What the DBCFT?

I must be losing my edge. I don’t believe I understand Paul Ryan’s and Kyle Pomerleau’s proposal for a destination-based cash-flow tax (DBCFT) as an alternative to President Trump’s tariffs in an op-ed in the Wall Street Journal. Here’s their description of the tax:

The DBCFT has three important features. First, all investment costs can be immediately deducted rather than depreciated over years or decades. Second, there is no deduction for borrowing costs. Third, a “border adjustment” would subject all imports to a single rate tax while providing all exports with a subsidy at the same rate.

Adopting a DBCFT would finish the job that Congress and Mr. Trump began in 2017 with the Tax Cuts and Jobs Act. That legislation made it more attractive to invest in the U.S. by cutting the corporate income-tax rate and introducing temporary 100% bonus depreciation. Mr. Trump’s One Big Beautiful Bill Act built on this by making the expensing provision permanent and temporarily expanding it to manufacturing structures. The DBCFT would make expensing universal and permanent, eliminating all remaining penalties on investment.

A DBCFT’s border adjustment is a smarter way than tariffs to tax imports. Border adjustments are widely accepted tax policy in most of the world. More than 170 countries, including America, use border-adjusted taxes. U.S. state and local sales and excise taxes are border adjusted. As a result, the DBCFT would be much less likely to prompt retaliation from trading partners.

I understand the export subsidy part of it. What I don’t get is how the import part of it differs from a tariff.

One way or another I agree with them that President Trump should work with Congress to enact into law whatever it is we end up with. That’s assuming, of course, that Congress ever comes back into session.

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Winners and Losers

There are no winners in war. One side just loses less than the other. I have refrained from commenting on the ceasefire in the conflict in Gaza because I’m skeptical that it will hold. Since the surviving Israeli hostages have been released I wanted to make some observations about the winners and losers in this conflict.

Winners

  • the families and loved ones of the surviving hostages
    This goes without saying. They have yearned for it for two years.
  • President Trump
    As we may tire of hearing this is a win for President Trump and he deserves credit for it.

I didn’t list the released hostages themselves as winners because I suspect they will have a long, difficult road ahead of them. They have endured severe physical and psychological hardships during their captivity which will remain with them. Now that they’ve been released some will undoubtedly have “survivor’s guilt” and other forms of post-traumatic stress disorder with which to contend.

Losers

As I see it there are many more losers than there are winners.

  • Hamas
    Not only have Hamas’s forces, leadership, and other resources been severely degraded but according to PSR their support among Palestinians has declined sharply.
  • the people living in Gaza
    They have suffered innumerable deprivations during the war including food, healthcare, and loss of their homes. I doubt that Gaza will ever return to its pre-2006 state.
  • Iran
    I don’t think you can neatly separate the U. S. attacks on Iran’s nuclear facilities from the war in Gaza. The cost in money to Iran of those attacks are not the only cost.
  • Gulf Arabs
    Something else I do not think can be neatly separated from the war in Gaza is the Israeli attack on Hamas in Qatar. Taken together I suspect that the attack on Iran and Qatar eroded Hamas’s financial support. What has been revealed is that the road to progress in the unrest in the Middle East runs through the Gulf State supporters of radical Islamist violence. Does Turkey still support Hamas?
  • The U. S. diplomatic establishment
    Not the least of the losers in the ceasefire and release of hostages is the U. S. diplomatic establishment. To echo the words of Samantha Powers they have been admiring the problems in the Middle East rather than solving them for far too long.
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Men and Women Behaving Badly

There’s a new Chicago story I wanted to remark on. Tre Ward reports at ABC 7 Chicago:

CHICAGO (WLS) — WGN-TV released a statement Friday after a video showed one of their employees being detained by federal agents in Chicago.

She was later released without charges.

The woman was taken into custody Friday morning near Lincoln and Foster avenues in Lincoln Square, video showed.

A Department of Homeland Security spokesperson said U.S. Border Patrol agents were working in the area when the WGN staffer allegedly threw objects at their vehicle.

What actually happened? I don’t know. In this day of picking sides, slanted reporting, phony audio, and AI-generated videos I don’t think we’ll ever know, especially since no charges were filed.

Just about three-quarters of a century ago my parents taught me some very valuable lessons. Speak calmly and politely to law enforcement officers when they are in the course of their duty and, most importantly, don’t resist arrest. These lessons have not apparently been handed down to younger generations.

My opinion about it is pretty simple.

Chanting slogans and carrying placard—protected speech.

Throwing things (regardless of what the things are), spitting on law enforcement officers, pushing LEOs, hitting them or their vehicles with vehicles—not protected speech.

