Today in United States v. Hansen, the Supreme Court upheld the federal criminal prohibition on encouraging or inducing violations of immigration law. To do so, the Court adopted a narrow interpretation of the statutory language at issue. The Court held that, in the context of this particular statute, the words “encourages” and “induces” are terms of art referring to the criminal concepts of facilitation and solicitation. The Court thus held that the law criminalizes “only the intentional solicitation or facilitation of certain unlawful acts.” On that basis, the Court declined to strike down the law as facially overbroad under the First Amendment.

The Court’s opinion, written by Justice Amy Coney Barrett for seven justices, conceded that “encourage” and “induce” both have very broad dictionary definitions. In the abstract, these words can simply mean to “inspire with courage, spirit, or hope” and to “move by persuasion or influence.” Both the Ninth Circuit below and the defendant in this case argued that the words in the statute had these broad meanings. That is why the defendant argued that the law could criminalize even an “op-ed or public speech criticizing the immigration system and supporting the rights of long-term undocumented noncitizens to remain.” Cato filed an amicus brief supporting the defendant providing similar examples, including a viral video arguing that “even if a noncitizen is violating the law, it’s better to stay here and prosper in America.”

The Court conceded that if the statute potentially criminalized op-eds or speeches, “its applications to protected speech might swamp its lawful applications, rendering it vulnerable to an overbreadth challenge.” But the Court held that the statutory words “encourages or induces” should be interpreted not based on their dictionary definitions but rather based on their “specialized, criminal-law sense.” And under that interpretation, the Court held that the statute “reaches no further than the purposeful solicitation and facilitation of specific acts known to violate federal law.”

The Court’s interpretation rested largely on statutory context, reasoning that “when a criminal-law term is used in a criminal-law statute, that—in and of itself—is a good clue that it takes its criminal-law meaning.” And to resolve any remaining ambiguity, the Court also invoked the doctrine of “constitutional avoidance,” which urges courts to adopt an interpretation of a statute that would make the statute constitutionally sound. As the Court put it, “When legislation and the Constitution brush up against each other, our task is to seek harmony, not to manufacture conflict.”

The majority opinion is written with an unmistakably skeptical eye toward the First Amendment overbreadth doctrine. The Court sets the tone by noting at the outset that “An overbreadth challenge is unusual.” The Court further tips its hand by emphasizing that “To justify facial invalidation, a law’s unconstitutional applications must be realistic, not fanciful.” In a concurring opinion, Justice Clarence Thomas goes even further, arguing that the facial overbreadth doctrine has carried the judiciary “far afield” from its “constitutional role.”

The concern raised by both the majority and concurring opinions is that a defendant may challenge a statute as overbroad even though the statute would be constitutional as applied to the conduct of that particular defendant. Justice Thomas objects that under overbreadth doctrine, courts can “declare laws unconstitutional in the abstract without the law ever being applied against any individual in an unconstitutional manner.”

But this concern is convincingly rebutted in a dissenting opinion by Justice Ketanji Brown Jackson, joined by Justice Sonia Sotomayor. As Justice Jackson noted, “it makes little sense for the number of unconstitutional prosecutions to be the litmus test for whether speech is being chilled by a facially overbroad statute. The number of people who have not exercised their right to speak out of fear of prosecution is, quite frankly, unknowable.”

Justice Thomas thus takes too narrow a view of when a law has been “applied” in an unconstitutional manner. A law affects conduct when someone self-censors to avoid risk, which means an overbroad law has in fact been “applied” and has in fact limited freedom of speech even in the absence of a prosecution. Facial overbreadth challenges are often the only means of attacking laws that have real effects on freedom of speech.

Justice Jackson’s dissent also explains how the overbreadth doctrine plays a crucial role in encouraging Congress to write criminal statutes with precision. For decades, Americans have rationally erred on the side of caution when speaking on immigration issues due to this statute, not knowing exactly where the line of criminality falls. Because the law remains on the books, questions about whether particular future applications might be unconstitutional are left “up in the air.” Although an as-applied challenge to a particular prosecution can still be raised in the future as part of a criminal defense, the risk of jail time if a defendant guesses wrong on the constitutional question is not a risk that anyone can reasonably be expected to take.

