Italy has signaled to the United States that it is likely to exit China’s Belt and Road Initiative by the end of the year. @markets
Italian Prime Minister Giorgia Meloni reassured US House Speaker Kevin McCarthy during a meeting in Rome last week that while a final decision hasn’t been taken, her government is favoring an exit from its role in China’s massive Belt and Road Initiative, according to people present at the talks. Italy signed onto the infrastructure initiative in 2019 when Giuseppe Conte was premier, becoming the only Group of Seven country to become part of the deal. Participation will automatically renew in 2024 unless Rome actively exits the agreement. China’s Belt and Road Initiative has funded $900 billion in infrastructure projects globally.
In seventeen advanced economies the self-harm rate for teenage girls is up 143% since 2011. @TheEconomist
We focused on suicides and hospitalisations for self-harm among 17 countries. Both indicators look worrying for girls. Suicide rates have been falling overall, but girls—who kill themselves less often than other groups—are an exception. Among girls aged 10-19, suicide rates rose from an average of 3.0 per 100,000 people in 2003 to 3.5 per 100,000 in 2020. The rate among boys, although higher at 6.1 per 100,000 population, has barely changed. Girls engage in more non-fatal self-harm, like cutting, than boys do. This measure shows even steeper increases. For teenage girls, rates of hospitalisation for self-harm have climbed since 2010 in all 11 countries with available data, by an average of 143%. Boys’ average rise was 49%.
A @NBERpubs study presents evidence on the market impact of LLMs. Firms with top quintile exposure to AI outperformed firms with lowest quintile exposure to AI by over 9% from Dec 1 to Mar 31. @andrea_eisfeldt @gregorschub @rainozhang
We measure the impact of a major event in the advancement and dissemination of Generative AI technology, namely, the public release of ChatGPT, on equity returns at the firm level. Our key finding is that the arrival of ChatGPT had a sizable positive effect on the value of firms whose labor forces are more exposed to Generative AI and related Large Language Models (LLMs). Firms with higher exposure to the release of ChatGPT, as measured by the exposure of their labor force to being made more productive by tools like ChatGPT, outperform firms with lower exposures by over 40 basis points in daily excess returns during the two weeks following its release. Notably, these return differences are not only due to differences in labor force exposures across industries. Returns of firms with high labor force exposures also outperform firms with low exposures by about 40 basis points daily in industry-neutral portfolios.
.@AswathDamodaran suggests that the “stickiness” of a bank’s deposit base has strong explanatory power for overall resiliency. Banks with the highest deposit growth in the past five years (suggesting low stickiness) have tended to see big declines.
It is banks with the least stick deposits that should have seen the biggest declines in market capitalization. My proxies for deposit stickiness are limited, given the data that I have access to, but I used deposit growth over the last five years (2017-2022) as my measure of stickiness (with higher deposit growth translating into less stickiness): The results are surprisingly decisive, with the biggest market capitalization losses, in percentage terms, in banks that have seen the most growth in deposits in the last five years. To the extent that this is correlated with bank size (smaller banks should be more likely to see deposit growth), it is by no means conclusive evidence, but it is consistent with the argument that the stickiness of deposits is the key to unlocking this crisis.
Torsten Slok @apolloglobal notes the credit crunch will have a meaningful economic impact as small banks are responsible for 40% of lending.
Bank credit conditions are tightening, and the negative impact on the economy from the ongoing banking crisis is going to be significant because small banks account for 30% of assets in the banking sector and 40% of lending, and small banks are facing three headwinds from 1) higher funding costs, 2) lower asset prices because of higher interest rates, and 3) more regulatory scrutiny.
New @BIS_org data shows a contraction in dollar credit outside the US of at least $1.4T in Q4 of 2023.
