Category: Current Affairs
Labour considers fast-tracking approval of big projects
There are a few modest signs of progress in the UK (and Canada):
Ministers are exploring using the powers of parliament to cut the time it takes to approve new railways, power stations and other infrastructure projects.
In an attempt to promote growth, the government is examining whether it could pass legislation that would allow transport, energy and new town housing projects to circumvent swathes of the planning process.
The move could limit the ability of opponents to challenge projects in the courts and reduce scrutiny of some developments. It is loosely modelled on a Canadian scheme that was the brainchild of Mark Carney, the new prime minister and a former governor of the Bank of England.
The One Canadian Economy Act was passed by Canada’s parliament in June and gives Carney’s government powers to fast-track national projects. The Treasury is understood to be examining how a UK version could speed up the approval process for nationally significant infrastructure projects, such as offshore wind farms or even a third runway at Heathrow.
Here is more from The Times.
I write on the BBB for The Free Press
I view the Big Beautiful Bill of Trump as one of the most radical experiments in fiscal policy in my lifetime.
In essence, Trump has decided to push all of his chips to the center of the table and bet on the American economy. I would not have proposed this bill, as critics are correct to note that it increases the estimated U.S. debt by $3 to $4 trillion over the next 10 years. That is a massive boost in leverage at a time when America’s fiscal position already appeared unsustainable.
Nonetheless it is worth trying to steelman the Trump decision, and understand when it might pay off. The biggest deficit buster in the bill is the extension—and indeed boost to cuts—in corporate income tax rates. That means more resources for corporations, and stronger incentives to invest. The question is what the American economy can expect to get from that.
Since 1980, returns on resources invested in American corporations have averaged in the 9 to 11 percent range. There is no guarantee such returns will hold in the future, or that they will hold for the extra investment induced by the corporate tax cuts (e.g., maybe companies will just stash the new profits in Treasury bills). Still, an optimist might believe we can get a high rate of return on that money, thereby making America much wealthier and also more fiscally stable.
A second possible ace in the hole is pending improvements in artificial intelligence and their potential economic impact. It is already the case that U.S. productivity has risen over the last few years, and perhaps it will go up some more. That could make our new debt burden more easily affordable.
My view of the fiscal authority—Congress—is that its primary fiduciary duty is to act responsibly. The Big Beautiful Bill is not that. Nonetheless, I am reminded of the classic scene in the 1971 movie Dirty Harry when Clint Eastwood (Harry) asks, “Do I feel lucky?” Here’s to hoping.
Here is the link, there are numerous other interesting contributions, including from Furman, Summers, Scanlon, Salaam and others.
Tom Tugendhat on British economic stagnation
Second, and even more detrimental to younger generations, is a set of policies that have artificially created a highly damaging cult of housing. For many decades, too few houses have been built in the UK. Thanks in part to the tax system, housing has been transformed from a place to live and raise a family into a de facto tax free retirement fund that excludes the young. More than 56 per cent of the UK’s total housing wealth is owned by those over 60, while home ownership among those under 35 has collapsed to just 6 per cent. This has had profound social and economic consequences as fewer people marry and have children, further impairing long-term demographic regeneration. The result? More than 80 per cent of the growth in real per capita wealth over the past 30 years has come from appreciation of real estate, not from the financial investment that powers the economy.
Michael Tory, co-founder of Ondra Partners, has argued that this capital misallocation has created a self-reinforcing cycle, weakening our national and economic security. Without productive capital, we are wholly dependent on foreign investment and imported labour, straining housing supply and public services. These distortions can only be corrected through a rebalancing of our national capital allocation that puts long-term national interest above narrow electoral calculation. That means levelling the investment playing field to reduce the taxes on those whose long-term savings and investments in Britain’s future actually employ people and generate growth. Along with building more houses and stricter migration controls, this would bring home ownership into reach for younger generations.
British pension funds should invest more in British businesses as well. Here is more from the FT.
Trump Accounts are a Big Deal
Trump’s One Big Beautiful Bill Act was signed into law on July 4, 2025. It’s so big that many significant features have been little discussed. Trump Accounts are one such feature under which every newborn citizen gets $1000 invested in the stock market. These accounts could radically change social welfare in the United States and be one important step on the way to a UBI or UBWealth. Here are some details:
- Government Contribution: A one-time $1,000 contribution per eligible child, invested in a low-cost, diversified U.S. stock index fund.
- Eligibility: U.S. citizen children born between January 1, 2025, and December 31, 2028 (with a valid Social Security number and at least one parent with a valid Social Security number).
