Is that… Congress’s music?! The nation turns its lonely eyes to not only the capital but in fact the Capitol, on issues from affordability to labor to trade and industry. But first…
The question of foreign policy toward Israel, and the question of that question’s centrality to conservative politics, has risen rapidly in prominence over the past year, prompting headlines like “A Rupture Over Israel Is Tearing MAGA Apart” in the New York Times. In his Foreign Affairs essay on “A Grand Strategy of Reciprocity” in the fall, Oren argued both that Israel’s commitment to taking responsibility for security in its region illustrated well the posture that the United States should demand from other allies, but also that direct U.S. aid to Israel should end. So for the new “Conservative Crossroads” series that the EPPC’s Henry Olsen launched this week, Oren joined the Hudson Institute’s Michael Doran to debate the issue. Here is his (lightly edited) opening statement:
In my mind, there are two related questions. First, what should be the formal U.S. foreign policy toward Israel and then, second, what should be the conservative movement’s posture toward Israel. So I will take those in turn.
When it comes to our foreign policy toward Israel, my view is that Israel is a good ally for the United States. We have a general commonality of values and, as a result, of interests. We have historically had a quite good relationship. And there are many ways in which we benefit from maintaining that relationship, whether in terms of intelligence sharing, in terms of technological development, in some cases, even in terms of joint military or diplomatic action. The United States should aim to maintain that.
My concern is that Israel has tended to have a special status as a U.S. ally that looks very different from the relationship with other allies like, say, Korea or Australia. Israel occupies an outsized position in our politics and we have tended to become overly entangled in what might be very strong Israeli interests but are not necessarily strong U.S. interests.
Obviously, one place the rubber meets the road is on the very tangible question of whether the United States should be providing foreign aid to Israel. I know it is argued that they take the aid and use it to buy weapons from us, but that doesn’t fundamentally change the character of the assistance. If you want to ignore that we’re giving them money and say instead that we’re giving them weapons, fine. Regardless, the question is why would we be giving them anything? They’re a quite wealthy market economy with a strong government and robust defense spending, perfectly capable of acquiring by their own means the equipment that they might need.
As we would say about any other ally, the clear answer is that we do not need to be providing aid to Israel. We should be happy to sell weapons to them, as we do to other allies. But arguments in favor of offering them aid invariably make clear that we are not engaging in the relationship in a way that best advances U.S. interests or, in the long run, advances Israeli interests. Because the special relationship produces an entanglement that has broad implications for the influence we think we should have, or need to have, over their actions, leaving us with responsibility we don’t want to have and them with obligations they don’t want to bear. A more arm’s-length and conventional allied relationship would be a lot better.
This points to the second and related problem within the conservative movement, where it seems to me that political leaders in the United States have been particularly focused on and overly solicitous of issues related to Israel. A very concrete example: look at the 2024 Republican platform. Israel is the only country mentioned positively. There is a separate line declaring, “We will stand with Israel.” I don’t know why that’s there. We wouldn’t put, “We will stand with Korea, we will stand with Australia, we will stand with Japan, we will stand with the United Kingdom” in the platform.
Of course, in the context of our alliances, we should stand with these countries, but we should be doing so in a measured and balanced way. It’s impossible to reconcile a clear-eyed view of American priorities with the way a lot of Republican politicians at times focus on Israel-related issues and the way activist groups attempt to elevate what are, from the American perspective, third-order concerns into first-order concerns.
So again, to make this tangible, I think we need to ask: What does the term pro-Israel mean? Why do we ask of politicians, “Are you pro-Israel?” in a way we would not about any other country, about any other relationship. I am “pro-Israel” in the sense that I think Israel is generally a force for good in the world, and I think they are and we should want them to be a good American ally. But pro-Israel isn’t how I would describe the relevant policy choice. I would say that I am pro-America and, to the extent that an alliance with Israel is healthy for America, we should pursue it. But our approach to foreign policy cannot be one that asks whether our policies are oriented toward the benefit of a particular other country.
