My Weekly Reading for May 11, 2025

First, Happy Mother’s Day to all the mothers who are reading this post.

CBO Score Shows Medicaid Is Inefficient and Current Spending Levels Unpopular

by Michael F. Cannon, Cato at Liberty, May 7, 2025,

Excerpts:

These projections reveal a troubling and dangerous aspect of Medicaid. If the CBO’s assumptions are reasonable, they further suggest—and I expect every Medicaid observer would agree—that if Congress were to eliminate all federal Medicaid funding, states would respond by dropping tens of millions of enrollees from their programs. Again, the reason would be the same: states and voters value enrolling those people if states need only furnish 23 percent to 50 percent of the spending, but not if states must raise taxes high enough to furnish 100 percent of the spending.

This should terrify anyone who cares about providing health care to vulnerable patients. Rather than make medical care and health insurance more affordable and secure for low-income households, Medicaid makes tens of millions of people dependent for their health care on government subsidies that lack political support and could therefore crumble like a house of cards.

And:

As my colleagues Krit Chanwong, Dominik Lett, and I write elsewhere:

Congress should combine federal Medicaid, CHIP, and Obamacare funding into a single block grant that the federal government distributes to each state. The amount that states receive would not rise or fall with state actions. Block grants would, therefore, end the scams that have contributed to wasteful and fraudulent Medicaid spending.

Block grants could deliver any level of savings Congress desires. Congress should set the total amount of federal Medicaid, CHIP, and Obamacare funding at the level the Republican Study Committee has proposed: $342 billion for 2026. Congress should set the growth rate of this funding stream at zero percent. Each year, in aggregate, states would receive $342 billion. Whereas the House Republicans’ budget resolution would merely reduce the rate of growth in federal Medicaid spending from 4.5 percent to 3 percent, this proposal would actually cut federal spending by $5.6 trillion below the CBO’s current-law baseline. It would reduce “primary” federal deficits (i.e., deficits excluding interest payments) by 61 percent over the next decade. It would eliminate the primary deficit by 2035. Even with these significant cuts, however, Congress would still have to take additional steps to balance the federal budget.

This is one of Michael Cannon’s best recent articles.

Am I Rational?

by David Friedman, David Friedman’s Substack, May 6, 2025.

Excerpt:

I start with an anecdote from about thirty years ago, when I was a faculty fellow at the University of Chicago Law School. One summer I mentioned to Richard Posner, a distinguished colleague, that in order to commit myself to riding a bike in to work I had not paid for a summer parking space at the school. Posner responded that he thought I believed in individual rationality; if riding a bike was the right decision I should not have to trick myself into making it.²

I responded that rationality was an assumption I made about other people. I knew myself well enough to recognize contexts where I would not take the action in my long run interest, used commitment strategies to correct errors I would otherwise make. I did not know other people, the masses of strangers whose behavior I used economics to predict and understand, well enough to improve on the first approximation provided by the rationality assumption.

by Liya Palagashvili and Ravena Sharfuddin, Mercatus Center, May 7, 2025.

Excerpt:

Labor unions are often evaluated through the wage premiums they secure at the bargaining table. Our study finds that although US unions have historically secured short-run pay gains, these victories often come at the expense of slower employment growth, fewer future job opportunities, reduced investment and productivity, and diminished firm growth and viability. Yet downstream job losses and firm decline can be traced not to the collective voice itself but to the statutory monopoly structures that amplify aggressive bargaining tactics and block alternative channels for cooperation. These trade-offs arise not because unions are uniquely “aggressive,” but because US labor laws promote a legally protected union monopoly that crowds out constructive representation and worker voice. Drawing on 147 studies, we find that when the monopoly face dominates and delivers seemingly “big wins” at the bargaining table, companies respond to wage pressure by trimming R&D, cutting capital, reducing company growth, and ultimately shrinking jobs for unionized workers—dynamics that explain roughly 55 percent of the decline in the Rust Belt’s share of manufacturing employment between 1950 and 2000. Cross-country evidence shows that systems permitting multiple forms of representation, voluntary unions, and flexible agreements retain the benefits of worker voice without the high costs linked to the downsides of monopolies. These findings show no link between greater union power and increased worker welfare: It is the structure of representation—not the presence of a collective voice—that determines whether unions help or harm workers. Policy reforms that relax monopoly privileges for labor unions in the US and encourage pluralistic forms of worker voice and moderate demands could preserve the gains of collective bargaining while mitigating its unintended costs.

The Microschool Revolution Is Just Getting Started

by Michael Bindas and Erica Smith Ewing, Reason, May 8, 2025.

Excerpts:

Forget apples—this Teacher Appreciation Week, how about giving educators something they can actually use: freedom. Florida did this with a 2024 law that opened the door for educational innovation by easing zoning and land-use restrictions on microschools, making it easier for alternative learning models to flourish outside the traditional system.

Following the passage of House Bill 1285, veteran educator Alison Rini repurposed a vacant day care center in the middle of a government housing project in Sarasota, Florida, and opened a microschool. A microschool generally refers to elementary, middle, or high school programs that are tiny by design, averaging just 16 students each.

And:

Instead of focusing on instruction, teachers who strike out on their own must navigate bureaucratic red tape, pass on-site inspections, and respond to demands for unnecessary building and fire safety upgrades. At some point, the regulatory burdens become unbearable, and teachers can find themselves trapped in the same system they previously escaped.

These code compliance rules kick in as soon as any K-12 enterprise grows beyond a certain point. The threshold in Wisconsin is any “instructional program provided to more than one family unit.” The threshold in North Carolina is more than two families. Imagine needing lockdown drills and $97,000 fire sprinklers for groups this small.

Our organization, the Institute for Justice, saw this abuse firsthand when a fire marshal in Cobb County, Georgia, tried to shut down St. John the Baptist Hybrid School—a microschool offering supplemental instruction for homeschoolers—overlooking a 2021 state law that protected microschools from over-the-top code enforcement.

The U.K. Trade Deal Screws American Consumers

by Eric Boehm, Reason, May 9, 2025.

Excerpt:

The White House is hailing a new trade deal with the United Kingdom as “a great deal for America.”

But is it a great deal for Americans? The specifics of the deal seem to suggest otherwise.

The agreement maintains the 10 percent universal tariff that President Donald Trump imposed on nearly all imports to the United States. But even the president admits this is a tariff hike on American consumers, rather than a reduction.

The point of comparison should be the average tariff rate on imports from the U.K. before Trump took office. In 2023, the most recent year for which full data are available, the average U.S. tariff on British goods was 3.3 percent.

That means this “deal” charges American consumers a 10 percent baseline tax on goods that were previously taxed at 3.3 percent. That’s not a win for free trade or lower prices.