- Employer Contributions: Employers can contribute up to $2,500 annually per employee’s child, and these contributions are excluded from the employee’s gross income for tax purposes. These are subject to the overall $5,000 annual contribution limit (indexed for inflation) per child (which includes parental contributions).
The employer contribution strikes me as important. Suppose that in addition to the initial $1000 government payment that on average $1000 is added per year for 18 years (by a combination of parent and parent employer contributions). Note that this is below the maximum allowed annual contribution of $5000. At a historically reasonable 7% real rate of return these accounts will be worth ~36k at age 18 (when the money can be fully withdrawn), $58k at age 25 and $875k at age 65 subject to uncertainty of course as indicated below.
The $1000 initial payment is available only for newborns but, as I read the text, the parent and employer donations can be made for any child under the age of 18 so this is basically an IRA for children. It’s slightly complicated because if the child or parents put after-tax money into the account that is not taxed at withdrawal (you get your basis back) but everything else is taxed on withdrawal as ordinary income like an IRA. There are approximately 3.5 million citizen births a year so the program will have direct costs of $3.5 billion plus indirect costs from reduced taxes due to the tax-free yearly contribution allowance, which as noted could be quite large as it can go to any child. Thus the program could be quite expensive. On the other hand, it’s clear that the accounts could reduce reliance on social security if held for long periods of time. The $1000 initial contribution is limited to four years but once 14 million kids get them, the demand will be to make them permanent.
BBB on drug price negotiations
The sweeping Republican policy bill that awaits President Trump’s signature on Friday includes a little-noticed victory for the drug industry.
The legislation allows more medications to be exempt from Medicare’s price negotiation program, which was created to lower the government’s drug spending. Now, manufacturers will be able to keep those prices higher.
The change will cut into the government’s savings from the negotiation program by nearly $5 billion over a decade, according to an estimate by the nonpartisan Congressional Budget Office.
…the new bill spares drugs that are approved to treat multiple rare diseases. They can still be subject to price negotiations later if they are approved for larger groups of patients, though the change delays those lower prices.
This is the most significant change to the Medicare negotiation program since it was created in 2022 by Democrats in Congress.
Here is more from the NYT. Knowledge of detail is important in such matters, but one hopes this is the good news it appears to be.
New York facts of the day
It’s truly astonishing how fiscally irresponsible New York is. The state budget proposal calls for $254 billion in spending, which is 8.3 percent higher than last year. That comes despite New York’s population having peaked in 2020. It’s a spending increase far in excess of the rate of inflation to provide government services for fewer people.
Ditch compares the New York state budget to the Florida state budget, a sensible comparison since both are big states with major urban and rural areas and high levels of demographic and economic diversity. He finds:
- New York’s spending per capita was 30 percent higher than Florida’s in 2000. It was 133 percent higher last year.
- New York’s Medicaid spending per capita was 112 percent higher than Florida’s in 2000. It was 208 percent higher last year. Florida has not expanded Medicaid under Obamacare, while New York has expanded it more aggressively than any other state. “For perspective, in 2024 New York spent nearly as much per capita on Medicaid ($4,551) as Florida did for its entire state budget ($5,076).”
- New York’s education spending per student is highest in the country, at about $35,000. Florida spends about $13,000 per student. Florida fourth-graders rank third in the country in reading and fourth in math. New York fourth-graders rank 36th and 46th.
- Florida has surpassed New York in population and continues to boom.
Here is more from Dominic Pino.
Amazon’s Robotic Revolution
Amazon now employs almost as many robots as humans leading to huge productivity improvements. From the second graph, “end-to-end” packages handled by Amazon rose from 175 in 2015 to nearly 4000 in 2025. Incredible. Excellent piece in the WSJ.
Hat tip: Edward Conard.
Big Beautiful Bill critiques
So far I am not finding them very impressive.
To be clear, there are many things — big things — I do not like about the bill. I would sooner cut Medicare than Medicaid (that said, I do not find the idea of cutting health care spending outrageous per se). The corporate rate ends up being too low, given the budget situation. No taxes on tips and overtime is crazy and cannot last, given the potential to game the system, plus those are not efficient tax changes.
I strongly suspect that if I knew more of the bill’s details (e.g., what exactly is the treatment of nuclear power in the current version?), I would have more complaints yet. I do not wish to boost taxes on solar power. Veronique de Rugy criticizes the underlying CEA projections.
That all said, doing the budget is not easy, especially these days. Maybe I have read fifteen or so critiques of BBB, and have not yet seen one that outlines which spending cuts we should do. Yet comparative analysis is the essence of economics, or indeed of policy work more generally. In that sense they have not yet produced critiques at all, just complaints. Alternatively, the critics could outline all the tax hikes that would put the budget on a sustainable path, but I do not see them doing that either. Again, no comparative analysis.