Indeed, one key question about the statute is explicitly left unanswered by the Court’s opinion: whether it is constitutional to criminally punish speech that facilitates or solicits a mere civil (as opposed to criminal) violation. The Supreme Court has never answered the question whether speech can be criminally punished when the conduct facilitated by that speech is not itself a crime. And many of the immigration violations covered by the law are indeed civil, rather than criminal, violations. Yet the only way to resolve this question, after the Court’s decision, is to raise it as a defense in a criminal prosecution.

Finally, Justice Jackson’s dissent notes another key problem with the Court’s decision: the government has, on many occasions, adopted a much broader reading of this statute when doing so was in the government’s interest. Indeed, at an earlier stage of this very case, the government fought against an interpretation of the law requiring that intent be proved for conviction. As Justice Jackson writes: “In its role as prosecutor, the Government often stakes out a maximalist position, only later to concede limits when the statute upon which it relies might be struck down entirely and the Government finds itself on its back foot.”

Unfortunately, that gambit paid off in this case. The government received the benefit of an arguably broad law for decades, but now a narrowing construction has saved that same law from constitutional challenge. When courts allow the government to shift its interpretation of statutes to its own benefit, the liberty of the people is often on the losing end at every stage of the process.

Education entrepreneurs come from all walks of life. Monica Hall, founder of THRIVE Christian Academy near Atlanta, didn’t set out to start a school. She was serving as an Army chaplain and gradually realized her soldiers needed more support. This prompted her to open a community center focused on well being. She was also a youth pastor at a nearby church, and people started asking her to add tutoring at the center or start a school. Monica was initially reluctant, but after a few different people suggested something similar, she realized maybe this was what she was meant to do.

In 2013, Monica opened THRIVE Christian Academy, which stands for Truth, Humility, Respect, Integrity, Victory, and Excellence—the six pillars of the school. There were initially just two students—both children whose parents helped inspire her to create the school. Because she only had two students, Monica met up with homeschoolers throughout the year for various activities. She finished the school year with three students and gave them each a “brag book” that compiled some of the things they’d done during the year.

One of the parents shared photos of the brag book on Facebook where a local teacher saw it. The teacher showed up at Monica’s door one day and said she wanted to be part of the school. “I don’t have any kindergartners and you teach kindergarten,” Monica recalls telling the teacher. The teacher said three of her fellow teachers also wanted to join THRIVE and assured Monica that students would come if she hired the teachers.

She was right—THRIVE opened the new school year with 56 students, pre-K3 to 5th grade. Enrollment kept growing. Monica added a middle school and then a high school. The first graduating class was 2020—the COVID class they called themselves. In Georgia, things started opening back up from COVID-19 restrictions by the end of May, so they held that first graduation on Juneteenth. Monica expects to have around 300 students when school is back in session this fall.

THRIVE utilizes a unique blended curriculum that pairs high-quality video lessons with in-person instruction from dedicated teachers. This allows students to have a more tailored, individualized experience. Monica estimates that around 40 percent of her students have special needs. Most of them just need extra attention and are integrated into the general education population.

“Some have a significant educational delay, like maybe they’re in 6th grade but they read on a 2nd grade level,” she says. “So, let’s figure out where the stepping stone was missed. Let’s fill in that gap, and let’s just watch you accelerate.” 14 students have more intensive needs and are in their own classroom with a dedicated teacher and aide, which is pretty impressive for such a small school.

The school also offers a variety of extracurricular academic activities, including debate, robotics, geography and spelling bees, a science fair, and math, history, and quiz bowls. Each year, they take an enrichment trip; previous destinations have included Washington D.C., New Orleans, Memphis, Niagara Falls, Baltimore, and Chicago.

