Via this Cato white paper, I submitted the following recommendations to the Department of Government Efficiency, a private-sector organization that will advise President-elect Donald Trump on how to reduce inefficiency in the federal government. The following recommendations would make health care more universal by reducing regulatory barriers to lower-cost, higher-quality health insurance and medical care. I further submitted recommendations relating to federal health spending and the federal tax treatment of health care. The three sets of recommendations operationalize reforms I propose in my latest book, Recovery: A Guide to Reforming the US Health Sector (Cato Institute, 2023). 

Individuals have a right to self-medicate, choose their health care providers, and choose whether and how to pool medical expenses with others. When the government respects these rights, health care becomes more universal as a matter of course. Prices fall, owing to market innovation and competition. Quality improves as new treatments and insurance designs make health care better and more secure. The Food and Drug Administration (FDA), the Center for Consumer Information and Insurance Oversight (CCIIO), and other federal and state agencies violate these fundamental human rights.

The results are higher prices and lower quality health care (i.e., less-universal health care). The FDA blocks access to essential medicines and requires patients to get unnecessary prescriptions. Cost–benefit analyses consistently find that, at the margin, FDA regulation on balance harms patient health. The CCIIO enforces regulations that increase insurance premiums and ration care until, as President Biden’s economic adviser Michael Geruso admits, even “currently healthy consumers cannot be adequately insured.” State licensing regulations block patients from accessing top doctors across the country.

The reforms below would cause prices to fall while improving quality—making health care progressively more universal by reducing the number of people who cannot afford the care they need. (The Medicaid/Children’s Health Insurance Program reforms in the Reduce Federal Health Spending section would give states flexibility to address the unmet medical needs that remain.)

The federal government should do the following:

• Abolish the FDA, including its powers to block new medical tests, devices, and treatments from the market; to require patients to obtain prescriptions; and to limit truthful speech.
• Regardless of the fate of the FDA, free patients to purchase medical tests, devices, and treatments that are available in other advanced nations.
• Use the Commerce Clause to free consumers to obtain health services from clinicians who hold licenses in other states and US territories.
• Use the Commerce Clause to free consumers and employers to purchase health insurance from other states and US territories.
• Repeal what’s left of the Patient Protection and Affordable Care Act of 2010 (i.e., Obamacare) and other federal laws that restrict health insurance choice.
• Free consumers and employers to purchase health insurance exempt from federal regulations, by
  • creating a new category of statutorily exempt health insurance;
  • codifying President Trump’s 2018 rule regarding “short-term” health plans; and
  • codifying President Obama’s 2014 guidance exempting US territories from Obamacare regulations (and then freeing consumers and employers to purchase insurance from US territories).

In the aftermath of the COVID-19 pandemic, the United States experienced a much higher rate of inflation than at any time during the prior few decades. Like the prices of many goods and services, the cost of housing rose rapidly, with the median home price increasing by almost $100,000. (Figure 1.) Unsurprisingly, many potential homebuyers were—and still are —shocked and upset.

As they have in years past, many politicians have latched on to the anger surrounding the recent housing market turmoil. During the presidential debate, Vice President Kamala Harris said, “Here’s the thing: we know that we have a shortage of homes and housing. And the cost of housing is too expensive for far too many people.” Prior to the election, Donald Trump outlined his own solutions, and now federal officials want to implement a host of policies, ranging from subsidies to selling federal land.

But is the United States really facing a housing crisis? Or a shortage of homes? And should Americans really expect recent federal policy proposals to make housing more affordable?

This Cato at Liberty post is the fourth in a series that examines these questions. (Previous posts are here, here, and here.) While the series presents evidence that the United States is not facing a true housing crisis or shortage, nothing in the series suggests that local officials should refrain from relaxing zoning restrictions and other regulations. Elected officials should reduce rules and regulations to make it easier and less costly for people to live. Additionally, federal officials should end the many demand-side policies that place upward pressure on prices across the nation.

Just as important, nothing in the series ignores that many Americans have taken an economic beating these past few years—real wages have fallen, and prices have not reverted to pre-COVID levels. It is no surprise that so many people have been calling for increased government intervention.

As previously, though, if federal officials answer those calls, it will likely increase Americans’ economic burden. Evidence shows that over the long term people have overcome the many federal roadblocks that increase the nominal cost of housing, but affordability would be much improved in the absence of those policies.

