an afterthought. Reindustrialization, energy dominance, decoupling from China, affordability for families, and a renewed appreciation for beauty and the frontier in the American tradition; all of these priorities already animate our coalition, and all of them tie directly to environmental policy.

That’s doubly true because, even if America alone somehow achieved zero emissions tomorrow, it would make little difference to the overall trajectory of climate change. China and India would continue dwarfing the rest of the world’s contributions to global emissions, and the U.S. would never successfully convince developing nations to trade their own growth for the sake of UN emissions targets. Our priority should instead be to make clean technology so cheap, abundant, and exportable that the rest of the world adopts it out of self-interest.

In an essay Isaiah Menning and I wrote for American Affairs, we made the case for a common-good energy framework with three pillars. The first is permitting reform. An environmental impact statement takes three-and-a-half years on average (with litigation adding nearly four more for energy projects). These burdens fall hardest on the technologies the climate movement claims to want: Roughly 90% of major projects delayed under the National Environmental Policy Act are clean energy ones. Making it easier to build in America would not only reduce energy prices and increase our industrial capacity, but also disproportionately favor cleaner sources of energy.

Capital deployment is the second pillar. We need the federal government to help finance nationally critical energy infrastructure that private markets alone are ill-equipped for. Whether it’s competitively financing coal-to-nuclear conversions, or next-generation deep geothermal wells, there is a legitimate role for the government through the Office of Energy Dominance Financing and other vehicles to help commercialize critical supply chains or derisk first-of-a-kind technologies.

Innovation is the third, for which there is no better recent example than the shale revolution. The federally supported fracking boom not only made America energy-independent for the first time since the 1960s by tapping previously inaccessible natural gas resources below the ground, but it also displaced much of America’s coal industry, which is the largest source of our emissions reductions over the last two decades. The same innovation model it was borne of, with national lab-based research partnerships and milestone-based awards, is the path forward toward commercial geothermal, next-generation nuclear power, and long-duration storage.

This kind of energy addition is the precondition for any serious attempt at reindustrialization. Following nearly 20 years of flat demand, American electricity consumption is finally climbing again. While gas will continue playing a critical role for the foreseeable future, solar paired with storage is the fastest option available for new capacity in the short term. Long term, our plans should orient toward the pursuit of clean firm power in the form of advanced nuclear and geothermal energy that run around the clock and scale quickly.

Like many other facets of smarter environmental policy, this approach would have additional benefits. These changes would produce not just cheaper, cleaner, and more resilient power for American families, but would also decrease reliance on China. At present, China dominates critical mineral processing, battery manufacturing, and the lion’s share of the solar supply chain—all with unscrupulous environmental and labor standards. American industry is among the cleanest on earth, which makes reindustrialization and onshoring good national security policy, economic policy, labor policy, and environmental policy all in one.

Data centers represent the convergence of all of these issues. Demand growth, reindustrialization, and the ability to underwrite behind-the-grid power plants all represent generational opportunities if pursued seriously. Yet, the data center conversation is stuck in an all-or-nothing power struggle between AI-accelerationists and skeptics calling for a moratorium. Local communities are rejecting data center developments across the country, in large part over environmental and land use concerns.

The better answer is to build more creatively, not to block building altogether. We should encourage data center development on brownfields and Superfund parcels rather than farmland, in exchange for developers cleaning up those areas. Similarly, we could structure their power contracts to pay for clean firm power generation, such as advanced nuclear reactors. Such an approach would put communities first, while still enabling economic development and unlocking environmental co-benefits in the process.

The same logic can and should be extended to all corners of the American ecosystem. Active forest management can reduce catastrophic fire, protecting communities in the process. Precision farming practices can cut costs for farmers while improving soil health and water downstream. Adaptation, too, in the form of cloud seeding or terraforming or inventive strategies for crop durability, each of these represent ways of building resilience in the face of a changing climate rather than just squabbling over it. Solutions like these offer concrete answers and tell voters that our side is serious about their futures.

Don’t Repeat the Left’s Mistakes

Defining the next era of environmental policy comes with pitfalls. For all the Left’s failings, the Right has developed reflexes that risk falling into many of the same traps, leaning too much on tribalism or political purity tests..

Where the Left catastrophized, the Right has often been tempted to deny the reality of these challenges outright. The same dynamic has become true of our approach to energy and conservation issues. Conservatives have spent a decade correctly criticizing the Left’s energy obstructionism. We cannot now turn around and practice it ourselves. Issuing stop-work orders against offshore wind projects already under construction or inventing bureaucratic hurdles for solar permits shares the exact same roots as the Left’s drilling pauses and LNG moratoria.

Likewise, propping up uneconomical coal to “own the libs” is unserious energy policy. While coal still makes sense in certain developing parts of the world, it is one of the most expensive and dirtiest sources of domestic energy. And on the conservation side, trying to sell a parcel of Yosemite to a private developer or running bulldozers through Big Bend National Park despite opposition from local Republican sheriffs does little to instill faith in voters that we care about the places they consider special.

This moment also requires more than just victory laps around the last breaths of the climate hawk. Yes, we should reform the National Environmental Policy Act and the Endangered Species Act. Yes, we should continue calling out climate alarmism and cutting funding from meritless projects, but an affirmative vision is also required of us.

Filling the Vacuum

Abundance conservation gives conservatives a coherent framework for aligning environmental policy with human flourishing, economic strength, and national pride. We must unapologetically place Americans and future generations at the center of that policy while treating wise use, technological innovation, and productive natural resources as mutually reinforcing parts of the same agenda.

The era of the climate hawk has passed, and it has left a vacuum that gives conservatives a historic opportunity to define the next generation of energy and environmental policy and progress. It should be grounded in our confidence in America’s ability to grow, build, and innovate while responsibly stewarding the natural wealth on which we depend.

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When the Federal Reserve Open Market Committee meets this week, they will discuss whether to raise interest rates for the first time in three years. President Trump, on the other hand, has made clear his preference for lower rates to reduce the deficit and help the economy grow out of its debt problem. This view is shared across the political spectrum as most policymakers believe lower rates are generally desirable and understand the tradeoff to be the risk of higher inflation. But it’s not true that lower rates are necessarily better for investment and growth; keeping rates too low for too long fuels financialization and reduces the productive capacity of the U.S. economy.

The conventional economic understanding of how interest rates influence the business cycle is incomplete at best. According to that narrative: The Federal Reserve sets short-term interest rates for the economy. When it wants to stimulate growth, it lowers interest rates. Conventional neo-Keynesian theory, on which the Fed’s economic models are based, argues that this effect occurs through the investment component of Gross Domestic Product (GDP). Lower interest rates mean a lower cost of capital for the private sector, which makes companies more likely to deploy capital productively. Their investment causes the economy to grow and the unemployment rate to fall. When the economy starts to run too “hot,” inflation rises. The Fed raises interest rates to make borrowing more expensive. Investment falls, growth slows, inflation comes down.

Or so the theory goes.

Yet over the past 25 years, non-residential investment has shown little correlation with interest rates. The Fed can set short-term rates, but investment cycles are driven primarily by other, more amorphous factors: animal spirits, technology, trade policy, regulation, and so on, all of which are outside the Fed’s purview.

While firms have shown themselves fairly unresponsive to changes in short-term interest rates, one place where the Fed’s policy has a significant impact is asset prices. As a result, when the Fed keeps interest rates too low for too long it encourages debt accumulation, financial engineering, and worsening inequality. It shapes incentives that steer the U.S. economy away from real economic activity and toward financial transactions, and ironically, reduces investment and growth from levels they might reach in a higher interest rate environment.

Federal Reserve Chairman Kevin Warsh has discussed how short-term interest rates might be restrictive for some parts of the economy though not for financial markets. This is a good start. Under his leadership, the Fed should reassess the role that monetary policy has had in increasing financialization, which has made harder the Fed’s goal of maximum employment with stable prices.

A Brief History of Persistently Low Rates and Weak Investment Cycles

The investment portion of GDP can be divided into residential and non-residential components. Non-residential investment—that is, business investment or capital expenditures—has been weakly correlated with interest rates over the past quarter century. This component of GDP is very important to the economy because it expands the country’s capital stock and its productive capacity. Generally, real wage growth has correlated with productivity growth, because more productive workers can demand higher wages. Net domestic investment is the best measure of capital stock growth and has been steadily declining as a share of GDP for decades. It is not surprising that real wages have stagnated.

As American Compass research has shown, recent decades have seen a notable increase in companies that consume fixed capital faster than they make new capital expenditures, even as they return cash to shareholders. This is partly due to the Fed’s interest rate policy.

Since 2000, the Fed has maintained some of the lowest policy rates of all time. Three times it has pushed the nominal interest rate below inflation (and thus pushing the real cost of borrowing below zero): the early 2000s, following the dot-com collapse and the 9/11 attacks; a full decade following the Global Financial Crisis (GFC); and the roughly two years when the nation was dealing with the COVID pandemic. Throughout, the long secular decline in national investment continued. Each instance helps to illustrate, in its own way, why interest rate policy had so little effect.

In 2001, under Chairman Alan Greenspan, the Fed cut interest rates from 6.5% to 1.0%. While the 2001 recession did warrant cuts, Greenspan pushed rates well below inflation because he incorrectly feared a Japanese-style deflationary spiral.

But in the hangover from the dot-com boom, businesses had little appetite for investment regardless of interest rates. With China joining the WTO in 2001, what investment did take place tended to go abroad rather than expand the U.S. capital base.

The effects of the low interest rates spilled instead into asset values and, especially, housing prices—setting in motion events that would eventually lead to the GFC. While lax regulation played an important role, the impact of low interest rates on housing prices and the shift toward adjustable-rate mortgages, a ticking time bomb awaiting eventual rate hikes, were key contributing factors.

The second episode of negative real rates began in 2008 in response to the GFC, when Chairman Ben Bernanke reduced the federal funds rate to zero. This was the correct decision at the moment of crisis, allowing borrowers to refinance debt and avoid widespread default. Yet the Fed kept rates below 1% until June 2017.

Investment in the GFC’s wake was not weak because interest rates were too high, but because the banking system cut lending following its subprime losses. Increased regulation played a role too. Faced with a lack of investment opportunities, companies used the low-rate environment to engage in financial engineering: increasing debt, buying back stock, and conducting mergers and acquisitions rather than making productive investments.

Most recently, the Fed followed a similar playbook in its pandemic response. Rates were cut to zero at a moment of crisis but then held there even as inflation accelerated sharply. By the time the Fed started to raise rates in March 2022, inflation was running at 8%, producing the most negative real rates since the 1970s.

The biggest beneficiary of low rates was the U.S. Treasury, which increased government debt substantially. Once again, low interest rates meant cheap debt, but cheap debt did not mean productive investment; this time, it yielded household transfers that boosted consumption and buoyed the stock market.

Ironically, the U.S. is now experiencing an investment boom despite interest rates being at their highest level in decades. Just as low interest rates failed to drive investment in the face of other factors, high interest rates are failing to suppress it now. This time it is a technological breakthrough, artificial intelligence, calling the shots. But while Fed policymakers are not nearly so powerful as they might wish, the lesson of the past 25 years is that their choices do have major economic and asset price impacts, if not the intended ones, of which they should be far more mindful.

Interest Rates and Debt

Low interest rates encourage debt. From 2000 to 2025, total debt in the United States across households, nonfinancial corporations, and government rose from 185% to 256% of GDP. Debt is not necessarily a problem if it finances productive investments. Households use mortgages to spread the cost of housing over the duration of its use. Firms may borrow to fund projects that generate cash flows sufficient to repay loans and create value for shareholders. Indeed, the 1990s saw stable debt and strong growth, suggesting that borrowing was largely productive. Governments may borrow to fund investment in research or infrastructure that expands the economy and thus the tax base.

Today, however, each additional dollar of borrowing is generating less than a dollar of GDP growth. While the composition of borrowing has shifted—from households in the early 2000s, to corporations in the 2010s, to government in the 2020s—the overall trajectory is one of rising leverage with diminishing returns. And unproductive debt prompts a vicious cycle, in which higher debt levels divert cash flows from investment to interest payments.

Low real interest rates have been a central driver of this trend. In the early 2000s, cheap credit fueled a household borrowing boom that culminated in the housing bubble and subsequent crash. In the post-GFC period, corporations took advantage of low rates to increase leverage, with nonfinancial corporate debt rising from 67% of GDP in 2012 to 77% prior to the pandemic.

This debt was largely used to fund shareholder payouts. By increasing leverage, firms boosted return on equity and achieved higher valuations, as investors seeing a lack of investment opportunities post-GFC rewarded financial engineering over long-term capital formation.

Low rates also fueled a surge in mergers and acquisitions, pumping up the private equity industry and increasing industry concentration. Since the late 1990s, more than three-quarters of U.S. industries have become more concentrated. In parallel, business dynamism declined sharply: the share of employment accounted for by newly formed firms fell by 43% between 1980 and 2016 according to the Federal Reserve.

While concentration has supported corporate profits, consistent with Warren Buffett’s preference for “economic castles protected by unbreachable moats,” it has come at the expense of productivity growth. Research shows that firms in more concentrated industries have higher margins but not necessarily higher productivity.

Corporate spending patterns reflect this shift. In the mid-1990s, S&P 1500 companies allocated less than 3% of market capitalization to shareholder returns and acquisitions and between 3% and 4% to capital expenditures. By 2018, spending on financial activities had risen to 7.9%, while capital expenditures remained in the same range.

In recent years, the primary source of rising debt has been the government. Pandemic-era fiscal programs—including the CARES Act, American Rescue Plan, Infrastructure Investment and Jobs Act, and Inflation Reduction Act—led to unprecedented government borrowing.

Fiscal expansion was enabled by the Fed’s near-zero interest rates and quantitative easing (buying assets from the market). Low rates reinforced the perception that government borrowing carried little cost, encouraging policymakers to prioritize short-term consumption over long-term investment. The result has been a further increase in debt without a commensurate rise in productive capacity.

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Interest Rates and Inequality

Another consequence of chronically low interest rates has been elevated asset prices. The low interest rates of the early 2000s caused housing prices to rise substantially. Similarly, the stock market has benefited as investors are willing to pay higher multiples for future cash flows in a lower rate environment. The Fed’s repeated decision to intervene in the market to prop up asset prices has led investors to believe they are protected from downside risk.