As to the conduct of the federal agents, it looked to me as though they were pretty rough. I believe that’s what’s referred to as “situational control” and it’s what they’ve been taught to do. I don’t think much of it but I avoid those situations.

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My Dad’s Birthday, 2025

I didn’t want to let today go by without recognizing that it was my dad’s birthday. Well over his hundredth birthday.

I don’t know what I can tell you about my dad that I haven’t before. How he graduated from high school at 16 and from college four years later—summa cum laude, Phi Beta Kappa, editor of the college newspaper, graduated from law school two years later—law review, received a JD (rare in the those days).

He took a year off to bum around Europe and North Africa. Arrested as a spy in Serbia. Was in Munich on November 9, 1938. Someday I’ll post a picture of the notification from the State Department he received in his American Express box telling him to get the heck out of Europe.

How he couldn’t get a job as a lawyer so wrote editorials for the St. Louis Star, then became an insurance claims adjuster, finally getting hired as an associate with one of the biggest law firms in St. Louis. How he worked there until the firm collapsed in a scandal and then went off on his own.

He was the smartest, hardest-working, kindest, bravest, most loving man I’ve ever known or ever expect to know.

I still miss you, Daddy.

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Who Ordered Whom To Do What?

At CWB Chicago Tim Hecke reports:

One of the highest-ranking officers in the Chicago Police Department barred city cops from responding to calls for help from federal agents who reported being surrounded by a large crowd in Brighton Park on Saturday, according to CPD radio transmissions.

CPD Chief of Patrol Jon Hein ordered city officers to leave the area as tensions escalated following the shooting of a woman by Border Patrol agents, supervisors said in recorded radio traffic.

concluding:

A dispatcher relayed that an agent said “he’s one of about 30 armed Border Patrol agents, ICE. They’re being surrounded by a large crowd of people [and he is] requesting CPD. They don’t see any weapons in the crowd.”

“If you guys can immediately head down to 39th Place and Kedzie, please, and go assist them,” the dispatcher urged units leaving the station. “I’m looking on the [cameras], and there are lots of cars.”

Those CPD units responded but, per supervisory orders, stopped a couple of blocks short of where the agents said they were being surrounded. About five minutes later, they were told to leave.

“Just to confirm,” a dispatcher asked, “they were saying that they were being surrounded by that large crowd and they were requesting the police and we’re not sending?”

“Again, those are the orders we’re being given,” the supervisor replied.

Saturday’s shooting marked at least the second time this week that CPD supervisors directed officers to avoid federal enforcement actions involving ICE. On Wednesday, after Border Patrol agents detained a man at the scene of a West Side traffic crash, CPD officers initially responded but were later told to steer clear.

“The [crashed] car can sit in the middle of the street,” one supervisor said. “As long as we’re not over there, it’s all that matters.”

Read the whole thing. The part of the story you are more likely to have heard about happened shortly thereafter which Matt Masterson reports at WTTW:

Chicago Police Superintendent Larry Snelling rejected claims his officers failed to respond to a pair of incidents involving federal agents in the city over the weekend, saying more than two dozen officers were affected by chemical gas deployed by the agents.

Snelling on Monday refuted statements that his officers were told not to respond to the calls for service Saturday, one of which allegedly involved a federal agent shooting a woman and a second that involved vehicles allegedly attempting to “box in” federal vehicles.

“Those who will tell you that our officers weren’t there, say that to the 27 officers who were affected by the chemical agents that were deployed by federal agents,” he said in a press conference.

When asked about Chief of Patrol Hein’s directions, Chief Snelling responded that it was a mistake and he had spoken with Hein.

If true, it was worse than a mistake. It was a crime—obstruction of justice.

At this point I have no idea what actually happened. I only know what different sides are reporting.

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The Magnificent Emptying Mile

For those of you not familiar with it the “Magnificent Mile” is Chicago’s premium shopping district, home to upscale shops and pricey fashion outlets. It runs along Michigan Avenue from the Chicago River to Oak Street. This post was inspired by Stephen Taylor’s recent remarks at Outside the Beltway:

First and foremost, the obsession over Chicago is a long-term, right-wing, media-fueled narrative. To be clear, there is crime in Chicago. But not as much as the rightwing media narrative likes to pretend is the case. Chicago is far from a hellhole. Indeed, it is a lovely place and one of my favorite cities to visit.

I agree that Chicago is not a “hellhole” but I wonder how long it has been since Stephen has been here. I further wonder how many blocks south or west of the University of Chicago he’s strayed.

