Although widely recognized in the U.S. for its peaches and southern charm, Georgia has a different reputation internationally: its location and attributes have caused it to quickly become a magnet for foreign direct investment and a hub for European companies. With economic and political tensions currently rising between the U.S. and E.U., subnational diplomacy, which is defined as international engagement on a local or regional level, and economic cooperation between American and European partners, are more important than ever to ensure the long-term success of the transatlantic relationship. It’s this type of European involvement in the state of Georgia that is reshaping the economy, increasing innovation, and elevating the state’s globalization.

Georgia’s strategic location makes it an ideal spot for overseas companies’ investment. Atlanta is home to multiple headquarters of Fortune 500 companies, as well as the Hartsfield-Jackson International Airport, one of the world’s busiest airports, providing easy access to almost 80% of America’s largest metro cities within a 2-hour flight. As a result, more than 70 countries have official consular and trade representatives in the state, who are responsible for representing their respective national interests to the entire Southeast. Additionally, Georgia’s coastal location is an attractive prospect for many European countries, as it houses two ports. The Port of Savannah is both the largest container terminal in America and the fastest-growing port in the country, functioning as a vital hub for international trade and logistics. The Port of Brunswick is the country’s number one port for new auto imports. European companies in key industries such as supply chain, logistics, and technology, including Vanderlande Industries, Stellantis/Groupe PSA and Hapag-Lloyd, have all chosen Georgia as their U.S. headquarters for these reasons.

Over the past few decades, these companies, particularly German ones, have significantly contributed to Georgia’s economy. Germany is Georgia’s top European trading partner, and has consistently been in the top five international trading partners of the state. For example, Porsche Cars North America (PCNA), a German car brand, established its U.S. headquarters in Atlanta in 1998. More recently, it opened its renowned Porsche Experience Center Atlanta in 2015, a facility that offers multiple drive, track, and simulator experiences. PCNA invested an initial $150 million and expanded their facilities in 2023, contributing an additional $50 million. In 2018, Mercedes-Benz USA, the North American subsidiary of German automotive company Mercedes-Benz, opened its corporate headquarters in Sandy Springs, a suburb a few miles out of Atlanta. The company invested upwards of $74 million and built a facility that could employ up to 1,000 people. Motor vehicles have consistently ranked in the top five traded products between Georgia and international partners, further facilitated by the Port of Brunswick. Other German companies, such as ThyssenKrupp and Siemens, have opened regional or North American headquarters in Georgia. 

To further strengthen these international partnerships with Germany and Poland, Georgia governor Brian Kemp announced an overseas economic development trip, which took place in January 2025. Governor Kemp and representatives from the Georgia Department of Economic Development met with German companies already operating in Georgia, as well as companies with expansion plans, in order to reinforce relationships while participating in diplomacy and partnerships. In Poland, Georgia officials met with Polish business leaders to explore opportunities in the defense industry. Coupled with the news that a Czech aerospace and defense company established North American headquarters in Roswell in February 2025, and Lockheed Martin’s Marietta site, this initiative reflects an effort to support the defense industry in the state. Strong economic relations with Europe aid job creation and stimulate the local economy, simultaneously allowing the state to attract more foreign companies looking to expand to the U.S. In addition, creating enduring relationships with eastern and central Europe allows Georgia access to new emerging markets and stay at the forefront of innovation in science, technology and defense.

The first months of 2025 have presented a number of particularly difficult challenges for the U.S.-E.U. partnership. Strengthening and reinforcing economic partnerships with foreign countries at the local level not only supports the country’s diplomatic ties, but acts as a stabilizing force for transatlantic relationships in an economically and politically uncertain time. While subnational economic relationships cannot replace formal diplomacy, they serve as an opportunity for states to expand their reach and forge cross-cultural partnerships. International investments, like the German and Polish examples discussed above, create thousands of jobs in Georgia each year and bring in millions of dollars in funding. This positions the state to leverage its strategic advantages in diplomacy, geography, and infrastructure, something that has become more important than ever in the modern global landscape.

That grocery run for your religious holiday might affect more than just your depleting bank account. 

Christmas, Holi, and Chinese New Year are some of the most celebrated holidays around the globe. What comes with each holiday varies, but they are all filled with deep tradition that resonates with religious deities, color, sacrifice, and spirituality. But on an international scale, these festivals have a huge effect on trade and the global economy. 

International relations scholars often neglect religion’s impact on macroeconomic policy. To begin with, Christmas—the largest holiday in the world—has an astronomically high spending power. In the United States alone, holiday retail sales have skyrocketed to a whopping 843.4 billion dollars in 2021, which is roughly 100 billion dollars more than the military budget.  The seven countries that spend the most on holiday retail sales in Europe contribute a total of 219.19 billion euros, which is roughly 2.5 billion dollars. One might assume that large amounts of imported revenue only help a country’s economy and GDP, but there’s more behind that claim. Christmas spending doesn’t necessarily “help” the economy, because it merely concentrates spending into one part of the year. Christmas doesn’t facilitate a healthy economy, as even if people don’t spend money on Christmas, they will eventually spend that saved money later. An already healthy economy facilitates a successful Christmas, not the vice-versa. Joel Waldfogel, writer of the classic paper “The Deadweight Loss of Christmas,” says that “between ten percent and a third of the value of gifts” is a waste, or what economists call “deadweight loss.” This deadweight loss is attributed to the recipients not liking their gift and valuing it less than the gifter does. However, an alternative perspective states that recipients could resell their undesired gifts to other parties, thus resulting in more economic activity. 