High asset prices are not a problem if their growth follows the economy’s. But after holding steady below 400% of GDP during the second half of the 20th century, U.S. household wealth surged to almost 600% in the 2020s. Rising wealth has exacerbated income inequality and gains have been concentrated among older households—particularly the Baby Boom generation, which holds roughly half of U.S. wealth.

Rather than channeling these gains into productive investment, this cohort has largely used wealth to sustain consumption, particularly in sectors such as healthcare and housing. At the same time, rising inequality has increased barriers to upward mobility. Education, traditionally a pathway to higher income, has become significantly more expensive, reflecting both increased demand and the higher opportunity cost of remaining outside the top income brackets.

The Dollar, Capital Flows, and Deindustrialization

Even though interest rates were low during much of the 2010s, the dollar strengthened as U.S. markets outperformed others around the world, attracting inflows of foreign capital .

A self-reinforcing loop emerged: rising U.S. asset prices attracted capital inflows, which strengthened the dollar. Countries with relatively weaker currencies were able to generate trade surpluses, which they recycled into U.S. assets, driving asset prices even higher.

But while Wall Street reaped enormous profits from this dynamic, a stronger dollar has significant consequences for Main Street as well. A stronger dollar makes exports more expensive, reducing the competitiveness of U.S. manufacturing and frustrating efforts at reshoring. Instead, firms have an incentive to offshore production to lower-cost regions, contributing to deindustrialization and lower investment.

The Fed’s Path from Here

Why did the Fed keep interest rates so low, even when doing so failed to deliver the investment effects that its models predicted? The central bank has a dual mandate to pursue maximum employment consistent with stable prices. In standard economics, the main risk from low interest rates is an overheating economy that generates inflation. For much of the 2000s, inflation was below the Fed’s target, so it could focus on the employment side of the mandate.

However, full employment with stable prices and rising wages requires capital formation to make the workforce more productive. Robust investment has other invaluable benefits as well. The pandemic exposed the consequences of a degraded U.S. industrial base and weak U.S. supply in turn magnified COVID’s impact on inflation. To its credit, the Fed responded decisively, if belatedly, by raising rates in 2022–23. But now, as inflation moves closer to target, the conversation has followed its traditional pattern back to when rates could be cut further.

The question on everyone’s mind is whether rates are too “restrictive” of investment, the assumption being that higher rates are more restrictive. But the last few decades have shown that interest rates suppress investment when they are too high or too low.

The Fed needs to consider a more nuanced set of tradeoffs. On one hand, the AI-driven capital investment cycle has the potential to deliver strong growth, full employment and disinflation.

On the other, we are already seeing signs of rapid asset price appreciation and unsustainable debt accumulation. Asset prices relative to GDP are setting new highs and consumption is increasingly dependent on a buoyant stock market. Interest rates have not restricted government borrowing or worsening debt dynamics in the corporate sector. Higher rates won’t necessarily create a drag on the kind of investment the economy needs. To the contrary, they may promote that investment by squeezing the unproductive financial engineering activities of which we need far less.

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Davenport characterizes the policy change as one that “would effectively create a government incentive for parents to stay home with their children,” which is “effectively” true only in the sense that it would negate the overwhelming incentive that current policy creates to use paid child care. The policy would offer a family nothing for having a stay-at-home parent that it could not also receive without one, so it creates no “incentive” in that respect. Rather, it would end the policy of telling parents they can receive the subsidy only if they make the latter choice.

Critics were also quick to complain that the policy change would take funding away from one set of parents and give it to another, but that dynamic is also misstated. Davenport warns at one point, “the move could end up redirecting money away from working parents and their child care providers, causing some to raise their rates or even close, critics said, potentially worsening what many experts say is a child care crisis in the country.” But then she provides this example:

Krystal Gastineau, the owner of Cribs 2 Crayons, a child-care center in Aurora, Colo., said that about half the children she cares for receive the subsidies, which are paid directly to Ms. Gastineau’s business via direct deposit. “If they could, I think parents would choose to take the money and stay home,” she said. “That would take away a major source of income.”

That quote speaks volumes. “I think parents would choose to take the money and stay home.” In other words, the day care center operates on federal funds provided to serve parents who would prefer a different arrangement. Altering the policy would allow parents (married, with one working) to make the choice they prefer. So who is incentivizing what on whose behalf here?

The Japanese soldiers of the Old Right, unaware they are still fighting a war that ended 30 years ago, came charging out of their caves with some genuinely bizarre arguments.

Jonah Goldberg: “Any evidence it works? Got some studies? Data? Examples of any kind? Or are you just going along because it sounds good or polls well or keeps you in good graces with Vance and Heritage Foundation and (wink wink) Heritage Americans and small donors? Maybe you just like expanding entitlements so long as you think it’ll benefit your coalition? Prove you have anything like republican virtue or intellectual seriousness.”

It’s not clear what Goldberg means when he asks if this “works.” Like, does making families with a stay-at-home parent eligible to receive support “work” in making those families eligible for that support? Unclear what data is needed. Is reallocating funds without increasing spending really a form of “expanding entitlements”? Is Jonah Goldberg someone who comes to mind when you think about “republican virtue” and “intellectual seriousness”?

Dana Loesch: “No. Incentivizing government dependency isn’t ‘great’ for families. Dependency is one of the tools the left has used for the past 100 years to destroy the family. This proposal will also include illegal aliens, as currently law determines status by the child not the adults so anchor babies are eligible for this fund, which isn’t ‘great’ for American families…”

Does providing support only to households that earn income “incentivize government dependency”? Does offering the expansion only to married couples “destroy the family”? Should conservatives leave untouched any program that serves illegal aliens, lest improving the program incidentally improve services for illegal aliens as well? (And does this argument apply to public education, highways, and the police?)

EPPC’s Patrick Brown offered the far more thoughtful critique that “the broadening of eligibility comes with real trade-offs … a conservative estimate is that the population of eligible children might double after the new rules. As a result, the odds of being a CCDBG-eligible child who actually received the assistance would go from 1 in 7 to 1 in 14.”

But the problem with this objection is two-fold. First, as noted by Ms. Gastineau above, in many cases we could be talking about the same households still benefiting from a subsidy but now having more options in how to arrange their lives. Second, even insofar as there is a direct tradeoff, that tradeoff already exists. Those families with a stay-at-home parent are there, and the policy choice is to give 0% of the subsidy to them. Is 0% for households with a stay-at-home parent and 100% for households where all parents work the correct split? You could make that argument, but it would be difficult, and Patrick doesn’t try.

Especially seeing as the Trump administration proposal would merely give states the option to open eligibility (where, presumably, those states believe that doing so would benefit their populations), the starting assumption should be that greater flexibility and the option of a refined allocation would produce a net benefit. “No reallocating existing funds, you can only add new ones” is the standard left-of-center approach to the safety net, neither conservative nor wise. (Patrick responds to the response here, in his always-excellent Family Matters newsletter.)

Most worthy of critique, on the other hand, is President Trump’s promise to give everyone $5,000 if Republicans win the midterms. Without spending too much time on it: (1) terrible way to run a campaign, (2) we cannot afford it, (3) it’s inflationary, (4) only mail universal checks as stimulus in a crisis.

The better idea would be a deficit reduction plan that both raises taxes and cuts spending. Encouragingly, that continues to gain traction with Republicans. As Social Security fund runs dry, some Republicans say it’s time to raise taxes (Washington Post). Congressman Tom Cole (R-OK), chairman of the House Appropriations Committee, says: “We’ve got too many people who say, ‘Well, we have to stay within the current income level or stay at the current tax rate.’ I’m willing to look at the tax rate. I am willing to raise the amount of income through tax.”

YOUR ONE WEEKEND READ on this 25th anniversary of 9/11 is The Man Who Refused to Sit on the Sidelines, from The Atlantic. “The FDNY lost 343 men on September 11; 65 of their sons and daughters now serve in the department.”

If you’ve never read Esquire’s story on The Falling Man, that would be very much worth your time as well.

BLUE-COLLAR BOOM

The Wall Street Journal reports, Americans Without College Degrees Are Having One of the Best Job Markets in Years. “Unemployment among younger workers who didn’t go to college has rarely been lower in recent decades. It is the opposite story for college grads.” Important to note, though, that this is still relative to these cohorts’ own experience in the past. In absolute terms, college grads still have a lower unemployment rate.

But something is clearly happening to the college degree. The Financial Times: The University Degree Is Losing Its Lustre. Both the Journal and FT point the finger at technology and economic trends, and surely those play a role, but it’s also worth bearing in mind the extent to which universities are doing this to themselves, both with lousy programs that produce graduates lacking both hard and soft skills, and with overproduction of graduates in the first place that floods the market with low-value diplomas. In a recent Commonplace piece, Perverse Incentives Handed Higher Ed to AI, Dalton Haydel explores this further.

ARTIFICIAL INTELLIGENCE

What is the economic effect of A.I. going to be? Anthropic has released a really nice modeling tool that lets you put in your own assumptions about likely labor-market effects. It’s simplistic in all sorts of ways, but does well what a model is supposed to do, which is test your intuitions about reasonable assumptions, how they relate to each other, and how they would affect outcomes.

Here’s my own run through it:

By 2030, AI will be capable of doing 85 out of 100 knowledge-work tasks. (We did it! “AGI”!)

Out of every 100 instances of a task AI can do by 2030, AI will be doing 50.

For those 50 tasks, some of them will be fully automated, meaning a human is not involved at all.

Tasks where AI is involved will get done twice as fast as today.

When someone is displaced entirely from their occupation, it will take them six months on average to find a new job.

Results! GDP up 14%. Unemployment rate just below 5%. Wages up for all types of workers, by 11% on average. Labor share of income at 58% (similar to today).

Frankly, those are some pretty aggressive assumptions and some pretty pleasant outcomes, at least economically speaking. Try it for yourself.

When is AGI not AGI? When it’s OpenAI talking about AGI! Pitchman Sam Altman has always played a shell game with his definition, but I especially enjoyed this comment from OpenAI president Greg Brockman promoting the new Astra model. “Everyone has a different definition of AGI . . . it’s a grey, fuzzy thing. But I think when we look back people will think it’s about this time and about this model.” We don’t know what AGI is, but this is it. OK, then.

Anyway, per Brockman, it’s now more of a “spiritual concept.”

And in Dallas, at the Republican Convention: AI Loses Debate (Semafor). Ben Smith has a great writeup of the faceoff between Joe Lonsdale and Joe Allen, which he reports the latter Joe won convincingly. Apparently Lonsdale was surprised that arguments like “we have Kitty Hawk, we have 747s, we built the railroads” didn’t land, nor did comparing AI complaints to “Black Lives Matter hysteria” or saying they’re “psyops from China.” As Allen put it, data centers are “a constant humming reminder of a future they don’t believe in.”

Speaking of which, read my New York Times essay on why Americans don’t believe in the AI future! Big Tech Fooled America Once. The Second Time’s Not Going So Well.

IN MORE PROMISING CORNERS OF AMERICAN INDUSTRY

Japan, U.S. advance $550 billion investment pact with AI, chips in focus (Investing.com): “Japan is making progress on a $550 billion investment initiative with the United States, with artificial intelligence and semiconductor projects expected to play a central role in the next phase of the agreement, Bloomberg reported on Friday.” And, South Korea Nears Agreement on Billions in U.S. Investments, a Win for Trump (Wall Street Journal): “The deal, potentially worth more than $100 billion, envisions South Korea financing the construction of up to eight nuclear power plants and a natural-gas project, according to people familiar with the matter.”

The Department of Energy announces a new critical minerals investment. Ex-Im Bank announces a new manufacturing investment for advanced satellite communications systems. And, USA Rare Earth breaks ground on its South Carolina facility—the first new rare earth magnet factory in America in 40 years.

While Ron Paul himself would probably not be excited by such aggressive industrial policy, allow us to say: It’s Happening.

But wait, don’t be fooled so easily by all of the great data coming out of the industry, the increases in output and now employment, the investments coming online. Richard Stern, working always at Advancing American Freedom, has some bad news: “the tariffs have limited what could have been a far larger manufacturing surge” and “threats of more government involvement in industry are holding back growth and delaying investments.”

What’s worse, “this bounce in manufacturing output is largely explained by a rise in industrial capacity utilization rather than by an expansion in manufacturing capacity.” Instead of instantly making new factories appear, the economy appears to be boosting production in existing factories while working to bring new ones online. Suspicious.

Fortunately, while fundamentalists confused by a world not aligning with their dogma might attempt to reverse engineer an incoherent story that validates their one truth, we have analysts like Richard and organizations like AAF doing the hard work of explaining how the novel set of policies designed to boost manufacturing have nothing to do with the boost in manufacturing, while the set of policies pursued for decades as manufacturing collapsed are responsible for the progress.

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MEANWHILE, IN CHINA NEWS

A broad-based coalition of unions and industry groups have just written to Senate leaders John Thune and Chuck Schumer in support of the Connected Vehicle Security Act that would exclude Chinese vehicles from the U.S. market. This is important legislation with growing bipartisan support that the Trump administration should get behind as well. Transportation Secretary Sean Duffy has just written to Ford, blasting its continued pursuit of partnerships with Chinese companies, but, like, you don’t have to use the Article II angry-letter power. The Constitution afford our nation stronger tools.

Polestar, seen last week complaining about its poor treatment by U.S. regulators, “cut its full-year delivery forecast, hurt by Washington’s crackdown on Chinese-linked vehicles that forced it out of the United States.” One correction, though. Reuters describes Polestar as a “Swedish company, which is majority-owned by China’s Geely Holding.” If you’re majority owned by a Chinese company, sorry, you’re not Swedish any more.

Good story in the New York Times on dynamics in Latin America, where Peru Shows the Limits of Washington’s Anti-China Push. It does seem a bit incongruous, though, to report “Senior administration officials have warned, while offering no evidence, that Chinese-financed projects threaten Peru’s sovereignty and, in the case of the port, could give Beijing a military foothold” and then “today, Chinese companies control Lima’s electricity distribution system and play a role in transportation, banking and telecommunications.” What evidence are we looking for here?

Georgetown’s Peter Harrell highlights a potential decision by Malaysia to use Huawei chips in a major “sovereign data initiative,” an early test of provisions in bilateral trade agreements secured by the Trump administration that would seem to preclude such moves. Decisions like these, and the U.S. choice to respond or not, will determine whether we can successfully establish a “China or the U.S., pick one” framework for potential trading partners.

