Charles G. Koch Professor of Economics Archives

A recent Heartland Institute and Rasmussen Reports poll found widespread irregularities in the 2020 election. While whether this proves theft of the presidential election is debatable, it certainly demonstrates serious issues with voting by mail.

The poll was conducted during the first week of December with 1,085 respondents. Thirty percent of respondents claimed to have voted by mail in 2020; some questions were asked only of mail voters. The margin of error was 3 percentage points.

The poll has received considerable attention, including a post from President Trump, “This is the biggest story of the year!” The headline results:

21% of mail voters answered affirmatively to, “did you fill out a ballot, in part or in full, on behalf of a friend or family member?”
17% said that they signed “a ballot or ballot envelope on behalf of a friend or a family member.”
17% of all respondents reported voting, “in a state where you were no longer a permanent resident.”
8% said they were offered a payment or reward for voting by “a friend, family member, or organization.”

A first consideration is the potential for deliberately incorrect responses. Some respondents might have been reluctant to report misconduct, even in a survey. But I could also see Trump supporters answering to undermine the credibility of the contest. The official margin of error may not be accurate.

Some of this fraud is not terribly heinous. Assisting a parent or grandparent confused about marking the ballot or signing their ballot for them at the post office would qualify as fraud. The one-in-five fraudulent ballots headline does not involve votes being changed or ineligible persons voting.

Additionally, the irregularities would not necessarily benefit either party. A second-order advantage for President Biden, who received a higher share of the mail-in than in-person votes, might exist, even if Democrats and Republicans were equally likely to commit inadvertent fraud. So, excluding all fraudulent ballots might have changed some swing state outcomes.

Payments for voting concern me the most. Vote selling has some merits but is not currently allowed. Mail-in ballots let voters show others how they voted, enabling vote purchases. Yet survey responses may be based on joking offers by relatives or friends.

The allegations of fraud by President Trump, Rudy Guiliani, and Sydney Powell involved boxes of bogus votes and rigged voting machines. This survey offers no evidence of such misconduct, but clearly indicates vulnerabilities of mail-in voting. A voting process yielding one in five fraudulent ballots does not inspire confidence. And the inadvertent fraud is so easy, intentional fraud must also be possible.

Mail-in voting helped over 20 million more Americans vote in 2020 than 2016. Economics predicts that more people will vote (or do anything) when the cost falls. Changes in how we vote (by mail, electronically, or making election day a holiday) which increase turnout and yield different results than if fewer persons voted is not fraudulent.

The unfamiliar is often frightening, so many Americans naturally worried about security with voting by mail. These fears, even if unfounded, are sincere. And yet these concerns were not taken seriously and patiently addressed. Instead, anyone voicing concerns was vilified as an election denier.

I think President Trump opportunistically exploited election integrity concerns. The promised evidence of fraud was never produced. And since Rudy Giuliani has been sued into bankruptcy over defamation claims, I presume evidence of rigging is nonexistent.

What can be done to secure elections? I do not view eliminating voting by mail (or opposing technology generally) as a path forward. Continuous updating of voter registration rolls should reduce voting in states where people no longer live. We should make people request a mail ballot. And Justin Haskins of the Heartland Institute suggests notarizing mail-in ballots, with free notary services available.

Democracy ultimately de-escalates political conflict. People forego extralegal means of conflict and wait until the next election. If we view other Americans as fellow citizens, we should ensure everyone can vote and have confidence in the process. We are a long way from this goal.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.

Economists debate whether typical Americans are better off now than 50 years ago. The debate concerns the reliability of the Consumer Price Index (CPI). The Cost of Thriving Index (COTI) from American Compass and Oren Cass think tank contends that middle class prosperity is becoming unaffordable for American families.

Cass gained attention with the publication of “The Once and Future Worker.” He voices the frustration of many conservatives with free markets, particularly emphasizing how markets leave many Americans without jobs capable of supporting families.

The dollar loses value with inflation, making dollar amounts not comparable over time. Economists adjust dollar values using the CPI, yielding “real” as opposed to nominal values. Between 1985 and 2022 the CPI increased 142% and men’s median earnings 145%, leaving real income basically unchanged.

The term “thriving” is deliberately chosen, as the COTI measures the cost of a changing “middle class” life. By contrast, the CPI tries to measure the cost of the same items – a typical market basket – at different times. Cass contends that being middle class in 2022 does not mean having the same things as in 1985.