Monica wants to make sure THRIVE alum have plenty of options in the future. “We make sure that they apply to at least three colleges, and we have a 100% acceptance rate now,” she explains. “So far from the senior classes, probably about 60% of them are in college.” The others are pursuing various careers like the Army, EMT, modeling, and entrepreneurship. “For me, the point of requiring them to apply is that they know they always have that option,” says Monica. If they start down one path and it doesn’t work out, they’ll “forever know that push comes to shove I’ve been accepted to schools before. I can go back and go to college if I decide to do that.”

Like most of the education entrepreneurs I talk to, Monica says if you have the urge to open your own school, just do it. “It wasn’t the ideal time for me when I started THRIVE—my son was two weeks old on the first day. I carried him in there in a car seat, fed him, burped him, put him down, and went next door to welcome two 1st graders for the first day of school,” she says. “But the feeling isn’t going to leave. You’re going to keep feeling this tug until you do it, so you’re going to be sleepless anyway. You may as well just go ahead and jump out there and trust God to catch you.”

On June 21, the North Carolina State Senate overrode Governor Roy Cooper’s veto of SB 299, which imposes penalties on local governments that fail to file their financial audits within one year of the fiscal year’s end. The matter now moves to the State Assembly which overwhelmingly passed the measure in May. Timely financial reporting is not only a sign of good stewardship, but it is also necessary for effective monitoring of local government finance.

The last two cities to file municipal bankruptcy petitions, Fairfield, AL and Chester, PA, were substantially delinquent in releasing their financial audits. Neither was in compliance with the nine-month deadline the federal government imposes for Single Audit reporting, which is required of all governments spending more than $750,000 of federal funds in a given fiscal year.

The one-year threshold for penalties set by SB 299 is longer than the federal deadline, double the six-month timeframe recommended by the Government Finance Officers Association, and three times as long as the four month deadline set by the North Carolina Local Government Commission (LGC).

The penalty SB 299 would impose is modest. If a county or municipality has failed to file its audit after one year, the state would withhold from its sales tax revenue distribution an amount equal to 150% of the cost of the required audit. According to state data, audit fees range from $5,000 or less for smaller communities to as much as $200,000 for larger cities and counties. The withheld sales tax revenue would be released by the state whenever the audit is filed or two years after the fiscal-year end date, whichever comes first.

Although Governor Cooper’s veto message cited the financial hardships for smaller local governments, units affected by the measure are not necessarily one-horse towns. For example, as of this writing, Caswell County had yet to file its 2021 audited financial statements, which were due to the State Treasurer on October 31, 2021. In its 2020 fiscal year, the County spent over $29 million and employed over 200 individuals.

Another non-compliant government is Spring Lake, a suburb of Fayetteville with a population of 11,762. This entity has also not filed FY 2021 financial statements, but, unlike Caswell County, it is facing severe financial distress. In his FY 2022 budget message, Spring Lake’s town manager wrote:

The Town of Spring Lake is in a strained financial situation. Expenditures have exceeded revenues for the past several years, fund balance appropriations have been made each year in all funds to produce a seemingly balanced budget, and budgets that were adopted were not implemented.

After that, the LGC voted to assume control of the town’s finances. State Treasurer Dale Folwell who chairs the LGC said:

We want to save Spring Lake. We are here to assist the town to correct past mistakes and missteps, get on sound, sustainable financial footing, act in accordance with the law and provide confidence to residents that their hard-earned tax dollars are being carefully and properly spent.

Perhaps if Spring Lake had met its financial reporting deadlines, problems could have been identified earlier and the state takeover could have been avoided.

LGC’s action in this case shows why North Carolina is a national leader in local government financial stability, with a relatively high proportion of cities and counties carrying top credit ratings. But it was not always that way.

In the late 1920s, North Carolina counties began suffering municipal financial distress due to excess borrowing and poor expenditure controls. During the Great Depression, many North Carolina local governments defaulted on their municipal bond obligations.

During this time Governor Max Gardner asked the Brookings Institution to evaluate state government operations and make recommendations for reform and reorganization. Brookings analysts recommended the formation of a dedicated state agency to oversee county and municipal finances.

