Over the Fourth of July weekend, The Wall Street Journal reported that the Biden administration is likely to lift some tariffs on imports from China as Washington tries to combat inflation and Beijing reels from COVID-19-related shutdowns. The report indicates that the tariff “pause” would likely cover consumer goods “such as clothing and school supplies, as well as launching a broad framework to allow importers to request tariff waivers.” Politico, meanwhile, is reporting that the value of tariff relief will be a meager $10 billion out of the approximately $370 billion imposed by the Trump administration. This is better than nothing, but still woefully inadequate.

The U.S. Trade Representative (USTR) is currently conducting a required review of the Trump-era tariffs, the comment period for which expired earlier this week. News reports indicate a rift within the Biden administration: Treasury Secretary Janet Yellen is supportive of removing most of the tariffs in order to put downward pressure on prices, while National Security Adviser Jake Sullivan and Ambassador Katherine Tai, the USTR, are opposed to any tariff relief, citing the supposed “leverage” provided by the tariffs. The Financial Times noted that internal White House skepticism of cutting some tariffs is driven by the president’s desire to “avoid a backlash before the midterm elections from lawmakers who view cutting tariffs as being weak on China.”

Yes, it is true that opportunistic lawmakers and candidates will almost certainly howl about any tariff relief on imports from China, but those same partisan voices are unsparing in their criticism of the Biden administration’s handling of inflation and are already calling him “weak” on China. Either way, the political backlash of tariff relief is likely to be overblown; inflation is top of the mind for voters by a wide margin, and the president has the bully pulpit to counter the inevitable opposition spin.

As I explained recently, loose fiscal and monetary policy are driving up demand. The tariffs act as a serious impediment to increasing supply. Reducing tariffs is not a panacea for reducing inflation, but it could help put some downward pressure on prices. In particular, real tariff relief (i.e., far more than what’s reportedly on tap) could save American families hundreds of dollars per year.

Even before the onset of serious inflation, moreover, the tariffs were a complete failure. They raised prices for consumers; hurt domestic manufacturers reliant on imported intermediate inputs and capital goods; decreased market access for American exporters, particularly the agriculture industry; and led to investment slowdowns and substantial job losses. On top of that, the tariffs utterly failed to induce Beijing to make significant changes to its legitimately concerning international trade and investment practices. Indeed, a former CIA expert on the Chinese economy recently told The Financial Times that, in terms of possible leverage, there was no “compelling reason” to keep the tariffs in place. Other foreign policy experts have echoed that conclusion.

Indeed, if the President really is prioritizing inflation like he claims, even more tariff relief is in order. Save a temporary reprieve on Ukrainian products, for example, the Biden administration has made little effort at removing the Trump administration’s disastrous “national security” tariffs on steel and aluminum imports, including from longstanding allies. Tariffs on imported solar products and washing machines—legacy tariffs inherited from the Trump administration—remain in place. Likewise, the Biden administration has refused to open any market liberalizing free trade agreement (FTA) negotiations with potential trading partners, instead trying to establish a “framework”—without market access, the longstanding cornerstone of FTAs—with spurned commercial partners in Asia. Finally, the White House hasn’t pushed for Congress to reauthorize the Generalized System of Preferences (GSP)—a modest unilateral tariff relief program designed to bolster developing countries and help American consumers—which expired right before Biden took office. As a result, tariffs on imports from GSP beneficiary countries have increased, and Americans are increasingly (and ironically) sourcing covered consumer products from China. That’s a tariff double-whammy.

As my Cato colleague James Bacchus recently noted in a lengthy policy paper, for all of its talk about repairing alliances and undoing the damage of the previous administration, in practice, the Biden administration’s trade policy is a spitting image of the Trump administration’s ill-conceived protectionism.

To be sure, the decision to lift a small number tariffs may provide a little relief for some American families and firms hurt by inflation. It’s also a quiet admission by the White House that Americans, not the Chinese, are paying (and suffering from) the tariffs. Likewise, a renewed tariff exclusion process is a good idea. But these are minor changes — not the wholesale shift in the trajectory of U.S. trade policy that Americans really need. Over the long term, our current protectionist trade policies will raise prices, dampen growth and diminish U.S. geopolitical standing, leading to a poorer and weaker America in the process.

According to The Atlantic’s David Frum, Colombia’s outgoing president, Ivan Duque, is a misunderstood statesman. Ungrateful voters, he argues, fail to recognize Duque’s brilliance and thus assign him “an approval rating in the low 20’s.”

Frum cites Colombia’s vaccination policy, a 10-year work permit granted to Venezuelan refugees, and the country’s current economic growth as examples of “a record of policy success unmatched in recent South American history.” Which is why Duque, as Frum learned during the president’s recent visit to Washington, D.C., “is as baffled as anyone else” by his enormous unpopularity, which he blames on social media and “polarization.”

