What You Should Be Reading: January 2025

Welcome to “What You Should Be Reading,” a monthly series in which the Taxpayers Protection Alliance (TPA) hops off the whiplash machine known as American politics long enough to commend to your attention a few recent entries in the corpus of public-policy research.

This month’s edition — our editors assure us that somehow, inexplicably, we have only reached the first week of February 2025 — includes the truth about trade deficits, a plan for responsible fiscal policy, and what lawmakers must do to protect children online.

So, without further ado…

American Institute for Economic Research: “Understanding Trade Balances and What to Do About Them”

To some, trade deficits are the evil in the night, the harbinger of doom stalking the American economy. They are (we are told by the more unreliable economic narrators) the subsidies to foreign nations, the henchmen of a rising national debt, and the void left by that giant sucking sound. They are the razors hidden in the apples given out to bright-eyed little trick-or-treaters, the scheme concocted in service of multinational corporate greed, spineless, sold-out politicians, and globalist neoliberal libertarian coastal-elite free-market-fundamentalist ideologues (or something; one loses track of the adjectives).           

This kind of hyperventilation misunderstands basic economics; its cause is psychosomatic, not real. In a helpful recent paper, Dave Hebert, a senior research fellow at the American Institute for Economic Research, dispels many misconceptions.

Trade deficits per se pose no menace to prosperity. “In the end,” Hebert argues, “a trade balance is nothing more than an accounting identity that is often confused for an economic identity.” Economic policy that fixates myopically on trade deficits will accomplish no tangible economic goods and, to boot, will likely introduce myriad non-economic maladies to the body politic.

The average consumer runs a trade deficit with his grocery store. The consumer needs good (i.e., groceries); the store needs currency. Neither party would have it any other way. Moreover, the consumer has not, on net, become worse off (quite the opposite). “Including both [capital and goods] accounts for both trading partners reveals that everything is in balance,” Hebert writes. “This simple insight remains true whether the grocery store is just down the street, in Canada, or in China.”

Dollars bartered for goods overseas do not become hopelessly stranded — they come home. Foreigners spend them to “purchase other US exports, sure, but they also use those dollars to purchase US investments,” Hebert explains. “Increased foreign investment, in turn, spurs job creation and wage growth in the US, not job destruction and wage decline.”

Read the full paper here.

Club for Growth Foundation: “Sustainable Budgeting: A Pro-Growth Blueprint for Fiscal Responsibility in the States”

The daily work of governing well is often drab and dull, involving more basic math than high-soaring rhetoric. Thoughtful lawmaking and administrative deftness lose none of their importance for that fact. Particularly at the state level, carrying out the basic tasks of governance with an unassuming competence is indispensable to the safety and happiness of the people — not to mention the electoral prospects of politicians. Budgets must be right-sized, tax burdens kept in check, neighborhoods policed, and roads paved. When these basics go undone, residents make known their displeasure at the ballot box — or with their feet, a fact that California’s and New York’s shrinking populations evidence.

Vince Ginn provides a blueprint for common-sense state-level fiscal policy in a new paper for the Club for Growth Foundation. “Sustainable budgeting is based on the idea that government spending should not grow faster than the average taxpayer’s ability to pay for it,” Ginn writes. “This budget limits government spending growth to a maximum rate of population growth plus inflation. The goal is to prevent the government from expanding faster than the economy and, thus, to avoid excessive taxation or debt accumulation that burdens taxpayers and stifles economic growth.”

Besides the obvious benefits of avoiding debts and deficits, sensible spending and low taxation conduce to prosperity. Citizens with more income invest more, spend more on consumer goods, and start more businesses. States that cannot resist the urge to fleece their residents with high taxes lose residents — another fact evidenced painfully by California and New York.

Moreover, had lawmakers in Washington, D.C. implemented this principle, the federal government might not now be living out a fiscal analogue of an episode of My 600-lb Life. “Federal spending surged by 81.7% [from 2014 to 2023], nearly four times faster than the 23.2% increase in the rate of population growth plus inflation,” Ginn notes. “If federal spending had been limited to this rate, the federal government would have spent $2.1 trillion less in 2023, significantly reducing the national debt.”

Read the full paper here.

Stop Child Predators: A Roadmap to Fight Child Exploitation for the Trump White House and 119th Congress

Children’s online safety has become the hottest front in debates over children’s safety. Bill have proliferated in statehouses and in Washington, D.C., of which many contain constitutional poison pills, from age-verification mandatesto outright online censorship regimes.

A new brief from Stop Child Predators (SCP) points out something both obvious and overlooked. Law enforcement is doing very little to protect children from honest-to-goodness predators online, and those predators are consequently harming children, often without consequence.

The enforcement shortfall boggles the mind. “In a recent 90-day period, there were 99,172 IP addresses throughout the US distributing known [child sexual abuse material] images and videos through peer-to-peer networks,” SCP reports. “Law enforcement only had the capacity to investigate 782, less than 1%, even though 75% of similar cases result in successful prosecutions.”

The Department of Justice has declined for a decade and a half to enforce fully the PROTECT Our Children Act of 2008, and Congress has declined to compel the agency to do so. Moreover, Congress has not enacted the Invest in Child Safety Act, a bill aimed at implementing the PROTECT Act and providing needed resources to law enforcement.

Instead, lawmakers have distracted themselves with the kinds of ill-considered and unconstitutional proposals described above. Besides violating the First Amendment, such proposals also violate standing principles of child protection,subordinating parental decision-making to lawmakers’ preferences. A “major precedent set by [the Child Abuse Prevention & Treatment Act of 1974] is that parents — not the government or private companies — have the responsibility to protect their children from abuse, neglect, exploitation and deadly harm,” writes SCP. “Parents should have fundamental rights and responsibilities to raise their children as they see fit, as long as they are protecting them from harm,” the report adds.

Note: TPA highlights research projects that contribute meaningfully to important public-policy discussions. TPA does not necessarily endorse the policy recommendations the featured authors make.