And per the Brookings Institution’s Kyle Chan, looking at the upcoming Trump-Xi summit, “sounds like Board of Trade / Investment talks are stalled—by Washington.” That’s something we’ve been pushing on since the spring, and would be good news indeed.

(For an appallingly weak counterpoint, see the new Foreign Affairs essay by former Biden adviser Brian Deese: The Case for Letting China In. The case, apparently, is that China has things we need, and if we structure our investment deals right we can get it to hand leadership back to us. Good plan.)

Maybe Mr. Deese would prefer to be in…

EUROPE

Oh, Europe. Still can’t decide what to do. Now, EU faces 300,000 factory job cuts as China ‘colonises’ supply chains, industry warns (The Guardian). In a Brookings symposium on the issue, Ryan Hass, director of the Institution’s China Center, hits the nail on the head:

The current EU-China trade trajectory serves China’s interests. Beijing will use carrots and sticks to sustain its open access to the EU common market, which is the only major market in the world with high purchasing power that remains open to China’s surging exports. China may pay lip service to European concerns, but it will not offer any concessions or meaningful voluntary restraints on its exports. If there is going to be any rebalancing of EU-China trade relations, Europe will need to instigate it.

Whether justified or not, China’s confidence in its capacity to sustain the current trade trajectory is borne of three factors. First, Beijing judges Europe’s leaders as politically weak, divided on China, and lacking a mandate to launch a trade war against China amidst an actual war in Ukraine and a widening transatlantic rift with U.S. President Donald Trump. Second, Beijing is confident it can build an image of its market as a key driver of future demand for European products, and thus a key opportunity that European industrial giants cannot afford to squander. And third, China is confident it has punitive tools at its disposal to prevail in any trade war with Europe, should it become necessary to use them.

On its current trajectory, China’s surging export wave will decimate key European sectors, including autos, chemicals, green energy, machinery, and industrial tools. This, in turn, will alter Europe’s political center of gravity. The only question is whether Europe will be compelled to push back now or later on China’s unfair trade practices, including China’s suppressed domestic demand, its subsidies, and its undervalued currency.

AND FINALLY, IN H-1B NEWS

The Department of Labor is investigating Cognizant. This has received extraordinarily little coverage, but Newsweek has a good rundown. Republicans on the Senate Judiciary Committee are pleased. One wonders what a large-scale investigation into the visa practices of a major Indian outsourcer might turn up, and how that might be applicable to the sector more broadly. Stay tuned.

In less helpful reform, IFP’s Connor O’Brien highlights a move by DHS that’s likely to backfire. The proposed policy change would force temporary visa holders to leave the United States immediately if they lose the job attached to the visa (whereas currently they have 60 days to find a new job). At first glance, this seems like a “tough on immigration” approach. But the reality is that employers already have far too much control over workers using these kinds of visas… that’s partly why employers love them! Essentially giving employers the power to deport a worker they’re unhappy with will only invite further abuse in the program. The answer is fewer temporary visas, not more exploitative relationships.

YOUR BAD TWEET OF THE WEEK

This week we salute the Tax Foundation’s Erica York for pushing back against the subversive narrative that the labor share of income is falling with better data showing that… the labor share of income is falling. Good catch.

There were indeed a couple of years in the late-1940s when labor share was lower than today, so… well, I guess that’s the question. So what? If the Old Right put half the effort into thinking about and addressing economic problems that it puts into trying to argue they just don’t exist, maybe it would be in better shape.

Enjoy the weekend!

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Some people believe the American Dream is dead and the game is rigged against them.

That isn’t my mindset or attitude. In order to fulfill your dreams, you must aspire to be what you desire. That is the American Dream, to me. And I think some people don’t understand what fulfilling that American Dream can take.

I live in Washington, D.C., and am surrounded by ambitious people aspiring to be politicians, writers, and journalists. Many of them are immigrants that came from repressive places where the government decides what your fate will be. In America, you’re not forced to work, you can choose to hold a cup panhandling or you can take risks and start a business. Trust me, I know people who have done both.

Part of the problem is that too many equate the American Dream with doing well—making money, the big house, the nice cars. Too many Americans suffer from a sense of entitlement, wanting instant gratification, rather than paying their dues. They envy someone running a business, who has two cars and a trophy wife. You don’t see the behind-the-scenes work it took to get there. You don’t know how someone may have started his business, working in his garage, may have spent days in the soup line and was mocked for thinking outside of the box.

Ten years ago I came to Washington, D.C. with $10, broke and homeless. I was unemployed and unemployable. I hadn’t bathed in weeks and the only prospect I had was to beg or sell a newspaper written and sold by the homeless, Street Sense. If anyone had a reason to give up, it was me. Many had and they have passed away. Being proud and competitive, I refused to be a beggar and charity case and saw that selling papers was better than panhandling.

Make sure your dreams are your own, not others’ expectations. Dreams start with plans and come down to choices. If you let others set your expectations for you, you’re letting them make your plans for you. Do I become a comfortable slave or do I take risks by becoming someone who is independent?

Sometimes that means marching to the beat of your own drum. It also means having a positive mindset. If you go into something with the mindset that your task is impossible, you’ll find yourself just wasting another day in bed dreaming. America will give you an opportunity, but you have to be the one to take action.

When it comes to solutions for those facing poverty, there is no one-size-fits-all solution. There isn’t one factor or stereotype. I was lucky to find organizations such as Street Sense, S.O.M.E. (So Others May Eat), Miriam’s Kitchen, and Bread for the City. Being addicted, I never went to rehabilitation, but found a sponsor at AA meetings and haven’t taken a drink in 12 years. Instead of complaining about my first job, which wasn’t great, I used it as a resume-builder. I focused on staying away from negative people and looking at the big picture.

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Following those dreams, being able to call your own shots and defining your own meaning of success, also means not taking rejection personally. I always say to myself, I’m sure the Apostles Paul, Peter, and Timothy were rejected, but eventually, they found the right audience to hear their message. Some of the greatest books in history, such as Gone With The Wind and Lord of the Flies have been rejected. It’s one thing to dream but don’t complain about America if you are not willing to fight, get knocked down, and pick yourself back up again.

Lastly, despite what you read or hear, America is still the land of opportunity. But at the same time, you must be realistic. I’m 5’11” and can’t jump or dribble, so I don’t think the NBA will be calling anytime soon. Again—the Dream isn’t about having the most or being the best. It’s about wanting to make the most of yourself without anyone telling you what you need to be doing.

As you can see, I’m an optimist. I define success as living my life on my terms. I’ve worked in companies that paid me handsomely and wanted to jump off a bridge. I was miserable living off the pressures of living by someone else’s definition of success. I was happier homeless than having the government, politicians, or corporate bosses imposing themselves on what I can or cannot do.

Follow your dreams and you will find success in America. It might not be success as you think of it right now. The American Dream isn’t about getting rich. It’s about living life the way you want to, and that is something we still have the freedom to choose every single day.

Editor’s Note: This piece was originally published September 22, 2021 by American Compass.

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Understanding America will come to you every other week, co-written by the whole American Compass team. As part of our broader project on Reclaiming American Citizenship, we’ll be highlighting the stories that best illustrate citizenship’s failure or renewal and explaining why they matter. Let’s see how it goes!

YOUR TOP READ THIS WEEK, from University of Chicago student Owen Yingling, is The Great Zombification (The New Critic). Our Abigail Ball writes:

The more AI writing I see out there in the wild (by which I mean the Wall Street Journal opinion page), the more I worry that we lack the social antibodies to fight off the worst elements of the technology. I thought it would be obvious that writing is a form of thinking and the source code for the modern world. By writing, we think more clearly; we sharpen, formalize, and sequence our arguments; and we are better able to remember what we’ve learned. So when I envisioned the future of AI in education, I assumed plenty of worthwhile fights about Ed Tech and whether kids should spend their class time staring at screens. Perhaps by devaluing “laptop work,” at least relatively, AI would push more young people toward the trades and we’d see a salutary rebalancing of post-secondary education. What I did not expect to see was the true ivory towers of liberal education willingly giving in to the wave of AI undermining the very premise of their existence.

Writing in The New Critic, Owen Yingling, a rising senior at the University of Chicago, provides a harrowing inside look at what exactly this has meant at one of our nation’s top universities. He describes AI use as a “cancer … that threatens to turn a generation of promising young Americans into a class of drooling morons, and it will grotesquely disfigure, if not destroy, the university as an institute in every way that it is imagined — as a sacrosanct humanist project, as a moral training ground, or even as a vulgar sweatshop for job training.” The whole piece is worth your time, especially if you were yourself educated in the liberal arts. The days of blue books and seminar-style Socratic dialogues are behind us; what remains are professors writing their lectures with Claude and students using ChatGPT to cheat even on in-class exams.

Worse still, Yingling explains how this is not merely happening as individual defections from the university’s desired norm. Campuses are welcoming AI with open arms, encouraging everyone to embrace these new tools. And yet, Yingling writes: “Every anecdote I hear about AI use shows that there is no ‘integration’ happening, there is simply substitution: for learning, teaching, and conversing. These are the bare activities required to enact whatever concept of the university you would like, whether it tends towards monastery or marketplace.”

The phrase “existential risk” is typically used in AI circles to describe an end state in which all of humanity is, well, dead. While I certainly wish to avoid this fate, I think the far more pressing “x-risk” is a potential new dark age brought on by the overuse of AI in education. I hate to sound dramatic, but I don’t know any other way to describe what would result from the total surrender of our institutions of higher learning.

• Bonus link: A Society of Cheats, by business school professor John Paul Rollert in The Atlantic.

BUT IS IT GOOD NEWS OR BAD NEWS THAT THE AI DOESN’T WORK? Oren Cass writes:

The Alpha School pitch is that teachers are unnecessary, most of school is a waste of time, and kids can learn much more with two hours each day of focused, computer-based tutoring followed by hours to explore whatever interests them. The schools, they claim, achieve incredible academic results!

It’s rather silly. Of course there are teachers, the school just calls them “guides” instead. The school has selective admissions and requires engaged families that can afford exorbitant tuition. (Current list price in a Boston suburb: $65,000.) And the repeated comparison of performance by Alpha students to performance of students in ordinary public schools disregards the reality that these are not comparable students. (Though strangely, the organization proudly publishes data on how many standard deviations its students test above the typical student, which seems to show that they take in students testing 4 to 5 standard deviations above the national mean in kindergarten and produce students testing 2 to 3 standard deviations above the mean by the middle grades. Is that good?)

Now we have the first quasi-experiment applying the Alpha School model to a public charter school. As Dan Meyer summarizes, “Unbound Academy projected 60% proficiency in math off a baseline of 34% and ended the year with 10% compared to an Arizona state average of 34%. They projected 65% proficiency in ELA off a baseline of 40% and ended with 28% compared to an Arizona state average of 42%.” Not good.

Of course, Alpha School can run an elite private school for a very niche subset of very privileged kids. But there’s a lot wrong with using it as a platform to trash the public school system that must serve everyone else, and then trying to push for wide adoption of a model that obviously will not work in most situations. It’s a classic case where these guys either do not understand how inapplicable their bubbled experience is to the rest of the country, or they don’t care, and the only question is which would be worse?

THE SNUGAROOZ FILES. Meredith Meroney comments on The Chew Toy That Ate My Small Business (UnHerd):

When a blind woman tried to buy a Snugarooz Floos N’ Fun Ball from School For the Dogs, her computer encountered metadata that “interfered” with her screen-reading software. So, she sued. The Americans with Disabilities Act creates a private right of action for such lawsuits. This particular woman has filed at least 40. The small owner of the small pet business whose website was insufficiently accommodating declared bankruptcy, and then wrote about the experience for UnHerd.

Complaints about serial litigant abuses under statutes like the ADA typically emphasize the economic effects. Investment and innovation don’t happen, small businesses go under. For many Americans, including Millennials and Gen Z, owning a business is the realization of their American dream and an opportunity to “control their own destiny”; the prospect of its arbitrary destruction through a broken legal system reinforces their economic precarity. When business owners and would-be entrepreneurs cannot even determine what would constitute adequate compliance, laws intended to provide protection instead become another unpredictable feature of the lottery economy.

The social dimension deserves greater consideration as well. These kinds of lawsuits are in part a function of the atomization and isolation that disconnects citizens from one another, making it easier for unethical lawyers and their clients to inflict harm. Is there even a real person behind that website? Why not make a quick buck by effectively blackmailing remote small (and big) businesses with the threat of lawsuits grounded in the misuse of well-intended laws with ill-defined standards of compliance? It’s “legal,” after all. Creating anything of value, sadly, is beside the point.

THE WOLVERINES NEED ANOTHER DO-OVER. Peter Balos comments on another mistake from the University of Michigan, but this time the B1G replay officials aren’t coming to the rescue. University of Michigan Drops First-Semester Grades to ‘Curb Mental Health Crisis’ (Wall Street Journal):

American higher education epitomizes our national shift from upholding standards and pursuing excellence to embracing cheap affirmations and relative truths. Rather than help students understand their own abilities and constraints, perhaps even expose them to adversity or failure, the University of Michigan is opting for participation trophies. “Can handle receiving grades” should be a prerequisite for admission to any university, especially a public one that is in turn setting expectations and helping define success for the K-12 system that feeds into it. Instead, UM seems intent upon taking its own easy way out, handing one to its students, and leaving the mess for someone else to clean up.

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RAGING AGAINST THE FLOCK. Brad Littlejohn writes:

Data centers aren’t the only place where the public is now venting its rage against the machines. In some communities, vigilantes have taken to vandalizing the Flock cameras that many municipalities employ for vehicle surveillance and law enforcement, part of a wider backlash recently chronicled by Axios. While automated license plate readers have played some role in law enforcement for decades, AI is supercharging their analytical capabilities, leading to mission creep as officers move beyond identifying stolen vehicles to predicting just who might be smuggling weed across state borders. A chilling recent essay from Transformer argues that “we’re sleepwalking into an AI surveillance dystopia” reminiscent of the film Minority Report: using algorithms to identify and arrest likely criminals before they can cause trouble.