Now take the Indian festival of colors: Holi. Shades of red, yellow, pink, blue, and green paint the busy streets of India. Bags of colored powder, buckets of water, water color blasters, and Indian sweets are purchased from vendors across the country, creating increased economic activity. But this simple celebration of the triumph of good over evil doesn’t stop there, it results in the additional triumph of political parties. The religious symbolism of Holi is used as a talking point by many Hindu nationalist parties, making parties like the Bharatiya Janata Party (BJP) in control of the vote. The BJP is characterized by foreign investments only in high-tech sectors and liberal economic policies. Thus, the countless festivals of Holi around India have become more than just a Hindu tradition, it has become part of a political strategy.

The same analysis can be applied to the Chinese New Year celebrated in China, Singapore, Malaysia, and even more. The Lunar New Year marks the busiest period of time for the film industry, air travel, and more. The Chinese New Year also starts the Chunyun, a mass migration and traveling period, which is crucial to families seeing each other and the stability of the Chinese workforce. Many employees of firms also choose to change jobs over the New Year period, leading the rate of employee turnover to be higher after the New Year period.

The celebration of religious deities through different lenses certainly brings joy to many cultures across the globe, but it spurs global trends that are unforeseen in different regions of the world. No matter what part of the world you’re from or what religion you practice, the festivals you and your family take are more than that long receipt from the supermarket; it affects macroeconomic factors and the political economy for all citizens regardless of their religious participation in festivals.

In one way or another, many of the statistics used to track American economic activity can be misrepresented to support the president’s policy goals. The current White House has embraced that fact wholeheartedly. Here’s a list:

Trade Deficits

The Wall Street Journal has reported that the Trump administration is considering altering the way trade deficits are calculated. Specifically, the proposed change will remove re-exports from the trade balance calculation.  Re-exports are exported goods that were originally manufactured in a foreign country. At some point prior, the good entered America as an import, but instead of being consumed in the domestic market, headed to another foreign country as an export.

Under the current system of calculating exports, the value of the re-exported good is added to exports.  Since a re-exported good is not actually made by American workers, the current system inflates exports by including re-exports.  This is particularly true in the case of our NAFTA trade partners. As there are no tariffs between Canada, Mexico, and America, America has become a center for re-exports from other countries destined for Canada or Mexico.  Removing re-exports from the export calculation would nearly double the trade deficit with Mexico, for example.

The political motivation is clear. Trump, a harsh critic of trade deals such as NAFTA, would no doubt prefer to use the larger trade deficit numbers in discussions regarding the effects of trade deals. Trade deficits involve an outflow of dollars. It is easy to frame that as America getting cheated by bad trade deals, as the president has done both before and after his election. The greater the trade deficit, the worse Trump can say America has been cheated. Along this line of logic, he has some unlikely allies. In 2014, Rep. Keith Ellison (R-MN), now the Deputy Chair of the Democratic National Committee, signed on to a letter advocating for the same change in trade deficit calculation. He was joined by 13 other House Democrats.

However, this change would be problematic for multiple reasons.  First, the correction for the exports side of American trade does not have an equivalent on the imports side. Therefore, the change would leave a significant portion of re-exports tallied on the imports side but not on the exports side, artificially inflating the trade deficit. Second, re-exports still play an important role in the American economy. Although re-exported goods are not made in America, the emergence of America as a re-export hub is a major contribution to the American economy. Plenty of those employed by the various transportation industries (truck drivers, shippers, etc.) are employed because of re-exports. Third, such a narrow focus on trade deficits overlooks the immense globalization of the American economy. Supply chains for manufactured goods now spread across international borders, and the distinction of American-made goods is much less meaningful. Some products cross the U.S.-Mexican border 14 times before heading to a consumer market, and the average import from Mexico sees 14 percent of its value made in America. And lastly, economists tend to consider most policies designed to reduce trade deficits as bad for the vast majority of Americans.

There’s a reasonable alternative. Intimately familiar with the re-export issues, the World Trade Organization and Organization for Economic Co-operation and Development have calculated value-added trade balances: essentially, exports would only be tallied when a country actually adds value to the good.  So a re-exported good would not contribute to exports but also would not contribute to imports, and a manufactured good that has parts made in both Mexico and America would only contribute the portion produced by American manufacturing to exports. The less-attractive part of this is that it would not paint such a gloomy picture of U.S. trade deficits. Compared to the current method of calculating exports and imports, the value-added approach would decrease the trade deficit with Mexico by 43 percent, and the trade deficit with Canada by 39 percent. If the Trump administration was interested with the accuracy of exports numbers, it would be considering a value-added approach instead. The actual push to change how deficits are calculated is instead very clearly intended to provide ammunition to those looking to attack trade deals.

Unemployment

In early January, the president proposed changing the official unemployment rate. The current rate is U-3 and is calculated by the Bureau of Labor Statistics (BLS). During the 2016 presidential campaign, Trump called the BLS monthly report “phony” and preferred presenting an unemployment rate of 42 percent. Or 21 percent, if he felt like changing things up. The proposed change would instead use the U-5 rate, also calculated by the Bureau of Labor Statistics. As of January 2017, the official unemployment rate stands at 4.8 percent, and the U-5 rate stands at 5.8 percent.

