A government report evaluates gender therapy and medical care for children

The following article appeared in the Economist online on May 05, 2025. The full article is reproduced below, with permission.

BACK IN JANUARY Donald Trump signed executive order 14187, entitled “Protecting Children from Chemical and Surgical Mutilation”. He instructed federally run insurance programmes to exclude coverage of treatment related to gender transition for minors. The order aimed to stop institutions that receive federal grants from providing such treatments as well. Mr Trump also commissioned the Department of Health and Human Services (HHS) to publish, within 90 days, a review of literature on best practices regarding “identity-based confusion” among children. The ban on federal funding was later blocked by a judge, but the review was published on May 1st.

A controversial president commissioning a department headed by a controversial health secretary, Robert F. Kennedy junior, amid a big reduction in government funding for science, sounded like a recipe for more culture warring. Yet what the commission has served up is unexpectedly rigorous.

“It is a lot like the Cass Review,” says Julia Mason, a paediatrician in Oregon and one of the few left-leaning physicians in America to ask questions publicly about the nationwide embrace of puberty blockers, cross-sex hormones and surgery for children. The Cass Review, published in 2024, is the most extensive report on the subject so far, commissioned by England’s National Health Service and headed by the former president of the Royal College of Paediatrics, Hilary Cass. It found that evidence for the benefits of gender-affirming interventions on minors was “remarkably weak”.

The HHS report is more than 400 pages long, with a 173-page appendix full of charts. It is in five sections: the history; a review of existing evidence; a section on “clinical realities” in American gender clinics today; a section on ethics; and a final one on the importance of psychotherapy. Chapters were subject to peer review, and contributors included doctors and medical ethicists, but the HHS has not named the authors, pending a post-publication review process. The report largely avoids culture-war battles or terminology, though it does refer to “paediatric medical transition” (PMT) rather than “gender-affirming care”.

The summary cuts to the chase. “The evidence for benefit of paediatric medical transition is very uncertain, while the evidence for harm is less uncertain.” When medical interventions pose unnecessary, disproportionate risks of harm, “healthcare providers should refuse to offer them even when they are preferred, requested, or demanded by patients.” Claims that distressed children who do not transition face greater risk of suicide “are not supported by the evidence”.

The report includes a review of 17 previous systematic reviews on the subject, many conducted in Europe, to evaluate the evidence for benefits and harms of PMT. It finds that the overall quality of evidence on the effects of intervention is “very low”. What is more, the report says the risks of PMT include sterility, sexual dysfunction, impaired bone density, adverse cognitive impacts, psychiatric disorders, surgical complications and regret.

The ethics chapter gives perhaps the deepest bioethical analysis of the issue yet to be published (the Cass Review had no chapter on ethics). In response, Jonathan Moreno, a professor emeritus at the University of Pennsylvania, who was an adviser to Barack Obama’s bioethics commission, told the British Medical Journal that the report cited reputable bioethical texts and presented a “plausible” analysis.

The HHS report pays particular attention to the role of the World Professional Association of Transgender Health (WPATH), whose advice is embedded in American health care, even though the group does not require members to be medical professionals. In the process of developing its latest standards of care, the report claims that “WPATH suppressed systematic reviews its leaders believed would undermine its favoured treatment approach”. As a result, the report says, WPATH promoted the idea that children could consent to the treatment, and that the treatment was beneficial, even though it knew the evidence could not support either assertion.

WPATH says the HHS report “misrepresents existing research and disregards the expertise of professionals who have been working with transgender and gender-diverse youth for decades”. Trans-rights groups have also been scathing. “It is deeply troubling to see the country’s top authority on health publish a collection of recommendations that seemingly have no basis in following established health care best practices, science, or input from providers who actually administer the type of health care in question,” said Casey Pick, director of law and policy at the Trevor Project, a non-profit.

Many American medical organisations, such as the American Academy of Paediatrics (AAP) and the American Medical Association, follow WPATH’s “gender-affirming” approach. The HHS report traces how this impression of medical consensus came about, through blind delegation of authority to WPATH and its members, a chain of trust that was broken, the report says, when WPATH chose to suppress evidence. One researcher who follows the issue expressed a hope that the report could help provide a “golden bridge” for the associations to retreat, admit they had been misled by WPATH, and change course, as is starting to happen in Britain and elsewhere.

That looks unlikely. Susan Kressly, president of the AAP, dismissed the report, saying it “relies on a narrow set of data and perspectives”. By using terms like “child mutilation” and campaigning hard on a painful issue for those parents and children directly affected, the Trump administration damaged its chance of being listened to by people on the fence. In Britain, the left-of-centre Labour government has committed to implementing the Cass Review in full. In America, by contrast, many well-meaning people on the left have dug themselves into a position that is not supported by research. Dr Mason says, “The best way to judge this document is to read it.”