In 2019 the vacancy rate on the “Magnificent Mile” was 3%. Now, according to Crain’s Chicago, it’s nearly 30%. The reasons for that are varied but one important factor is that stores on the Magnificent Mile have become targets for “crash and grab” thefts. The process for such thefts seems to be:

  1. Steal a truck or SUV.
  2. Crash the stolen vehicle through the front window of a store.
  3. Loot the store.
  4. Escape in other vehicles.

Some of the stores there have experienced “crash and grabs” there repeatedly. A lot of Chicagoans are reluctant to go downtown after dark. High vacancy rates are one example of the sort of “indirect measures” of crime I’ve mentioned from time to time.

In my very nice Chicago neighborhood there was a homicide about three blocks from where I’m sitting—the first of my recollection. There have been holdups, assaults, and a kidnapping within two blocks. Such things were previously unheard of.

I am completely prepared to believe that Chicago’s homicide rate has declined sharply this year. Homicide is one of the few crime statistics in which I have confidence. They’re harder to avoid. Chicago’s homicide rate remains high compared with other large cities.

Walgreens just announced they were closing their large Old Post Office location. I don’t know what role shoplifting played in the decision but I doubt it was not a consideration.

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Trash Talking

Yesterday President Trump called for the arrest of Illinois Gov. JB Pritzker and Chicago Mayor Brandon Johnson. Tahman Bradley reports at WGN:

CHICAGO — U.S. Northern Command Wednesday said approximately 200 soldiers from the Texas National Guard and roughly 300 from the Illinois Guard have mobilized for a 60-day mission. Their orders are to protect ICE and other government personnel and federal property.

Also, Wednesday morning, President Donald Trump called for Governor JB Pritzker and Chicago Mayor Brandon Johnson to be jailed.

“Chicago mayor should be in jail for failing to protect ice officers! Governor Pritzker also!” he posted on Truth Social

Gov. Pritzker and Mayor Johnson were quick to strike back:

Appearing at a government employees union rally at Chicago’s Federal Plaza, Pritzker hit back.

“He’s a coward. He says a lot of things to the camera, he likes to pretend to be a tough guy. Come and get me. Come and get me,” he said.

and

Johnson, in apparent reference to the Central Park 5, the ultimately exonerated men wrongfully convicted in 1989 of an assault on a New York jogger, said, “This is not the first time Trump has tried to have a Black man unjustly arrested. I’m not going anywhere.”

President Trump has a big mouth. That is not a state secret. Don’t we have a right to expect our elected officials to avoid schoolyard taunts like this? Why do Gov. Pritzker and Mayor Johnson feel they must descend to his level?

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I Agree With the Tribune

I materially agree with the editors of the Chicago Tribune:

The provocateurs on both the right and the left over the weekend defined the narrative around the Trump administration’s immigration enforcement surge into Chicago and its suburbs.

On the right, we had Immigration and Customs Enforcement officers “patrolling” Latino neighborhoods in Chicago and tear-gassing scenes that arguably didn’t call for such heavy-handed tactics. We had the Department of Homeland Security making Hollywood-style videos of a wee-hours South Shore apartment building raid that looks more over-the-top with each passing day.

On the left, we had activists who were attempting — with cars or otherwise — to physically impede ICE and Customs Border Patrol agents from doing the work they’re legally allowed to do. With those tactics, these militant activists are imperiling the far greater number of peaceful protesters striving mightily to make their voices heard without breaking the law.

I would point out one defect in the equivalence between “right” and “left” the editors are attempting to draw in their opening passage. “‘Patrolling’ Latino neighborhoods”, being heavy-handed, and making “Hollywood-style videos” are not illegal. Physically impeding federal agents in the the work they are obliged to do is illegal. Here’s the meat of the editorial:

The entire spectacle leaves all of us distraught. In a statement over the weekend, the Civic Federation, the Civic Committee of In a statement over the weekend, the Civic Federation, the Civic Committee of the Commercial Club of Chicago, and the Chicagoland Chamber of Commerce called for cooperation from the Trump administration with law enforcement in Chicago rather than more provocations. “National Guard troops on our streets have the potential to sow fear and chaos, threatening our businesses’ bottom lines and our reputation,” they wrote. We have said much the same before, and continue to believe that military deployment against the wishes of local officeholders would be counterproductive at best and dangerous at worst. Any military deployment, if necessary, ought to be done in close coordination with local law enforcement. Under the present circumstances, that appears highly unlikely.