Fortunately, federal officials have an excellent opportunity to make it easier for Americans to afford housing because the lessons learned from the post-COVID-19 inflationary episode are directly applicable to the housing market. In both cases, federal policies that distort demand and supply result in harmful outcomes. The housing market is just a microcosm of what can go wrong—and how difficult it can be to fix—when the federal government interferes with markets.

This post begins to investigate whether there is a shortage of new homes, or a scarcity in construction. It explores the importance of demand in housing markets, an often-overlooked subject in the housing affordability debate.

As previous posts in this series have argued, it is difficult to characterize the US housing market as one in crisis. Even though the US population increased by 130 million people during the past five decades, the homeownership rate remained stable outside of the 2008 crisis. In fact, the homeownership rate rose even after prices started spiking in 2019.

It is clearly not the case that the typical American has no place to live, but some members of Congress insist on equating homelessness with problems in the broader housing market. And as a recent exchange with Rep. Maxine Waters (D‑CA) shows (watch from about 1:14:00 to 1:19:00), some members do not care to put homelessness into perspective.

Still, there is an excellent case to be made that homelessness is a serious socioeconomic problem that is much broader than just a housing problem. For instance, in self-reported data collected across 15 states, 75 percent of unsheltered homeless people claimed they had substance abuse problems. These data are consistent with other research and reports by the National Alliance to End Homelessness which show that a disproportionately large share of the homeless population experiences either mental illness or substance abuse problems.

In fact, economists studying homelessness have long incorporated these kinds of factors into their models even while recognizing that “homelessness results from an imbalance between the cost of available housing and a household’s income.” Researchers have noted, for instance, that:

“Investigation of the causes of homelessness must go beyond housing markets alone, however, because of the special characteristics of the population at risk and the public policies that address their needs. Transfer payments and policies regarding institutionalization of the mentally ill, for example, should be important determinants of the incidence of homelessness but are not part of a standard housing model.”

From 2005 to 2024, San Francisco’s homeless population rose from approximately 5,400 people to more than 8,300. Over the same period, city spending (adjusted for inflation to 2024 dollars) on its Homeless Services program went from under $77 million to over $600 million—more than $73,000 per person in 2024 (spending figures from DataSF).

As University of California, Irvine, economist Jan K. Brueckner has pointed out, it is also possible that government regulation makes housing too expensive for some people who would otherwise not be homeless. For example, building codes that prohibit the construction of dormitory-style housing with shared bathrooms and kitchens might make housing too expensive to sufficiently discourage homelessness.

Fortunately, the number of homeless people in the United States trended down from 2007 to 2019, and the number has been a small share of the population for many years. The level did spike after the COVID-19 pandemic, but it is not much higher than it was in 2007, and the rate remains lower—0.195 percent in 2023 compared to 0.215 percent in 2007—even though the total population has increased.

Still, homelessness is a problem, and most efforts to end it have failed. But to the extent that serious health and substance abuse problems are key drivers of homelessness, it is unlikely that a nationwide program of further expanding home mortgages, rent subsidies, and housing trust funds will solve the problem. Yet that policy combination is precisely what some groups promote.

The 2024 Economic Report of the President even blames “affordability constraints” on “persistent market failures in the housing market.” It then justifies both demand-side and supply-side interventions, such as grants and direct subsidies, to fix the alleged market failures. 

However, the fact that every person is unable to pay for the housing that they want is not a market failure.

In any market, for any given demand, the only way to ensure such an outcome would be to shift the supply curve so far to the right that the market price drops to effectively zero. Although we make no judgment as to how low the market price for housing or rent should be, the fact that many Americans knowingly move into higher-cost areas of the country makes it worth questioning the need for more government intervention.

Americans Regularly Move to High-Density Areas

While many policymakers argue that the typical American has become steadily more burdened by increasing housing costs, people have been consistently choosing to rent and buy in more densely populated areas. This fact suggests that they can afford to pay higher rent and housing prices. That is, people have a strong preference for certain areas—for myriad reasons—and are willing and able to pay to live in those places, as demonstrated by their actions. At the very least, many Americans are choosing to move into these higher-cost areas.

Many people have moved from higher-cost areas to lower-cost areas, such as from various places in California to Arizona, Florida, Nevada, and Texas. However, most of these people are moving from densely populated areas to other densely populated areas.