© The Economist Group Limited, London (2025)

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South Africa’s 2025-6 budget has been subjected to more comment than usual. This is due to the political tensions generated by a proposed increase in value added tax (VAT).

South Africa’s choices on how it manages the revenue and expenditure issues in the budget are critical for how the larger issues of the country’s debt and its economic policies are handled. As things stand, the economy is locked into a low-growth trajectory which make the debt, revenue and expenditure issues more difficult to deal with.

This piece draws on a longer article which explores these issues in greater detail. Here, I focus only on the VAT issue.

The finance minister originally tabled an increase of 2 percentage points, then changed it to 0.5 percentage points. Still, it is threatening to end the country’s government of national unity, which was set up after elections in 2024.

Read more: South Africa’s finance minister wanted to raise VAT: the pros and cons of a tricky tax

Most commentators, including the political parties that have opposed the proposal, many academics, and non-governmental organisations claiming to represent low-income groups, have argued that an increase in VAT places an undue burden on low-income groups. This would make it regressive.

Based on work as an academic economist over the past three decades, I believe that the debate has been based largely on conjecture and ideological opposition to VAT, rather than on the evidence of its impact.

This is a pity as there is empirical evidence rooted in research that a VAT increase is, in fact, not regressive and is therefore a good policy decision.

Tax experts usually refer to the three Es in taxes – equity, efficiency and ease of administration – for evaluating tax policy proposals. New taxes should ideally promote equity (they should be progressive and not regressive), be efficient and be easy to administer.

An increase in VAT in South Africa ticks all these boxes.

First, contrary to what many commentators have been arguing, VAT isn’t always regressive – it depends on how it’s implemented. As proposed by the finance minister it would not be regressive because, while it would add to the burden of low-income households, most of the VAT would be collected from higher-income households. Added to this is that the proposed expansion of the existing list of zero-rated items would protect the lowest-income households.

Second, VAT is a very efficient tax. For relatively low increases in the rate, government is able to raise a large amount of revenue.

Finally, the system is easy to administer and adds very little cost to collection.

Key to its efficacy is the way VAT is implemented, including the choice of products to zero rate, and the political credibility of government.

The case for a VAT increase

VAT is a consumption tax, so it only affects the income that a household consumes.

According to the International Monetary Fund (IMF), VAT is now the mainstay of tax systems in over 160 countries, raising on average one-third of total government revenues.

In theory, there are good reasons to be concerned about the impact of VAT. First, it can place a high burden on low-income households because they spend a large proportion of their incomes on consumption goods such as food.

Second, VAT may also place a heavy burden of tax on women. In South Africa and many other countries, women-led households tend to be clustered in the lower end of the income distribution. And women disproportionately take responsibility for feeding and caring for family members.

So, at least in theory, VAT is a regressive tax. But is it really so in practice?

Three studies that have explored this issue in some detail have concluded that, in South Africa, VAT is not regressive.

In 2008, I worked with colleagues in eight countries (South Africa, Ghana, Uganda, Morocco, Mexico, Argentina, India and the United Kingdom) on the gender issues related to tax. In particular we looked at the burden of VAT on low-income and women-headed households.

Our findings were that, in general, VAT is regressive and discriminates against women, but it depends on how it is implemented.

In South Africa, the zero-rating of basic consumption goods is very effective, protecting low-income and female-headed households from VAT. It’s an example of a VAT system that is neutral – neither regressive nor progressive.

A more recent study by South African economist Ingrid Woolard and colleagues reached a similar conclusion in 2018.

A third study was done in the same year when VAT was increased from 14% to 15%. Following a similar emotive debate, the finance minister appointed an independent committee which I served on and which was chaired by Woolard, to advise on further zero-rating.

Our conclusion – again – was that zero-rating is highly effective at protecting low-income groups from the deleterious effects of VAT.

How it’s done matters

The challenge with zero-rating is that while low-income households benefit, high-income households benefit more (because they spend more, in absolute terms, on zero-rated goods). Large amounts of potential VAT revenue are lost to high-income groups that don’t need protection.

The trick is to find a basket of goods that low-income households consume a lot of, but which high-income households don’t consume in large quantities. Some typical examples are beans, canned pilchards and cabbage. These are all goods that low-income households consume and high-income households do not.

National Treasury’s proposals for increasing the basket of goods to be zero-rated are based on solid research.