The cost index has five components: food, housing, health care, transportation, and education. The COTI compares the dollar value of income and costs in each year and reports the weeks of work at the median wage needed to afford the middle-class life. The COTI stood at 39.7 weeks in 1985 versus 62.1 weeks in 2022. (The cost and weekly earnings were $17,500 and $443 in 1985 against $75,700 and $1,219 in 2022.)

Similar results hold for women’s earnings or earnings by education attainment.

In his book, Cass argues that “without access to work that can support them, families struggle to remain in tact or to form in the first place, and communities cannot help but dissolve; without stable families and communities, economic opportunity vanishes.”

This is an important consideration. Families transmit values in society, which is why progressives seek to undermine the family. Men with low earnings are less likely to marry and their marriages tend not to last. Remember that these are averages and do not deny that happy families with Mr. Mom.

Competition from imports has devastated many American industrial towns. Free market economists often argue for unrestricted imports and government assistance for those losing their jobs. Cass points out though that a life on the dole ensures family disintegration.

Cass further points to regulation in the offshoring of manufacturing. When high labor costs drive jobs overseas, this is efficient since highly valued and paid American workers can take other jobs. This is not the case when regulations increase the cost of manufacturing here. Free trade evades regulations but devastates communities.

Does the COTI prove that middle class living has become unaffordable?

Economists Scott Winship and Jeremy Horpendahl challenge this claim for the American Enterprise Institute. They criticize the measurement of some costs and consider quality improvements.

The healthcare component uses the full cost of employer provided health insurance, including cost paid directly by the employer, but does not add this to earnings. Although this might seem to cancel in comparisons over time, the cost of healthcare has risen much faster than inflation, biasing the measure.

Education uses in-state tuition for public universities. But very few students pay the full tuition price; net tuition, or tuition minus any institution-granted scholarships, better measures cost. Sticker price tuition has increased significantly faster than net tuition, overstating the cost increase.

Winship and Horpendahl further address quality improvements, a major source of economists’ concern over CPI accuracy. Expenditures today purchase bigger houses, more reliable cars, and better medicine. They estimate that a properly measured COTI has increased by 4 weeks since 1985, not 22.

Oren Cass rightly focuses attention on the economic requirements of strong families. The debate over whether American families are better off now than a generation ago is vital. Economists’ difficulty conclusively answering this question is telling, as I doubt there was disagreement in 1922 about whether families were doing better than in 1885!

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H.
Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.

The United States faces potential default in June as we run up against the debt ceiling, currently at $31.4 trillion. Whether the debt ceiling is good policy depends largely on one’s attitude toward Federal spending.

Is our national debt sustainable? I will defer to the judgment of financial markets. Interest rates compensate savers for being patient and for bearing default risk, the risk that borrowers may not repay the loan or interest payments.

The “risk free” interest rate is what investors would charge a borrower with no default risk. When default risk increases, investors will first demand a higher interest rate and then stop lending altogether.

U.S. Treasury securities have long been viewed as the risk-free investment. The inflation-adjusted (or real) interest rate on 10-year U.S. Treasury securities, courtesy of the St. Louis Fed, stands at 1.3%, over two percentage points higher than at the start of 2022. But this interest rate hike is widely attributed to the Fed’s tightening of monetary policy to combat inflation.

The debt to GDP ratio stands at historically high levels. But economists Jason Furman and Larry Summers argue that real interest payments as a percentage of GDP better measures indebtedness. This measure is not at record levels, suggesting that Washington has untapped credit.

Nonetheless, our current budget situation is troubling. The Congressional Budget Office (CBO) estimates this year’s deficit at $1.5 trillion, the third largest ever and seventh largest since 1962 as a percentage of GDP. Yet the economy is not in recession, we are at peace, and the COVID-19 pandemic is over. This represents a structural and not cyclical deficit.

Deficit projections depend on future policy choices so let’s consider entitlement spending. The CBO projects that Social Security and Medicare spending will increase from $2.3 trillion this year to $4.2 trillion in 2033. The deficit will increase significantly unless we cut spending or increase taxes.

Credit markets are voluntary; nobody must purchase Treasury bonds. At some point credit markets will say no more Federal borrowing. We would be wise to keep some credit for emergencies. Imagine financing World War II without any borrowing!

Now let’s turn to the debt ceiling, beginning with its history. Congress enacted the ceiling in 1917 to keep from having to approve each issuance of Treasury debt. The ceiling has been raised over 100 times since World War II and suspended on several occasions. Fiscal conservatives use the ceiling as leverage to push spending cuts, like the 1985 Gramm-Rudman-Hollings Debt Reduction Act and the 2011 budget deal.