In many ways, we’ve already made our peace with a post-privacy society and turned the Fourth Amendment into a dead letter, but we used to console ourselves that even if someone, somewhere was tracking our every move and keystroke, no one would ever be able to sort through the terabytes of data. Thanks to machine learning, that’s no longer the case. Advocates of this surveillance society will claim, perhaps correctly, that it will make us safer—and indeed our incentive structures of risk mitigation will always tend to function as a one-way ratchet in favor of more monitoring and less liberty. But liberty isn’t the only thing we sacrifice on the altar of safetyism; perhaps worse is the tendency of such a panopticon to deaden us into collective irresponsibility. In a world where the AI cameras are always watching, no one needs feel any obligation to intervene to stop a shoplifter or carjacker. Citizenship, it turns out, is a lot more work than being watched over by machines of loving grace.

AND FINALLY, R.I.P. WENDELL BERRY. Abby, again:

Wendell Berry died last week, leaving behind an incredible legacy. He had an ability to stand outside time, to live according to his values and one one else’s. He was an advocate and a prophet; a poet and a farmer. He understood deeply what it is to be a citizen, not merely a consumer, and examined the obligations we have to each other and to our land. John Carney at Breitbart explores how this led Berry not to nostalgia, but to a rich vision for the future: “the man who wrote to his fellow Americans for decades from his home in Kentucky did not devote his life to making the past picturesque. He asked how a people might have a future worth inhabiting.”

In The Atlantic, Joe Fassler looks at the other side of this coin, describing how Berry focused his attention on the present: “Obsessing about the future, he argued, also has devastating moral consequences. It allows people to avoid engaging with the urgent realities of the present. … He dared his readers to live in a way that honors the situation at hand, at this very second.” This kind of love of the here and now is more radical than ever in a culture dominated by optimization—multi-tasking, taking work home, always thinking about tomorrow’s to-do list. Berry instead simply embraced the work at hand.

He leaves us with a huge body of written work, but I’ll recommend one essay and one poem here:

“Why I Am Not Going to Buy a Computer” by Wendell Berry (1987)

“Manifesto: The Mad Farmer Liberation Front” by Wendell Berry (1973):

Say that your main crop is the forest

that you did not plant,

that you will not live to harvest.

Say that the leaves are harvested

when they have rotted into the mold.

Call that profit. Prophesy such returns.

YOUR CONCLUDING THOUGHT FROM RECLAIMING AMERICAN CITIZENSHIP:

Decline is a choice, and we can choose otherwise. It is the precise purpose of our republic, as described in our Constitution, to “establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.” In such a republic, a citizenry committed to reconstituting itself still controls its own fate, can still elevate leaders committed to that process, and so has the power to determine its future.

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In 1890, two landmark bills passed and were signed into law by Republican president Benjamin Harrison. That year, both the Sherman Antitrust Act and the McKinley Tariff simultaneously defined American antitrust law and established a historic tariff to protect American producers. This was no coincidence. For Republicans in the post-Civil War era, tariffs and industrialization were top priorities—but protectionism risked creating or strengthening industrial monopolies by insulating domestic firms from foreign competition. The discipline once provided by foreign firms needed to come from elsewhere: antitrust enforcement.

The U.S. is facing a similar challenge today: Tariffs are back after years of globalization let our antitrust muscles go soft, as the enforcer’s job was done by foreign competitors, with considerable consequences. In agriculture, for example, tariffs have walled off the economy from foreign imports and therefore muted competition for key inputs including fertilizers and equipment, putting the squeeze on America’s farmers. Across the economy, the same antitrust logic that applied in the Gilded Age applies today: tariffs and trustbusting must go hand-in-hand.

If imported products become more expensive because of tariffs, the thinking went, domestic producers would face less pressure to lower prices, innovate, or expand output. This logic built the case for antitrust enforcement against some of the most powerful companies in the country at the time, including Standard Oil, U.S. Steel, and the meatpackers. For Republicans, antitrust was the pragmatic response to the inevitable loss of competition created by the tariffs. Indeed, some historians argue the first antitrust law, the Sherman Act of 1890, partly functioned as a political safety valve, allowing Republicans to preserve the tariff system while responding to popular anti-monopoly sentiment.

President Harrison was an early advocate for both tariffs and antitrust. In his 1889 annual message to Congress, he argued that America needed protective tariffs to build domestic industry, but once shielded from foreign competition domestic industry needed to compete fairly. According to Harrison, “combinations and monopolies” threatened competition, but tariff policy and antitrust policy should be held separate.

“Earnest attention should be given by Congress to a consideration of the question how far the restraint of those combinations of capital commonly called ‘trusts’ is a matter of Federal jurisdiction,” he told Congress. Harrison described monopolistic combinations in unusually strong, even moralistic, language. “When organized, as they often are, to crush out all healthy competition and to monopolize the production or sale of an article of commerce and general necessity,” he said, “they are dangerous conspiracies against the public good, and should be made the subject of prohibitory and even penal legislation.” For Harrison, not only were monopolies inefficient in economic terms, but also contrary to the “public good.”

By 1890, Republicans had successfully framed antitrust enforcement as a necessary complement to tariffs. Although Harrison was no Teddy Roosevelt, he laid the conceptual building blocks for future trust-busters: making clear that economic concentration threatens democracy; monopoly suppresses competition; and the federal government must respond to both threats.

Following in Harrison’s pragmatic footsteps, President William McKinley was one of the leading protectionists of the era and the principal architect of the so-called McKinley Tariff. McKinley consistently defended tariffs as a labor policy, a nation-building policy, and a mechanism for industrial independence, but he also recognized the political danger that trusts and concentrated economic power posed.

The relationship between tariffs and antitrust was baked into Republican economic policy in the late nineteenth and early twentieth centuries, but as global free trade became the norm and tariff barriers were torn down, foreign imports constrained domestic prices and antitrust enforcement started to be seen as superfluous.

The process did not happen overnight—it needed an architect to overcome decades of orthodoxy. Those came in the form of Robert Bork and the ascendant Chicago School of Law and Economics, which challenged antitrust’s core assumptions as it leaned into the idea that “Big Can Be Beautiful,” and its thinking came to dominate federal antitrust policy at the Federal Trade Commission and the Department of Justice (DOJ) Antitrust Division from the 1980s onward. This intellectual shift in antitrust combined with the growth of global free trade shifted Republican orthodoxy away from the pragmatic symbiosis between tariffs and antitrust toward a new, more laissez faire approach to antitrust which reached its zenith during the globalization era that followed the Cold War as the U.S. tilted toward unrestrained global free trade. This shift changed antitrust analysis in important ways. In merger cases, courts and agencies asked whether, absent tariffs, foreign imports disciplined domestic firms, and found that in many cases they did. With the rise of China as an exporting behemoth in the 2000s, foreign imports became a real and serious constraint on U.S. domestic competition.

In 2005, the household appliance businesses of Whirlpool and Maytag announced their intention to merge. Many thought the merger would raise antitrust concerns, but the DOJ concluded that evidence of foreign imports from China, Mexico, and other free trade zones was so strong that the merger was unlikely to lessen competition in meaningful ways. The DOJ’s press release announcing its decision provides a bird’s eye view of the interplay between antitrust and free trade at that moment of peak globalization.

According to the DOJ, not only did Whirlpool and Maytag manufacture many products for sale in North America in Mexico, so did everyone else thanks to NAFTA. Not only that, big box retailers such as Best Buy and The Home Depot freely imported large volumes of products from LG and Samsung, both Asian manufacturers. LG in particular was found to have “grown to a significant volume of sales at Best Buy and The Home Depot in a short period of time.” Tariffs and antitrust enforcement declined in tandem.

The shift in trade policy that began in the Trump era could have inspired Republicans to pragmatically embrace antitrust as they did in the 1890s, accepting its necessary role in ensuring domestic competition.But they did not; at least not at first. Instead, the first Trump administration’s antitrust agencies carried forward the Chicago School laissez-faire model, and tariffs, industrialization, and antitrust remained siloed.

This changed when the Biden administration promoted the neo-Brandeisian school at the antitrust agencies, understanding that a lack of import competition—whether from tariffs or global supply chain shocks—can entrench domestic oligopolies and monopolies. They argued that reduced import competition increased the need to police domestic consolidation more aggressively and took a skeptical stance on mergers.

The Trump administration’s second-term tariff policies underscore the need for antitrust vigilance in key sectors—in particular, agriculture. Farmers and ranchers see the need for antitrust vigilance, and these groups are politically important to the Trump governing coalition. They argue that the twin logic of tariffs and antitrust should apply to the agricultural sector since tariffs have been particularly impactful on U.S. farmers’ and ranchers’ ability to afford key inputs such as fertilizer, machinery, chemicals, and fuel-related products.

Fertilizer remains the biggest concern for most farmers and many ranchers. The U.S. is heavily dependent on imported fertilizer inputs, especially potash from Canada, although the USDA has in recent months taken active steps to boost domestic production. Canada supplies more than 80% of U.S. potash imports, so even the threat of tariffs has rattled the agricultural sector. Some fertilizer products have been granted partial exemptions, but farmers continue to struggle with high fertilizer prices.

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Seeds are less affected by tariff policy because many are produced domestically but farmers still worry about concentration in the seed market, which foreign-owned corporations dominate in part due to a merger wave during the Trump 45 administration. Compared to fertilizer and machinery, seed imports have remained relatively stable. Here too, farmers are calling for antitrust intervention that would shield domestic production from further market concentration.

The administration has gradually responded. Last September, the DOJ and USDA announced a joint Memorandum of Understanding to investigate rising farm input costs, including fertilizer, seed, fuel, and equipment markets. The DOJ recently announced a deal with Bayer to remove certain restrictions from seed supply agreements with farmers and independent seed companies, but the terms of the deal remain opaque to industry observers. And the USDA is working to reshore fertilizer production through its Fertilizer Production Expansion Program. The USDA is fast-tracking approvals along with the EPA for fertilizer production plants. In the meantime, however, farmers face high input prices.

America’s ranchers are also impacted by tariff and antitrust policies, and ranchers are hugely important to the Trump governing coalition. As in the Gilded Age, ranchers feel beholden to meat packers, principally Tyson Foods, Cargill, JBS, and National Beef Packing Company. These firms reportedly control between 80% and 85% of U.S. beef processing capacity and, according to the ranchers, the packers flex their buyer power to drive down rancher margins. At the same time, the U.S. cattle herd is at its lowest level since the early 1950s after years of drought, high feed costs, and ranchers selling off the family business out of financial necessity, pushing beef prices higher on the supermarket shelf.

The ranchers claim that it is the packers’ buyer power that is suppressing prices paid to ranchers, and the packers’ seller power that results in higher prices on supermarket shelves. Ranchers have called for antitrust investigations into this phenomenon for several years now, and absent government action, have resorted to private antitrust litigation in several courts and states.

The White House is under political pressure from the well-organized ranchers and lesswellorganized consumers who face affordability issues heading into the midterm elections. The administration has tweaked tariff-rate quotas and increased imports from countries like Brazil, Argentina, Australia, and Canada to ease consumer pricing, but the heat has not left the issue. The White House’s economic logic is wrong per se. More imported beef lowers prices, increases supply, and relieves pressure on consumers’ pocketbooks. However, many U.S. ranchers oppose expanded imports because they fear foreign competition, they distrust Brazilian and Argentine sanitary and labeling standards, and they believe imports weaken domestic producers at a time when they are working to rebuild the national herd.

Amid this seemingly intractable problem, a political coalition—ranchers plus antimonopoly conservatives plus economic populists—is driving a renewed antitrust focus in the tradition of the Gilded Age Republicans. Last November, the DOJ opened an antitrust investigation into the meatpacking industry. The latest development in the investigation includes bringing supermarket retailers into the fray.

Could it be that prices are higher to consumers because of the supermarkets rather than the meat packers? It is hard to tell, and the DOJ has asked for data and documents on a voluntary basis, not issuing a subpoena. The supermarkets will politely point out that their margins on beef have not exactly increased in recent times, which more than suggests that someone else is making the profit in the supply chain, and it is not the ranchers. As to the Big Four meat packers, based on public reporting the focus includes possible collusion in cattle purchasing, coordination on slaughter capacity, price manipulation, and broader meat-packer buyer-power concerns.

The fusion between trade policy and antitrust enforcement illustrated by this investigation and the coalition behind it harkens back to the early days of antitrust. Time will tell if this DOJ will follow in the footsteps of Harrison, McKinley, and Roosevelt, or chart a different course heading into the midterms.

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The Federal Reserve’s latest Beige Book reports: “Healthy labor demand was seen most frequently in manufacturing, construction, and some service sectors... Significant wage increases were most often connected to demand for skilled workers in construction and manufacturing.” Also encouraging.

And the Purchasing Managers’ Indices continue to report strong growth this month.

• From S&P: “The headline seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) was unchanged at 53.9 in August, signaling a solid expansion in the manufacturing economy. Output volumes rose for the fifteenth consecutive month…”

• From ISM: “New Orders Growing; Production Growing; Employment Growing… Economic activity in the manufacturing sector expanded in August for the eighth consecutive month…”

And from the Dallas Federal Reserve, Texas Manufacturing Activity Accelerates as Outlooks Improve Further.

Caveat: There may be something wrong with these numbers. The true experts in the free trade gang were so reliable about posting data from these sources in the months after Liberation Day, when it didn’t immediately turn positive. But now they’ve gone quiet. They may know something we don’t. We are monitoring the situation.

YOUR ONE WEEKEND READ is Why the World Needs to Force China’s Yuan to Revalue: A currency accord, enforced with tariffs, might be the only way to get China to act, from Greg Ip in the Wall Street Journal:

China’s massive and growing trade surplus threatens to hollow out its trading partners’ industrial bases. For years, the rest of the world has pleaded with China to change its economic model to rely more on domestic demand, and less on exports, to no avail.

A currency accord, enforced with tariffs, might be the only way to get China to act. The time may be ripe. Frustration with China is boiling over, especially in Europe. “This Chinese surge now threatens…the very core of Europe’s productive system,” a French government report said in February. In June, German Chancellor Friedrich Merz called for a new Plaza Accord aimed at China.

A meeting by central bank governors and finance ministers from the top 20 economies starting this weekend in Asheville, N.C., would be a good place to start the conversation.

Read the whole thing and, while you do, imagine former Trump CEA Chair Steven Miran bursting through the wall like the Kool-Aid Man. Did someone say a currency accord backed by tariffs?