A good example of the trade-offs to consider is the case of chicken. Chicken is an important source of protein for low-income households, but also for high-income households. So, if all chicken were zero-rated, this would protect poor households, but a large amount of VAT revenue would be lost.

In our 2018 zero-rating report, at 2018 prices and consumption patterns, we calculated that zero-rating all chicken products would be equivalent to R1.3 billion (US$67.6 million) but government would lose R4.6 billion (US$244.4 million) to high income households.

Not a good trade-off.

However, some chicken products, such as chicken heads and feet, are mostly consumed by low-income groups, and are therefore good candidates for zero-rating.

The two other Es – efficiency and ease of administration – of taxes are also key to consider.

On these two considerations, VAT has big advantages.

It’s very difficult to avoid or evade VAT because it’s collected along the chain of production. There’s evidence that South Africa has very little leakage in the system.

So it is relatively easy to increase the VAT rate without needing to invest additional resources to collect the tax.

Credibility is key

Apart from the economic considerations, tax policy has to be politically credible. People should believe that their tax contributions are being used effectively, and government should be seen to be acting in line with this.

If people don’t believe in government’s ability to spend wisely, resistance to taxes increases. Then tax avoidance and evasion increases.

It would be fair to say that, with the high levels of corruption in South Africa’s political system, government’s credibility is low.

Thus, if VAT is to be increased, government has to do a lot more to improve its credibility and reassure South Africans that the tax revenues will be well spent.

122 C Street N.W., Suite 700, Washington, DC 20001

May 9, 2025

Dear Member of Congress:

On behalf of National Taxpayers Union (NTU), America’s oldest national-level taxpayer advocacy organization, I write to provide a timely—and timeless—reminder from the economics community as both Houses of Congress proceed with this year’s budget reconciliation effort: price controls are not a viable solution for reducing long-run taxpayer costs in federal programs like Medicaid or Medicare.

Reportedly, some members of the executive and legislative branches are considering a form of price control known as “Most Favored Nation” (MFN) for prescription drugs administered via the Medicaid system; a similar proposal for Medicare may be forthcoming. Economists knew this well-trodden policy path of “reference pricing” when it was proposed in 2018-2020 for certain Medicare prescription drugs, both as MFN and as an “International Pricing Index (IPI).

In 2018, NTU organized a statement signed by more than 150 respected economists warning:

“Implementing a reference pricing system in the United States would create price controls that bring with them the same types of harms these policies have caused in foreign countries, to the detriment of the health care system at large and investments in U.S. research and development.

“In this case, price controls can lead to a reduction in patient access to certain drugs, less investment in the research and development of new drugs, and cost-shifting that raises the prices of other therapeutics. Ultimately, patients will suffer as cures are delayed or entirely undeveloped, while taxpayers will be denied potential savings from drugs that could obviate more expensive treatments in government healthcare programs, and the investment of capital in development of new medicines.”

A full copy of the 2018 economists’ statement is attached to this letter. NTU urges you to remember their words of caution as you deliberate Medicaid’s rising and unsustainable costs. Better solutions exist for restoring this program to its original, vital purpose of providing quality health care to vulnerable and low-income Americans. More details on approaches to making Medicaid work better for patients and taxpayers may be accessed online:

House Republicans Shouldn’t Believe the Medicaid Scare Tactics to Slow Tax Relief

Price Controls: How to Make Medicaid Worse Without Really Trying

Other information on Medicare is available at ntu.org. Should you have any questions, feel free to contact us. Thank you for your consideration.

Sincerely,

Pete Sepp, President

President Trump and members of his administration claim that international trade is rife with unfair dealing. As a sign of this unfairness they point to the fact that the U.S. buys more goods from many countries than these individual countries purchase from the United States, arguing that such bilateral trade deficits mean that the United States is being “ripped off”. They claim that the country’s overall trade deficit – the sum of the U.S. trade balance with all countries — represents a macroeconomic weakness: President Trump’s executive order declaring a national emergency due to trade begins by stating “large and persistent annual U.S. goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States.” What can bilateral trade deficits and the country’s overall trade deficit tell us about our trading relations and the health of the U.S. economy?

What can bilateral trade deficits and the country’s overall trade deficit tell us about our trading relations and the health of the U.S. economy?