As Table 1 shows, between 2000 and 2020, when the US population increased by 18 percent, the number of people living in large metro areas increased by 32 percent. People living in the suburbs of these large metro areas increased by 48 percent, while the number of Americans living in rural areas decreased by 39 percent. (The long-term effects on this pattern from the COVID-19 pandemic on the labor market remain unclear.)

None of this should be too surprising. People tend to move from higher-cost areas to lower-cost areas, but they also tend to move where other people live rather than to the middle of nowhere. They move in this manner because, from their point of view, it allows them to lower their cost of living and improve their quality of life. The federal government should remain neutral in these decisions.

Construction Has Not Evaporated

Still, critics regularly blame a shortage in newly constructed homes for the supposed housing crisis. In fact, this view became conventional wisdom long before the recent spike in home prices. In July 2017, for example, Politico published a story titled “Why Washington Can’t Fix the New Housing Crisis.” The story stated:

“The country is in the grip of a new kind of housing crisis that Washington has virtually no power to solve. The crisis is a shortage of houses. Nationally, the inventory of homes for sale has been shrinking for 24 straight months, stoking bidding wars for even the lowliest fixer-uppers. In January, a measure of supply hit its lowest in history, according to the National Association of Realtors. That scarcity has helped push the homeownership rate to a near 50-year low.”

Oddly enough, when the article was published, the homeownership rate had already rebounded from its post-2008 financial crisis low of 62.9 percent, reached in 2016. It continued to climb, and by the third quarter of 2017 it was up to 63.9 percent. This fact alone is reason to question whether “scarcity” helped push the homeownership rate down.

Given that construction steadily increased from 2011 to 2021 (Figure 2), along with the higher ownership rates and the bidding wars, it is at least plausible that higher demand—for whatever reasons it occurred—helped drive home price increases during the period.

Finally, it is unsurprising that prices would rise as demand increases because housing supply is generally more constrained than demand. It takes time to construct new housing, and many desirable areas are already densely populated. In any given geographic area, new land cannot be produced in the same way that other goods can. Yet, people can get into the market for housing rapidly, despite those supply constraints.

The pandemic price spike provides a clear example: New construction was even more constrained during the pandemic due to supply chain disruptions, and demand was heightened. This combination helps explain the severity of the price spike that followed the pandemic.

Nothing in this post implies that more construction may not be beneficial. Local housing markets experience their own unique dynamics, and there are surely many rules and regulations that could be relaxed to boost construction that would improve local markets. But those decisions are best left to state and local officials, especially because it is so difficult to objectively define a shortage or a surplus. 

The government—especially the federal government—should not be in the business of deciding the type and number of homes that people need and want.

The next post in this series examines several specific estimates of the so-called housing shortage.

The Wall Street Journal reports President-elect Donald Trump’s advisers are exploring “pathways to dramatically shrink, consolidate, or even eliminate the top bank watchdogs in Washington.” These kinds of reforms can’t come soon enough.

As Cato’s new report to the Department of Government Efficiency (DOGE) explains, US financial markets have too many regulations and too many regulators. Many of the regulations protect incumbent firms, exacerbate instability, and inflate costs. Many of the regulators possess redundant authority.

There’s a good case to be made for scrapping pretty much the whole framework. But elected officials can make many important improvements without doing anything so controversial as a complete reboot. This post offers a few ideas for improving things on the banking side.

To start, banks do not need more than one federal regulator. That much should be obvious, but getting from the current system to there will be tricky because so many agencies are currently involved in regulating banks. Here’s one approach that might work:

• Make the Office of the Comptroller of the Currency the federal regulator for all banks with more than $15 billion in assets. (It’s an arbitrary cutoff that would leave the Comptroller regulating about 100 banks. Don’t get hung up on the number.)
• Make Fed district banks the federal regulator for banks in their districts with less than $15 billion.
• Remove the Consumer Financial Protection Bureau’s examination authority.
• Remove the Federal Deposit Insurance Corporation’s regulatory responsibilities and convert it to a bank resolution agency that administers deposit insurance.
• Eliminate the Fed’s Vice Chair of Supervision.