Frum mentions Colombia’s vibrant flower and avocado export sectors. He might have also noticed the expert cherry-picking in Duque’s narrative.

Take the case of his pandemic policy. Yes, the vaccine rollout was successful, but it came after some of the longest, most draconian and destructive lockdowns in the world. These had elements that are constitutionally unfathomable in the United States, such as the requirement of official permission to travel across municipal boundaries. Inevitably, Duque’s lockdowns caused much greater economic harm than necessary, with over half a million small businesses destroyed in 2020 and a 6.8 percent drop in GDP, a slightly higher figure than the World Bank’s average for Latin America.

The lethal mix of Covid-19 and the government’s dismal, authoritarian response boosted unemployment, which reached a whopping 15.9 percent in 2020 (up from 10.5 percent the previous year), while informal laborers made up 49 percent of the work force. Duque could have tackled these problems by relaxing Colombia’s notoriously rigid and onerous labor laws. He did not. Instead, he decreed an outrageous 10 percent increase in the minimum wage for 2022, thus contributing to persistent, two-digit unemployment levels— making Venezuelans’ work permits largely obsolete— and to a new wave of inflation. In 2021, he added to inflationary pressures by increasing tariffs on textile imports, thus benefitting his cronies at the expense of Colombia’s poorest consumers.

Duque’s government likely would respond that inflation is a global phenomenon. But so too is the commodities boom, which is why Duque can hardly take credit for today’s growth, buoyed as it is by oil, Colombia’s main legal export, as well as the coal and coffee sectors.

During his 2018 campaign, Duque promised to cut taxes and wasteful spending. But far from trimming the bureaucratic monster he inherited, he enlarged it by creating two new, unnecessary ministries: Science and Sports. He also kept a wealth tax that was set to expire and had to backtrack on proposed VAT hikes on food items, with a convoluted devolution scheme for poor citizens. His tax rises gave the far left a perfect excuse to launch the violent national strike that paralyzed the country between May and June of 2021. Duque’s weak response and inability to uphold the rule of law helped to unleash nation-wide chaos.

Can Duque blame his misfortunes on the pandemic? Not if you consider how he squandered the first year and a half of his presidency. Upon taking office, he did nothing to reduce the fiscal deficit or debt levels, which had already surpassed the dangerous threshold of 40 percent of GDP. Once gross general government debt approached 60 percent of GDP in 2021, Fitch downgraded Colombia’s credit ratings to junk. While debt soared, the Colombian peso plummeted, losing over a third of its value against the dollar since Duque took office. Other emerging markets have fared similarly, but Duque failed to take any measures to protect Colombians’ purchasing power from devaluation, such as allowing dollar-denominated bank accounts.

In 2018, Duque succumbed to aggressive student protests and increased the education budget, which was already the largest government sector despite paltry results. Similarly, he set up a “basic income” scheme and, to this day, prides himself on the amount of welfare handouts he has distributed. Elected on a fiscally conservative platform, he governed as a tax-and-spend social democrat, thus isolating his voter base even before the pandemic began. From the outset, he sought to please the leftist commentariat, which despised him all the more for his ideological towel-throwing.

Beyond Duque’s few positive measures—some VAT tax holidays and an FTA with Israel— his only redeeming achievement was his defeat of Gustavo Petro, a 21^st Century Socialist, in the 2018 election. But as Petro prepares for his inauguration on August 7— in no small part due to Duque’s deserved disapproval among voters— even that victory has lost most of its significance.

PCE Core Inflation (less food and energy) rose at an annual rate of 4% rate for the past four months – down from a 5.3% rate in the previous 8 months (and 6.5% last March to June).

By contrast, the annual rate of PCE Food inflation averaged 16.3% from February to May, and PCE Energy inflation averaged 78.2%.

Unless anyone imagines the devastating impact of Russia’s war with Ukraine on global food and energy supplies and prices is something the Federal Reserve could or should try to fix (by adding higher interest rates to those expenses) we should welcome this year’s moderation of Core PCE Inflation. There are encouraging signs it may slow further, from 0.3% a month to 0.2% or less. 

In a new working paper, economist Simeon Djankov proposes how an independent, academic institution can continue the important work that the World Bank conducted for 20 years under its Doing Business project, but that the bank decided last year to put to an end.

As a reminder, the annual Doing Business report measured the ease of doing business in countries around the world on a range of indicators such as starting a business, paying taxes, enforcing contracts, etc. The report produced a sort of index on these indicators, showing how countries were doing with respect to each other and over time, and it served as a guide to policymakers and a useful resource for researchers, journalists, and others. It quickly became the World Bank’s preeminent flagship publication.