WHAT ELSE SHOULD YOU BE READING?
James Pogue profiles Rep. Marie Gluesenkamp Perez (D-WA) in the New York Times: “This Rural Congresswoman Thinks Democrats Have Lost Their Minds. She Has a Point.”
Here’s an interesting idea from MGP: “Expand options for college credit for technical classes like welding and woodworking,” so you don’t have to give them up for AP French.
Not unrelated, from the Wall Street Journal: “AI Can’t Touch These Skilled Trade Jobs. If Only Enough Humans Would Fill Them.”
Opioid deaths have been falling dramatically over the past couple of years, but why? A new paper from Keith Humphreys et al. in Nature argues: “There was a major disruption in the illicit fentanyl trade, possibly tied to Chinese government actions, that translated into sharp reductions in overdose mortality beginning in mid- or late-2023 and continued into 2024 across both the US and Canada.”
Charles Fain Lehman dives in further on X.
A story we’ve been tracking for some time, with huge social and economic consequences, gets some attention in the Wall Street Journal: “Gen X and Millennials Will Inherit Trillions in Real Estate Over the Next Decade.” Reminder to everyone eagerly working to bring down housing prices… the flip side of that coin is bringing down home values – a massive (implicit) redistribution of wealth. That doesn’t mean we shouldn’t do it, but it’s important to understand that the core political problem is not so much obnoxious NIMBYism as the core economic interests of the Americans who built wealth in exactly the way they were told they should.
Yuval Levin joins the Ezra Klein podcast to discuss the first year of the Trump administration. Levin asks, “How do you reconcile the amount of activity with the absence of durable action? To me, that’s the story of the first year of this presidency.”
And, in the Wall Street Journal, “Why This CEO Won’t Let Private Funds Near His Company’s 401(k).” Great quote:
Private-fund managers and politicians pushing for wider use of nontraded assets in 401(k)s say it’s unfair that big institutions have long invested in nontraded assets while small investors haven’t been able to. Why shouldn’t the little guy have equal access to the potentially higher returns on private assets?
“That sounds like ‘mom and apple pie,’ but it’s a bulls— argument,” fumes Sullivan, the RPM CEO. “The reality is, now they’re having a hard time raising money and returns are reverting to the mean.”
In fact, fundraising for private-equity, venture-capital and other nontraded funds has shriveled, and their portfolios are glutted with thousands of unsold companies. Private-equity funds held by major institutional investors trailed the S&P 500 by an average of 4 percentage points annualized over the 10 years ended June 30.
Speaking of which! Read Oren’s new policy brief, “No Alternative Assets in Tax-Advantaged Retirement Accounts,” which tackles the issue head on. The “Pinpoint Policy Institute” published a blistering riposte depending entirely on the claim that “private equity produced average annual returns of 10.48% over the 20-year period ending on June 30, 2020,” which apparently is what you say when it’s already 2026 and you’re shilling for an asset class that underperformed a simple public index over the last quarter, year, three years, five years, and ten years. (Come for the bad data, stay for the financial illiteracy: Pinpoint also claims that “the ‘tax advantages’ for [retirement] accounts are deferrals, not handouts” and thus do not constitute subsidies. Again, these are the arguments for putting private equity in your 401(k)...)
IMMIGRATION
An important comment from Vice President J.D. Vance on Monday:
Just spoke with a guy who owns a small business. Complaining about the fact that that he pays his employees $18-20hr (minimum) but the people who hire illegal aliens pay them $6.50 an hour and hurt his business. Many of the people threatening law enforcement and interfering with deportations are just mad that this system is coming to an end.
True! And yet! If the goal is to bring that system to an end, shouldn’t a vital part of the strategy be to… enforce the law against the people who hire illegal aliens and pay them $6.50 an hour? The absence of enforcement against employers remains a yawning gap in the White House strategy. As a substantive matter, relying on more aggressive and invasive action elsewhere is in many cases less efficient and effective. As a political matter, it allows opponents to frame their criticism around tactics that are broadly unpopular with the public instead of forcing them to defend exploitative corporations undercutting American workers.