These changes would be a great starting point for reforming bank regulation. But the folks at DOGE could offer up even more improvements that fall short of replacing the whole regulatory framework. Just a few examples include:

• Eliminate the ability of federal regulators to use reputational risk in their examinations.
• Create a materiality threshold for all safety and soundness risks.
• Create a materiality threshold for all federal regulatory directives, such as Matters Requiring Attention.
• Transfer all regulatory authority for Bank Secrecy Act rules and regulations from the Fed and the OCC to the Financial Crimes Enforcement Network or the Federal Bureau of Investigations.
• Remove the concept of “abusive practices” from federal consumer protection statutes, reverting to the standard (time-tested) legal standards for “unfair” and “deceptive” practices.

If the administration and Congress can implement any similar reform package, it would also be the perfect time to shrink federal deposit insurance limits and get rid of the systemic risk exception for covering uninsured deposits.

The current “cap” of $250,000 is far above both the median account balance (approximately $5,000) and the average balance ($42,000). Even most high-income families have balances well below the $250,000 cap—as of 2023, the average balance for the highest 10 percent of income earners, surely biased upward by very high earners, was $229,000.

The current FDIC caps simply have nothing to do with protecting the typical American.

Of course, the DOGE folks could push for a much longer list of reforms. For instance, there is no reason for the Consumer Federal Protection Bureau to exist given that another federal agency (the Federal Trade Commission) already exists to police consumer protection standards. Nor is it necessary to have a federal agency (the Federal Housing Finance Agency) to regulate essentially just two companies. Similarly, Congress could eliminate the National Credit Union Administration because it basically regulates banks—the Fed or the OCC could regulate those credit unions, depending on the size.

The system is bad, and the reform list goes on.

I don’t like the Elf on the Shelf.

For those not in the know (or who don’t have kids), the Elf on the Shelf is a small, plush creature you place somewhere in your home—on a shelf perhaps—in advance of Christmas that is purported to be Santa’s eyes and ears on the scene, reporting back to him all the naughty things your kids might do in November and December … if only he can stay out of trouble himself which, as anyone who ventures onto Instagram during the holidays can confirm, is almost never.

Call me grinchy but I never started the tradition in our home (although we certainly have lots of traditions that we like). I dislike the idea of cuteifying the surveillance state. (But maybe I’m weird? I also have concerns that my fellow Generations Xers had no-knock police raids normalized for them as children after watching the Kool-Aid Man burst through walls unannounced for a decade on television.)

I was reminded of the Elf on the Shelf tradition when I saw a November press release from the National Association of State Contractors Licensing Agencies (NASCLA). (Yes, Virginia, there is a trade association for contractor occupational licensing boards.)

In the press release, the NASCLA touts the operation they coordinated with their elves on the shelf—19 licensing boards and regulatory agencies across 13 states and the District of Columbia—near the end of October, targeting at least a couple thousand job sites. When a violation was uncovered, the penalties included “administrative citations, criminal notices, legal actions, and [the initiation of] further investigations.”

Were these violations the result of site visits designed to seek out and penalize those performing or overseeing shoddy construction work? Nope. The purpose of these enforcement operations was to, according to the press release again, “protect consumers and the public by ensuring contractors and tradespeople are properly licensed and registered.” In other words, to make sure the workers had the right permission slip from the government.

One of the biggest myths about government occupational licensing—a myth usually perpetuated by the boards themselves—is that licensing boards often police standards or that licensing is itself an effective way to ensure quality. For starters, there is little evidence that licensing requirements increase quality of services, regardless of how actively a board enforces state law. Simply having a license is not a good proxy for whether someone provides quality work. Justifying enforcement actions like the NASCLA does based on that equivalency is misguided.

Empirical evidence is emerging that many, if not most, of the occupational board enforcement actions aren’t related to complaints about workmanship at all. A recent first-of-its-kind study by occupational licensing researchers Conor Norris, Alex Adams, and Edward Timmons looked at newly-released public records of four Idaho state licensing board enforcement actions, including at least one year of that state’s Contractors Board, between 2013 and 2018. More than half of the average overall enforcement actions by the boards were mostly just “let me see your papers”-type checks or violations of technical aspects of the licensing law.

At least the Elf on the Shelf is supposed to encourage good behavior. The licensing version of Elf on the Shelf is merely interested in whether you have the governmentally mandated paperwork.

Luckily, there is an alternative: get rid of licensing laws and the boards that enforce them. They can be replaced by some form of private certification.

And there’s a good alternative to the Elf on the Shelf creatures: toss them in the trash and replace them with … well, frankly, anything else.