Over the years, the Doing Business report came under increasing criticism within the Bank and by outside groups that did not agree with the report’s pro-market agenda, and the Bank responded to those and technical critiques by making some changes, as we’ve written about here, here, and here. Still, the report and its components remained an incredibly useful resource for countless research organizations worldwide with ongoing research projects. We rely on its data in the Human Freedom Index as does the Fraser Institute for its Economic Freedom of the World report, for example.

It was a serious mistake for the World Bank to discontinue the Doing Business report. It did so out of concerns about data irregularities for two years affecting four countries. Instead of instituting sensible, new measures on process and methodology as recommended by the firm that conducted an independent review for the World Bank, the bank chose to scrap the Doing Business report altogether. From the outside, it very much looks like the decade-long campaign by critics of market-oriented policies finally triumphed.

That’s a shame because the Doing Business report generated serious scholarship, and the World Bank was uniquely positioned to conduct that intensive project in the 190 countries it measured. In “Doing Business 2.0: A Better Guide for Policymakers,” Djankov reviews the academic and real-world importance of Doing Business and proposes how an academic institution could feasibly carry on the Doing Business project in a way that improves the process and the product.

As we head toward Independence Day on Monday, it seems like a good time to consider educational freedom.

If we were designing a system of education today, it’s unlikely anyone would suggest building schools and assigning kids to them based on where they live. No other area of life works that way—not even other levels of education, like preschool or college. Food stamp recipients aren’t assigned to government-run grocery stores. Medicare and Medicaid don’t require recipients to see a ZIP-code assigned doctor. K‑12 education is an anomaly.

It’s easy to see why children were residentially assigned to schools back in the 1800s when the public school system was started. Transportation and communication were incredibly difficult. Since we no longer face the same limitations, it makes no sense to continue funding education this way.

That’s where educational freedom comes in. Rather than funding a system and requiring kids to attend a specific school based on where they live, we can fund students and let families find the options that work for them.

The benefits to funding students are enormous. Parents would be empowered to choose the education that works best for their individual children. This is incredibly important because we know one size doesn’t fit all in education—even within a family. It also helps parents ensure their children are receiving an education that fits their values.

Educators would also benefit because they’d be able to choose from a wide variety of work environments rather than being largely locked in the district system. Classical schools, unschooling learning centers, hybrid options, STEM-focused schools, Montessori or Waldorf environments—the possibilities are almost limitless. Teachers could also become entrepreneurs by opening their own learning centers that give them ultimate autonomy. Importantly, educators would have more say in their compensation packages instead of being lumped into a union contract.

With widespread educational freedom, schools and other learning options would be better able to innovate and compete to attract and retain students. The growing popularity of microschools mean even students in rural areas can benefit from these new opportunities.

Educational freedom is also the best way to reduce the rampant conflict that is frequently seen in public schools. When parents are free to choose their children’s learning environments, they no longer need to engage in political battles to decide whose preferences will win the day.

Fortunately, educational freedom is on the march. Last year, 18 states started or expanded education choice programs. Six of those states adopted education savings accounts, which let parents use funds for tuition, tutoring, curriculum, and other education-related expenses. West Virginia led the pack by adopting a nearly universal program that’s open to all kids currently in public school or about to enter kindergarten. And just last week, Arizona lawmakers passed the nation’s first truly universal ESA, which the governor has indicated he’ll sign.

We’re finally entering a new era in education—one that recognizes and prioritizes the needs of individual students. Recent polls and elections indicate that parents want more options, not fewer. By expanding educational freedom, we can help put every child on the path to a bright future.

By a 6–3 vote, the Supreme Court in West Virginia v. Environmental Protection Agency took an important step toward restoring constitutional balance to federal policymaking. Though Washington Post columnist George Will probably overstates the case in calling it the “term’s most momentous decision,” he is right that this is a big deal. As I discuss below, the Cato Institute perhaps played a role in this welcome result.

So, what happened? Setting aside the case’s backstory (explained here), the immediate result is that the EPA doesn’t have the power to impose a nationwide cap-and-trade climate policy based on an “ancillary” part of the law that no one had heard of before the Obama administration. The Biden administration is working on a significant climate rule based on the very statutory provision at issue in West Virginia v. EPA, so the Court’s holding provides guidance as to what the EPA cannot do.

But it’s how the Court reached this result that will have lasting consequences. In ruling against the government, Chief Justice Roberts’s majority opinion “announces the arrival of the ‘major questions doctrine,’ as put in a dissent by Justice Kagan.

And what is the “major questions doctrine”? It is, the Chief Justice explains, no more than “common sense” regarding how Congress works. Basically, it’s the Court’s belief that Congress will be clear when it assigns major policymaking authority to regulatory agencies. In practice, this means that “major” domestic policy must emanate from the votes of elected lawmakers rather than from expansive legal interpretations devised by unelected bureaucrats. Again, this is common-sense stuff. Under our Constitution, lawmakers are supposed to pass laws to make major policy.