Not unrelated: Axios reports today, “President Trump’s team recently reviewed private GOP polling that showed support for his immigration policies falling. The results, reflected in public surveys, bolstered internal concern about the administration’s confrontational enforcement tactics.”
Zooming out, though, the administration has unquestionably succeeded in reducing the population of illegal immigrants. ABC News headlines: “U.S., for first time in 50 years, experienced negative net migration in 2025.” The underlying report, from the Brookings Institution, estimates “net flows of -295,000 to -10,000 for the year.” Of particular importance: “We estimate the sustainable pace of monthly job growth to be between 20,000 and 50,000 in late 2025 and believe it could be negative in 2026.”
This is a point you’ve seen us harp on repeatedly here at Understanding America, and in Oren’s Commonplace article last summer, “Coming Down from the Open-Border Sugar High.” That article, drawing on earlier estimates from the same authors who wrote this more recent report, emphasized that the slowdown in job growth could be attributed entirely to the reversal from a large influx of immigrants to an outflow. This new paper confirms that result (as does, more obviously, the unemployment rate!). And as it notes, we could even see job growth turn negative next year, not because the economy is weakening, but because we will have a smaller population of people not authorized to live and work in the country.
Speaking of disingenuous efforts to find economic disaster in immigration enforcement, the New York Times went on a search for crops rotting in the fields and food prices surging, and came up empty. “Data released Tuesday by the Bureau of Labor Statistics found the cost of food at home rose 2.4 percent overall in the previous 12 months,” in other words, not out of the ordinary. Our intrepid reporters continue:
A lack of workers in some areas has led to cherries rotting in Oregon fields, blueberries rotting in New Jersey fields and Pennsylvania dairy farmers selling off cows. But the cost of other fresh fruits, which include berries, has fallen 1.2 percent over the last year, and the price of milk is down 1 percent.
Fruit farms and dairies are especially reliant on immigrant labor. Given that those prices have fallen, it isn’t clear if the immigration crackdown hasn’t yet affected them or if perhaps prices would have decreased more if labor was more readily available.
Yes, perhaps prices would fall more if we didn’t enforce our laws that regulate the labor market. Goes for many things!
IS THAT… CONGRESS’s MUSIC?
The Constitution’s structure almost guarantees that action on federal policy in the first year of a new administration will focus on the executive branch, where the president will tend to hold the most political capital and his team will be prepared with a long list of executive actions to take. Certainly, that has been the case in Year 1 of Trump 2.
But then things start to shift. Partly, that which can be done easily through executive action has been done. Partly, the president’s popularity tends to decline. Partly, Congress gets restless, especially as it looks ahead toward the midterms, and also frustrated with those executive actions it dislikes. We seem to be going through that moment now, as Congress finds itself in the spotlight on a range of issues.
On Affordability:
The president is calling for action on credit card interest rates and swipe fees. This latter issue is one on which we’ve done a lot of work at American Compass, and good bipartisan legislation already exists. Read policy director Chris Griswold on the Credit Card Competition Act. See also, the Federal Reserve’s analysis of the existing credit card market, in which high swipe fees fund rewards programs that benefit “sophisticated individuals … at the expense of naive consumers.” What do we think of capping credit card interest rates? You’ll have to listen to today’s episode of the American Compass podcast.
The ACA subsidy debate is also coming to a head, and the president has weighed in as well with what he is calling the “Great Healthcare Plan.” As the New York Times notes, “the long-awaited plan would leave much to Congress.” Has anyone in Congress given the issue the thought necessary to move forward with real action?
On Workers:
Things got spicy on the House floor this week, as a group of Republicans joined Democrats to vote down a law that would have relaxed overtime rules. A business-friendly definition of “joint employer” responsibility looks destined to fail too, which “likely sends House Education and Workforce Chair Tim Walberg (R-Mich) back to the drawing board as he seeks to pass an ambitious labor agenda,” per Politico. Not a good week for the Chamber of Commerce.
