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Bear Market - U.S. Economy
Since 1776 when Adam Smith infused the rigor of the Enlightenment into economics, steady refinements via the professional peer review process have resulted in a disciplined way to think about economic problems. The resulting “Principles of Economics” describe the economy's private and public sectors and the importance of representative government.
Smith discovered that when private-sector markets are competitive—i.e., information is transparent, property rights are well defined and secured by the public sector courts and police forces, and transaction costs are low—private profit-seeking enterprises tend to deliver goods and services more efficiently than government provision even though that is not part of the interest of the profit seekers. Just as important, where these "axioms” are not present, the principles can guide economic policy. Smith’s work supported the calls to freedom, and the revolutionary dismantling of monarchical and feudal concentrations of power. Two hundred fifty years of refinement through peer reviewed research and empirics continue to support the finding that decentralized market mechanisms outperform top-down control.
Two Radical Departures from Economic Principles
Consider two recent government actions based on Project 2025 that violate core principles of market economics. First, chaotic tariff policy has disrupted functioning international trade markets by injecting uncertainty into pricing and supply chains, diverting power from the market to the president. Second, deep cuts to publicly funded research that, by its nature, must be conducted in the public sector. These cuts deny the market system a steady infusion of new knowledge.
Tariffs Should Be a Congressional Decision: The Constitution Says So, and So Does Economics
Import tariffs are reflected in the prices that U.S. consumers pay for imported goods. Trade has real costs, including the cost of import and export harbors, airports and border crossings, plus military protection on high seas. By including these costs in the prices, consumers pay for imported items, consumers can choose between domestic and imported options on the basis of fair price comparisons. These days, however, due to Trump's much higher tariff rates, the tariff revenue does not just pay for the operating costs of trade but also offsets some of the deficit increase resulting from Trump's tax cuts. Because U.S. consumers pay the tariffs, the income extracted from them is shifted up the income scale from average Americans to the wealthy.
Article I of the U.S. Constitution assigns tariff authority to Congress—not the President. This assignment is sound economics: when in the hands of a unitary executive, whether King George III or President Trump II, tariffs become tools of protectionism, executive coercion and transactional diplomacy. So rather than trade allocated by market forces, it is instead allocated by the chaotic policies of the unitary executive—just as the Founders feared.
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Government Sponsored Research
Left solely to market forces, the creation of new knowledge—a public good—would be under-produced; foundational breakthroughs that benefit the general public would be chronically underfunded. Basic science not only entails high cost but also often lacks immediate commercial value and clear profit incentive. In these cases, public funding or institutional support is essential to ensure continued progress. Consequently, much of America’s scientific research is conducted in federal labs—run by agencies like the National Institutes of Health (NIH), the Centers for Disease Control and Prevention (CDC), and the National Aeronautics and Space Administration (NASA).
These agencies gain a multiplier by contracting with highly qualified professors at research universities. They award grants and contracts to faculty who have proven their research capability through the peer review process, a highly rigorous screen. The payoff to society comes in the form of breakthroughs in vaccines, energy, cybersecurity and technologies that drive our economy and protect national defense.
The payoff also comes in the form of educating future researchers: Students can benefit immensely from attending universities where research is actively conducted, and through their internships learn whether they have the talent and will to become researchers themselves.
Recent cuts in these agency and university research activities forfeit the promise of mRNA vaccines for childhood diseases, cancer therapies, and future COVID variants—along with advances in climate resilience, cybersecurity and AI. These cuts also deter top researchers and brilliant students from pursuing STEM careers in the U.S., weakening our workforce, stalling innovation, and compromising national security.
The chaotic tariff policy and the massive cuts to basic scientific research erode our ability to lead, innovate, and enable our citizenry to afford their accustomed daily activities. They render our nation increasingly dependent on foreign innovation, less competitive, less secure and ultimately, less free.