Seriously, though, it’s good to see the international economic framework that has guided the Trump administration get the credit it deserves in the Journal…

…and with our trading partners! On Sunday, reported Reuters, G20 countries should consider more trade barriers on China to cut imbalances, Bessent says. “U.S. Treasury Secretary Scott Bessent said on Sunday he will encourage G20 members to re-examine terms of trade with China to shrink global imbalances and press Beijing to rebalance its economy away from exports and toward domestic consumption.”

On Tuesday, the U.S. released a “chair statement” from the summit with support from 19 of 20 countries. Any guess on who the one is? (The Financial Times provides a hint: China derails consensus after US-hosted G20.) As Bloomberg’s chief U.S. economist Anna Wong notes, “The 19-1 vote is really telling. Now that Europe is experiencing what the U.S. had experienced in the 2000s, there is finally something approaching moving toward a global consensus on global imbalances.”

Strange, that. We were warned by the very best experts that aggressive U.S. action on trade was going to alienate allies and drive them toward China. But it seems to have had the opposite effect, and now everyone is coming together to confront and isolate China.

From the Wall Street Journal: U.S. Says It’s Fed Up With China’s Overcapacity—and More Countries Agree. For instance, “When it comes to China, ‘everyone’s feelings have crossed a threshold,” said Japanese Finance Minister Satsuki Katayama.’” And, “a February report by the French government titled ‘The Chinese Steamroller’ said China’s export surge threatened the ‘very core of Europe’s productive system.’ In Indonesia, one of the poorest G-20 members, government officials have said that a flood of Chinese imports is hurting domestic industry.”

Indeed, it appears that by refusing to continue absorbing the brunt of the global imbalances itself, the U.S. has forced its partners to acknowledge and address the problem alongside it.

In his latest at Foreign Affairs, A Great Rebalancing Is Coming: Who Will Bear the Costs of a Global Trade Adjustment?, Michael Pettis looks at how all this might play out:

Beijing seems set on trying to preserve its surpluses for as long as possible. Washington is just as intent on reducing its deficits. If Europe can develop the political capacity to do the same, the burden of adjustment will increasingly fall onto the surplus economies, which would have to rely more on domestic demand and less on exports. If it cannot, Europe will absorb more and more of the global surpluses, and what appears today to be a trade conflict mainly between China and the United States may become a conflict between China and Europe—and a struggle between the two of them to avoid bearing steeper costs down the road.

If I were Canada, I’d work on teaming up with the United States against China on this one, rather than cozying up to China or thinking about joining the EU. I would not recommend the current strategy. As Secretary Bessent suggests, “I don’t think you can be in a tit-for-tat with someone who’s 13 times larger than you are.”

MORE GOOD READS FROM THE WEEK

I still don’t have the greenlight to emulate Matt Walsh’s “What Is a Woman?” documentary, sporting a man-bun wig while wandering around conferences to ask pretentious and underachieving economists “what is an economist?” So you’ll have to make do with this not-a-parody column from Soumaya Keynes in the Financial Times: When Is an Economist Not an Economist?

Think of economists as a guild whose members police who is allowed to join and what counts as true economics. By guarding the definition of economic expertise, they preserve their influence over the public and public policy.

This seems mostly right, with the caveat that their definition of “true economics” has fallen so flat on its face that defining their profession by its terms is at this point reducing their influence rather than preserving it. (Also, fun fact: Yes, Ms. Keynes is related to that Keynes! She is his great-great-niece.)

Forthcoming in the American Economic Review, from Daron Acemoglu et al: Eclipse of Rent-Sharing: The Effects of Managers’ Business Education on Wages and the Labor Share in the US and Denmark. Apparently, CEOs with business degrees don’t just wear snazzier quarter-zip fleeces, they also reduce wages by placing higher priority on shareholder value. They do not, on the other hand, increase output, investment, or employment growth.

And, from the New York Times, Wispr Flow is supposed to make writing effortless and magical. So I “wrote” this column with it. Amy X. Wang observes:

To tell you the truth, I hate this. I hate Wispr Flow so much. I hate that so many people in the world are lauding this like it’s the greatest invention, when actually I think it’s making everyone sound a little like an idiot, and now everybody has to read everyone else’s idiot words. I wish I could describe elegantly how much I hate it with some kind of handy, clever metaphor, but that kind of creativity comes to me through writing with my hands.

Speaking of things AI is ruining…

EDUCATION

NYC school system to ban AI for elementary, middle school students (Politico). Good for them. EPPC’s Patrick Brown makes the salient political point: “One political side has its leaders pushing robots as tutors and ‘A1 in every classroom.’ The other side has a major city administration keeping generative AI out of elementary and middle school classrooms. One of those paths is more family- and human-friendly than the other.”

• This misstep by at least one faction of the right-of-center parallels the one I wrote about in Vice President Donald Trump: “If Trump brands Republicans as the party of liberty-means-license and ‘kids want to spend their time gambling with borrowed money because that’s their welfare-maximizing revealed preference,’ while Democrats become the party that speaks in moral terms and works to ensure young men build decent lives, the electoral consequences will be steep.”

In better news, from the State Department, “Vice President J.D. Vance and Secretary Marco Rubio announced today the launch of Foundry School, a training program for entrepreneurs, engineers, technicians, and industrial leaders to rebuild American manufacturing.” Cutting the enormous and counterproductive subsidies to traditional higher education is important, having new models like this toward which funding can be directed is equally important.

And back to worse news, from the Department of Justice, Ohio State University Agrees to $2.1M Settlement to Resolve Allegations that it Failed to Disclose Employees’ Ties to the People’s Republic of China in Applications for Federal Research Funding. Well the fine is good news, but as FDD’s Craig Singleton goes deeper on the problem in Higher Ed’s Secret Foreign Funding:

Washington has a list of names. What’s delaying disclosure? (Wall Street Journal).

China, China, China. It’s enough to make you think entangling our economy and society with a communist, authoritarian one might not be a good idea! Which brings us too…

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CHINA

A few decoupling items to keep an eye on, all from Bloomberg:

Top Automakers Urge Congress to Permanently Ban Chinese Cars: “The call by the US auto industry’s biggest trade association — echoing a similar plea made by the alliance and other auto groups in March — underscores mounting concerns in the domestic industry about the threat posed by China’s automobile makers. The alliance represents domestic carmakers including General Motors Co. as well as overseas giants Toyota Motor Corp. and Volkswagen AG.”

• A wild, related statistic from BYD’s latest financial report: “First-half sales from overseas rose 34% to 181.3 billion yuan ($27 billion), accounting for 53% of the total, while they shrank 31% in Greater China.” That’s, um, not normal. “The results show how the vast Chinese market, where annual vehicle sales outnumber those of the US by nearly two-to-one, has become so brutal that not even its national champion can count on making money there. That’s why Chinese carmakers have increasingly turned abroad…”

Why the FCC Is Becoming America’s China Uber-Hawk: “Perhaps less-well recognized is that the regulator is emerging as a key instrument in Washington’s efforts to ‘de-risk,’ or in some cases outright decouple, US supply chains from China. This shouldn’t come as a surprise: Since before the FCC’s creation, the US national security apparatus (and especially the Navy) was paying close attention to devices that transmit and receive signals over the air.”

LABOR x IMMIGRATION

Don’t look now, but: Record-High 47% Want Unions to Have More Influence (Gallup). Of particular note, “partisans differ on whether unions should gain influence, but majorities in all three groups approve of unions overall: 89% of Democrats, 70% of independents and 52% of Republicans. Broad Democratic approval is typical, but this is only the second time in the past quarter century — the first being in 2022 — that a majority of Republicans have approved of unions.”

Perhaps not unrelatedly, the quiet withdrawal of the case for mass immigration continues apace, even on the Wall Street Journal opinion page. In Immigration Becomes a Global Powder Keg, Walter Russell Mead makes the obvious yet not so frequently made point: “In recent years, American immigration advocates have argued that falling birthrates create a need for more immigrant labor. Those arguments are less convincing in the face of the accelerated automation that artificial intelligence appears ready to unleash.”

Example? Watch this “AgTech moon landing moment.” The first robotically harvested head of lettuce!

Perhaps not unrelatedly, the Center for Immigration Studies has released its latest analysis on the foreign-born population in the United States, finding that since January 2025, “The total foreign-born population declined 2.9m; Illegal immigrant population may have declined 2.3m.”

Either “root causes” like climate change suddenly reversed their effect, or enforcing the law works. You be the judge.

One place that enforcing the law seems to work is trucking. The U.S. Department of Transportation announced that it has shut down more than 100 commercial driver’s license (CDL) schools that were granting licenses to drivers who failed English proficiency tests, among a variety of actions. Vice President JD Vance on the problem: “We know that trucking is one of the best sources of employment for non-college-educated men. It was bad for people’s jobs, but it also made our streets and our highways a lot less safe.”

OPT, Yeah You Know Me (you’re welcome, Gen X). Here’s a problem that deserves more attention and seems easy enough to solve: alongside the H-1B mess, people are catching on to the absurdities of Optional Practical Training program (OPT), which was intended to allow foreign college students to work temporarily, but has been expanded by corporations and allied regulators into yet another boondoggle. Bloomberg actually had one of the best rundowns on this a number of years ago in The STEM Graduate System Is Broken. Here’s How to Fix It:

OPT has also opened a side door into the U.S. job market with minimal labor protections and oversight. It is increasingly funneling cheaper and more pliable, visa-dependent foreign candidates into fields such as software engineering and development, depressing wages and making a once-attractive career path less desirable. Moreover, even as OPT benefits U.S. schools eager to attract foreign students, it can undercut American students looking for work. And there have been too many instances of exploitation and outright fraud.

Fair warning, though, from the Cato Institute, which is proudly promoting testimony from its director of immigration studies, David Bier: “If you make legal immigration impossible, don’t complain about illegal immigration. You created it. You made it illegal.” That’s one way of looking at it! Fortunately, not one that conservatives have to put up with any longer.

And finally, speaking of things conservatives don’t have to put up with any longer…

YOUR BAD TWEET OF THE WEEK

Likely a regular feature, given the volume of foolishness out there (nominations welcome). Our inaugural edition comes to us from Grover Norquist’s former tax policy director, Ryan Ellis:

Enjoy the weekend!

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Artificial intelligence did not wreck our colleges and universities. Leadership in higher education did. AI simply revealed the perverse incentives underpinning America’s system. Where the three actors of academia—administrators, faculty, and students—should strive in harmony toward Truth, our universities abandoned that pursuit long ago and reoriented themselves toward a new end: the appearance of learning.

American colleges depend on tuition, and administrators must keep the money flowing in. Student-derived revenue provides roughly 75% of operating budgets for the median private college, and roughly 50% for the median public college. Approximately 13 million students each year pay their tuition with federal dollars received through Title IV of the Higher Education Act of 1965, which governs student financial aid programs. Although students can only use this funding at accredited schools, the accreditation process is flawed, as many state and private accreditation organizations overemphasize outcome metrics like retention and graduation rates.

But maximizing for these metrics has unintended consequences. Most significantly, it incentivizes university administrations to churn out as many graduates as possible rather than focusing on rigor, which weakens academic standards. With these incentives in place, every student expelled for cheating constitutes lost revenue and a hit to the university’s rankings, not to mention the administrative cost, potential lawsuits, and public scandal that every institution wants to avoid.

The faculty have their own misaligned incentives. About 68% of instructional positions are now contingent, meaning that the majority of faculty depend on non-tenure, short-term contracts that are increasingly subject to the tyranny of student evaluations. If instructors are unpopular with their students, it is reflected in end-of-semester surveys that department chairs review before offering contract extensions. Thus, most instructors are strongly incentivized to appease their students to score well on course evaluations and keep their jobs.

It should come as no surprise when instructors are reluctant to report honor code violations that could ding their approval ratings. This system fosters a soft-on-academic-crime atmosphere that licenses cheating and replaces the student-teacher relationship with a transactional customer-satisfaction dynamic that rewards leniency and punishes the rigor of true learning.

From the student’s perspective, pursuing a degree is more pressure-filled than ever, with two major trends increasing pressure on students: credentialization and grade inflation.

About 36% of jobs require at least a bachelor’s degree, with most other positions favoring candidates who hold one. Meanwhile, about 94% of parents expect their children to attend college. The bachelor’s degree has crept into jobs that never before required one and has become a rubber stamp for a steady career. If the diploma is the goal, and the checkpoints along the way only measure what the student turns in, learning becomes a cost. The rational student cuts the cost and produces those outputs as efficiently as possible with AI.

Students are left feeling that they must obtain their credential, and they rationally decide that using AI will make the task easier and alleviate the pressure.

A related phenomenon is the pressure students face from grade inflation. When the average student earns an A, a single B+ reads like a scarlet letter. What used to be a competition for a B in a C-average class is now a fight for the one or two A+ grades in an A-average class. With a single mediocre exam performance or poorly written essay, a student may forfeit his chance at a top medical school or law school, where the median GPA of accepted students is somewhere between 3.82 and 3.96. There is no room for growth because there is no room for error.

Thanks to pandemic-related lockdowns, many of today’s college students spent their formative high school years in virtual classrooms, acing any test via a second browser tab or chatbot app. Instead of making flashcards or rewriting essays through trial and error, these students circumvented the strenuous process of learning. When they entered college, they were stuck playing a game of catch-up in an environment that punishes every mistake. For the student who never built the mental muscle, AI is not an escape from work he should have done but a mobility scooter for his mind, carrying him through work he cannot trudge through alone.

The whole incentive structure now comes into view: The administrator cannot afford to expel the cheater, the instructor cannot afford to accuse him, and the student cannot afford to stop. No one in the university has a structural incentive to promote learning, only the appearance of learning, which is why AI conquered the higher education landscape within a couple of years.

The Advent of AI in Education

I was part of the first college class for whom AI was a daily feature of academic life. Some of what I witnessed resembled the recent case of the Brown professor, who allowed students to take a midterm exam at home only to see the class average rise from its usual range of 65–80 out of 100 to a whopping 96. Most of what I saw was more subtle, and perhaps even more destructive.

There was an unimaginable escalation of students’ dependence on AI. The synonym finder became the essay writer; the spellchecker became an editing agent; the brainstorming tool became the brains. Students used AI to summarize required readings, finish their homework problems, and review their notes for exams. By the time I graduated in May, many students around me could no longer synthesize a difficult text, draft a paper, or form opinions without first consulting the machine. My experience was not unique. A 2026 survey of British undergraduates found that 94% of students used generative AI to help with assessed work, a trend that holds true across American institutions.