If you don’t want to cut health care spending, what do you want to cut? I am willing to cut health care spending, preferring to start with richer and older people to the extent that is possible.
You can always spend more on health care and save more lives and prevent some suffering. But what is the limiting principle here? Simply getting angry about the fact that lower health care spending will have some bad outcomes is more a sign of a weak argument than a strong argument. Again, a strong argument needs comparative analysis and some recognition of what is the limiting principle on health care spending. I am not seeing that. I am seeing anger over lower health care spending, but no endorsements of higher health care spending. I guess we are supposed to be doing it just right, at least in terms of the level?
It is commonly noted that the depreciation provisions and corporate cuts will increase the deficit, but how many of the critics are noting they are also likely to increase gdp (but by enough to prove sustainable?)? I write this as someone who thinks the proposed Trump corporate tax rate is too low, but I am willing to recognize the trade-offs here.
Another major point concerns AI advances. A lot of the bill’s critics, which includes both Elon and many of the Democratic critics, think AI is going to be pretty powerful fairly soon. That in turn will increase output, and most likely government revenue. Somehow they completely forget about this point when complaining about the pending increase in debt and deficits. That is just wrong.
It is fine to make a sober assessment of the risk trade-offs here, and I would say that AI does make me somewhat less nervous about future debt and deficits, though I do not think we should assume it will just bail us out automatically. We might also overregulate AI. But at the margin, the prospect of AI should make us more optimistic about what debt levels can be sustained. No one is mentioning that.
It also would not hurt if critics could discuss why real and nominal interest rates still seem to be at pretty normal historical levels, albeit well above those of the ZIRP period.
Overall I am disappointed by the quality of these criticisms, even while I agree with many of their specific points.
Austin Vernon on taxes on solar (from my email)
I think your question about new taxes on solar and wind is an interesting one, and increasing taxation has been an ongoing process for years.
Some of these tax increases are normal, like ending property tax exemptions. These taxes don’t impact project economics too severely, and the breaks create a lot of ill will at the local level.
Solar has seen constant tax increases and quotas on imported panels. Uncompetitive domestic producers, other competing energy sources, anti-trade folks, and China hawks all favor these taxes. The important metric is that buying panels in the US is 2x-3x more expensive per watt than in the rest of the world.
Solar panel factories are easy to build, and technology changes quickly. There is a Dutch boy and the dam effect. We constantly have to add new tariffs on different countries and new technologies (although foreign production from US-owned companies has generally been exempt). These tariffs have to get stiffer to maintain the balance.
A recent change was that the IRA finally led everyone to start building factories in the US. An absolute avalanche of panel factories is/was on the way with less activity for cells, wafers, and polysilicon. These factories might be viable without subsidies considering US panel prices. Most of the interest groups listed don’t appreciate this outcome, especially because many are Chinese-owned factories. Foreign Entity of Concern content and ownership penalties are the obvious solution as the next hole to put a finger in because many subcomponents would still be imported and the general kludge laws like that add.
The solar installation lobby has been satisfied with tax credits that counteract some of the high panel costs. These rules tend to discourage new technology in the fine print and skew incentives. Simpler, denser solar farm designs make sense once panels are cheap. There is no reason to make the switch if panels are expensive and the tax credit is based on the total install cost. Roughly 90% of US utility-scale installations have trackers that add cost but increase per panel output. In China, there are almost no trackers. There are also some nasty effects in the residential business that encourage complex financial products over streamlining construction and permitting.
It is an interesting crossroads where the tax credits are gone, and there is now a reason to have a more direct confrontation on panel cost. The battery industry is in the early stages of a similar conflict, but it seems like they might retain the deal with the devil and keep tax credits for now.
The world’s most expensive toll?
A bridge connects Copenhagen and Malmo, and now the price is higher:
…the basic price for a one-way car journey across the bridge has been jacked up to 510 Danish kroner, or £58. For the largest vans, it is the equivalent of £218.
Research by Sydsvenskan, a regional newspaper in southern Sweden, suggests this is by far the most expensive bridge toll on the planet, costing about twice as much as its nearest rivals in Japan and Canada…
Despite the vehicle toll, the total number of people crossing the Oresund by car, train or ferry hit a record 38 million last year, equivalent to about 105,000 trips a day. A one-way railway journey between central Copenhagen and Malmo typically costs only £13.
Here is the full story from The Times. I find this intrinsically interesting, but I also would like to make a simple point. If you are assessing the optimal toll here, claims that “the higher toll limited congestion,” or “the higher toll diminished the number of car trips” are not dispositive. They are relevant information, but one also has to measure whether gains from trade across the two polities went down as well. Otherwise, you do not have much of a conclusion.