Banks’ cross-border claims fell by $1.4 trillion in Q4 2022, slowing the year-on- year (yoy) growth rate to 6%. Both lower bank credit (i.e., loans and holdings of debt securities) and a drop in the market value of banks’ derivatives and other residual instruments contributed to the decline. Global cross-border bank credit (i.e., loans and holdings of debt securities) fell by $749 billion, or $400 billion on a seasonally adjusted basis. Euro-denominated credit declined by $231 billion after expanding earlier in the year. Cross-border bank credit to emerging market and developing economies (EMDEs) fell by $179 billion in Q4 2022 due to weaker dollar lending. Credit to the Asia-Pacific region contracted the most. The BIS global liquidity indicators (GLIs) show a large contraction in dollar credit to non-banks in EMDEs in Q4 2022. Dollar credit to EMDEs shrank by 4%, a rate last seen during the Great Financial Crisis of 2007–09.
Brownsville, Laredo and El Paso have declared states of emergency in advance of President Biden’s decision to end Title 42 which allowed the Federal government to rapidly expel migrants who arrive illegally.
Barring a last-minute legal challenge, the Trump-era policy known as Title 42 will expire at 11:59 p.m. Eastern on Thursday. It was put in place three years ago under the premise of preventing the spread of Covid-19. Border agents, state and local officials and even President Biden’s top aides in Washington are all bracing for the arrival of tens of thousands of migrants in the coming days. Already, people have begun crossing into U.S. border towns, anticipating the end of Title 42, which since 2020 has allowed the government to swiftly expel citizens of several countries back to Mexico. Three cities in Texas — Brownsville, Laredo and El Paso — have declared a state of emergency. No one is certain what will happen after Thursday. The federal government is expecting as many as 13,000 migrants each day immediately after the measure expires, up from about 6,000 on a typical day.
Michael Barone argues the ongoing population shift to the sunbelt may give the GOP an edge in the electoral college by 2030 with states Trump won in 2016 and 2020 having 247 electoral votes, 23 shy of the 270 needed to win.
Republicans stand to make much bigger gains in the census in 2030. That’s the news from the American Redistricting Project’s forecast, based on extrapolations from 2022 Census Bureau estimates. ARP shows California, which gained seats in every census from 1850 to 2000 and lost just one seat in 2020, losing five seats in 2030. It shows New York losing three seats and Illinois two seats. It also shows large-scale flight to low-tax states, with Texas and Florida each projected to gain four House seats in 2030 and Georgia, North Carolina, Tennessee, Arizona, Utah, Idaho, and Delaware one each. In 2016, the balance between the consistently Trump and consistently Democratic electoral votes was precisely even, 232-232. The 2020 reapportionment would have changed that just slightly to 235-231, with the switching states dropping from 74 to 72 electoral votes.
Benjamin Keys notes homeowners’ insurance premiums jumped 12% between 2021-2022 as the insurance industry responds to a sixfold increase in the number of large loss events since the 1980s. @wharton
The average cost of homeowners coverage has reached $1,900 a year nationwide, but it’s $4,000 a year in New Orleans and about $5,000 a year in Miami, according to Policygenius, an online insurance marketplace. After recent years of paying out claims for about 20 disasters a year with damages of over $1 billion, a sixfold increase from the 1980s, insurers are getting serious about new pricing models that incorporate the costs of a warming climate. Across the United States, premiums jumped 12 percent from 2021 to 2022, according to Policygenius estimates, and they are expected to continue to rise. Ten insurers have gone belly up in Florida in just the last two years. And in many cases, insurers are pulling back in risky areas, leaving state-backed insurance plans holding the bag.
.@jasonfurman notes “the employment-population ratio for prime age workers is 0.3pp above where it was prior to COVID,” and anticipates further rate hikes from the Fed.
Job growth is slowing, from a ~325K/month pace to a 225K/month pace. Here is something truly amazing, the employment-population ratio for prime age workers is 0.3pp above where it was prior to COVID. This reflects a combination of the unemployment rate and the labor force participation rate. We're now well into the era of the mystery of the extra workers. Both payroll & household employment are well above CBO's pre-pandemic forecast, which is especially amazing given that the population is smaller than they expected due to premature deaths and missing immigrants. [This] employment situation not consistent with inflation falling from its 4.5% pace to a <3%. Overall Fed has a bit less reason to worry about rate hikes, I'll bet more coming.