The problem is not the prevalence of AI but how AI distorts learning by widening the gap between what a student knows and how he performs. Never before have so many students produced coherent work about which they have little to no prior knowledge.

Achieving a high test score and turning in a well-written paper are no longer finish lines that can only be crossed after months of daily, sequential training. In running terms, thousands of students are finishing marathons without ever lacing up their sneakers.

How Did This Happen?

While AI has widened the gap between students’ knowledge and performance more than ever before, the perverse incentive structure began separating them decades ago. Two ideologies built this flawed incentive structure: libertarian economics and therapeutic progressivism.

Libertarian logic tells us that the university is a marketplace of credentials, and the degree is its prized commodity. Students pay tuition to the university, enjoy the amenities, and, in exchange, the university awards them a credential. The student is a consumer, the university is a vendor, and any actual learning is a side effect of this exchange. Many conservatives absorbed this premise without noticing, and they repeat it every time they assert that higher education should be judged by return on investment.

The student’s growth in virtue, development of critical thinking skills, and pursuit of the transcendentals (Truth, Beauty, and Goodness) are cast aside because they cannot be measured. Yet to reduce education—the integral formation of the whole person—to nothing more than a means to a financial end is to reduce the person himself to nothing more than a unit of capital.

The other ideology of the modern campus is therapeutic progressivism, which sees the student as a patient whose feelings need to be managed rather than a citizen whose personality and preferences need formation and ordering. In the university, the student-as-patient mindset has fueled an ever-expanding accommodations regime, syllabi designed to minimize stress, and an enormous bureaucracy of administrators hired to please the student-customer.

In this system, the professor is not to challenge or judge students, for to do so would be an act of “aggression.” The school cannot stand for Truth, for to do so would be to encroach on its students’ truths. Everything from dress codes in the classroom to common-sense guest policies in the residence halls—even grading assignments—is off the table, for to have such policies would only “hurt” the students. Do not even consider running students’ papers through an AI checker; just think of all the emotional damage inflicted on the patient!

These two ideological messes stand at opposite ends of our political spectrum but are united in one belief: the student is a consumer, and the university is a service provider. While the libertarian view makes the case economically and the progressive view makes it psychologically, both degrade higher learning by distorting the ends of education. Rigor, to the libertarian, is just an inefficient cost added to student-customers’ degrees. To the therapeutic progressive, rigor is a harm to the students’ well-being because it makes them feel uncomfortable.

AI brings our universities’ already distorted ends to their logical fulfillment. It cuts the cost the libertarian despises and dissolves the discomfort the progressive dreads.

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A Better Answer

Conservatives have every right to be disgusted with academia. The very institutions founded to impart the fruits of Western Civilization have spent a generation deconstructing them and fostering a sense of Western self-loathing. Whenever anyone tries to realign the university to its proper ends, students, faculty, and administrators close ranks behind “academic freedom,” a principle invoked only as a defense mechanism against reform.

The Trump administration deserves credit for bursting this bubble. Its funding settlements proved that even the most ideologically committed universities will change their policies to keep taxpayer dollars flowing. Yet while the administration has made strides in restoring university life, it has also fallen victim to some of the same ideological undercurrents that led us here in the first place. If we are ever to restore the American university to a system that forms citizens and is resilient in the face of emerging technologies, we must use the federal arm to realign the incentive structure in accordance with a conservative understanding of education.

The Trump administration’s single attempt at clarifying the ends of the university, the Compact for Academic Excellence in Higher Education, rightly targets the stifling ideological conformity of progressive wokeism but ignores the commodification of education and value-neutrality that allowed such ideological mania to take over.

It declares “truth-seeking” a “core function of institutions of higher education,” one that is fulfilled by “maintaining a vibrant marketplace of ideas.” Just like that, the Compact repeats the libertarian fallacy of the university as a kind of marketplace, where the best idea is supposed to win.

We cannot revive the university by simply reopening the marketplace that facilitated its decline. We must, first, order it to a positive vision of its own ends. A university can afford neutrality on many things, but not on the fundamental axioms of inquiry: it must hold that Truth exists, that It can be known, and that It is worth pursuing.

The conservative approach to higher education has a better answer: the university exists to take a young adult and, through discipline in the legitimate intellectual pursuit of Truth, form him into someone capable of thinking for himself and governing himself—a citizen fit for a republic. This vision is durable, and doubly so in the face of AI. While exams, essays, and even credentials are subject to AI counterfeits, a well-formed mind and a virtuous heart are not.

Using the Federal Arm

Instead of further dismantling the federal governance of higher education, the Trump administration should use its leverage formatively. The precedent for conditioning Title IV funding eligibility is strong and effective. Institutions of higher learning are required to have training, reporting mechanisms, and fire drills for accreditation eligibility and federal funding. Verifying whether a school’s assessments are real cuts even closer to the heart of the education the federal government is subsidizing. Title IV fueled the distorted incentive structure, and a prudent realignment of Title IV funding can fix it.

First, the Trump administration should require institutions receiving Title IV funds to report AI-resistant measures of academic competency such as proctored in-person written or oral exams in all courses. This measure makes the gap between GPAs and actual knowledge visible, incentivizing universities to restructure their curricula and assessments around true learning, since they will begin to compete in the public rankings for the smallest gap.

Second, have the Department of Education direct accreditors to pair retention and completion measures with demonstrated learning measures and to take academic integrity seriously. In order to meet accreditation standards, universities should be forced to implement sufficient AI-resistant modes of assessment (blue book exams, in-class essays without use of personal computers, and in-person tests), fund just processes for adjudicating academic honor code violations, and minimize the importance of student satisfaction surveys in instructor retention.

Third, if the gap between students’ performance and actual knowledge persists, tie Title IV funding directly to universities’ implementation of the demonstrated competency standards above.

Students should not have to be tempted by take-home online exams. Professors should not have to choose between enforcing the honor code and keeping their jobs. Administrators should not have to choose between a financially viable university and an academically rigorous one. With these changes, the federal government and the subsidiary accreditors do the dirty work for the universities by restructuring the incentives.

The Right holds more authority today over American higher education than it has in generations. It, too, faces a choice: stand by while AI finishes the demolition of higher education, or fight to restore the university’s mission of forming citizens in Truth.

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The tweed-wearing professor saunters smugly across the front of the lecture hall, hands clasped behind his back. “Here’s a thought experiment,” he intones. “Suppose the President of the United States offers to provide early access to his public statements for a fee. Hedge funds form a line down Wall Street to sign up. Is there anything wrong with this?”

Of course, it’s not a thought experiment at all. President Trump’s media company is doing precisely this. On August 1, Trump Media launched Truth API, a service that charges $100,000 per month to access Truth Social posts from the president and other “leading accounts” milliseconds faster than the general public. (An API, or Application Programming Interface, allows software systems to connect with each other and exchange data.) Clients can then trade on information before it reaches the general public.

Back in the lecture hall, one student raises her hand. “Well, isn’t that illegal?”

Probably not. The payments are not intended, or likely, to alter the content of the president’s pronouncements (he’ll make money regardless). So they are hard to describe as bribes.

Further, most federal anti-corruption laws exempt the president, and he enjoys immunity from criminal prosecution for official acts anyway. The case’s ambiguity is underscored by the variety of legal theories being deployed: a lawsuit filed by The Intercept and the Freedom of the Press Foundation argues that Trump API violates the First Amendment, and leans on Banks v. Manchester, an 1888 ruling that judges cannot copyright their own decisions.

Congressional Democrats meanwhile have decried Truth API as insider trading. But that would require trades based on nonpublic information; here, public releases are simply arriving faster to customers willing to pay more. An endless variety of subscription services, and entire technology packages like the Bloomberg terminal, operate on similar premises. Twitter (now X), a direct competitor to Truth Social, began selling API access years ago. It’s completely legal and entirely normal.

On an August 10, 2026 earnings call, an unidentified executive asked the obvious question: “Regarding Truth API, how does the company respond to criticism that Trump Media is giving some traders in a market an unfair advantage by selling this access?” Truth Social interim CEO Kevin McGurn responded:

The criticism is misinformed, is the first thing I would say. Truth API provides machine-readable feeds of publicly available Truth posts from the platform’s top accounts in milliseconds. Our customers will get published and publicly available posts fractionally faster. Providing licensed real-time public data through commercial APIs is a well-established business practice, which we’re hopeful will deter scraping and other violations of our terms of service. We’re encouraged by the early demand for Truth API and we look forward to rolling out the product to other sectors, including retail investors.

Two weeks later, as the client list continued growing, McGurn went on CNBC to defend Trump Media against growing criticism: “The technology is a tried and true technology that’s been in the social media system for quite some time, more than a decade. So all of your big platforms run APIs into high frequency trading platforms, news and information services, prediction markets, you name it.”

For the high-frequency traders most likely to make use of Truth API (indeed, they say they have “no choice” but to), this is just one more advantage of exactly the kind that their business model is equipped to exploit. They take advantage of an ability to access and process information fractions of a second before others can, executing thousands of trades in the moments when they hold actionable market information others do not. High-frequency trading accounts for over half of total trading volume in America. As McGurn says, it is beyond normal.

Our students squirm in their seats now. This must be wrong somehow, but no one knows the answer. Why won’t the professor just tell them?

Even if not illegal, one might expect those market fundamentalists most passionately protective of the sacred transaction between consenting adults to have an account of the economic harm caused by this tomfoolery. But no, to the contrary, experts in the financial sector and ideologues in their think tanks defend it. High-frequency trading is good for markets, the argument goes, because it gets more usable information into the market, increases liquidity, and offers opportunities to boost returns on capital. By that logic, even if Congressional critics were able to demonstrate that Truth API constitutes insider trading after all, it shouldn’t matter, because outright insider trading is good. According to the Cato Institute, for example:

Every security transaction has a willing buyer and a willing seller. Moreover, much ‘insider’ trading is legal, such as hedge funds trading on their own research. Insider trading is likely to make markets more efficient by incorporating MNPI [material non-public information] into stock prices faster. According to a 1992 study, on both insider trading days and those leading up to the eventual announcement of information, pre-announcement price drift occurs. Were the market to remain static, investors would face greater risks as security prices would not reflect the true value informed by insider knowledge.

Freely transacted, more efficient, less risk. How is Truth API any different?

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High-frequency trading, of course, provides none of the value its advocates claim. The information that high-frequency traders exploit is not usable to anyone without their infrastructure and thus disadvantages the slower investors they front-run, like smaller traders and pension funds. The liquidity that high-frequency trading ostensibly provides is usable only to themselves, and is often illusory, instantly withdrawn in the middle of active trading (“ghost liquidity,” analysts call it). It presents serious market stability risks. And, most fundamentally, it is pure rent-seeking: profit premised on nothing productive, simply shifting money from other, less sophisticated pockets into theirs.

High-frequency trading is just one of many rent-seeking strategies through which well-positioned people misapply their talents toward misappropriating the resources of others. How is Truth API different from, say, the schemes proudly constructed by hedge funds like Cliff Asness’s AQR to help the wealthiest Americans avoid paying taxes on their capital gains? It’s legal, isn’t it? Heck, as Asness notes, he has an obligation to maximize returns for his clients. Doesn’t Trump Media have that same obligation for its shareholders? Yes, says McGurn. “This was demand that came to us from the market,” he protested on CNBC, and “we wanted to make sure that we satisfy that demand in the most brightly lit way for us.” What else could they have done? The wealthy paying for access to the information and skills that other wealthy people can provide, to profitably maneuver a rigged system that average investors are not equipped to navigate, is as American as apple pie.

The students think they are beginning to catch on. The law has no way to check a corrupt president. The economic dogma of market fundamentalism doesn’t either. Maybe it’s a trick question, and the point is that Truth API is A-OK. They can proudly build their own careers and make their own fortunes the same way.

But from the back of the room, a freshman raises his hand. He lacks training in both law and economics, but he hazards a guess anyway. “Isn’t what’s wrong with this that it’s just wrong?”

“Ah,” the professor says with a smile.

The deeper outrage of Truth API is not the potential violation of an SEC regulation (though that would be bad), or a crimping of market efficiency (though even some market actors are quietly horrified). It is the simple (lower-case t) truth that leveraging public office for private gain is gross. Selling access to Oval Office social media posts is a betrayal of the public trust and a violation of the political virtue that we require from our leaders, if we are to enjoy the blessings of a democratic republic that commands the loyalty of its citizens.

Truth API is so disturbing because it really would be the ideal thought experiment, taking misguided ideas about both our economy and our democracy to their extreme, and yet we are now living in that extreme. We recoil not only from Truth API’s degradation of the presidency and the damage it does to our republic, but also from our recognition of its banality and of the intellectual architecture that justifies it as normal. Truth API is simply the logical next step for a perverted capitalism that has forgotten its purpose and does not expect our leaders in the public or private sectors to recover it. There is plenty of degradation to go around.

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On Wednesday night, I was picking up my daughter from volleyball practice when something about the line of middle-school girls waiting in the hallway caught my attention. It wasn’t just that they all had smartphones—that was to be expected outside of our little homeschooler bubble. And it wasn’t that half of them, at any given time, were looking at their screens rather than talking to one another—if anything, that’s a pretty healthy ratio these days. It was what they were doing when they weren’t looking at their phones. Rather than hanging limply at their sides, their phone-holding hands were oddly fidgety, restlessly gripping and stroking the polished glass.

Slightly disturbed, I looked it up and discovered this is a documented phenomenon—a 2020 article in the Journal of Consumer Research, “The Smartphone as Pacifying Technology,” described users “self-soothing” with phones like a child with a teddy bear. Unlike the teddy bear, however, the phone was both comforter and tormentor for these teens.A sinister Stockholm syndrome was on display in that hallway, as these girls sought rest in the source of their restlessness.

Ironically, I was headed home after volleyball practice to celebrate with my wife after one of the greatest victories for child online safety in my lifetime: that day, 51 state attorneys general had announced a landmark settlement with Meta for $17 billion for its decade and a half of systemic child abuse in what many commentators were calling Big Tech’s “Big Tobacco moment.”