Privatize Federal Land!
I’ve long advocated selling off some federal land—an idea that reliably causes mass fainting spells among the enlightened. How could we possibly part with our national patrimony, our land, our sacred wilderness? Calm down. Most of this “public land” is never used by the public. Selling some of it would actually make it more accessible and useful to real people.
Moreover, most of you wailing about selling some Federal land are probably very happy we sold the “public” airwaves for your private cell phone use. Privatizing the airwaves made them much more useful to the public. (Thank you Reed!).
AEI has an excellent map of the lands that could be sold and developed in the Mike Lee bill. Here’s their conclusion:
The data show a significant opportunity. Our analysis finds that developing just 135-180 square miles of the most suitable BLM land, a minuscule fraction of the total, could yield approximately 1 million new homes over ten years. This would substantially address the West’s housing shortage while generating an estimated $15 billion for the U.S. Treasury from land sales.
Here’s an example of the some of the land potentially developable around Las Vegas.
Here’s a Google satellite image of the bit around Mountain’s Edge. Enjoy your fishing on these public lands!
And here’s a very crude but useful scatter plot showing the correlation between median home prices in a state and Federal land ownership. Should home prices in Utah (63.1% Federally owned) really be 71% higher than in Texas (1.8% Federally owned)? Of course, Texas is famously an urban hellscape with no parks, no open space, and nowhere to hunt or fish.
C’mon British people, you can do better than this…
I’ve seen estimates that thirty people a day are arreested in the UK for things they say on social media. Other anecdotes of varying kinds continue to pile up:
Describing a middle-aged white woman as a “Karen” is borderline unlawful, a judge has said amid a bitter row at a mental health charity.
The slang term, used increasingly since the pandemic, refers to middle-aged white women who angrily rebuke those they view as socially inferior. Sitting in an employment tribunal, a judge has now said that the term is pejorative because it implies the woman is excessively and unreasonably demanding.
The woman who used the term nonetheless was acquitted, though barely. Here is the article from Times of London. And this:
The government’s new Islamophobia definition could stop experts warning about Islamist influence in Britain, a former anti-extremism tsar has warned.
Lord Walney said that a review being carried out by Angela Rayner’s department should drop the term Islamophobia, or risk “protecting a religion from criticism” rather than protecting individuals.
Ministers launched a “working group” in February aimed at forming an official definition of what is meant by Islamophobia or anti-Muslim hatred within six months.
Here is The Times link. British people, it is not just J.D. Vance who is upset. You are embarrassing yourselves with all this! Please stop. Even enemies of free speech think you are going about this in a pretty stupid way.
Detroit helicopter drop of cash
The money drop was apparently the last wish of the owner of a nearby car wash. Knife said the man recently died due to Alzheimer’s Disease and his funeral was Friday.
Despite the mad dash for free cash, the incident remained peaceful, if hectic, Knife said.
“There was no fighting, none of that,” she said. “It was really beautiful.”
…Witnesses said a helicopter hovering in the area of Gratiot Avenue and Conner Street dropped thousands of dollars in cash onto the pedestrians below, bringing a sudden and surreal burst of joy to a hot Friday afternoon in east Detroit.
Lisa Knife, an employee at the nearby Airport Express Lube & Service, 10490 Gratiot, estimated that thousands of dollars were tossed from the chopper.
Here is the full story, via Edward Craig.
The military culture that is German
Pistorius must grapple with a procurement bureaucracy that once took seven years to select a new main assault rifle and more than a decade to procure a helmet for helicopter pilots. He will have to oversee an enormous ramp-up by an arms industry already struggling with capacity. And billions must go towards tasks such as upgrading barracks, some of which are in “disastrous” shape with crumbling plaster and mould, according to the armed forces watchdog.
Here is more from the FT.
Turkey fact of the day
Real interest rates, which subtract inflation from central bank policy rates, have been negative for a remarkable 13 of the 22 years that Erdoğan has been in power, according to FT research. This helped spur growth, boost incomes and sustain a construction boom. It also laid the foundation for an economic crisis.
By late 2022, real rates had fallen to minus 75 per cent. By mid-2023, fuelled by high government spending following a devastating earthquake and pre-election fiscal splurge, the economy was overheating. Inflation was running at 60 per cent, the lira was in freefall and Turkey had a current account deficit equivalent to almost 6 per cent of GDP but had negative net reserves of about minus $60bn.
Here is more from John Paul Rathbone at the FT. I would want to know more about what actual net borrowing rates have been, all factors considered. Still, this is quite something, even if it is only an interest rate on paper, so to speak.