Regional banks rebounded today after widespread selling over the course of the week. @markets
PacWest Bancorp led a rebound across US regional banking stocks after a bruising week of losses, amid signals that some of the selling has been overdone. PacWest’s shares gained as much as 40% in US trading on Friday, while Western Alliance Bancorp rose 30%. Charles Schwab Corp., whose massive banking unit has been a source of investor concern, added 4.7% after an update showed outflows slowed for a third month. The pessimism became so indiscriminate that Pacific West Bancorp, a small lender based outside Portland, Oregon, felt impelled to issue a statement to remind everyone that it’s “a separate entity with no affiliation” to the similarly named PacWest.
Satellite data suggests Russian economic statistics are overstating output, as atmospheric pollutants have declined significantly.
Here is a data point that is hard for Russia to fake: pollution emitted by its factories and detectable by satellites in outer space. Rather than showing an economy that suffered an initial shock and has since stabilized, this data reveals an industrial sector that, for the most part, has declined even further as the war has continued. This unusual bird’s-eye view of Russia’s economy comes courtesy of the European Space Agency’s Sentinel-5P satellite, launched in 2017. To monitor the release of pollutants into the atmosphere, the satellite has a cutting-edge Tropospheric Monitoring Instrument, known as Tropomi, which can detect gases such as nitrogen dioxide, ozone, formaldehyde, methane and others. Over the past six months, urban pollution in Moscow and St. Petersburg has begun to increase (partially a reflection of traffic) but pollution in industrial regions has continued to drop, off 1.2% over the six months ended in April and down 6.2% over the past year—more than during the worst of the coronavirus pandemic. By contrast, Russia’s official measure showed industrial production rose 1.2% in March from a year earlier.
Opposition to mass immigration seemingly peaked in the West in 2016. @jburnmurdoch
Remember the rise of the right? First Brexit, then Trump, then a wave of rightwing populism broke over Europe. There were dozens of news articles on the “rising tide of anti-immigrant sentiment.” Except it turns out that in the west, 2016 was a high water mark for such views. This is true of almost all western countries, but the most dramatic shifts have come in the US, Canada and, in particular, Britain, where the share of people saying there should be strict limits — if not an outright ban — on immigration has more than halved from 66 per cent on the eve of the EU referendum to 31 per cent last year. We see similar shifts in the general public’s attitude towards members of other ethnic groups and faiths. Just 3 per cent of Americans and 2 per cent of Britons say they would not want someone of a different race as a neighbour, with only Sweden scoring lower across the developed world. Discomfort with people from other faiths falls to just 3 and 1 per cent in the US and the UK respectively.
Assembly theory estimates an “Assembly Index” for various substances by measuring the complexity of their molecular structures. Since biological entities tend to have high complexity, this theory offers a possible test for extraterrestrial life.
Assembly theory started when Lee Cronin of the University of Glasgow in Scotland asked why, given the astronomical number of ways to combine different atoms, nature makes some molecules and not others. It’s one thing to say that an object is possible according to the laws of physics; it’s another to say there’s an actual pathway for making it from its component parts. “Assembly theory was developed to capture my intuition that complex molecules can’t just emerge into existence because the combinatorial space is too vast,” Cronin said. Sara Walker of Arizona State University, meanwhile, had been wrestling with the question of life’s origin — an issue closely related to making complex molecules, because those in living organisms are far too complex to have been assembled by chance. Something, Walker mused, must have guided that process even before Darwinian selection took over. Called assembly theory, the idea underpinning the pair’s strategy has even grander aims. As laid out in a recent series of publications, it attempts to explain why apparently unlikely things, such as you and me, even exist at all. And it seeks that explanation not, in the usual manner of physics, in timeless physical laws, but in a process that imbues objects with histories and memories of what came before them.
Enrico Moretti and @wilson_daniel_j find 35% of billionaires leave states that have an estate tax. However, for the average state the additional revenues from an estate tax exceed the loss of revenues from forgone income taxes by 31 percent.
