“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
AI Summary.The Congressional Budget Office projects that if interest rates run 1.5 percentage points above its economic forecast, deficits would be $6tn larger over 2026–2036, reflecting a $4.9tn rise in net interest costs and $1.1tn in added debt-service costs. Debt held by the public would reach 133.1% of GDP in 2036, 12.9 percentage points above its baseline.
CBO StaffCongressional Budget OffIce
Date Posted:
If interest rates rise 150bp above CBO’s current extended baseline over 2026–2036 (which would leave the 10-year Treasury with a mean yield of 5.8% over that period), deficits would be $6T larger over the period.
How much would higher interest rates add to deficits and debt?
Core argument: CBO projects that interest rates 150 basis points above its economic forecast would make deficits a total of $6 trillion larger over the 2026–2036 period than in its baseline projections.
[If] interest rates are 150 basis points higher than those in CBO’s economic forecast—deficits are a total of $6 trillion larger over the 2026–2036 period than they are in the agency’s baseline projections. That increase in deficits is attributable to a $4.9 trillion increase in net interest costs resulting from higher interest rates on the amount of debt in CBO’s baseline projections and a $1.1 trillion increase in debt-service costs. In 2036, debt held by the public reaches 133.1% of GDP—12.9 percentage points more than debt that year in CBO’s baseline projections.
Takeaways by Macro Roundup® AI
CBO projects that interest rates 150 basis points above its economic forecast would make deficits a total of $6 trillion larger over the 2026–2036 period than in its baseline projections.
The $6 trillion deficit increase comprises a $4.9 trillion rise in net interest costs on the debt in CBO’s baseline projections plus a $1.1 trillion increase in debt-service costs.
Under the higher-interest-rate scenario, CBO projects debt held by the public reaches 133.1% of GDP in 2036, 12.9 percentage points above its baseline projection for that year.
Related Articles:
The Budget and Economic Outlook: 2026 to 2036— The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
How Might Fiscal Policy Respond to the Rise of Artificial Intelligence?— The Congressional Budget Office estimates that a permanent 0.5 percentage point increase in annual productivity growth would lower publicly held federal debt after 30 years by 39% of GDP, offsetting roughly half the projected rise from 101% of GDP to 175%. Higher revenue and slower spending growth outweigh higher interest costs.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
AI Summary.In Spain, immigrant households work less, earn less, pay less in taxes, and are more likely to use social assistance than native households at every level of education. Non-EU-origin households are almost three times as likely to receive social assistance, with 6% of highly educated non-EU households receiving it versus 4.4% of all native households.
Nicholas EberstadtAmerican Enterprise Institute
Date Posted:
Eberstadt argues immigration at scale may not postpone the crisis of the European welfare state. In Spain, non-EU immigrant households are ~3x more likely to receive social assistance than natives at every education level, and draw larger amounts when they do.
Do immigrant households in Spain use more social assistance than natives?
Core argument: At every educational level, non-EU-origin households in Spain are almost three times as likely as native Spanish households to receive government social assistance, and average social assistance follows the same pattern.
Spain’s immigrants work less, earn less, pay less in taxes, and use more social assistance benefits. Maybe the nostrum that mass immigration is helping postpone the crisis of the European welfare state needs to be examined more carefully. Immigrant households are much more likely to utilize social program benefits than Spanish nationals, regardless of educational attainment. At every educational level, non-EU-origin households are almost three times as likely to be taking government social assistance as native Spaniards; so too average social assistance. Hardly less noteworthy: The incidence of social assistance, and average benefits per household, for high-education non-EU households (6%) is higher than for native Spanish households of all educational backgrounds (4.4%) even though most Spanish natives lack higher education.
Takeaways by Macro Roundup® AI
At every educational level, non-EU-origin households in Spain are almost three times as likely as native Spanish households to receive government social assistance, and average social assistance follows the same pattern.
High-education non-EU households in Spain take social assistance at a 6% rate, above the 4.4% rate for native Spanish households of all educational backgrounds, even though most Spanish natives lack higher education.
Spain’s immigrants work less, earn less, pay less in taxes, and use more social assistance benefits, which invites closer examination of the claim that mass immigration is helping postpone the crisis of the European welfare state.
Related Articles:
Depopulation Globally and in the Asia-Pacific: The Shape of Things to Come— Population aging and fertility below replacement levels are connected to a revolution in family structure in which families grow smaller, fewer people marry, and voluntary childlessness becomes common across countries. As a result, families become less able to bear the demands that may be placed on them.
Quo Vadis, Hispania? Part One— Official Spanish data show births exceeded deaths by barely 200,000 over the first quarter of the 21st century—less than 0.5% of Spain's population at the start—while immigration accounted for 98% of the country's population growth, the largest increase of any European Union member. Deaths have exceeded births since 2015.