In 1931, the state legislature implemented Brookings’ plan by creating the Local Government Commission. LGC approves all local bond issuances, sells debt to municipal bond investors, oversees annual local government financial audits, monitors county and municipal financial condition, and intervenes in cases of severe distress.

Delayed audits impede LGC’s oversight responsibilities and jeopardize the record of local government fiscal discipline built up over the last ninety years. As such it is reasonable for state officials to insist on timely audits and to create incentives for local governments to provide them.

In 2017, Republicans passed the Tax Cuts and Jobs Act, which cut taxes for the vast majority of Americans and simplified taxpaying by making modest reforms to, among other things, the system of itemized deductions. One of the most politically contentious reforms was a new $10,000 cap on the state and local tax (SALT) deduction. This revenue-raising change was critical in offsetting the cost of the individual tax cuts, and without it, extending the tax cuts will be next to impossible.

Politicians representing high-income congressional districts in high-tax states, such as California, New York, and Illinois, have since campaigned on repealing the SALT cap. This same group of legislators is threatening to derail the Republican’s new economic tax package because it does not increase or eliminate the SALT cap. Democrats dealt with a similar dynamic on major legislation last year.

As the 2025 expiration of the 2017 tax cuts draws closer, members of Congress need to remember that a simpler tax code with lower tax rates must also limit or repeal special interest provisions, such as the SALT deduction. It’s much harder to cut tax rates without broadening the tax base.

Below is a refresher on why the costs of the SALT cap are overstated and why the cap is good policy in its own right.

Does the Cap Hurt?

Estimates show that more than 95 percent of taxpayers benefited from a tax cut in 2018 or saw no change in their tax bill. This leaves a small minority of taxpayers who could have seen tax increases. Higher taxes for some is a predictable outcome of any reform that attempts to limit special interest tax provisions that provide large benefits to a few taxpayers at the expense of others.

However, the problem of higher taxes due to the SALT cap is often overstated. In the hardest-hit congressional districts in New York and California, with the largest share of taxpayers with estimated tax increases, 88 percent of taxpayers benefited from a tax cut or saw no change.

So why the disconnect? Even higher-income taxpayers who face the new SALT limit likely saw a tax cut for three reasons.

First, the tax law doubled the standard deduction, so many people who previously itemized their taxes now take the larger standard deduction instead.

Second, tax rates were lowered for people at all income levels. The SALT cap increased some people’s taxable income, but lower tax rates mean most people still come out paying less in total taxes.

Third, the 2017 law raised the exemption for the alternative minimum tax (AMT), which denied 5 million higher-income AMT-paying taxpayers any SALT deduction. The AMT is a parallel tax system that generally applies to taxpayers with large deductions and certain types of income, requiring them to calculate their taxes twice and pay whichever tax is higher. For these taxpayers, the SALT deduction increased from zero to $10,000.

Why Cap SALT?

The SALT cap and other limits on itemized deductions make tax cuts possible, simplify taxpaying, and reduce subsidies for high-income taxpayers and state governments.

Capping the SALT deduction is a crucial ingredient in the classic tax reform recipe of lower tax rates, offset with a broader tax base. The $10,000 SALT cap and other limits on itemized deductions raised $668 billion over ten years, one of the largest individual tax changes used to pay for lower tax rates.

Without the SALT cap and other revenue-raising components of the 2017 compromise, the old tax rules will snap back in 2026, bringing back the old AMT, higher marginal tax rates, and smaller standard deduction. This is the counterfactual; it is not an option to eliminate the SALT cap in isolation. Without limits on itemized deductions, the rest of the tax cuts are unsustainable. Full SALT deduction for higher tax rates is a bad trade for almost all taxpayers—even those in high-income coastal states.