We find that billionaires responded strongly to geographical differences in estate taxes by increasingly moving to states without estate taxes, especially as they grew older. Our estimated elasticity implies that $80.7 billion of 2001 Forbes 400 wealth escaped estate taxation in the subsequent years due to billionaires moving away from estate tax states. Yet despite the high elasticity of geographical location with respect to the estate tax, we find that for most states the benefit of additional revenue from the estate tax exceeds the cost of forgone income tax revenue by a significant margin. Adoption of an estate tax implies a one-time tax revenue gain for the state when a resident billionaire dies, but it also reduces its billionaire population and thus their flow of income tax revenue over remaining lifetimes. For the average state the benefit of additional revenue from the estate tax exceeds the cost of forgone income tax revenue by 31 percent. While the cost-benefit ratio varies substantially across states, most states that currently do not have estate taxes would experience revenue gains if they adopted estate taxes. California, which has the highest personal income top tax rate, is the main exception In California, the cost-benefit ratio is 1.45, indicating that if California adopted the estate tax on billionaires, the state would lose revenues by a significant margin. (Currently, California does not have an estate tax.)
An earlier version of this research was cited in my chapter The Economics of Inequality in High-Wage Economies in Oxford University Press's United States Income, Wealth, Consumption, and Inequality
Silicon Valley’s share of venture investment has fallen from more than 40% in 2018-19 to 29.9% in the 12 months ending March. New York/LA/Boston have maintained share, while the rest of the US rose from 29.9% at the end of 2019 to 38.6%. @foxjust
The quarterly investment flows are pretty lumpy, so to measure market share I’ll use trailing-12-month data. Over the 12 months ending in March, 29.9% of US venture investment flowed to Greater Silicon Valley — down from more than 40% in 2018 and 2019. The combined share of the next three VC destinations held more or less steady, while the share for the rest of the US rose from 29.9% at the end of 2019 to 38.6% as of March. It looks a bit like the “rise of the rest” egged on by venture capitalist and AOL co-founder Steve Case, only it’s happening amid an overall collapse in VC investment that’s probably not exactly what he had in mind.
California’s population shrank for the third year in a row with a net change of -138,443 in 2022 primarily driven by migration to other states like Texas, Nevada, Idaho and Oregon.
It was big news a few years ago when, for the first time in more than a century, California’s population shrank. The small but still startling decline in 2020 was driven by Covid-19 deaths and falling immigration and birth rates, and it was something of a turning point for a huge state founded on rapid growth and long accustomed to it. The state’s population dipped yet again in 2022, for the third year in a row. The number of people living in California fell by 138,443 last year, to 38.94 million, according to state data released this week. The primary driver of the state’s population loss has been Californians moving to other states, like Texas, Nevada, Idaho or Oregon, according to Hans Johnson, a senior fellow at the Public Policy Institute of California. Between July 2021 and July 2022, the net movement out of California was a record 407,000 people, he said. “In the past, California had continued to gain college graduates and people who had higher incomes, even as we were losing a very large number of less educated adults,” he said. “And then in the most recent couple years we’ve seen an outflow for every group.”
Several regional bank stocks, most notably PacWest Bancorp, are still under stress.
PacWest Bancorp said core deposits have increased since March and confirmed it’s in talks with several potential investors, seeking to calm markets after a 60% stock rout that made it the new focal point of concern over the health of US regional lenders. Western Alliance Bancorp also said Wednesday that it had seen no unusual deposit outflows and reaffirmed its guidance deposits would rise quarter-over-quarter. Yet the stock slumped 18% in premarket trading, set to add to a 20% drop this week. Comerica Inc. and Zions Bancorp were also poised to extend steep weekly losses.
Torsten Sløk @apolloglobal notes since the SVB collapse both the Russell Microcap Index and S&P Midcap 400 Index have underperformed the S&P suggesting investors think credit conditions could impact middle market firms.
Small and medium-sized businesses have been underperforming in the stock market since the SVB collapse, suggesting investors are worried about the negative impact of the ongoing credit crunch on middle market companies, see chart below.
