Also: Department of Education Cuts and American Shipping

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Happy Thursday! In today’s newsletter, we examine the inflationary risks of a prolonged conflict in Iran, the changes in the Department of Education since President Trump took office, and the Jones Act’s impact on American shipping.

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1. Can the US Economy Withstand the Iran War? ([link removed] )

3.19_Strain ([link removed] )

Topline: The ongoing conflict in Iran has led to large spikes in oil prices and the looming threat of a sustained energy supply shock. AEI’s Michael R. Strain warns ([link removed] ) that a prolonged conflict may lead to greater inflation if the public believes the energy price shocks will translate to inflation accelerating across the board in the long term.

The Economic Shocks of War: Public expectations of future inflation heavily influence actual inflation, and high prices are currently front of mind for US consumers. Since March 2021, inflation has accelerated due to the Biden administration’s policy decisions and other factors that pushed up demand and constrained supply, and the Federal Reserve has failed to return inflation to its 2 percent target. According to a January 2026 survey ([link removed] ) by the Pew Research Center, 92 percent of Americans are concerned about the cost of food and consumer goods.

An Inflationary Fight: Strain argues that the Fed should treat public inflation psychology as fragile—which makes the situation with Iran even more precarious. President Trump claims that energy price increases will be short-lived, but consumers know gas prices are already higher than usual, and a self-reinforcing inflation spiral is a real threat. The Fed is in a difficult position—as Trump publicly demonstrates hostility to the central bank’s independence, it still faces a mandate to return inflation to its target rate and restore Americans’ trust in long-term economic prosperity.

“If an energy price shock caused by the Iran war leads the public to worry that inflation is accelerating, then that concern could itself cause inflation to accelerate. And the public seems primed to worry about exactly that. A self-reinforcing inflationary spiral is a real concern."

—Michael R. Strain ([link removed] )

More on Inflation
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2. Meet the New Department of Education ([link removed] )

3.19_Hess ([link removed] )

Topline: The US Department of Education (ED) has seen many changes since Trump took office last year, but their significance for states and schools is less than many observers may think, writes ([link removed] ) AEI’s Frederick M. Hess.

Show Me the Results: ED’s employee head count has been reduced dramatically—from about 4,000 to 2,000, which could save over $100 million in salaries and benefits while establishing a more efficient operation. Trump’s ED has also used interagency agreements to assign functions to other agencies (such as the Department of Labor), which has become a default strategy for hollowing out the department. However, K–12 programs and funding have not been substantially cut. The fiscal budgets of programs such as Title I, special education, and school lunches remain at or above their 2024 levels under the Biden administration.

Educated Guesses: The interagency agreements are a piecemeal strategy for dismantling ED. They demonstrate that this agency isn’t necessary to deliver programs and funding, but they do not necessarily reduce the federal role in education by increasing the states’ role. Fired staff can usually be rehired, and interagency agreements can be reversed by the next administration. The durability of Trump’s changes will depend on how thoroughly the relocated functions are integrated into their new homes and whether these changes are workable throughout the rest of his term.

“Amid all the hyperbole, it can be tough to know what’s really going on. Here’s my bottom line: There’ve been big changes at ED, but both camps have exaggerated their impact. For good or ill, the significance for states and schools is less than many observers might imagine.”

—Frederick M. Hess ([link removed] )

More on the Department of Education
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3. How the Jones Act Hampers American Shipping ([link removed] )

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Topline: The Jones Act, introduced in 1920, requires all shipments of goods between US ports to be carried on US-built and -flagged vessels. AEI’s Vincent H. Smith makes the case ([link removed] ) that this bill is largely antiquated and creates economic strain on US energy supply chains. While Iran lays mines in the Strait of Hormuz to disrupt global oil and gas supplies, the Jones Act is preventing US energy producers from responding to domestic needs to keep prices manageable.

Restrictions and More: The Jones Act has inflated transportation and other costs for the US economy with its hefty restrictions and rules. Substantial crewing requirements for US-flagged vessels, expensive regulatory demands for building vessels in US shipyards, and other mandates remove incentives for US-flagged ships to incorporate a wide range of labor-saving mechanisms and other technologies. Transport costs for shipments of oil and natural gas between US ports would be much lower if bids for those shipments were open to competition from other vessels.

Energy Shocks: To mitigate the effects of the Strait of Hormuz’s effective closure, the Trump administration would be wise to immediately and temporarily suspend the Jones Act’s US flag provisions—a policy decision that previous administrations, including the first Trump administration, have done in the past. However, a more durable approach would be for Congress to end the antiquated bill altogether.

“This moment of international crisis presents a golden opportunity for Congress and the administration to say good riddance to an ancient and decrepit set of regulations that for over 100 years have persistently disrupted energy and other markets, hurting thousands of US companies and millions of American households in the process.”

—Vincent H. Smith ([link removed] )

More on the Jones Act
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Dive into More Data

3.19_Kiesling ([link removed] )

Is Artificial Intelligence Driving Costly Electricity Bills? ([link removed] )

More on Artificial Intelligence
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3.19_McCusker_EDIT ([link removed] )

The Cost of Operation Epic Fury ([link removed] )

More on Defense Spending
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Special thanks to Carter Hutchinson, Drew Kirkpatrick, and Rosalie Blacklock.

Thanks for reading. We will be back with more data next Thursday!

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