This change could actually be good. The reason why the U-5 rate is higher is that it also includes discouraged workers and those marginally attached to the labor force. Heidi Shierholz, former chief economist for the Labor Department under the Obama administration, argues that this might be a more accurate picture of the current unemployment situation. Moreover, altering the official unemployment rate would not make a significant change to the way economic policy-making works, given that it is already part of the six measures of unemployment that the Bureau of Labor Statistics publishes monthly, and policymakers already pay attention to all of them.

On the other hand, switching to U-5 would involve some difficulties in backward-looking comparisons.  U-5 has only been around since 1994, while U-3 has been recorded back to 1948.  In any case, U-5 is currently at pre-Recession levels.

National Debt

Trump recently tweeted a complaint that the media was not covering the $12 billion reduction in national debt during the first month of his administration, compared to the $200 billion increase in national debt during the first month of the Obama administration. This is factually true, but also highly misleading.

No legislation relating to the fiscal operation of the United States government has been passed. It seems a bit odd, then, that debt reduction occurred when no spending cuts (or tax revenue increases) were actually made.

According to daily Treasury statements from January 20, 2017 to February 21, 2017 (no statements released on President’s Day), the total public debt fell from $19.947 trillion to $19.935 trillion.  However, some more digging reveals that this fall can be entirely attributed to a decrease in intragovernmental debt, i.e. debt the government owes to itself. There was actually an increase in debt held by the public, such as debt held by private individuals, investors, and foreigners, of approximately $90 million during the first month.

Additionally, the statements show that the Trump administration inherited $382 billion from the Obama administration, and a month later, that figure was now $267 billion, a decrease of $115 billion.

GDP

The Washington Post’s Catherine Rampell has reported that the Trump transition team ordered Council of Economic Advisers (CEA) staffers to predict sustained economic growth of 3 to 3.5 percent and then devise calculations that would support that predictions in their models.

The usual method for CEA economic projections happens in reverse. CEA staffers make baseline projections of economic growth and then adjust those projections for the expected impact of the president’s policy proposals. The final result would be the projected economic growth. Since the president will be hoping to implement pro-growth policies, the projections are usually somewhat more optimistic than those coming from outside sources, such as the Federal Reserve, Congressional Budget Office (CBO), and private forecasters.

But this isn’t the normal process, and the growth projection isn’t just somewhat more optimistic.  Consider the Obama administration’s economic projections presented in February 2016.  The CEA projected 2.7 percent real growth, while the CBO projected 2.7 percent real growth; the Blue Chip (outside business economists firm) forecast was 2.6 percent. Given that the 2017 real growth forecasts from the Federal Reserve and CBO stand at 1.9 percent and 1.8 percent, respectively, the demanded growth projection would diverge from outside forecasts by more than a percentage point, about 10 times as much as the CEA’s divergence from other forecasts in 2016.

Rampell argues that the purpose of these unjustifiably optimistic projections is to make budgeting easier for the administration. Higher growth means higher tax revenue, and that makes it easier to justify, say, tax cuts, without acknowledging the impact on budget deficits. If those higher projections end up not occurring because they have no foundation in reality, it will presumably be worse in the long-term. But it makes things sound good right now.

China is the world’s largest owner of the U.S. government’s debt, holding $1.273 trillion worth of U.S. Treasury securities as of February 2014. As a result, many pundits, policymakers, and analysts fear that these holdings give China leverage over U.S. policymaking, as this 2010 commercial by Citizens Against Government Waste hyperbolically suggests. Others forecast a doomsday scenario in which China dumps its holdings back into the world market, crushing the value of the dollar. Contrary to these claims, however, current research suggests that China benefits from its U.S. debt ownership and has much to lose by dumping its holdings.

The Debt Market

The U.S. government consistently relies on deficit spending—spending more money than the government brings in through taxes—in order to provide a high number of government services without a heavy tax burden. To account for this deficit, the government sells stocks and bonds (securities) to the public and in international capital markets. The government can immediately spend the money it acquires through the sale of bonds, but the bonds must be paid back with interest out of future national income.

Historically, the American public held the vast majority of governmental security holdings. However, in recent years the U.S. government increasingly relies on foreign investors. In fact, foreign investors held $13.261 trillion dollars (75 percent of our current national debt) in U.S. securities in 2012, as this table from the Treasury Department shows.

Why China Wants American Debt

China’s economy has grown drastically since the early 2000s. The engine for this growth is a methodology called export-oriented growth. As the name implies, export-oriented growth is a government-led focus on exports. Governments that apply this method encourage the production of goods that are in demand internationally, acquire access to global markets, and export at a high volume. If the strategy is effective, high employment will follow high productivity, and the nation will export more than it imports, resulting in significant capital accumulation.

China’s export-oriented growth has been wildly successful, but its means of accomplishing this growth are controversial. The most contentious of these means is China’s undervaluing of its currency, the Renminbi (RMB). Getting “tough” on China and the threat of a “trade war” became hot topics during several 2012 presidential campaign debates. However, China’s policy of undervaluing the RMB is actually the reason China owns so much U.S. debt.