A prominent mathematician is leaving the University of Pennsylvania for Peking University joining at least 1,400 US-based ethnic Chinese scientists who returned home in 2021. @SCMPNews
Sun Xin, now an assistant professor in mathematics at the University of Pennsylvania, will take up a new appointment at the Beijing International Centre for Mathematical Research at his alma mater, Peking University, although the university did not specify Sun’s new role. At least 1,400 US-based ethnic Chinese scientists switched their affiliation in 2021 from American to Chinese institutions, according to a joint report by academics from Harvard and Princeton universities and MIT. Life scientist Yan Ning, for example, made headlines in China when she gave up a permanent post at Princeton. After five years in the US, the structural biologist returned to China last year to establish and serve as dean of the Shenzhen Medical Academy of Research and Translation.
The US and Japanese armed forces have “seen exponential increases…just over the past year” in their joint preparations for a possible conflict with China, according to Lieutenant General James Bierman, the commanding general of Marine Forces Japan. @ft
The US and Japanese armed forces are rapidly integrating their command structure and scaling up combined operations as Washington and its Asian allies prepare for a possible conflict with China. The two militaries have “seen exponential increases . . . just over the last year” in their operations on the territory they would have to defend in case of a war, Lieutenant General James Bierman, commanding general of Marine Forces Japan, told the Financial Times in an interview. “Why have we achieved the level of success we’ve achieved in Ukraine? A big part of that has been because after Russian aggression in 2014 and 2015, we earnestly got after preparing for future conflict: training for the Ukrainians, pre-positioning of supplies, identification of sites from which we could operate support, sustain operations,” he said. “We call that setting the theatre. And we are setting the theatre in Japan, in the Philippines, in other locations.”
New @nberpubs research finds that Americans are working 3% fewer hours annually in the aftermath of the pandemic. This reduction in hours worked means labor markets are even tighter than LFP would imply.
The negative impact of the Great Recession on aggregate hours worked and the ensuing slow recovery through 2019 materialized almost exclusively along the extensive margin. However, of the 3% decline in annual hours worked per person (including those who do not work) between 2019 and 2022, more than half is accounted for by the intensive margin. That is, focusing only on the extensive margin (lower employment and participation rates) will underestimate the total decline in labor supply by more than half. The most striking fact is the lower participation of young male cohorts without a bachelor's degree, whose participation rate is up to 7pp below that of older cohorts at the same age. The Great Recession seems to be casting a very long shadow, even on those who were in their teens when it happened.
.@davidautor shows high school workers’ wage growth overtaking college wage growth in the aftermath of the pandemic and argues that higher wages better reflect rising productivity as companies compete more intensively for workers.
For first time in four decades, wage inequality falling, due to rising lower tail. Despite inflation, real wages rising among young HS grads, 1st quartile workers. It’s tempting to attribute this change to ‘tight’ labor markets—but what does this mean in practice? The simplest explanation is that labor markets are operating on a higher point on the labor demand curve. Evidence indicates this explanation too simple: Competition has intensified. Distinction is critical: Rising competition means higher wages that better reflect productivity and higher aggregate productivity — a double dividend.
J.P. Morgan estimates consumers still have $900B of excess savings, down from a peak of $2.1B in August 2021.
From March 2020 to August 2021, consumers amassed a peak $2.1 trillion in excess savings relative to the pre-pandemic trend. Since August 2021, consumers have drawn down on these excess savings. Household debt payments were 9.8% of disposable personal income in Q4 ’22 vs. a peak of 13.2% in Q4 of ’04.
The American college workforce is 5% larger than in Feb 2022, whereas the high school workforce is 4% smaller. This has likely contributed to the decrease in earnings inequality in the post-pandemic period. @Greg_Ip
In the decades before the pandemic, the wages of lower-paid, less skilled hourly employees steadily lost ground to those of skilled workers, college graduates, managers, and professionals. In the two years since, those trends have sharply reversed. We don’t know if this narrowing in inequality will last. Perhaps it is a function of labor shortages that, like semiconductor shortages, will disappear as the pandemic recedes. Maybe it is the result of a tight labor market whose days are numbered as the Federal Reserve seeks to cool the economy. Some of this was catalyzed by the pandemic, which shrank the supply of people willing to do traditionally low-paid work. Many dropped out of the labor force, retired, or died from Covid-19. The college-educated labor force was 5% larger last month than in February 2020; the high school-educated and high school dropout labor force is 4% smaller. (Data between the two periods isn’t strictly comparable.)