Meanwhile, interest in workforce development is picking up. Rep. Riley Moore (R-WV) has introduced the Jumpstart Savings Act to help workers save for training expenses. At American Compass, we are seeing unprecedented interest in proposals like the American Workforce Act, from unions, employers, and Congress.
On Trade:
The House is pushing back aggressively against the Trump administration’s plans to license Nvidia’s advanced AI chips for sale to China. The House Foreign Affairs Committee held a hearing on Wednesday, in which both party’s representatives and all three witnesses were unanimously opposed to the White House approach. Oren was one of the witnesses, you can read his opening statement here. Excerpt:
We are here today because the administration has inexplicably reversed course, and is now poised to begin licensing the sale to China of Nvidia’s H200, a far more advanced chip, in mass quantities.
U.S. policy has been seemingly reshaped by business executives who promote China as a partner and prioritize short-term profit over the national interest.
Most prominently, Nvidia CEO Jensen Huang has argued that the term “China Hawk” should be a “badge of shame.” Huang has also argued that Chinese leaders “want companies to come to China and compete in the marketplace,” and says that we should take statements by the Chinese Communist Party “at face value.”
Of course, under our constitution, citizens have the right to petition their government, no matter how unwise their ideas. But also under our constitution, it is the people’s representatives, not multinational corporations, that set national policy, to ensure that it advances the national interest.
We’ve reached the point where Laura Loomer is posting on X that the White House is “aggressively blocking CCP access to these chips” and efforts by Congress to actually block access represent “pro-China sabotage.” Gee, wonder who paid for that one?
Psssst, Congress, if you are all agreed on the matter, you don’t have to hold more hearings, you can actually pass a law.
And Sens. Todd Young (R-IN) and Jeanne Shaheen (D-NH) have just introduced the SECURE Minerals Act, an important proposal to establish a $2.5 billion “Strategic Resilience Reserve” for critical minerals, per Axios. This resembles Dean Ball’s proposal in the Techno-Industrial Playbook, drawing on work done by Employ America on “Reimagining the Strategic Petroleum Reserve.”
Congress will be indispensable to making progress on reindustrialization this year, from fostering industries like critical minerals and shipbuilding, to legislating on tariffs (especially if the Supreme Court confines the president’s IEEPA authority), to establishing a permanent institution that can facilitate industrial financing. Whether they are up for it is another matter.
SPEAKING OF INDUSTRY…
Lots of good news to report. Sticking with critical minerals for a moment, Treasury Secretary Scott Bessent is focused on bringing the G7 together to establish non-China supply chains by, for instance, agreeing on price floors that would ensure other sources remain economically viable:
Bessent on Friday told Reuters that he had been pressing for a separate meeting on the issue since a G7 leaders summit in Canada in June, where he delivered a rare earths presentation to gathered heads of state from the U.S., Britain, Japan, Canada, Germany, France, Italy and the European Union. Leaders agreed to an action plan at the summit to secure their supply chains and boost their economies, but Bessent has grown frustrated about the lack of urgency demonstrated by attendees, the official said.
On the defense industrial base, Secretary of War Pete Hegseth’s speech at SpaceX Starbase in Texas, drew on key themes from last year’s American Compass essay on “Big Stick Economics.” As we wrote then:
After 1993’s “Last Supper,” that behavior flipped on its head. In both 1994 and 1995, all five primes were Eroders. For the next decade, the primes collectively operated as an Eroder every year. Over the 25 years from 1994 to 2018, the individual firms were Sustainers 33% of the time and Eroders 67% of the time. They returned $240 billion to shareholders through buybacks and dividends while making less than $90 billion in capital expenditures.
But this predictability comes at a (severe) cost to innovation and efficiency as procurement regulations and contracting models eliminate incentives for the risk-taking, capital commitments, and cost savings driven by competition in a well-functioning commercial sector.