Because China is export-oriented, its government wants products “Made in China” to be cheaper than international competitors’ products. China has succeeded in doing this by avoiding currency appreciation, the increase in value of the RMB relative to other currencies. For example, one U.S. dollar is currently worth 6.23 RMB; if the RMB appreciates relative to the U.S. dollar and 6.23 RMB becomes worth two U.S. dollars, the purchasing power of the U.S. in China would be cut in half. Chinese products would cost twice as much for U.S. consumers even though China did not change any prices. As a result, the United States would import a smaller quantity of Chinese goods. A decrease in the quantity of exports is the nightmare scenario for China’s government, which must keep hundreds of millions of workers employed. Therefore, China maintains a low currency value in order to keep its exports the cheapest in the market.

But how exactly does China go about keeping its currency from appreciating? This is where American debt comes into play. Purchasing U.S. securities gives China’s central bank a large reserve of dollars to meet their desired RMB-dollar ratio. The Central Bank is the only bank in China that can legally keep its U.S. dollars (all others give their U.S. dollars to the Central Bank in exchange for RMB), and the Central Bank then prints enough RMB to retain the same ratio between the currencies. U.S. securities are a safe investment because they are backed by the full faith and credit of the U.S. government. America is also the only nation with a large enough debt market to absorb a significant amount of the wealth generated by China’s trade surpluses.

Thus, Chinese acquisition of American debt enables the United States to do what it has traditionally done—consume more than it produces—and helps China do what it has traditionally done—produce more than it consumes.

Is There a Threat?

Most experts and analysts have agreed that there is not a significant threat of China exerting influence on U.S. policymaking by using debt ownership as leverage. If China were to suddenly sell its reserve of U.S. securities, there would likely be a market-wide panic, causing other nations to sell their reserves of U.S. securities. The market would thus be flooded with a supply of U.S. securities, and the value of the dollar would plummet. This is the doomsday that some envision. However, if the dollar were to depreciate drastically, so would U.S. purchasing power abroad, meaning the United States could not afford to continue importing a high volume of Chinese goods. Furthermore, without an alternate debt market in which to bury China’s wealth, the RMB would appreciate. Even worse, the devastation inflicted on the U.S. economy would be disastrous for the world economy as well, hurting other nations’ abilities to afford Chinese goods. China would be left with an abundance of goods that no one could afford to buy, which in turn would cause high unemployment. In sum, China stands to lose a lot if it were to exploit its only supposed “bargaining chip” over U.S. policymaking.

America’s reliance on China is indicative of a larger problem, however. Continued deficit spending, reliance on foreign investments to cover debts, and printing large quantities of currency are all unsustainable policies. China recognizes the risks associated with these.

“Chinese officials have expressed concerns that actions by the Federal Reserve to boost U.S. monetary supply will undermine the value of China’s holdings of U.S. dollar assets, either by causing the dollar to depreciate against other major currencies or by significantly increasing U.S. inflation,” wrote Wayne Morrison in a Congressional Research Center report.

Additionally, America’s long-term sovereign credit rating by Standard and Poor dropped from AAA (outstanding) to AA+ (excellent) in August 2011. Thus, China has reason to question the safety of its investments in U.S. securities.

China has started a gradual move towards diversifying its investments, but in the short-term, it has few alternatives to the massive U.S. capital market. In the long-term, diversification may strengthen China’s export-oriented strategy by better ensuring the security of its investments. Nonetheless in the near future, China needs the U.S. in order to keep producing, and the United States needs China in order to keep consuming. This is the symbiotic relationship of the world’s two largest economies.

On Aug. 9, 1995, the Internet browser startup known as Netscape went public, opening with shares priced at $28 apiece. By the end of the day, one share was $58.25. By the end of the year, it was $174.

And so, with 24-year-old programming wunderkind Marc Andreessen at the helm, Netscape ushered in a new era in Silicon Valley, where the Internet was a realm of endless possibility. Investors and engineers alike clamored to follow in Netscape’s footsteps, and the market was soon filled with budding tech startups. This was a time of eager investing and ever-rising stock prices, and many young company founders and CEOs reaped a fortune. A startup social networking service called theGlobe.com posted a record-breaking first day gain of 606 percent and made its 23-year-old co-founders mega-millionaires. Marc Andreessen’s Netscape stake was worth well over $100 million—never mind the fact that, at the time of its initial public offering, Netscape had yet to make a cent in profits. As technology journalist Robert X. Cringley put it, “There were a lot of business plans that would have a section of the business plan that said, ‘And then a miracle happens…and out the other side comes the product.’”

By the time the dot-com bubble had burst about five years later, trillions of dollars of tech company market value had vanished, along with tens of thousands of jobs. Investors were inflating the value of companies for their booming popularity rather than chances for future profits. Most of the victims of the crash went under, while others, like Netscape, simply faded into irrelevance.

Fast forward to May 18, 2012, the day Facebook went public. The IPO was one of the most eagerly anticipated in technology, but the affair was marred by a litany of issues. Technical glitches on the part of the NASDAQ exchange delayed the opening of trade, and by the end of the day stock prices finished below the opening bell value in what was the beginning of a rough next two weeks, beset with steady declines in share value. Soon the accusations started pouring in—glitches hampered orders and cost investors millions, and Facebook’s underwriters Morgan Stanley, JP Morgan, and Goldman Sachs came under fire for artificially inflating the price of the stock and failing to share all pertinent information with the general public. By all accounts, the initial public offering of Mark Zuckerberg’s global social network was a fiasco.