.@mfariacastro at @stlouisfed estimates that the decline in asset values in 2022 drove 170,000 workers aged 51-65 back into the labor force. This represents 16% of the increase in LFP from Jan through Oct 2022.
The figure above plots the estimated average change in net worth per head of household age category during 2022. People between the ages of 55 and 74 lost, on average, over $100,000 in net worth due to falling asset returns between January and October 2022. This partly reverses some of the net worth gains in 2020-21, which were particularly high for these age groups. This is explained by the high exposure (in absolute terms) of people in these age groups to asset classes such as stocks and bonds, which performed reasonably well in 2020-21 but posted significant negative returns during 2022. Focusing on only people between the ages of 51 and 65, whose decision to participate in the labor force tends to be more sensitive to wealth effects, we find that the decline in asset values may have caused an extra 170,000 people to return to the labor force. This corresponds to an increase in the LFP rate of 0.06 percentage points, or about 16% of the total increase observed through October 2022.
Bank of America notes evidence of reshoring to Mexico at the expense of China with imports of Mexican low-tech goods such as plastics and textiles up ~60% relative to pre-pandemic levels.
Another big winner in the U.S.-China trade war could be Mexico. It has lower wages than China, an established manufacturing sector anchored by the automotive industry, and the perfect geographic position for serving the U.S. market—particularly since the rise of videoconferencing, which has increased the importance of being in the same time zone. Analysts at Bank of America already see some evidence that this is happening, with U.S. imports of Mexican manufactured goods roughly 60% higher than before the pandemic as of October. Interestingly, Mexico has gained share of U.S. imports in some low-tech industrial sectors such as plastics and textiles, while China has lost share.
Independent analyst @JosephPolitano notes that the primary driver of capacity under-utilization for American manufacturing firms has shifted from insufficient orders to insufficient supply of labor and materials.
American manufacturing firms are also citing materials and labor shortages as major constraints to production at the highest levels in decades. Everywhere you look, supply chains seem to be in disarray—and demand seems to be off the charts.
According to recent surveys, recently laid-off tech workers are quickly finding new employment with 40% accepting a new position within 30 days. @WSJ
About 79% of workers recently hired after a tech-company layoff or termination landed their new job within three months of starting their search, according to a ZipRecruiter survey of new hires. That was just below the 83% share of all laid-off workers who were re-employed in the same time frame. Nearly four in ten previously laid-off tech workers found jobs less than a month after they began searching, ZipRecruiter found in the survey.
An analysis by @jburnmurdoch suggests millennials in the US and UK are breaking a historical pattern of becoming more conservative in their voting behavior as they age.
By my calculations, members of Britain’s “silent generation”, born between 1928 and 1945, were five percentage points less conservative than the national average at age 35, but around five points more conservative by age 70. The “baby boomer” generation traced the same path, and “Gen X”, born between 1965 and 1980, are now following suit. Millennials — born between 1981 and 1996 — started out on the same trajectory, but then something changed. The most likely explanation is a cohort effect — that millennials have developed different values to previous generations. This is borne out by US survey data showing that, having reached political maturity in the aftermath of the global financial crisis, millennials are tacking much further to the left on economics than previous generations did, favoring greater redistribution from rich to poor.
cording to @jmhorp Millennials are keeping pace with Baby Boomers and Gen X in terms of generational wealth per capita.
Millennials are roughly equal in wealth per capita to Baby Boomers and Gen X at the same age. Gen X is currently much wealthier than Boomers were at the same age: about $100,000 per capita or 18% greater. Wealth has declined significantly in 2022, but the hasn’t affected Millennials very much since they have very little wealth in the stock market (real estate is by far their largest wealth category.)