Prior to yesterday, in a handful of decisions over the last 25 years, the Supreme Court had relied on reasoning that resembled what scholars came to call the “major questions doctrine.” But it was all circumspect and indirect. Indeed, no majority opinion even used the term “major questions doctrine.” As a result, this interpretive principle was inchoate. Regulated parties often invoked the concept in challenging agency rules, but lower courts had no idea how to identify a “major question.”

All that changed yesterday. Chief Justice Roberts didn’t just officially recognize and rely on the major questions doctrine to check the EPA’s (ludicrous) statutory interpretation. He also provided lower courts with guidance how to identify major questions. Of course, an agency’s rule must be economically and politically significant to trigger the doctrine. Also, the rule would have to be based on an expansive interpretation of ambiguous statutory text. Other red flags include whether the agency is doing something unprecedented, or if the agency is attempting to do something that Congress failed to do, or if the “nature” of the law doesn’t comport with the agency’s claims to power. Still another red flag is when the agency is operating outside its expertise. All these boxes were checked with the EPA’s climate rule at issue in West Virginia v. EPA.

Many commentators are up in arms about the decision; they claim it will take a wrecking ball to the administrative state. They are wrong. Just because the EPA can’t impose a nationwide cap-and-trade for climate change, it doesn’t mean the agency is “gutted.” As the Chief Justice noted, the EPA retains broad authority to regulate greenhouse gases. More generally, as noted by Chief Justice Roberts, the major questions doctrine will come into play only for those “extraordinary” regulations that evince the circumstances identified in the prior paragraph. In the past, agencies issued these sorts of “major” policies only a handful of times per presidential administration. Anyone who claims this decision would undermine the administrative state simply doesn’t know what they’re talking about.

That’s not to discount the decision’s effects! Even though there haven’t been many regulations that would run afoul of the major questions doctrine, it doesn’t mean those instances weren’t highly deleterious. After all, Congress only passes, at most, a handful of major laws during any given presidential administration. The practical problem with the executive branch interpreting vague old laws to make “major” policy is that there’s no permanency. What any one presidential administration can do, the next can undo. We saw this with the EPA’s climate rule at issue in West Virginia v. EPA. Obama ordered the EPA to issue the rule; Trump ordered the EPA to replace Obama’s rule; and then Biden ordered EPA to replace Trump’s rule. The electricity sector—a very important industry!—was caught in the spin cycle. Chief Justice Roberts just put a stop to the chaos engendered by the worst excesses of executive lawmaking.

Unlike regulations, laws endure. If Congress directs an agency to take on a major question, then the agency will perform that role, regardless of the president’s political orientation. From now on, when it comes to “major” policymaking, the ball is in Congress’s court, as the Constitution intended.

A couple final notes:

• Chief Justice Roberts’s majority’s opinion was masterful. In fact, the Chief Justice has a history of making important (and welcome) administrative law doctrine, as I explain at this Notice & Comment post.
• At the risk of sounding self-important, I believe that the Cato Institute might have influenced the Court’s thinking. While other parties argued that the EPA’s climate rule clearly implicated the major questions doctrine, our amicus briefs (joined by the Mountain States Legal Foundation) were the only ones to ask the Court to flesh out the doctrine to resolve confusion in the lower courts. To that end, we had pitched a framework for identifying major questions. And the majority opinion tracks our framework. The upshot is that we either contributed to the court’s thinking, or we predicted exactly what the Court would do. Regardless of whether our input was coincidental or influential, yesterday was a great day for liberty.

A recent headline exclaimed: “Central Banks Should Raise Rates Sharply or Risk High-Inflation Era, BIS Warns.” The Bank for International Settlements is owned by 61 central banks, so they should know better than to equate higher interest rates with lower inflation.

Countries with the lowest central bank interest rates (below zero) include Switzerland and Japan, according to the BIS.

Those with the highest policy rates include Argentina and Turkey, with rates of 49% and 14% respectively.

Should we conclude that Argentina and Turkey are valiantly fighting inflation with high interest rates while Switzerland and Japan are pursuing wildly inflationary easy money policies? That would be preposterous. The latest year-to-year CPI inflation was 2.9% in Switzerland and 2.4% in Japan, but 60.7% in Argentina and 73.5% in Turkey.

Even within the Euro bloc, countries which share the ECB below-zero policy rate face higher 10-year bond yields if their inflation is higher: France his 5.2% inflation and 2.3% bonds; Greece has 11.3% inflation and 3.9% bonds.

Irving Fisher of Yale (1867–1947) taught that nominal interest rates consist of a relatively small real rate (linked to the real return on capital) plus an inflation premium. That is why countries with high inflation have high interest rates, and why periods of low inflation in the U.S. also had a low federal funds rate. It would be paradoxical to expect high nominal interest rates to result in sustained low inflation.