Prior to its IPO, Facebook had been valued at tens of millions—before ever generating any revenue. By 2006, with a valuation of about $500 million, Facebook was operating at a net loss for the year. In fact, Facebook continued to accumulate millions in losses for the next few years. With a shaky IPO and dismal performance in the following months, at one point dropping to a low of less than half of the initial offering price, the skeptics seemed validated in labeling Facebook a fad.

But these days, Mark Zuckerberg surely has a few things to like about his situation. Facebook stock rose steadily throughout 2012, and had reached new heights by the end of 2013. Earlier this month, Facebook jumped 12 percent in after-hours trading thanks to the latest results from the social network’s fourth quarter earnings.

So just how well has Facebook been doing?  In the year of 2013, Facebook reported profits of $1.5 billion, compared to just $53 million in 2012. Facebook advertising revenue keeps growing as its prices for individual ads skyrocket—with average fourth quarter prices a stunning 92 percent higher than last year—and its mobile presence continues to grow. For the first time, the majority of Facebook’s ad revenue is coming from mobile devices, and its share of the worldwide mobile advertising market has more than tripled in the last year.

Of course, this meteoric rise may slow down in the coming year, and this trend may be just that—a trend. Recently, it has become somewhat popular opinion to call Facebook unpopular. Studies abound proclaiming that teens no longer find Facebook cool, preferring instead sleeker alternatives like Twitter and Snapchat. But is coolness more important than ubiquity?

Facebook may have seemed gimmicky during its nascent years, but unlike most of the once-promising companies of the tech bubble just a decade earlier, the plan has been strategic, calculated, and anything but a miracle. On top of the news about Facebook’s mobile advertising gains and growing market share, the company has impressed with its revamped standalone Messenger app and, most recently, its new Paper news-reading app released earlier this month. Paper has been winning rave reviews and serves as an example of Facebook’s growing vision: a whole suite of standalone apps to specialize the many experiences tied into the social network. These new complementary apps will only strengthen the Facebook brand—and of course, open the door for more revenue-generating opportunities. Competing social platforms like Twitter and Snapchat are poised to follow in Facebook’s footsteps, but as of yet have not proven profitable. (In Snapchat’s case, investors are still waiting to see any revenue). There is a sense that Facebook has an advantage in the scope of the product it has to offer.

With 1.23 billion monthly active users, Facebook has built a network so deep that hearing someone doesn’t have a Facebook has become a rarity. The social media giant has amassed a detailed database of its users—from knowing their favorite TV shows to their closest friends to their hometowns—the likes of which has never been seen before. Services like iPhone puzzle games and online subscriptions prompt you to pick a username, password, and fill out several fields of information—or effortlessly connect through Facebook. One of the easiest ways to coordinate clubs and organizations is making a Facebook group.  For better or worse, Facebook has become inextricably linked to most of our daily lives, and Mark Zuckerberg may have said it best: “Maybe electricity was cool when it first came out but pretty quickly people stopped talking about it because it’s not the new thing, the real question you want to track at that point is are fewer people turning on their lights because it’s less cool?”

Photo Credit: TwinDesign

When the Mega Millions jackpot exceeded half a billion dollars, my family bought tickets.  We didn’t expect to win—the odds of winning the Mega Millions jackpot is about one in 259 million—but it was fun to sit around the dinner table and talk about what we would do with the money.  And alright, maybe we did have some hope: perhaps the Georgia Lottery got to us with all those “Today could be the day” advertisements.

The jackpot ended up at $648 million before it was won (narrowly missing the record of $656 million).  A Georgian woman, Ida Curry from Stone Mountain, was one of the two lucky winners.  It is not surprising that Georgia sold one of the winning tickets: Georgia ranks number one on Bloomberg’s Sucker Index, which is measured by dividing the state’s profits from the lottery by its residents’ income.  Georgia sells the fifth-most lottery tickets of any state, and its residents spend one percent of their incomes on lottery tickets, the second-highest proportion of any state.

We at the University of Georgia are quite happy that Georgia’s lottery sales are so high.  The Georgia Lottery benefits educational programs, most notably the HOPE Scholarship.  Ninety-seven percent of incoming in-state freshmen at UGA and 66 percent of all undergraduates are on HOPE.  Last year, the lottery provided $461.7 million for HOPE students, which was 13 percent of its total revenue.  So even though my family didn’t win the Mega Millions, at least we were supporting HOPE, which funds both my sister and me here at UGA.

Using the lottery as the means to fund HOPE and other programs has come under criticism for benefitting the richer and better-educated at the expense of the poorer and less-educated.  The lottery is essentially a tax on the mathematically-illiterate: the expected payout of a $1 ticket in Georgia is only $0.63, which means that lottery players will lose $0.37 on average for each dollar they spend.  (The exception is the recent Mega Millions because the jackpot was so outsized that the expected payout might have been more than the ticket price.)

The least affluent are the least likely to realize this: thirty-eight percent of those with incomes under $25,000 said that winning the lottery was the most practical way for them to accumulate wealth, compared to 21 percent of the general population.  According to the same survey, 30 percent of those without a high school degree said that winning the lottery was an important wealth-building strategy, compared to 8 percent of those with college degrees. Poorer people are more likely to play the lottery, and tickets also represent larger percentages of their incomes.  People whose incomes are under $12,400 spend five percent of their income on lottery tickets.