The SALT cap also simplified taxpaying. The tax code offers taxpayers the choice of taking a flat standard deduction ($27,700 for a family in 2023) or the sum of a list of itemized deductions for specific expenses, including mortgage interest, state and local taxes, and charitable giving. In 2017, 30 percent of taxpayers used the more complicated itemized system. After Congress capped the SALT deduction, curtailed other itemized deductions, and doubled the standard deduction, 9.5 percent of taxpayers itemized their taxes. By one estimate, this saves taxpayers about 100 million hours of time that they would have spent filing their more complicated tax returns.

In addition to simplifying and cutting taxes, capping the SALT deduction was a good governance reform. The SALT deduction is a subsidy for high-income taxpayers in high-tax states, paid for by the rest of Americans. It created perverse incentives that limited the cost to states for increasing their taxes because higher-income taxpayers could write off the tax on their federal return. As I’ve written elsewhere, before the 2017 cap, “the average millionaire living in New York or California deducted more than $450,000 worth of SALT; the average millionaire in Texas deducted only $50,000 and therefore paid close to $180,000 more per year in federal taxes.”

With an uncapped SALT deduction, middle-class taxpayers are forced to subsidize millionaires who could use the SALT deduction to write off hundreds of thousands of dollars from their federal taxes. Without the cap, taxpayers with identical incomes pay different amounts in federal taxes based entirely on their state of residency.

The new federal tax code cut taxes for most taxpayers and flipped the incentives for state governments so that inefficiently high state taxes are no longer subsidized by taxpayers in more responsible locals.

A Path Forward

The SALT deduction is still distorting tax policy even in its limited form. For example, the poorly conceived temporary $4,000 bonus deduction proposed in the Tax Cuts for Working Families Act, part of the Republican economic tax package, is the result of SALT politics. The proposal attempts to give additional tax relief to taxpayers concerned by the SALT cap.

As initially proposed by House Republicans in the lead-up to 2017, the correct policy is to repeal the SALT deduction entirely. The $10,000 cap was a political compromise necessary to get enough votes for the bill. Raising or lifting the cap significantly reduces revenue, making it harder to extend or expand the tax cuts when they expire at the end of 2025.

There’s been a lot of very loose talk recently from the press, politicians and think tank wonks about “decoupling”—that is, entirely eliminating trade, investment and migration—the United States and Chinese economies. Proponents of decoupling the two economies never grapple with the enormity of the task and thus it’s useful to consider what such an idea actually entails as well as the costs to the U.S. and global economies. In reality, a hard decoupling is not nearly as simple and painless as proponents argue. Washington bureaucrats and politicians one day flipping a switch and cutting off all economic ties between the world’s two largest economies is as unworkable as it would be economically disastrous.

Practically speaking, in order to operationalize a hard economic break with China, the U.S. would need to hire dramatically more customs agents as well as export control and investment monitors to police everyday transactions. Furthermore, as Adam Posen, president of the Peterson Institute for International Economics, recently noted in an excellent Foreign Policy essay,

A unilateral U.S. withdrawal from commerce with China would be partially offset by other economies taking up market share where the United States no longer operated. If anything, it would increase the arbitrage opportunities for other countries and for companies headquartered elsewhere to trade and invest where the United States ceased to do so.

[…] In order for such restrictions to succeed, the United States would have to become a commercial police state on an unprecedented scale. The United States would also have to monitor and prevent its own headquartered companies from moving activities abroad. Washington has done this, on a limited scale, on specific technology transfers. But scale matters, and current proposals would be an order of magnitude more ambitious and thus infeasible.

Even more daunting than the feasibility of administering such a regime are the tremendous economic costs of a hard decoupling.

When the Trump administration levied extensive tariffs on imports from China—nearly 70 percent of all imports are now covered by an average tariff of 20 percent, up from about 3 percent before the trade war began—the results were predictably bad. According to the New York Federal Reserve, the tariffs cost the average American household an estimated $830 per year when accounting for direct costs and efficiency losses and led to a staggering $1.7 trillion loss in market capitalization for businesses due to slowed investments. My Cato colleague Scott Lincicome and I estimate that the tariffs effectively nullified about half the average household’s savings from the Tax Cuts and Jobs Act of 2017.