The price tag, big as it is, is chump change for the trillion-dollar behemoth. No, what caught my eye were the terms of the settlement agreement, an extraordinary 45-page document that may presage one of the greatest policy revolutions in the history of the digital economy. Here was the beginning of the end of a business model built upon the torment of those restless and anxious girls I had seen in the school hallway—if parents and policymakers have the courage and clarity to capitalize on the moment.

It is important to be clear about what the settlement did and did not accomplish. While victims, parents, and advocates across the country celebrated the news, Meta’s investors also breathed a sigh of relief that a theoretical $1.4 trillion liability had been reduced to just $17 billion, and the stock ended the day slightly up. A combative James Uthmeier, Florida’s Attorney General, refused to join in the settlement, calling it a “slap on the wrist” and expressing his determination to see Meta in court. And the lawyers for thousands of individual plaintiffs and school districts girded up for ongoing battle against the tech giant.

The terms of the settlement were, as always, more nuanced than early headlines made them out to be. Meta, after all, is only one of the defendants in a barrage of multi-district suits that also target its major rivals YouTube, Snap, and TikTok (indeed, Meta’s platforms are not even the most popular social media apps among teens anymore). The settlement reflects this fact, with some of the stricter provisions and higher monetary fines only taking effect if the other companies agree to similar terms, and until they do so, the settlement could have the perverse incentive of driving teens to more permissive, even less safe platforms. Advocates and lawmakers should not rest on their laurels but press their advantage.

In many ways the settlement constitutes Meta’s capitulation to the framework of the Kids Online Safety Act that it has long fiercely opposed in Congress, which would mandate design changes and parental controls for teen users. Meta’s lawyers, of course, were as miserly as possible in haggling over the terms of these concessions. Teens are still free to sign up for Facebook or Instagram without parental consent, and the settlement’s “supervisory parent accounts,” which give parents some visibility into risky activity and the ability to customize key settings, are purely optional; indeed, they seem more designed so teens can lobby their parents to relax default restrictions rather than to allow for more robust controls. These default restrictions are less impressive than advertised.

The new “night mode,” offering a blackout of both Facebook and Instagram, only lasts from midnight to 6am (extendable to 10pm-7am if Meta’s rivals agree to similar provisions), and does not apply to DMs. The “school mode” (automatically in effect from 8am-3pm) leaves app access unchanged, constituting only a default mute of notifications—again, excluding DMs. Moreover, even as the settlement compels Meta to implement many of the particular design provisions called for by KOSA, it does not create a generalizable “duty of care” for the company toward minor users. The settlement imposes no obligation on Meta to refrain from collecting personal data from minors to use for targeted advertising, even if it does allow the option of creating a non-personalized, purely chronological feed (something only millennials may remember from the olden days of Facebook).

In other words, Meta is still counting upon a steady pipeline of teens to juice its user base over the coming years. It’s easy to see why investors breathed a sigh of relief. Why then call this settlement the greatest victory for child safety in my lifetime, or the harbinger of a profound policy revolution?

It’s because Big Tech’s walls have now been critically breached. It is not invulnerable. It is governable, after all, and it remains only for good policy to pour through the gaps in its now-cracked defenses.

Consider: For years platforms like Meta have argued that meaningful age verification is technically infeasible, egregiously privacy-violating, and constitutionally untenable. This last argument was profoundly weakened by the Supreme Court’s dramatic ruling last year in Free Speech Coalition v. Paxton, but many had argued that it applied only to obscenity. By the terms of this settlement, Meta has not only committed to carry out such age verification (and to submit to stringent efficacy standards), but waived the right to contest these terms as unconstitutional. For years, the platforms, aided and abetted by free market fundamentalist cheerleaders, have denied that there was anything harmful or addictive about their products.

Any attempt at regulation, they declared, was a naked example of nanny-state interference in the free and rational utility-maximizing choices of the platform’s young users. If teens spent six hours a day scrolling Instagram, that was an expression of revealed preference that no one should second-guess. If parents chose to buy their children smartphones, that should be taken as implicit consent to set their children loose in the cesspool of sextortion and self-harm content that would soon inundate their feeds. These free market just-so stories seem outdated now; both the law and Silicon Valley have moved on. Even if Meta made no admission of wrongdoing in this settlement, every one of the features that Meta agreed to remove from teen accounts is one that hijacks teens’ psychology in predictable and pernicious ways. If even Meta isn’t claiming otherwise now, economists shouldn’t either.

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And the specific design concessions are worth pausing over, because two in particular constitute an unprecedented retreat from the central logic of the attention economy by the company that first pioneered it.

In perhaps the most quietly astonishing passage of the agreement, under the heading “Social comparison,” the text declares: “Meta SMPs [social media platforms] will, by default, disable Teen Users from seeing numbers of likes or reactions on Meta SMPs. This default for Teen Users cannot be modified without approval from a Supervising Parent.” If you’re heading to college this fall, you were barely alive when Facebook first introduced the legendary “like” button, creating social media as we know it: an engine of relentless social comparison that prompts each of us to seek our happiness not in the qualitative affirmation of a hug, a smile, or a fist-pump, but in that cruelly quantitative counter, which is somehow always stuck at a lower number than our friends’.

Through this and other instruments of social comparison, platforms like Instagram conscripted millions of teenage girls into the attention economy—not merely in the sense of customers paying Meta with their attention, and its resulting data value, but as what Byung-Chul Han calls “entrepreneurs of the self” in his book Psychopolitics. Rather than directing their energies toward learning and play, they are catechized from tenderest years in a capitalist creed of cutthroat competition, seeking to optimize their production, market share, and profit/loss ratios within this attention economy.

To be sure, young people have always been more than capable of hyper-competitive social comparison without technology, as any viewer of Mean Girls knows. But before the phones, at least the mean girls didn’t follow you home, and there was a limit to how much they could torment you during Chemistry class. Today, thanks to the notification-machines burning a hole in their pockets, today’s young people have nowhere to go from the rat race of selfies, stories, and streaks, whether they’re in the middle of a midterm or burning the midnight oil. As Han writes in another book, Non-Things: “The smartphone is a mobile labor camp in which we voluntarily intern ourselves.” In this too, today’s young people are being catechized in the creed of contemporary capitalism, which long ago abolished the Sabbath that had once offered workers and families some respite from the torments of the market, and has since relentlessly colonized every spare moment of our time.

Riddled with exceptions though they may be, then, Meta’s screen-time concessions—only two hours per day across its platforms, a blackout between midnight and 6am, and no notifications during school hours—represent an abandonment of a second of the central dogmas of life in the age of the smartphone: “thou shalt be always available.” These apply by default to all teen accounts and can only be overridden by supervising parents. They thus constitute the first faint outlines of what we might call a “digital sabbath principle,” a recognition that we require periods of rest from our own devices. It turns out that we do not need, as so many tech advertisements have told us for two decades, to be continually connected 24/7 by 5G internet access. And certainly our children do not need to be. For Meta to acknowledge this is astonishing.

To capitalize on this victory, parents and policymakers must press their advantage on this implicit concession that children should not be treated like market actors or market commodities, and force the companies to make it explicit.

Why, after all, are children allowed to enter into contractual agreements with these platforms in the first place? In a recent lawsuit against Roblox for the suicide of a thirteen-year-old girl, Roblox sought to have the suit dismissed on the grounds that the child had signed away her rights to redress and agreed to arbitration when she clicked “Yes” to a terms of service agreement at age 8. Absurd. Only parents have the right to contract with companies on their children’s behalf. If we were actually serious about governing the online world the way we do the analog world, no minor would be able to set up a Meta or Roblox account in the first place without parental consent.

Lawmakers must move swiftly in codifying the critical concessions in this settlement into a law that governs all platforms equally. But they must also tackle this problem at the root: children do not belong in the attention economy, whether as data mines for Silicon Valley to exploit, or as self-exploiting “entrepreneurs” addicted to producing what Silicon Valley demands. Parents may not be perfect gatekeepers—but it’s time to at least give them back the keys.

For nearly two decades now, Meta and its rivals haven’t given their restless young users a rest, bombarding them with ads and notifications night and day. Neither should we give them a rest now. It’s time for parents, advocates, and lawmakers to demand a lasting transformation of the digital economy that gives our children space to be children again.

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So now we have a split. Understanding America will be returning to your inbox in early September as a bi-weekly digest from the whole American Compass team focused on the challenges of reclaiming American citizenship. Weekly on Fridays, you’ll receive this fine product, The Real Economy, covering the stories that matter in, well, the real economy.

YOUR ONE WEEKEND READ is Reforging American Industrial Deterrence and Reclaiming the Common Good, a fantastic new essay from Congressman Riley Moore in the latest issue of American Affairs. He dives deep into the steel industry as a case study in America’s willful abandonment of its own industrial base and the necessity of reindustrialization:

We must implement policies that align commercial incentives with our strategic interests, so that it once again becomes profitable for private firms to build and sustain the capacity our deterrence depends on. And, ultimately, we must reintegrate our national security infrastructure with a strong and independent commercial industrial base.

It won’t be easy. Wall Street’s profit-maximizing logic is opposed to even modest tariffs to protect American industry, and it will fight even harder against the much higher tariffs and direct federal investment required to rebuild once great mills like Weirton. But doing so is necessary, not only for our national security but for our identity as a country that is independent, self-sufficient, and capable of standing on its own two feet.

Moore’s concept of “industrial deterrence” mirrors closely the “industrial depth” that Assistant USTR Mark DiPlacido and I described a couple of years ago in Big Stick Economics:

The big stick of President Theodore Roosevelt’s dictum is not an exorbitantly expensive fighter jet that takes 40 years to develop, is impossibly difficult to maintain, and depletes the munitions stockpile after a few sorties. Security at home, functional alliances, and deterrence all require industrial depth: a diversified resource base capable of meeting the demands of wartime production, flexible supply chains in competitive markets without single points of failure, a skilled workforce with a strong talent pipeline, and an industrial commons that fosters the interaction and investment necessary for constant innovation. The measure of the conservative commitment to a strong defense is not the size of the Pentagon’s budget or the number of invasions launched, but the willingness to adopt economic policy that ensures market forces strengthen rather than erode the foundations of national power.

Read that one too!

MORE GOOD READS FROM THE WEEK

Wall Street Journal: Europe Chastised Trump’s Climate Rollback. Now It’s Delaying Its Own Green Goals. Developed nations are increasingly balking at the cost of measures to cut down on fossil fuels. In a surprise to no one capable of doing math, the grandiose climate commitments that began a decade ago with the Paris Climate Accord now lie in shambles as the “ambition” of statement-issuing diplomats gives way to the reality of the energy needs of an industrial economy.

New York Times: Private Equity Is Stuck With 33,575 Unsold Businesses. Even amid a booming deal-making environment, private equity firms are unable to exit a growing number of investments at values their investors require. In the past four years, private equity returned 6% annually, trailing the S&P 500 by almost 10 percentage points. This is impossibly bad. The unluckiest monkey throwing darts at a list of stocks would perform far better. At least they’ve ruined companies and degraded services in the process… Great story in today’s Times about the degradation of a once great residential community when the local ownership sold to a private equity firm on the other coast.

One industry they’ve worked hard to ruin is youth sports. You can read more about that in New York Magazine: The Pay-to-Play Childhood. Private leagues have made youth sports expensive, hypercompetitive, and all-consuming. Investors are making a killing. For more on the theme, check out these two Commonplace classics:

• Michael Brendan Dougherty, In Defense of Travel Teams. Travel baseball and the dance mom circuit drain the wallets and time of suburban families. But I’m not going to stop taking part.

• Yours truly, The Moral Arbitrage Driving Wall Street Profits. Squeezing ‘inefficient’ businesses run for greater purpose will generate cash, but not value.

IMMIGRATION x LABOR

Fresno Bee: Federal judge finds Department of Labor’s effort to cut farmworker wages is unlawful. Sorry farmers, but if so few Americans are willing to work for you at a reasonable wage, leaving you desperately reliant on temporary foreign workers, you can at least pay those workers the going rate.

Politico: Unions sound alarm on last-minute push for robot farm equipment. A draft trailer bill would let unpiloted machines work alongside farmworkers, angering labor groups worried about job loss and safety. Bizarre move by organized labor, but no more bizarre than its general opposition to immigration enforcement or restriction. A union representing the interests of legal American workers would be falling over itself to support investment in farm automation, which would address “labor shortages” not by bringing in temporary foreign labor at low wages but instead by mechanizing processes and rapidly boosting productivity, which would improve job quality and wages. Another term for “job loss” of “jobs Americans won’t do” is “progress for workers.” Help us help you, labor organizers.

OH, CANADA!

Shortly after Liberation Day, the commentariat made copious amounts of hay about how the United States was no longer a trustworthy trade partner, its demands were unreasonable, allies would retaliate… and then the opposite happened. Virtually every American ally came to the table and reached a reasonable agreement.

This left Canada in a rather awkward position. Hard to complain the United States is being unreasonable when everyone else managed to get along just fine. And sure enough, the sticking point in the latest Mountie Meltdown appears to be the entirely reasonable and necessary American demand that Canada hold hands with the U.S. and Mexico in keeping Chinese distortions out of the North American market.

As Michael Froman, president of the Council on Foreign Relations and U.S. Trade Representative in during the Obama administration, explained on CNN:

I think the new issue is that the Trump administration is pressing Canada, as well as other countries, to adopt a common approach vis a vis China, whether it’s a common external tariff or export controls, or ensuring that Chinese products, inputs don’t get inserted into products in Canada, that will then be imported into the United States. And that’s a new set of trade issues and Prime Minister Carney has noted that that goes against their sovereign right to establish relationships with other countries. So that’s going to be an issue of contention that the administration is going to continue to have to have dialogue with Canada and with other countries over time.

Prime Minister Mark Carney has acknowledged the same, saying, “the U.S. introduced in the last hours, efforts to restrict our ability to have other trade deals. We’re the partner of choice in many respects for countries around the world, and the Americans wanted to restrict that. Unacceptable.”

But with due respect to Carney, this is not something the U.S. introduced in the last hours. It has been the core issue for more than a year. I wrote this in March 2025: “The third requirement of participation in a U.S.-led economic and security alliance should be the maintenance of a collective perimeter that excludes China. Partners should agree on common tariff barriers, investment restrictions, export controls, and immigration policies.” You should try reading Understanding America, Mr. Prime Minister, if you need help understanding America.