For this reason, the lottery is often called a regressive tax. Even though it is optional to play, and therefore not truly a tax, it provides funds for state programs, and poorer people pay a higher percentage of their income towards it than richer people do.  And while HOPE is open to Georgia students of all socioeconomic levels, much of the scholarship money goes to middle- and upper-class students.  So the lottery works as an abstract redistribution program, but instead of transferring funds from the richer to the poorer as most programs do, this one transfers funds from the poorer to the richer in aggregate.

The regressive nature of the lottery seems especially problematic considering the nature of the overall economy.  The gains from the economic recovery have been extremely uneven; 95 percent of income gains after the recession have gone to the wealthiest one percent of Americans.  Leaders ranging from President Obama to Pope Francis have recently decried economic inequality and pushed for more progressive policies.  Lotteries are probably not included in those policies.

But it is difficult to condemn Georgia’s lotteries for widening economic inequality.  Inequality of opportunity is possibly more worrisome than inequality of income, and Southern states like Georgia have very high levels of the former. Atlanta has the fifth-worst upward mobility of the United States’ 100 largest cities: people born into the bottom 20 percent of income distribution in Atlanta have only a four percent chance of entering the top 20 percent of income distribution.  Access to quality education is one of the most important methods to reduce inequality of opportunity, especially access to preschools and higher education.  And those two are what the majority of Georgia lottery profits go to, through the HOPE Scholarship and Pre-K programs.

These programs have been successful and politically popular, despite criticisms of lottery funding.  The HOPE Scholarship has improved Georgia colleges and access to higher education; the rise of both the University of Georgia and Georgia Tech into the top twenty public colleges has been partially attributed to HOPE (which increased the SAT scores of students attending Georgia colleges by 40 points and tripled the proportion of high-scoring Georgia students attending college in-state), and increased the numbers of both white and black students attending college, and the HOPE effect on black students was greater than on white students.  University pre-K programs improve the test-scores and on-grade retention of children who participate in them, especially poor, rural children.  Another point in Georgia’s favor is that the programs its lottery funds are intended to supplement state education budgets, unlike other states where lottery revenues supplant state funds for education.

It’s not likely these programs would exist without lottery funding.  School districts across Georgia are facing budget shortfalls that are forcing them to cut school days and teachers.  State funding for the University System of Georgia has fallen every year since 2009 both in total ($2.3 billion in 2009 to $1.74 billion in 2012) and per enrolled student ($8,191 per student in 2009 to $5,505 per student in 2012).  Under current conditions, it seems impossible that the University System of Georgia could provide HOPE Scholarships and that school districts could provide universal preschool without the lottery.

There seem to be no good replacements for lottery funding, either.  Replacing the lottery—an optional “tax”—with a mandatory tax would be politically unfeasible.  And the lottery represents an opportunity for the state to capitalize on gambling revenue that it might not otherwise be able to collect, as most gambling is illegal in Georgia. Even if lottery players spent all the money they would have playing the lottery on other goods upon which Georgia could collect a sales tax, an unlikely occurrence at best, the four percent sales tax the state collects pales in comparison to the 25.8 percent of lottery revenue that currently goes to education.

A program that relies on the least-educated to fund the education of the state may initially seem like a less than ideal policy.  However, both HOPE and universal preschool have proven to be both successful and popular.  If they are to be funded, as most would agree they should, an optional form of cheap entertainment is not such a bad way to do it.  The lottery is not exactly a principled, moralistic policy, but it is a practical one.  So play on, Georgia.  Today is probably not the day, but that’s okay.

Candy canes, brick-sized candy bars, peppermint mocha frappe latte cappuccinos – ‘tis the season for sugar, a white powder that falls more abundantly than snow in the realm of holiday tradition. For the true sweet savants, December and January are just the icing on the cake. According to the Center for Science in the Public Interest, the average American consumed 78 pounds of sugar in 2010, including 39 pounds of sucrose, or “traditional” table sugar. As consumers sprinkle their diets with the sticky substance, they aren’t the only ones feeling the rush. Since as early as 1789, the United States’ sugar policies have offered the country’s cane and beet producers a pretty sweet deal in the form of tariffs, import quotas, price support loans, and processor marketing allotments (legally-binding limits on the amount of sugar that can be sold each year). But at an annual cost of nearly $2 billion (more recent and more politically charged estimates range up to $4.5 billion), U.S. government involvement in the sugar industry has begun to leave a bitter taste in the mouths of consumers on both sides of the aisle.

Sugar tariffs first became a staple of U.S. trade policy in 1789 when, strapped for cash, the United States imposed a duty on imported commodities in an effort to raise government revenue. At the time, sugar production in the fledgling nation was limited at best, so the sugar tariff had more to do with feeding the Treasury than protecting an industry. Over the next 100 years, sugar production slowly increased, and in 1890, the McKinley Tariff Act replaced the tariff with a 2-cent-per-pound subsidy. Unable to compete with international sugar prices, the United States scrapped the subsidy four years later and reinstated the tariff that sugar producers would come to know and love.