The tariffs likewise triggered inevitable retaliation from Beijing, which fell particularly hard on American farmers and ranchers, resulting in a massive taxpayer-funded bailout program for agriculture producers who lost vital market access in China. Moody’s Analytics estimated that the trade war caused the loss of approximately 300,000 jobs. My Cato colleague Alfredo Carrillo Obregon and I recently documented some of the real-world harms from the Trump-Biden China tariffs, particularly the pain inflicted on a lot of small and medium-sized businesses in the United States.

Despite the tariffs, two-way goods trade between the United States and China reached an all-time high in 2022 on a nominal basis, perhaps owing a bit to U.S. inflation. (Real goods trade, meanwhile, was lower than in 2021, but still represented an increase from 2019 and 2020.) A total ban on trade, investment and migration between the United States and China would make the enormous costs of the Trump tariffs look rather quaint.

If the world economy were separated into disparate economic blocs—one led by the United States and one led by China—the global economy would suffer tremendously. Earlier this year, the International Monetary Fund (IMF) released a study on the economic impact of such a system. In an excellent essay for his own Substack, economist Bert Hoffman summarized the IMF paper’s findings,

[T]he costs of investment fragmentation could lower global GDP by 1 percent, and double that for GDP in China. Trade and technology fragmentation can be more damaging still: the cost to the global output from trade fragmentation could range from 0.2 percent in a limited fragmentation scenario to up to 7 percent of GDP (in a severe fragmentation/high-cost adjustment scenario). With additional technological decoupling, the loss in output could reach 8 to 12 percent in some countries. […] These are massive costs.

Indeed, this is not trivial—it’s trillions of dollars on a yearly basis. Washington politicians, journalists and think tankers wouldn’t bear the brunt of such a policy; as the IMF report notes, “[T]he unraveling of trade links would most adversely impact low-income countries and less well-off consumers in advanced economies.” Meanwhile, economists at the World Trade Organization (WTO) estimate that such a fragmentation as envisioned by some members of Washington’s political class would decrease real incomes around the world by 5.4 percent on average. It takes an immense amount of arrogance to simply hand waive away the costs of a hard decoupling.

Perhaps these costs would be worth it if a ban on trade, investment and migration forced Beijing to make holistic changes to its economic practices, but that almost certainly would not be the case. Recent history suggests that China will not change its troubling economic practices due to Washington’s protectionism. In early 2018, on the eve of the trade war, other Cato scholars and I predicted that the tariffs would simply impose costs on Americans while doing virtually nothing to change Beijing’s course. Sadly, our warnings were prescient: China’s aggressive 21st-century mercantilism continues apace. Are we really to believe that cutting off all economic exchange between the United States and China will stop, say, Beijing-directed cyber hacking into U.S. commercial networks to steal trade secrets? Of course not.

While it is likely that some trade and investment between the United States and China will—and maybe should—decline in this era of strategic competition between near-peers, the reality is that a lot of two-way trade and investment is largely benign—and in no way “strategic,” i.e., at the nexus of technology and national security. Sabine Weyand, the European Union’s Director-General for Trade, recently noted in an essay for Internationale Politik Quarterly that 94 percent of EU trade with China is “unproblematic” and that only about six percent is the result of a one‐​sided dependency for EU member nations. A comparable analysis for the United States would almost certainly produce similar results.

To be clear, the Chinese Communist Party (CCP) is an increasingly illiberal actor: it is more aggressive on the world stage and repressive at home. Still, of the 1.4 billion people living in China, only about 100 million people have any connection to the CCP. The rest of China’s citizens are not responsible for their government’s relatively rapid and ill-advised turn away from liberalism. The United States desperately needs a thoughtful response to Beijing’s economic practices, but mimicking Chinese protectionism and industrial policy is a recipe for stagnation. Last month, my Cato colleague Scott Lincicome and I released a policy analysis charting a better course to outcompete China in the 21st century—one that is much more practical to implement in a relatively globalized world.