Over the past 50 years, international trade has become an increasingly important feature of the U.S. economy. The U.S. has been running a trade deficit — that is that the total value of imports to the country has exceeded the value of U.S. exports — every year since 1975. However, this does not represent a decline in the country’s exports, on the contrary: both exports and imports have more than doubled since the beginning of this period (see chart). This reflects the greater integration of the United States in the world economy, something that has been happening worldwide – world trade relative to world GDP has increased from 26 percent in 1970 to 63 percent in 2022. Moreover, there is a high correlation (greater than 90 percent) between exports and imports — typically when U.S. exports to the rest of the world are declining, U.S. imports of foreign goods tend to decline as well. This is especially the case in crisis years like 2008 – 2009 and 2020. The global financial and economic crisis and the onset of Covid saw both a contraction of the United States economy (and other economies) and of world trade.

It is normal for a country to have a bilateral deficit with some of its trading partners and bilateral trade surpluses with others. The economist Robert Solow illustrated the irrelevance of bilateral trade deficits by noting that he had “a chronic trade deficit with my barber who doesn’t buy a damned thing from me.” But this does not mean Solow’s barber was taking advantage of him. Solow simultaneously had a persistent trade surplus with his students who benefited from learning from a Nobel Laureate. There is a similar logic for a country’s trade patterns. Businesses will export those goods and services that can be produced more cheaply or of a higher quality than those of foreign competitors. The United States is a major exporter of manufactures (including airplanes and other transportation equipment); fuels and mining products; and many agricultural commodities, among other products. In the same vein, Americans purchase most of their clothes and footwear from foreign suppliers able to produce them at a lower cost. It is sometimes missed that international trade involves services as well as goods – the Administration’s formula for tariffs is based on imbalances in only goods trade and does not take into account trade in services. The United States is the world’s leading exporter in services running a trade surplus in services that reflects its comparative advantage in areas like education, entertainment, and finance. In 2024, the United States ran a trade surplus in services of $295 billion (and a trade deficit in goods of $1,213 billion).

Bilateral trade statistics can be misleading. Exports are recorded as going to the country that initially receives goods, not their final destination. For this reason, the United States has large recorded trade surpluses with the Netherlands since its ports receive goods from the United States that are then transported to other countries. The global integration of supply chains — where the components for a final product are sourced from many countries also muddies measures of bilateral trade. Trade statistics record the wholesale price of a final good from a country as the value of its export without taking into account inputs that come from other countries. For example, the full value of an IPhone assembled in China is recorded as an import from China even though its design, software development, project management, and other elements of its production are supported by high-wage jobs in the United States, and many other physical components are made in countries other than China (see here and here ). In a world with extensive international supply chains this can lead to large mis-assignments of the source of exports. The appropriate assignment of the value added of an import to each country that contributes to its production is difficult to untangle. But research has found that, for example, in 2004 the United States’ bilateral trade deficit with China based on the value added by Chinese companies to its exports to the United States was 40 percent smaller than the reported bilateral trade deficit that was based on the gross value of goods. The mirror image of this is that the bilateral trade deficit with Japan based on value added was about 40 percent larger than the recorded trade deficit. These differences reflect that China was a net importer of inputs to production of goods that saw their way to the United States while Japan was a net exporter of these inputs. This type of problem with bilateral trade statistics does not follow through to overall aggregate trade statistics since everything must come from somewhere so overestimates and underestimates cancel out.

An aggregate trade deficit is not by itself evidence of economic weakness. National income, as measured by Gross Domestic Product (GDP), measures the sum of what households consume, investment by firms, government spending and net exports (exports minus imports). Although imports figure negatively in this relationship, this does not literally mean that imports subtract from GDP. The components of GDP are all interrelated and are driven by other, underlying factors. There are episodes when stronger GDP growth is associated with increasing trade deficits. For example, during the Reagan boom of 1981 – 1985 tax cuts and increased defense spending stimulated GDP growth. Stronger growth in national income led to higher consumption and greater investment, including consumption and investment of imports. At the same time, these policies led to higher interest rates in the United States which attracted foreign capital inflows that strengthened the dollar, making imports cheaper and exports more expensive. The dollar appreciation further contributed to the increasing trade deficit. Alternatively, there are scenarios in which stronger GDP growth could be accompanied by a shrinking trade deficit. For instance, a case in which faster growth abroad draws in exports from the United States which shrinks the American trade deficit while driving a higher rate of U.S. GDP growth. These two examples illustrate that there is no consistent theoretical relationship between the trade deficit and GDP growth. In fact, the correlation between net exports relative to GDP and GDP growth over the last half century is essentially zero (-0.6 percent).

Over the long term, trade deficits that are persistent reflect underlying economic conditions that contribute to higher levels of imports over exports. A nation that has a persistent trade deficit is one that is consistently spending more than it earns. Much like a household that buys more than it earns, a nation will need to borrow from abroad to fund its higher spending (see here ). Persistent trade deficits can lead to a larger or more productive economy over the long-term, if spending is for productive investment.