Within 40 years, however, rapidly declining world prices rendered the sugar tariff insufficient to protect the U.S. industry, as it had become more economical for Americans to import sugar and pay the tariff than to purchase domestic sugar. In response, Congress passed the Jones-Costigan Act, or the Sugar Act, in 1934, which established import quotas and domestic marketing allotments, limiting the supply of sugar and propping up domestic prices. This legislation and its subsequent revisions form the basis of the modern U.S. sugar program. Though the act was allowed to expire following an unexpected price hike in the early 1970s, its provisions, including import taxes and quotas, were brought back with a vengeance along with a new non-recourse loan program by 1982. Under the program, sugar refiners could borrow money from the federal government and then either market their sugar and service the loan or forfeit their sugar to the Commodity Credit Corporation and default on the loan. The import quotas, which were replaced with a tariff rate quota in 1994, were meant to limit defaults and forfeitures by keeping the domestic price of sugar artificially high and ensuring that it did not drop below the loan rate. In theory, the program was supposed to operate at no net cost to the federal government.

Today’s sugar program, laid out in 2002 and continued under the 2008 Farm Bill as well as under both the House and Senate’s proposed 2013 bills, is a sticky, tangled web of policies that essentially serve to raise the domestic sugar price above the world price. These policies include a loan rate of 18.75 cents per pound for raw cane sugar and 24.09 cents per pound for refined beet sugar and an overall allotment quantity (the amount of sugar domestic producers can sell in the U.S. market) of no less than 85 percent of estimated consumption. Additionally, the United States maintains a tariff rate quota at the World Trade Organization minimum, restricts the Secretary of Agriculture’s ability to adjust the tariff rate quota, and requires that the USDA, in order to avoid loan forfeitures, must purchase any surplus sugar at a loss for ethanol production. Basically, the sugar program is designed to guarantee the income of sugar producers by controlling the supply and maintaining the price of sugar.

These measures have generated quite a sugar-induced buzz among the U.S. industries that rely on the substance as an input and American consumers, the parties that ultimately shoulder the cost of the program. With some fluctuation in price, U.S. consumers have paid roughly twice the world market price of sugar over the past 20 years. In October 2013, the world market price of wholesale refined beet sugar was 26.5 cents per pound, while in the United States, the price was 43.4 cents per pound. The artificially high price of sugar also exacted an indirect price on American consumers: with the reinstatement of sugar controls in the late 1970s, the newly purposed and relatively inexpensive high fructose corn syrup came to replace sugar in many American products. The jury is out on which substance is unhealthier, but items produced with cane sugar consistently rank higher in taste tests.

In addition to paying a higher price in the market, American consumers pay for the sugar program in the form of government spending. As part of its deal with the producers, the U.S. government must purchase and store any surplus sugar. When supply surged ahead of demand in August 2013, the USDA combated the plunge in prices by purchasing 7,118 tons of refined beet sugar for $3.6 million, which it sold to an ethanol producer at a loss of $2.7 million. The move was intended to help sugar producers repay $298 million in outstanding loans, which, if unpaid, would turn into forfeited sugar. This was the third such intervention of the summer.

Advocates of the sugar program argue that protectionist policies in other countries left the United States no choice but protect its own industry (and jobs) in response. Under a provision of NAFTA that took effect in 2008, for example, subsidized Mexican sugar flooded the U.S. market and placed immense downward pressure on prices. But due to the sugar program, the price of this downward pressure did not fall on sugar producers, but on consumers and taxpayers. If the United States wishes to see other nations’ protectionist agricultural policies eliminated, maintaining its own high trade barriers is not necessarily the answer. In terms of job protection, the American sugar industry is by no means the job-creator of the year. The Department of Commerce estimates that for every job saved in sugar production, the United States loses three confectionery manufacturing jobs. Pinched by inflated sugar prices, candy makers, bakers, and food processors are moving abroad.

Despite efforts from these sugar-dependents and groups such as the Coalition for Sugar Reform, sugar producers have thus far been able to sweet talk their way out of any significant legislative scrutiny. In 2013 alone, the sugar cane and beet industry contributed about $5.3 million to politicians on both sides of the aisle. Sens. Al Franken, D-Minn., and Marco Rubio, R-Fla., do not agree on much, but as representatives of two sugar-producing states, both seem to have something of a sweet tooth. Though sugar consumers have ramped up their lobbying efforts since the 2008 Farm Bill, they cannot quite compete with the sugar-producing Goliath.

The House and the Senate will likely finish off their updated Farm Bill deliberations in 2014. At the forefront of the discussion are the cuts to food stamps, allowing the sugar question to fly somewhat under the radar. For the time being, it appears that the U.S. sugar program is here to stay. Still, for all its sweetness, the Big Sugar price tag has turned increasingly sour on American consumer palate. This holiday season, be on the lookout for visions of sugarplums followed closely by dollar signs.

I recently had a chance to sit down with Dr. Jeffrey Dorfman and chat about the role of the federal government in the U.S. economy. Dr. Dorfman teaches economics in UGA’s Department of Agricultural and Applied Economics. His career has spanned 25 years, from a PhD at the University of California Davis to his current position at the University of Georgia. An accomplished author, Dorfman regularly contributes to the online columns of Forbes and RealClearMarkets.com and also published Ending the Era of Free Lunch, which deals with the federal government’s encroachment on its constitutional limits.

Since the 1930s, the United States has spent trillions of dollars in order to stimulate and stabilize the U.S. economy. Spending is particularly high during recessions when government spending often spikes in order to keep unemployment low. This fiscal policy is known as Keynesian economics and was developed by eponymous British economist John Maynard Keynes. He believed that the public sector had a duty to pump money into the economy during recessions in order to smooth over the inefficiencies of the private sector, even if it meant large deficits in the annual budget.