A December 12 report in the UK Independent implies Elon Musk thinks most homeless people are “violent drug zombies with dead eyes, and needles and human feces on the street.” That’s an oversimplification, to say the least.

The report claims President-elect Donald Trump wants the government to force homeless people into drug treatment and mental institutions or face arrest. It cites the Trump/​Vance Agenda 47 website:

[W]orking with states, we will BAN urban camping wherever possible.

Violators of these bans will be arrested, but they will be given the option to accept treatment and services if they are willing to be rehabilitated. Many of them don’t want that, but we will give them the option.

We will then open up large parcels of inexpensive land, bring in doctors, psychiatrists, social workers, and drug rehab specialists, and create tent cities where the homeless can be relocated and their problems identified…

…And for those who are severely mentally ill and deeply disturbed, we will bring them back to mental institutions, where they belong, with the goal of reintegrating them back into society once they are well enough to manage.

Both Musk and Trump appear to give short shrift to a major cause of homelessness: a growing shortage of affordable housing. As Vanessa Brown Calder wrote in a Cato briefing paper, “Reforms that eliminate zoning, improve permitting speed, legalize greater housing density, and remove barriers to housing innovations—including co-living units, tiny homes, and manufactured homes—are all part of a successful strategy to reduce homelessness.” Building codes and land use and zoning laws are largely state-level issues.

Another key contributor to homelessness is mental illness. Two-thirds of homeless people have a mental illness, and up to 20 percent of the homeless may have schizophrenia. In many cases, mental illness is the force driving alcohol and illicit drug use. The Substance Abuse and Mental Health Services Administration points out that, in many cases, people with mental health problems “misuse these substances as a form of self-medication.”

Contra President-elect Trump’s proposal, the government coercing people, directly or indirectly, to undergo mental health or drug addiction treatment flagrantly assaults their autonomy. As psychiatrist and civil libertarian Thomas Szasz wrote in his classic work The Myth of Mental Illness: Foundations of a Theory of Personal Conduct, “Involuntary psychiatric interventions violate the fundamental moral and political principles of free societies and turn psychiatric authority into a species of despotism.”

Numerous studies have also failed to find evidence that involuntary mental health treatment is effective. There is some evidence it may increase suicidal tendencies.

Studies on the efficacy of mandatory drug rehab have also had negative results. Compulsory drug rehab has high relapse rates. There is also evidence that it increases the risk of subsequent overdose deaths among people released from rehab.

Enforcing public nuisance laws or penalizing actions like blocking streets, creating public health hazards, or disturbing the peace is not inappropriate or unjust. Incarcerating peaceful people who choose to live unhoused is. And coercing people with substance abuse and mental health problems to undergo treatment assaults their autonomy.

President-elect Trump’s pick for Secretary of Health and Human Services, Robert F. Kennedy, Jr, is seriously interested in reforming the public health agencies. Trump’s pick for the Food and Drug Administration, Dr. Marty Makary, has a history of challenging conventional narratives and welcoming outside-the-box ideas. One reform that both should consider, which can help mitigate the homelessness crisis, is ending the FDA’s Risk Evaluation and Mitigation Strategy (REMS) program it imposes on the drug clozapine—the only drug that the FDA has approved for treatment-resistant schizophrenia.

As Josh Bloom, PhD of the American Council on Science and Health, and I wrote in The Hill last month, “the REMS program has unintentionally created barriers that disproportionately affect individuals with severe mental illnesses like schizophrenia, further compounding the significant challenges they already face, including unemployment, substance abuse, heightened suicide risk and homelessness.”

An estimated 30 percent of schizophrenic patients do not respond to first-line antipsychotic drugs. Yet, clozapine is prescribed to only 4 percent of these patients in the United States—a situation that underscores a significant gap in treatment.

Bloom and I argue that REMS programs mandated by the government are redundant. Once the FDA approves a drug for marketing, manufacturers will monitor it for long-term risks to protect their reputation and avoid liability. Additionally, physicians prescribing high-risk medications routinely monitor their patients, as failing to do so constitutes malpractice.

There are about 653,000 homeless people in the US today. That population could be potentially reduced by 60,000–120,000 with easier access to a long-used, effective drug for schizophrenia. If the incoming Trump administration is serious about reducing homelessness, eliminating the FDA’s REMS program is a good place to start.