Quo Vadis Hispania? Part Two— Spain's first- and second-generation immigrant population totals at least 12mm—nearly 9.5mm immigrants and over 2.5mm descendants—out of a population of roughly 49mm. The authors estimate over a third of Spain's under-40 population and nearly two-fifths of children under 5 are immigrants or the children of immigrants.
AI Summary.France's official retirement age for full benefits was 62 in 2023, versus 67 in Denmark and the US, and its average actual retirement age was the lowest in Western Europe while life expectancy at 65 reaches about 87, two years longer than in the US.
Paul KrugmanKrugman Wonks Out
Date Posted:
The sharp rise in the price of credit default swaps on French government debt implies a 1.2% of default over the next 5 years, which Krugman thinks “is too low” and cautions “France may have crossed the line from too big to fail to too big to save.”
Does France retire earlier than other wealthy countries despite longer lifespans?
Core argument: France’s official retirement age for full benefits was 62 in 2023, compared with 67 in both Denmark and the United States, and its average actual retirement age was the lowest in Western Europe.
France does stand out, even among fiscally troubled nations, in one main way: its persistent inability to get realistic about retirement. The official French retirement age — the age at which workers can collect full benefits — was only 62 in 2023. By comparison, the retirement age in Denmark was 67 (which is also the age in the U.S.). The average actual age of retirement, which is always lower than the statutory age because some people choose to accept reduced benefits, was lower in France than anywhere else in Western Europe. You don’t have to be a conservative to see France’s early retirement as unsustainable, especially given that French life expectancy at age 65 is about 87 years of age, 2 years longer than in the US. France’s reliance on the euro means that it’s all too easy to see how this loss of confidence could turn into an ugly crisis.
Takeaways by Macro Roundup® AI
France’s official retirement age for full benefits was 62 in 2023, compared with 67 in both Denmark and the United States, and its average actual retirement age was the lowest in Western Europe.
French life expectancy at age 65 is about 87, two years longer than in the United States, a gap that strengthens the case that France’s early retirement is unsustainable.
France’s reliance on the euro makes it easy to see how a loss of confidence could turn into an ugly crisis.
Related Articles:
France’s Marine Le Pen Pledges To Rein In Public Spending— France's National Rally party, historically a champion of big-state spending, has pledged to clean up the country's degraded public finances alongside tax cuts it describes as a fully financed "competitiveness shock." The party also proposed lowering the retirement age from 62 to 60 for those who start working young, estimating €15bn–€20bn in pension savings from correcting "unjust or inefficient" measures.
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Le Boomer Spread— The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
AI Summary.France's National Rally party, historically a champion of big-state spending, has pledged to clean up the country's degraded public finances alongside tax cuts it describes as a fully financed "competitiveness shock." The party also proposed lowering the retirement age from 62 to 60 for those who start working young, estimating €15bn–€20bn in pension savings from correcting "unjust or inefficient" measures.
Leila Abboud, Sarah White and Ian SmithFinancial Times
Date Posted:
Marine Le Pen has proposed a referendum that would cap national debt at 60% of GDP and reduce the public deficit by .5pp annually to reach “close to a balanced budget.” At the same time she has also proposed to reduce the retirement age from 62 to 60.
Is a populist party shifting toward fiscal restraint and tax cuts?
Core argument: Marine Le Pen’s Rassemblement National estimates it could save €15bn–€20bn on pensions spending by correcting what it calls “unjust or inefficient measures” in the current system, helping fund its plans.
Long a champion of big-state spending to protect the working class, Le Pen in recent months has swung behind the idea that France needs a major clean-up of its degraded public finances. Her party, Rassemblement National (RN), also pledged tax cuts on Tuesday in what it said would be a fully financed “competitiveness shock” from 2027. Allianz chief economist Ludovic Subran called the proposals “voodoo economics.” “The RN now presents itself as the party of fiscal rectitude, but the route to its targets is unclear. The savings figures are disputed,” he said. Delivering the announced savings would be impossible unless the RN reversed tack to lower the retirement age.
Takeaways by Macro Roundup® AI
Marine Le Pen’s Rassemblement National estimates it could save €15bn–€20bn on pensions spending by correcting what it calls “unjust or inefficient measures” in the current system, helping fund its plans.
Rassemblement National pledged tax cuts as part of what it said would be a fully financed “competitiveness shock” from 2027, alongside lowering the retirement age from 62 to 60 for those who begin working at a young age.
Le Pen, long a champion of big-state spending to protect the working class, has swung behind the idea that France needs a major clean-up of its degraded public finances.
Related Articles:
France is the Biggest Loser in the Global Rates Reset— French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Le Boomer Spread— The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
AI Summary.The gap between French and German 10-year government bond yields exceeded 140 basis points, up from 40–50 basis points, which the author attributes to political choices favoring pensioners over bondholders, including a suspended pension reform leaving the minimum retirement age near 62. French over-65s hold higher average incomes than working-age people.