This article appeared on Substack on June 22, 2023

The New York Times reports that multiple states are responding to the opioid overdose crisis by passing harsh new laws aimed at fentanyl:

In the 2023 legislative session alone, hundreds of fentanyl crime bills were introduced in at least 46 states, according to the National Conference on State Legislatures. Virginia lawmakers codified fentanyl as “a weapon of terrorism.” An Iowa law makes the sale or manufacture of less than five grams of fentanyl — roughly the weight of five paper clips — punishable by up to 10 years in prison. Arkansas and Texas recently joined some 30 states, including Pennsylvania, Colorado and Wyoming, that have a drug-induced homicide statute on the books, allowing murder prosecutions even of people who share drugs socially that contain lethal fentanyl doses.

This approach is deeply misguided. Rather than further criminalizing fentanyl, federal and state governments should legalize it, along with all other opioids (and all other illegal drugs).

Most overdoses from illicit drugs result from accidental consumption of excessively potent or adulterated versions, since quality control is difficult in an underground market. That reflects the Iron Law of Prohibition.

In a legal market, fentanyl would be widely available, but in clearly marked dosages, allowing users to consume without risk of overdose. That is what occurs now for other legal but potentially dangerous products, such as alcohol or over-the-counter medications like acetaminophen (Tylenol). Overdoes occur for legal “drugs,” but they are rare and reflect deliberate excessive consumption.

Governments almost always try to fix society’s problems with more government. When the original problem resulted from too much government, that approach is especially unfortunate.

Recently, the Irish Data Protection Commission halted the launch of Google’s new artificial intelligence (AI) product, Bard, over concerns about data privacy under European Union (EU) law. This follows a similar action by Italy following the initial launch of ChatGPT in the country earlier in 2023.

Debate continues over whether potential regulation is needed to address concerns about AI safety. However, the disruptive nature of AI suggests that existing regulations, which never foresaw such a rapid development, may be preventing consumers from accessing these products.

The difficulty of launching AI products in Europe shows one of the problems of the use of static regulation to govern technology. Technology often evolves faster than regulation can adapt. The rapid uptick in the use of generative AI is the latest example of the increasingly fast adoption of new technologies by more consumers. But regulations typically lack the flexibility to consider such disruption, even if it might provide better alternatives.

The General Data Protection Regulation (GDPR) is an EU law that created a series of data protection and privacy requirements for businesses operating in Europe. Many American companies spent over $10 million dollars each to ensure compliance, while others chose to exit the European market instead. Furthermore, the law led to decreased investment in startups and development of apps in an already weaker European tech sector.

But beyond these expected outcomes stemming from static regulations, the requirements of GDPR have raised questions about whether new technologies can comply with the specific requirements of the law. Stringent and inflexible technology regulations can keep us stuck in the past or present rather than moving on to the future. At the time, much of this concern was focused on blockchain technology’s difficulty in complying with GDPR requirements, but now the disruptive nature of AI is showing how a regulatory and permissioned approach can have unintended consequences for beneficial innovation. A static regulatory approach impedes the evolution of technology, which, if permitted to develop without such restrictions, could potentially rectify the very deficiencies that the regulations originally aimed to prevent.

Unlike market-based solutions or more flexible governance, such a compliance-focused approach presumes to know what tradeoffs consumers want to make or “should” want to make. Ultimately, it will be consumers who lose out on the opportunity and benefits provided by new technologies or creative solutions to balancing these concerns.

While there may be privacy debates to be had over the use of certain data by the algorithms that power AI, regulations like the GDPR presume privacy concerns should always win out over other values that are significant to consumers. For example, more inclusive data sets run afoul of calls for data minimization in the name of privacy but are more likely to respond to concerns about algorithmic bias or discrimination.

Europe has long seemed set on continuing a path of heavy-handed regulation over a culture of innovation, and the growing regulatory thicket is starting to result in regulations that contradict one another on issues such as privacy. As the U.S. continues to consider any data privacy regulations and any regulatory regimes impacting AI, policymakers should carefully watch the unintended consequences the more restrictive approach in Europe has yielded.