The ceiling creates policy uncertainty for our economy. Uncertainty is unavoidable in life and especially business but hurts investment.

Government affects business in many ways, so uncertainty about government policy increases overall uncertainty. Failure to raise the debt ceiling will delay the repayment of bonds, drive up the Federal government’s interest rate, and potentially also other interest rates. A long-term budget agreement would be better than a fight over the ceiling every other year.

Evaluation of the ceiling depends mostly on how one views current Federal spending, not creditworthiness. If avoiding default were paramount, a deal could be done easily.

Republicans could agree to big tax hikes or Democrats could agree to freeze discretionary spending. These are not solutions due to their impact on spending.

The Biden Administration is considering challenging that the debt ceiling violates the 14th Amendment. I am not a constitutional lawyer, so I will not weigh in here. Fiscal conservatives have voiced opposition to this tactic, but we are a constitutional republic;
the constitutionality of any law can be questioned.

The inability to reach a compromise reflects our increasingly divided nation.

Legitimate government reflects the consent of the governed, meaning all Americans, because we recognize the equal moral worth of all citizens. Today both sides want to
force their preferred policy on the other by any means necessary. This is a tell that
many now view their fellow Americans as subjects, not fellow citizens.

The Biden Administration is battling what it terms “junk fees.” Is this consumer protection, or will it simply create additional costly regulation? The answer depends largely on how one views competition in markets.

The term junk fees include bank overdraft fees, credit card late fees, airline baggage and seat selection fees, hotel resort and destination fees, and entertainment ticket fees. In addition to capping or eliminating such fees, the Administration also wants transparency in pricing.

Before discussing any fees in detail, let’s consider the pricing process in markets. As economist Thomas Sowell observes, most intellectuals believe businesses exercise
considerable discretion over prices. Only public pressure or potential government
action checks corporate greed. Junk fees emerge from this rapaciousness to increase
revenue extraction from hapless consumers.

An alternative view recognizes that every purchase in the market is voluntary and that businesses face competition. The competition can be direct – from a rival airline – or indirect – travelers driving instead of flying. Businesses can set whatever price they want but are not guaranteed sales. Consumers are not hapless and as a groupdetermine which businesses profit and which fail.

Businesses seek profits but face real constraints if they wish to sell what they produce. The power of the market is real but intangible. A primary lesson of economics involves recognizing these invisible market forces at work.

Once we reject the exploitative view of markets, we can explore the functions different fees serve. Let’s start with checked bag fees. Airlines will be happy to provide baggage service, but travelers will have to pay for this. The question is how airlines charge for baggage service.

One possibility is through higher ticket prices and no baggage charges. In this case, passengers travelling light pay for others’ bags. Alternatively, airlines could offer lower ticket prices and bag charges, with the travelers checking bags paying for this service.

Fees provide an additional benefit. Each bag shipped involves costs; the marginal cost of extra baggage is not zero. With no bag charge travelers act as if shipping a bag is costless. Imagine a traveler who could pack light with one bag or heavy with two bags. If the traveler is unwilling to pay for the second bag, packing heavy is inefficient: the costs of shipping the bag exceed the value to the traveler.

How about bank overdraft fees? Banks charge these fees when a customer writes a check or uses a debit card without money to cover the transaction. The bank honors the transaction and charges the customer, including sometimes a fee for each day the account is overdrawn. Covering the check is effectively a short-term loan and costly. The fee also prods the customer to keep a higher account balance.

If banks cannot charge overdraft fees, all customers would share the cost of these loans, raising fairness concerns for customers never bouncing checks. Banks would likely end overdraft protection and possibly drop customers without sufficient account balances.

All-inclusive pricing raises different issues. It is frustrating when added charges yield a much higher price than promised. Yet this undermines the value of comparison shopping using an online booking site. Sites already have an incentive to address the resulting problem and will make better decisions here than federal bureaucrats who face no consequences for the destruction their regulations create.

One practice included with junk fees are free trials converting to paid subscriptions you can “cancel anytime.” Except that canceling is infinitely harder than signing up. This scheme is only profitable because the business makes cancelling more costly than continuing to pay. The customer does not value the service enough to willingly pay for it, so value is not being created. This is more like extortion than honest business and I will not defend this.

The “junk fees” characterization draws on a worldview where businesses abuse customers for sport and profit. Protecting consumers from junk fees promises to inject government into every detail of commerce. Americans should remember Ronald Reagan’s line about the nine most frightening words in the English language: “I’m from the government and I’m here to help.”