Dr. Dorfman takes issue with the federal government’s application of Keynes’s ideas. He believes that current policy makers have misapplied the philosophy by running consistent deficits, even when the economy is strong. What Keynes really intended was for decreased government spending and budget surpluses during “booms” and government spending, even deficits, during “busts.” The federal government has apparently forgotten (or disregarded) Keynes’s qualifier since we have only registered 12 surpluses in the last 73 years. As Dorfman puts it, the current rule is “to run a deficit when times are good and a bigger deficit during the recession, and that doesn’t actually work.”

To support his claim, Dorfman points to the most recent recession from 2007-2009. The US government spent more money trying to relieve the downturn than in all previous recessions combined, even when adjusting for inflation. Yet unemployment still hovers at around 7 percent, real household income has fallen, and nearly 7 million people have swelled the ranks of the impoverished.

The American Reinvestment and Recovery Act, the $831 billion dollar stimulus bill passed in 2009, serves as a microcosm for the ill effects of the US government’s adherence to Keynesian economics. Dorfman is quick to label it as “almost a complete waste of money.” It did not efficiently distribute money to where the economy really needed it (Solyndra ring any bells?) and it was funded at the expense of the drivers of real economic growth. The $831 billion was raised completely by borrowing.

Whether the government is raising money by taxing or borrowing, it drive the notion that the state knows how to spend our money better than we do.  Taxing takes money directly out of our pockets and lets the government decide how it would best ease our economic woes, while borrowing only serves to “crowd out” businesses from the lending market so the government could finance the massive debt it has accumulated due to its increasingly significant role in our economy.

The issue of borrowing is even more dangerous when we consider the $17 trillion (and growing) national debt  with which we are faced. Because government spending is so pervasive in the American economy, it will become necessary  to find a source of money when tax revenue runs out. Dr. Dorfman acknowledges the problem of a large debt, but not for the expected reasons. He dispels the common fear of foreign nations having leverage over us because of what we owe to them. In fact, he argues that the massive amount of debt owned by countries like China, Japan, and Brazil actually makes them beholden to us instead of the other way around. We decide if we are going to give them their money back, a powerful card to hold in the arena of international relations. The real problem with the debt is the interest payments associated with it. As our debt accumulates, we have to use more and more of our tax dollars to make interest payments to anyone who owns a treasury bond or other debt instrument. Since we are obligated to support our fast growing debt in addition to the Social Security and Medicare entitlement programs, we can expect tax rates to increase proportionally.

After considering the malevolent effects of debt associated with Keynesian economics, we are left with the question of what government should do to help its citizens in times of economic strife. Dorfman’s response to this question was a simple “nothing.” He qualified this shortly afterwards by suggesting the government step in to train workers in industries that are in need of labor. Training the unemployed to be welders or textile workers (both burgeoning industries) would be much better than paying those workers unemployment benefits. But on the whole, government should do nothing because they often end up wasting money. The essential principle is that individuals know what they want more than a government does; therefore, they will be able to more effectively direct their spending and decide which markets should be legitimately viable.

The idea that citizens would be more prosperous when given more control of their paychecks is illustrated by mandatory Social Security pensions. Social Security was conceived of during the 1930s in order to ensure that elderly Americans would be protected from the Great Depression. In exchange for giving up 6.2 percent of our monthly paychecks, we should be able to receive benefits once we get older. But is this massive spending project really helping Americans by giving them money when they are elderly and cash poor? Or is it forcing us to make the decision to pay into a  bankrupt program from which we will never realize the benefits? The federal overnment paid $773 billion in benefits in 2012 but collected just $563 billion in revenue. Are we forced to pay into a  bankrupt program from which we will never realize the benefits?

Dorfman says this is simply unsustainable. We will either have to cut benefits now or not pay them out later, assuming we don’t raise tax rates. As a solution, he seems to lean towards a private retirement savings account system (which could even be government administered) like the one in Chile. Workers there do not contribute towards a collective pool for benefits from which benefits will be paid out. Instead they pay into a personal account and are able to have a say in how the money is invested. This gives more autonomy to the individual and secures one’s savings so there is little fear of losing that money at a later age. This privatized, self-directed plan also eliminates the possibility that government is really wasting our Social Security by borrowing from the collective pool at their own discretion and spending that money on other projects, thus ensuring there will be little left in the reserves when current UGA students reach retirement age.

The essential idea that Dorfman conveyed was that our citizens are too dependent on the federal government. The feds have their fingers in everything from retirement savings to healthcare to farmer’s crop insurance. Even more than the deficit or national debt, excessive government spending and involvement in the economy is what threatens our future. Moreover, government has created the misconception that if they do not spend money, then it would not get spent at all. That is not true; it would have been spent. Only, the spenders would have been “Joe the Plumber” instead of “Joe the freshman congressman looking to bring home the bacon and get re-elected.” As an autonomous group pursuing our best interests, we cannot allow our economic decisions to be superseded by government institutions. The independent nature of our citizenry is what has historically set America apart from the rest of the world. Our adherence to the values of freedom, liberty, and the right to forge one’s own way should be as applicable to politics as it is to economics. This idea should lead us to an organic, self-directed economy instead of one where winners and losers are decided by arbitrary government subsidies and regulations.