Unfortunately, the sort of coordination and collaboration for which the civic organizations and the editors call is expressly prohibited by Chicago’s “Welcoming City” ordinance. They continue:

We would caution Gov. JB Pritzker and, more particularly, Mayor Brandon Johnson not to encourage unlawful protests. Johnson on Monday sounded shrill and didn’t imbue with confidence.

After signing an executive order barring federal agents from city property, an order that will be difficult at best to enforce, Johnson warned that the city might have to “take even more dramatic action” if ICE raids and the like continue. Asked to elaborate on what that might entail, he responded, he responded, “Everything. Everything, whatever is necessary to ensure that we’re protecting people.”

Mr. Mayor, that’s not an appropriate response. Because “everything” isn’t legally at your disposal in response to what’s happening. Rhetoric along those e
lines can inspire the more militant among us to take actions that put themselves, innocent bystanders and first responders at risk.

To that end, we were heartened that the governor on Friday had Illinois State To that end, we were heartened on Friday had Illinois State Police present at the federal detention center in Broadview, which has been the site of protests for several weeks. Pritzker took that step in response to the growing tension and some disturbing interactions between activists and ICE there, knowing he’d be criticized by voices on the left. Those critics predictably disparaged his effort to protect the rights of peaceful protesters as collaboration with federal immigration enforcement. Being governor sometimes entails taking actions that will make people in your own political tent upset. Pritzker deserves credit for doing so.

I only wish he had done that from the outset. Continuing:

Still, we were concerned when Pritzker seemed to refer to Illinois as a “sovereign state” when understandably lamenting the potential arrival here of e of
the Texas National Guard. Perhaps he was entirely using the adjective in terms of the Guard and its authorization, which is fine. But we remind everyone that Illinois obviously is not a sovereign state in the accepted sense of the word, meaning an independent political entity with total control over of the word, meaning an independent political entity with total control over its own territory. Like it or not, there is a duly elected federal government with power over immigration laws in this state and that must be spoken to and negotiated with. There is no other choice.

Mayor Johnson and Gov. Pritzker started with the “other choice”. That produced the results we are seeing.

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The Problem With Johnson’s “No-ICE Zones”

I’m going to admit to being very confused and depressed over what’s going on here in Chicago. Take the “no-ICE zones” that Mayor Johnson proclaimed here in Chicago, for instance. Via WGN from the Associated Press:

CHICAGO (AP) — A new executive order issued Monday by Chicago Mayor Brandon Johnson prohibits U.S. Immigration and Customs Enforcement (ICE) agents from operating on city-owned property.

Johnson signed the “ICE-Free Zones” executive order during a morning news conference at the Westside Justice Center. It comes days after President Donald Trump authorized sending hundreds of National Guard troops to Chicago, a move that’s prompted a legal challenge from Illinois Gov. JB Pritzker’s administration.

The mayor said he considers his executive order a step toward accountability, but he said more drastic action is needed to reign in what he called “a rogue administration.”

The order makes it illegal for federal immigration agents to use city-owned property for their operation. A sign will be posted at places that include Chicago Public Schools and Chicago Park District parking lots.

My immediate reaction to that was does the mayor really want the federal government eminent domain-ing city land? That the federal government has the authority to do that is settled law under United States v. Carmack. There might be some quibbling about whether it has been authorized by Congress but I suspect that would fall under the category of “necessary and proper”.

Breaking the law in the interests of preserving the law doesn’t sound like a winning proposition to me.

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The Effects of Subsidies on Prices


I’ve been wanting to post something on this subject for some time and with what I’ve been hearing today it seemed like the right time. The graph above illustrates the effects of government subsidies on prices, particularly when the supply of whatever is being subsidized is limited or otherwise does not respond to increases in demand by increasing the supply. In this context I use “subsidy” I was taught, as economists do. It means when the government spends money on something. Full stop.

As you can see the effect of a subsidy is to increase willingness to pay. Although consumers spend less out-of-pocket than they otherwise might, demand increases and, since the supply doesn’t increase, the price goes up.

That’s what we’ve been seeing for the last 60 years and, particularly, since 2014 in healthcare.

Since 2014 the price of a Big Mac has increased by about 35%; the price of healthcare insurance has rising by about 80%.

As you can see from the above we’re in a positive feedback loop. We spend more on healthcare; the price of healthcare goes up; we spend still more on healthcare. And around and around.

That’s not a workable situation. Right now there are only a handful of solutions to our problem. The federal government can spend less which means that poor people and old people will get less healthcare and prices will be raised on healthcare insurance to take up the slack. The supply of healthcare could be substantially increased. That would require major changes in how healthcare is provided and who does the providing. Or prices in healthcare could be regulated.

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