.@FiveThirtyEight analyst @geoffreyvs finds that Fetterman’s margin of victory was provided by non-college white voters: Fetterman polled 7pp better than Biden in counties dominated by non-college whites.
John Fetterman bettered Biden’s margin across almost the entire state on his way to defeating Republican Mehmet Oz by about 5 percentage points, his largest improvements over Biden tended to be in red-leaning counties with higher shares of white residents without a college degree. In counties with a population that’s at least 60 percent white without a college degree — which together produced about 36 percent of the state’s 2022 vote — Fetterman’s margin was 7 points better than Biden’s, on average, compared with just 3 points better elsewhere.
Americans are drinking at elevated levels in the aftermath of the pandemic with inflation-adjusted spending up 15% in 2022 vs. just before the pandemic. @foxjust
There is clear evidence that more people are drinking too much. Deaths from alcohol-induced causes rose from 39,043 in 2019 to 54,258 in 2021, according to the Centers for Disease Control and Prevention, and the population-adjusted death rate is now more than double what it was in the 2000s. Provisional data also show an encouraging decline in alcohol-induced deaths in the first half of 2022, although that trend could change as final numbers become available. Even after the big increases of the past couple of years, US alcohol consumption likely still lags that of many affluent countries, especially in Europe. And yes, Americans drank lots more back in the 1970s — not to mention the 1830s, when estimated per-capita consumption was nearly three times what it was in 2020.
During Biden’s first two years in office, he has approved at least $4.8T of new borrowing according to @BudgetHawks.
Since January 2021, the Biden Administration has enacted policies through legislation and executive actions that will add more than $4.8 trillion to budget deficits between 2021 and 2031. The $4.8 trillion is the net result of roughly $4.6 trillion of new spending, about $500 billion of tax cuts and tax breaks, and $700 billion of additional interest costs that are partially offset by $400 billion of spending cuts and $600 billion of revenue increases.
.@JohnHCochrane reviews Phil Gramm, Robert Ekelund and John Early book and highlights their big finding, “The effective marginal tax rate in the lowest three quintiles is effectively 100%. Earn a dollar and lose a dollar of benefits. Why work?”
Why has work collapsed in the bottom decile? Here we might have a big debate. $11.76 per hour (2017) isn't a lot. But the previous graphs certainly contain a suggestion worth pursuing: The effective marginal tax rate in the lowest three quintiles is effectively 100%. Earn a dollar and lose a dollar of benefits. Why work? Gramm Ekelund and Early are careful, and don't make any causal assertions here. They don't really even stress the fact popping from the table as much as I have. But the fact is a fact, a nearly 100% tax rate + an income effect isn't a positive for labor supply, and the amount of work in lower quintiles has plummeted. This is a book about facing facts and this one is undeniable.
A 2019 RAND study found 60% of American men in the 26-35 cohort who failed to graduate from high school had been arrested by age 26, and their arrest rate has been going up over time, reports @adam_tooze
60% of young men in America with less than high-school education have been arrested at least once by age 26. Strikingly, the report’s author James P. Smith found that the arrest rate has increased dramatically over time. Black men were significantly more likely to have been arrested. Of black men aged 26-35 in the study, 33% had been arrested by age 26 versus 23% for white men. Education plays an outsized role in explaining racial arrest differences, especially for men in the 26–35 age group. The overall higher rate of arrests by 26 among black adults in the 26–35 age group correlates with lower education levels. The study also found that having a more educated father was associated with lower rates of arrests and convictions by 26.
The MSCI India Index has outperformed the MSCI China Index through April 2022, according to @Wellington_Mgmt research, as noted by @tylercowen
Figure 1 shows the cumulative total returns posted by the S&P 500 Index, the MSCI China Index, and the MSCI India Index from December 31, 1992, through April 20, 2022. Our clients have been uniformly surprised that China’s long-term performance has been so much lower than that of the US and India, especially given all the investor focus on China in recent years. And they’ve been even more surprised that India – a market many clients have more or less ignored – has fared so well over the long run.