Hanno LustigThe Two Cents
Date Posted:
France has signaled that pensioners are the senior claimants on government revenues. In 2026, private investors must absorb net bond issuance equal to 7.5% of GDP, after years when ECB purchases exceeded issuance.
Why has France's borrowing cost gap with Germany widened?
Core argument: The French OAT-Bund 10-year spread exceeded 140 basis points in mid-2025, up from 40–50 basis points between 2022 and June 2024, which Lustig attributes to political decisions prioritizing pensioners over bondholders.
France’s 10-year spread over Germany has risen above 140bp, from 40–50bp before mid-2024. France has repeatedly signaled that pensioners are senior claimants on government revenues: pension reforms have been weakened or reversed, while governments trying to restrain pension spending have fallen. The minimum retirement age is now 62 years and 9 months, and French over-65s have higher average incomes than the working-age population. Meanwhile, ECB purchases exceeded French net bond issuance in five years from 2015–22, so private investors were net sellers of French bonds; in 2026 they must absorb net issuance equal to 7.5% of GDP. The 10-year (r-g) gap has swung from −3.9pp in October 2020 to +1.9pp. French insurers and pension funds’ share of negotiable government debt has fallen from about 25% in 2014 to under 11%, while nonresidents’ share has risen to 57.5%.
Takeaways by Macro Roundup® AI
The French OAT-Bund 10-year spread exceeded 140 basis points in mid-2025, up from 40–50 basis points between 2022 and June 2024, which Lustig attributes to political decisions prioritizing pensioners over bondholders.
France’s legal minimum retirement age remains frozen at 62 years and 9 months for men — the lowest in the Eurozone except Bulgaria — after Prime Minister Lecornu suspended the 2023 pension reform, and French over-65s hold higher average incomes than the working-age population.
French insurers and pension funds’ share of France’s negotiable state debt fell from about 25% in 2014 to under 11%, non-residents hold 57.5% of OATs, and private investors are projected to absorb 7.5% of GDP in net issuance in 2026.
Related Articles:
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.French government borrowing costs now exceed the country's nominal income growth by about 2 percentage points, the most unfavorable gap between borrowing costs and growth in the rich world. By contrast, Spanish and Greek bond yields remain about 2 percentage points below their income growth rates.
Matthew KleinThe Overshoot
Date Posted:
The change in a country’s interest rate, Klein argues, should be measured against the change in nominal income growth. By that metric, France has moved from “core Europe” into the periphery – while Italy, Spain and especially Greece have moved in the opposite direction.
Do French borrowing costs now exceed its income growth?
Core argument: France’s borrowing costs exceeded its nominal income growth rate by about 2pp as of 2026Q2, and by roughly 3pp at current yields, the most unfavorable such spread in the rich world.
The problem for France is that its bond yields are surging even as its nominal income growth has slowed relative to the 2017-2019 pace, to the point that, almost uniquely among rich countries, borrowing costs there now substantially exceed growth rates. In fact, the spread between French sovereign borrowing costs and French growth rates is now the most unfavorable anywhere in the rich world. The French economy was not quite growing by 2% a year in euro terms as of 2026Q2, which was even worse than the anemic 3% yearly average nominal growth rate recorded in 2017Q1-2019Q4. As of 2026Q2, France’s cost of borrowing was therefore about 2pp higher than its income growth rate. (At current yields, the penalty is more like 3pp.) By contrast, Spanish and Greek bond yields are still about 2pp lower than their income growth rates.
Takeaways by Macro Roundup® AI
France’s borrowing costs exceeded its nominal income growth rate by about 2pp as of 2026Q2, and by roughly 3pp at current yields, the most unfavorable such spread in the rich world.
French nominal growth was running just under 2% a year in euro terms as of 2026Q2, below the 3% yearly average recorded in 2017Q1–2019Q4, even as French bond yields surged.
Spanish and Greek bond yields remain about 2pp below their nominal income growth rates, in contrast to France’s unfavorable gap.
Related Articles:
Soaring Yields Find Europe’s Weak Spot— A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.A rapid rise in long-term US Treasury yields has highlighted vulnerabilities elsewhere, notably France, where risks are elevated. Because France is in the euro zone, any crisis there would extend to the currency area, and European stocks have sold off alongside a weakening euro.
John AuthersBloomberg
Date Posted:
The spread between 10-year French OATs and German Bunds is pricing a second eurozone sovereign-debt crisis. Authers suggests that the recent surge in US long-term yields has “shone a light” on France’s fiscal weakness, raising its salience to investors.
Do rising US long-term yields expose vulnerabilities in Europe?