With somewhat less respect, Canada is “the partner of choice”? No, you’re not. The U.S. is the partner of choice. And that’s why Canada has none of the cards, and will inevitably have to make the sorts of commitments on China that the U.S. is reasonably seeking and most other trading partners have already made. While the roughly $900 billion in bilateral trade between the U.S. and Canada represents less than 3% of U.S. GDP, it represents about 40% of Canadian GDP. How much pain Canadians wish to suffer to prove their toughness, before reaching a trade deal on the access they need to our market, is their decision to make.

Last but not least, watch U.S. Trade Representative Jamieson Greer’s interview on the CBC.

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THAT’S FINE IN PRACTICE, BUT WHAT DOES THE THEORY SAY?

A couple of interesting papers from highly credentialed academic economists are worth a look:

Caroline Freund, former global director of Trade, Investment and Competitiveness at the World Bank, finds that Foreign Exporters Absorbed Nearly Half of the 2025 US Tariff Shock. Huh. Say more. “Most economic forecasters predicted a sharp rise in consumer prices and significant import disruption.” Yes, that’s true. “Instead, retail prices rose modestly and import-dependent sectors held up. This column uses data for the 50 largest US trading partners to show that foreign exporters absorbed roughly 40–50% of the 2025 US tariff increases through lower export prices–much more than earlier studies suggested.” Interesting.

This is my favorite part: “The aggregate result vindicates optimal tariff theory. It does not mean the tariffs made America better off.” If an economist could cross her arms and stomp her foot in prose, that’s how it would sound. For more on the vindication of optimal tariff theory, be sure to check out today’s American Compass Podcast discussion with Stephen Miran, who chaired the White House Council of Economic Advisers last year.

And at the Federal Reserve Bank of Boston, How Much Did Labor Productivity Gains Offset the Inflationary Impact of the 2025 Tariffs? “We provide evidence that industries in which tariffs induced higher costs in 2025 also experienced greater labor productivity growth, which helped them mitigate those higher costs.” That wasn’t in the models. Strange.

WE CAN JUST BUILD THINGS

Speaking of manufacturing data, The Kobeissi Letter highlights:

US manufacturing activity is rapidly expanding: The Philadelphia Fed Manufacturing Index of current business conditions rose +6.0 points in August, to 47.4, its highest since April 2021.

At the same time, the index of future business conditions jumped +39.2 points, to 73.6, its highest level since the 1980s and its largest monthly increase on record.

Meanwhile, the index of future new orders soared +30.9 points, to 66.0, its highest since June 2021.

All while the 6-month forecast for capital expenditures surged +18.1 points, to 48.2, its highest since the 1970s.

The US manufacturing sector is gaining momentum.

One place momentum is growing? The Hyundai plant in Georgia that faced a massive immigration enforcement raid last year. Now, “the South Korean automaker could increase the planned production capacity of its Hyundai Motor Group Metaplant America from 500,000 units to between 700,000 and 800,000 units by 2028. … The potential capacity increase would be part of Hyundai’s plan to invest $26 billion in the U.S. through 2028, he said. The company aims to launch dozens of new products and has a goal to produce at least 80% of the vehicles it sells in the U.S. domestically by the end of this decade, up from roughly 40% in 2024.”

“For us, the USA is the most important market in the world besides Korea, which is our headquarters,” Hyundai’s CEO told CNBC. Maybe Canada just slipped his mind?

WOMP WOMP

Sad trumpet for Chinese firms, though, whose momentum isn’t growing so well.

Financial Times: How Shein’s IPO lost its shine. Once high-flying fast-fashion retailer is listing in Hong Kong at quarter of peak value after years of false starts.

Wall Street Journal: EV-Maker Polestar Says Trump Administration Strung It Along Before U.S. Ban. The Chinese-owned automaker told dealers it is still trying to understand why it is being barred from the U.S. market. Looks like they, too, could benefit from an Understanding America subscription. Maybe they can commiserate with the Canadians at their next strategic summit.

TURNING TO TECH

New York Times: Meta to Pay Up to $17.1 Billion in Landmark Settlement Over Social Media Addiction Claims. The social media giant settled with 47 states, the District of Columbia and U.S. territories, and agreed to make major changes to its products over claims its platforms endangered children. Stay tuned for more on this at Commonplace shortly.

New York Times: How Big Tech Captured American Schools. Companies like Google and Microsoft have used their money, their might and their massive reach to influence nearly every step of the education supply chain. The atrocious conduct by purveyors of social media has become common knowledge. The parallel playbook run by many of these same companies to cash in on public education and corrupt it in the process is only beginning to come into public view. The fallout is going to be similarly severe.

AND ARTIFICIAL INTELLIGENCE IN PARTICULAR

Quite the comment from Sam Altman:

I thought when we got to GPT-4, which was back in 2023, that very quickly after that there was going to be much more disruption, software businesses up for grabs right away, than it turned out to be. I think I was wrong about a few things, but one in terms of the speed: the economy just has so much inertia. People keep doing the same things, buying from the same company, wanting to use their tools the same way. I think this is actually a positive in many ways, and it’s going to make this big transition go smoother and slower. I’m grateful for it. But it means we’ve all been too ambitious on timelines. Even with this incredible technology, society and the economy will adapt more slowly.

Sounds like maybe his choice between curing cancer and educating the world for free is getting pushed out a few years? Of course, we haven’t all been too ambitious on timelines. Some people with experience in the real world and a preference for analysis over carnival-barking have been making these points for years. But we welcome Sam aboard.

Wall Street Journal: What Problems Should AI Be Solving? Some of the biggest fortunes may be hiding in markets and solutions that Silicon Valley is ignoring.

New York Times: Sick of A.I. Slop? So Are Tech Giants. Spotify, LinkedIn and others are trying to dig out of a digital sewage heap full of low-quality content made with artificial intelligence.

FINALLY, ON THE LIGHTER SIDE

Wall Street Journal: The New Cure for Career Burnout: Clown School. For actors and others worn down by rejection and the pressure to get everything right, clowning offers an unusual prescription: embrace failure.

Enjoy the weekend!

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The “common good” war has erupted again. Americans are increasingly isolated and distrustful, while revolutionary socialism has gained a new political foothold, shining a new light on debates about communal solidarity and individual autonomy.

There’s certainly a tension between a politics prioritizing freedom and one that stresses a sense of communal solidarity. But that doesn’t mean that affinities between the two can’t be found, and the unraveling of the neoliberal era indicates an urgent need for a politics that knits the bonds of community and nation while also defending freedom.

Right-leaning proponents of the common good argue that government can never be truly neutral on key ethical issues—a substantive vision of human flourishing must guide policy. In contrast, those of a more libertarian bent allege that prioritizing the “common good” disregards individual liberties and can even serve as a stalking horse for theological despotism or socialism. To them, the common good best arises not through government planning but through the spontaneous actions of millions of individuals.

The truth is that defending individual freedoms demands giving attention to the common. We enjoy our freedoms only within a bigger framework of social and political institutions. Government must set some of the terms of the market, such as a tax structure or rules for bankruptcy, and the American free market would not be free for very long if we lost our ability to maintain political sovereignty.

Likewise, protections for personal freedoms themselves contribute to the common good. Top-down autocratic controls are anathema to a nation as various and as variously divided as the United States. The Great Awokening ran afoul of the natural pluralism of the American people, and its downfall offered a warning to other ideological efforts attempting to impose absolute change from on high. The American public will push back against any comprehensive and exacting dogma, be it from the Left or the Right.

While drawing contrasts between today’s “New Right” and the conservative consensus of the 1980s is a popular Beltway parlor game, twentieth-century conservatives were not afraid of the language of the common good—or of using state power to promote it. When Ronald Reagan announced his run for the presidency in 1979, he appealed to the concept in discussing regional cooperation within North America: “Let us work toward the goal of using the assets of this continent, its resources, technology and foodstuffs in the most efficient ways possible for the common good of all its people.”

Like many affiliated with movement conservatism, Reagan often favored market-oriented policy approaches, but he and his contemporaries were not market absolutists. Social conservatives insisted that government institutions should promote a certain kind of national character—whether by encouraging certain values in public education or by banning hard drugs. In a 1971 New York Times essay, neoconservative luminary Irving Kristol defended censoring pornography by declaring that “if you care for the quality of life in our American democracy, then you have to be for censorship.” Reagan agreed.

During the Cold War, the Right did not simply trust the spontaneous actions of millions of consumers to defeat the Soviet Union. Instead, it embraced a project of full-spectrum economic, military, and technological mobilization in order to defeat the evil empire. Conservatives championed trade barriers against the Soviet Union. Cold Warriors did not leave national security up to private militaries voluntarily organized by patriotic Americans but poured hundreds of billions of dollars each year into building out our national military.

The spending was so vast that defense policy overlapped substantially with economic policy. Fielding high-tech missiles, fighter jets, and communications networks required investments in a broad industrial base. In the late 1980s, for instance, fears that the United States was being eclipsed in microchips prompted the federal government to fund Sematech, an industry consortium for semiconductor research and production.

However, the role of state capacity has eroded in the years since the Berlin Wall fell. To some extent, this is understandable. “Leave us alone” rhetoric and skepticism about government planning have been core components of the American Right for over a century. Without the countervailing pressure of the Soviet Union, it’s easy to see how conservatives might fixate upon Reagan’s 1981 declaration that “government is not the solution to our problem; government is the problem.” Taking that notion to its logical conclusion means that paring back “government” should unleash a utopia of radically free individuals, not just in the United States but across the globe.

Yet Reagan’s actual statement was far more nuanced. He was not ruling out all “government” in all times and all places. In fact, his full statement reads (emphasis added), “In this present crisis, government is not the solution to our problem; government is the problem.”

In our own present crisis, government policy cannot be reduced solely to tax cuts. Today’s effort to reinforce the common good could include the four overlapping areas of sovereignty, capacity, citizenship, and agency. As Reagan said later in the same speech, “All of us together, in and out of government, must bear the burden.” These areas extend far beyond GDP to address the urgent challenge of our day: protecting a framework for freedom and flourishing.

Many policymakers have awakened from the dogmatic dream that nations are nothing more than vast pools of atomized consumers. Supply chain vulnerabilities and dependence on our strategic competitors for critical materials threaten American sovereignty and the liberty of its people. Rebalancing trade and rebuilding domestic industry will be critical for American sovereignty.

For instance, de-risking supply chains from the People’s Republic of China, including through the use of tariffs, can help ensure that the Chinese Communist Party will not enjoy a chokehold over the American economy. Artificial intelligence innovations will make it even more imperative that the United States produces semiconductors and other cutting-edge technologies at home. Likewise, rumored shortages of munitions are a 150-decibel klaxon warning about our future.

To protect its interests and uphold commitments abroad, the United States needs bigger munitions reserves and an enhanced ability to produce defense material. The same logic holds for medical goods and rare earths.

None of this means a complete rejection of trade. But it does demand recognizing that the nuts and bolts of raw industrial capacity are critical for national sovereignty as well as economic vitality. Stock market averages are not enough to protect a nation’s market.

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Common Good Citizenship

Strengthening the bonds of citizenship will counter the twin civic solvents of the neoliberal era: atomized consumerism that leave us as isolated blips, and collectivist identity politics that subsume individuals into blocs of race, gender, or sexuality. Here, too, public policy is crucial. Mass illegal immigration and government-backed identity preferences in employment and other areas have helped fracture the body politic.

Strong border controls can eliminate the shadow economy of illegal labor, and immigration policy should prioritize integration by welcoming new arrivals as future equal participants in the American experiment rather than as fungible units of labor. Government policy can stop incentivizing an ethnic spoils system that pits Americans against each other.

Curtailing illegal immigration could also enhance economic opportunity for American workers, which connects to agency. We face new economic challenges today. In part because of technological innovation and the growth of global trade, the cost of many consumer goods has dropped. This is a major economic success in many respects. Televisions, clothes, and computers are much less expensive than they were a generation ago.

But there are affordability challenges beyond consumer goods: rising costs for housing, education, and health care make it harder for Americans to build a life of their own. This augurs ill over the long term, especially for defenders of market-oriented economics. As Vice President JD Vance recently noted, economic frustration has helped fuel interest in socialism.

To deliver for frustrated Americans, policymakers might prioritize an economics not just of consumption but of agency—to make it easier for young Americans to buy a home, start a family, and begin a productive life. There are multiple ways to enhance this agency, many of which are entirely compatible with free-market economics. Expanding vocational education and weeding overgrown educational bureaucracies could help expand educational pathways while cutting costs. Funding and allowing for more medical residencies could help increase the number of new doctors every year, and policymakers could explore other vehicles for streamlining medical training, especially for primary-care physicians.

Maintaining agency and sovereignty will be particularly important at the digital frontier. Far from emancipating us, the constant provocations of digitized commerce often undermine our agency. Incessant notifications degrade our attention, and the brave new world of online gambling puts new pressures on family finances.

A recent study in the Journal of Financial Economics found that the legalization of online sports betting did not displace other forms of gambling but instead ate into family savings and investments, especially among “frequent bettors and low-savings households.” Brad Wilcox and James Lynch have recently argued that the “vice economy” of digital gambling and pornography offers the illusion of freedom while dragging users—especially young men—down in an undertow of speculation, titillation, and isolation.

Policymakers are proving that we can address some of these challenges. More and more states are banning student cell phones in public schools, for instance, and many states have also passed age-verification laws for pornography. Regulating the digital more broadly may prove more controversial. But debates about online gambling themselves reveal the way that our understanding of freedom is never morally neutral. Prior to a 2018 Supreme Court ruling, a federal statute banned online sports gambling, which remains illegal in some states today. Yet most people would have described the pre-2018 United States as a free society.

Does Utah’s prohibition on sports gambling make it radically less free than New Jersey? Regulating sports betting seems a question of prudence rather than one of fundamental liberties. The opportunity to bet on your favorite NBA team is qualitatively different from freedom of religion, due-process protections, or free speech.

Reinforcing sovereignty, capacity, citizenship, and agency will help sustain the frameworks that make our freedoms possible. Distinguishing between liberty and license, the founding generation of the United States also reconciled freedom and the common good. The 1780 Massachusetts constitution declared that “government is instituted for the common good,” and it also affirmed that “all men are born free and equal, and have certain natural, essential, and unalienable rights,” setting the stage for the end of slavery in the commonwealth. Freedom and the common good marched in tandem then, and the realignment today must find its own harmony between those principles.

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