Said Hegseth this week:
A generation ago, one of my predecessors, in a dinner speech to industry now infamously known as the Last Supper, advocated for the consolidation of our defense industrial base. This consolidation created a closed innovation ecosystem dominated by just a handful of prime contractors. The results have been characterized by soaring costs, sluggish delivery and stagnant innovation. That’s what President Trump’s recent executive order on the defense industrial base and defense companies seeks to address. It makes crystal clear that the priority of the legacy prime contractors must be our nation’s national security, not the next earnings call. That means less focus on stock buybacks and more investment on the men and women on the factory floor. It means less stockholder dividends and more investment in infrastructure, plant and equipment. Today that old era comes to an end.
Anduril’s Palmer Lucky has been notably supportive of the executive order: “I think that when you are effectively run on the public’s wallet, the public should be able to impose whatever restrictions they want on you. … If they want to say that I only pay myself $5m until I’m caught up with my schedules, they should be allowed to do that.”
On chips: “Micron Sets Groundbreaking for $100B Chip Megafab in Upstate NY” (ConstructConnect).
On drugs: “AbbVie Strikes $100 Billion Investment Deal With Trump, Will Lower Medicaid Prices” (Wall Street Journal).
On energy: “Trump Praises Microsoft’s Pledge to Lower AI-Linked Electricity Costs” (Wall Street Journal). We’ve been talking for a while about this question of who will pay for the electricity to power data centers. “It’s a market, prices will rise, consumers can cut back” was always going to be a non-starter. Good to see Microsoft recognizing that and taking action on their own. The White House is stepping up pressure too: “Trump Moves to Make Tech Giants Pay for Surging Power Costs” (Bloomberg).
AND FINALLY, YOUR MOMENT OF TRADE
“Taiwan Reaches Trade Deal With Trump and Pledges More U.S. Chip Factories” (New York Times).
“In addition to the billions in investment by Taiwanese companies, the two sides agreed that Taiwan’s government would provide an additional $250 billion in credit guarantees to support smaller firms in the industry’s complex chip supply chain to expand in the United States. The Trump administration said it would lower the U.S. tariff rate on Taiwanese goods to 15 percent from the current 20 percent, an important concession since the United States overtook China in 2024 as Taiwan’s largest export market.”
The Economist interviews USTR Jamieson Greer: “Are America’s Tariffs Here to Stay?”
Bloomberg interviews Peter Navarro, who says: “we are strongly encouraging Europe to adopt exactly the same level of tariffs [on China]. When the president puts up tariffs to defend America from Chinese cheating, China can’t sell as much here. Where does it sell it? Europe. Mexico. Mexico did exactly what I’m suggesting. At the urging of our trade team, the Senate in Mexico passed 50% tariffs on China. Europe should follow the lead—they are doing that in steel [and] EVs.” https://www.bloomberg.com/features/2026-peter-navarro-weekend-interview/
Less encouraging, the president spoke in Detroit this week, and reiterated his unfortunate enthusiasm for Chinese vehicle manufacturing in the United States: “If they want to come in and build a plant and hire you and hire your friends and your neighbors, that’s great, I love that. Let China come in, let Japan come in.” The failure to distinguish between China and Japan in this context is a dangerous one, which Congress will have to address if the president does not change course.
And just plain silly: the Canadians. It’s worth watching the 45-second clip of Mark Carney in China, where he declares himself “heartened by the leadership” of Xi Jinping and envisions Canada and China as “strategic partners” including on “issues of security.” Canada is going to start letting in Chinese EVs at low tariffs, in return for selling more canola products in China. Per the New York Times, “Mr. Carney also announced on Friday that China would make a ‘considerable investment into Canada’s auto sector’ within the next three years as part of the agreement to lower tariffs on electric vehicles.”
It looks increasingly likely that USMCA may break into separate bilateral agreements for the U.S. with Mexico and with Canada, or not with Canada, if they continue in this direction.
Enjoy the weekend!