Core argument: The speed of the rise in US long-term Treasury yields has raised the risk of dislocations elsewhere, with France a point of elevated vulnerability that would extend to the rest of the euro zone.
The speed of [the upward move in US long yields] brought the risk of dislocations elsewhere, like in France. Much as a surprising hawkish shift from the Fed under Alan Greenspan in 1994 revealed underlying weaknesses in the Mexican financial system that led to the Tequila Crisis, so this Treasury scare has shone a light on where the world’s greatest vulnerabilities are to be found. As France is part of the euro zone, any crisis must naturally extend to the rest of the currency area, at a time when most of its members are moving in a nationalist direction and likely reluctant to help. That is beginning to have an impact on stocks. The main European bourses sold off even as US equities rallied on Thursday. In combination with a weakening euro, the continent’s stocks have now given up almost all their gains since Trump took office.
Takeaways by Macro Roundup® AI
The speed of the rise in US long-term Treasury yields has raised the risk of dislocations elsewhere, with France a point of elevated vulnerability that would extend to the rest of the euro zone.
The Treasury scare echoes the Fed’s surprising hawkish shift under Alan Greenspan in 1994, which revealed weaknesses in Mexico’s financial system and led to the Tequila Crisis.
Europe’s main bourses sold off even as US equities rallied, and combined with a weakening euro, the continent’s stocks have given up almost all their gains since Trump took office.
Related Articles:
France Seeks To Rein In Pensions And State Salaries In 2027— France plans to narrow its budget deficit to 5% of GDP by cutting state spending, capping increases to pensions and civil servant salaries, and raising taxes. Deteriorating public finances have left France borrowing at higher interest rates than Italy and Greece, with 10-year bond yields reaching their highest since 2002.
Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong?— An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
Global Debt Report 2026— Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
AI Summary.An analysis finds a Social Security tax-increase package lowers the debt-to-GDP ratio by 14.3 percentage points, with 97% of that coming from smaller Social Security deficits rather than economic growth. A benefit-reduction package cuts the ratio by 29.2 percentage points, raising long-run GDP by 12.1% versus 0.4%.
Andrew BiggsAmerican Enterprise Institute
Date Posted:
A Penn-Wharton simulation finds that restoring Social Security solvency with tax increases alone would cut debt/GDP by ~14pp by 2060, while a fix based only on benefit cuts would cut it by ~29pp.
How do benefit cuts and tax increases differ in reducing debt-to-GDP?
Core argument: The benefit-reduction package cuts the debt/GDP ratio by 29.2 percentage points in the long run, more than twice the 14.3 percentage points under the tax-increase package.
The first figure [in the gallery] decomposes the tax-increase reform package’s improvement to the debt/GDP ratio into separate effects: how much does it cut debt versus how much does it raise GDP? Almost all of the tax-increase plan’s improvement in debt/GDP comes from lowering federal debt by raising taxes. The plan has a small negative effect on the economy in the short run and a small positive effect in the long run. But 97% of its 14.3 percentage point long-run reduction in debt/GDP comes simply from reducing Social Security’s deficits. The economy is little-changed relative to a baseline in which Congress simply borrows to pay Social Security benefits. The benefit-reduction package [second figure in the gallery] tells a different story. It reduces debt/GDP by 29.2 percentage points, more than twice as much as the tax-increase package. Part of that comes from a larger reduction in debt: 17.2 percentage points versus 13.9. But the real kicker comes from higher long-run GDP: 12.1% under the benefit-reduction package versus just 0.4% under the tax-increase package.
Takeaways by Macro Roundup® AI
The benefit-reduction package cuts the debt/GDP ratio by 29.2 percentage points in the long run, more than twice the 14.3 percentage points under the tax-increase package.
Of the tax-increase plan’s 14.3 percentage point long-run reduction in debt/GDP, 97% comes from reducing Social Security’s deficits, leaving the economy little changed relative to a baseline in which Congress borrows to pay benefits.
Long-run GDP rises 12.1% under the benefit-reduction package versus 0.4% under the tax-increase package, with debt falling 17.2 percentage points versus 13.9.
Related Articles:
The Fairest Way to Reform Social Security May Also Be the Worst Way to Grow the Economy— Fully closing Social Security's funding gap by raising the payroll tax rate would require an immediate, permanent increase from 12.4% to 17.6%, which would reduce labor supply and economic growth. Research on a prior benefit cut found affected Americans raised earnings by 61 cents per dollar of lost benefits, generating additional payroll tax revenue.
How Federal Spending is Distributed by Age— An analysis classifying $4.4tn of $7tn in federal spending by age finds retirees aged 65 and older receive $2.7tn, 38.6% of total outlays and 61.9% of age-assignable spending, versus $1.2tn for working-age adults and $449bn for those under 26. Social Security and Medicare account for 80% of age-assignable spending on older adults.
The Great “Transfer”-mation— Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
