Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, February 7, 2019

AI Summary. Despite US tax reform aimed at encouraging repatriation of offshore profits, more than half of the profits American companies report abroad are still booked in a few low-tax jurisdictions such as Ireland, the Netherlands, and Bermuda. Repatriation rose temporarily but fell short of expectations, with much of the money going to stock buybacks.

Brad Setser New York Times
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@Brad_Setser The global distribution of corporations’ offshore profits remains largely unchanged, with over half still booked in low-tax nations. The TCJA has not effectively altered the incentives for booking profits offshore.

Did tax reform stop companies from booking profits in low-tax havens?

Core argument: More than half of the profits American companies report abroad are still booked in a handful of low-tax nations including Ireland, the Netherlands, and Bermuda, leaving the global distribution of offshore profits largely unchanged after the Tax Cuts and Jobs Act.

Despite the Tax Cuts and Jobs Act (TCJA) aiming to incentivize the repatriation of offshore profits, the global distribution of corporations' offshore profits remains largely unchanged. Over half of the profits reported by American companies abroad are still booked in a few low-tax nations, indicating persistent tax avoidance strategies. The repatriation deal led to a temporary surge in profits returning to the U.S., but the total amount fell short of the trillions anticipated, with much of it fueling stock buybacks rather than economic growth. The scale of tax shifting is so significant that addressing it could potentially increase reported GDP by over 1%. This highlights that the TCJA has not effectively altered the incentives for booking profits offshore, as multinational corporations continue to exploit low-tax jurisdictions like Ireland, the Netherlands, and Bermuda to minimize tax liabilities.

Takeaways by Macro Roundup® AI

  1. More than half of the profits American companies report abroad are still booked in a handful of low-tax nations including Ireland, the Netherlands, and Bermuda, leaving the global distribution of offshore profits largely unchanged after the Tax Cuts and Jobs Act.
  2. The Tax Cuts and Jobs Act's repatriation deal produced a temporary surge of profits returning to the U.S. that fell short of the trillions anticipated, with much of the money funding stock buybacks rather than economic growth.
  3. Addressing the scale of profit shifting by U.S. multinationals could raise reported U.S. GDP by more than 1%.

Breaking rule to show you this op-ed from Brad Setser as I suspect it's going to make a big splash

"...But now that a full year has passed since the tax bill became law, we have hard numbers we can evaluate. For starters, the law’s repatriation deal did prompt a brief surge in offshore profits returning to the United States. But the total sum returned so far is well below the trillions many proponents predicted, and a large chunk of the returned funds have been used for record-breaking stock buybacks, which don’t help workers and generate little real economic activity...... The global distribution of corporations’ offshore profits — our best measure of their tax avoidance gymnastics — hasn’t budged from the prevailing trend. Well over half the profits that American companies report earning abroad are still booked in only a few low-tax nations — places that, of course, are not actually home to the customers, workers and taxpayers facilitating most of their business. A multinational corporation can route its global sales through Ireland, pay royalties to its Dutch subsidiary and then funnel income to its Bermudian subsidiary — taking advantage of Bermuda’s corporate tax rate of zero....The scale of the tax shifting has become so immense that some economists believe curbing it could raise reported G.D.P. by well over a percentage point— something Mr. Trump, who’s been absorbed by opportunities to brag about the economy, should notionally welcome...."

Brad Setser, "The Global Con Hidden in Trump’s Tax Reform Law, Revealed,"New York Times, February 6, 2019, https://www.nytimes.com/2019/02/06/opinion/business-economics/trump-tax-reform-state-of-the-union-2019.html

AI Summary. U.S. debt held by the public as a share of GDP has risen above historical averages, driven by increased government spending and slower economic growth. The trend raises concerns about managing future budget deficits and interest payments, with fiscal reforms and faster growth proposed to stabilize the ratio.

CBO Staff Congressional Budget Office
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The debt held by the public as a percentage of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, according to @CBOStaff.

Is rising debt as a share of GDP straining fiscal sustainability?

Core argument: Debt held by the public as a share of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, raising concerns among economists and policymakers about long-term fiscal sustainability.

The debt held by the public as a percentage of GDP is a critical indicator of a nation's fiscal health, reflecting the balance between government borrowing and economic output. Recent data indicates that this ratio has been on an upward trajectory, raising concerns among economists and policymakers about long-term fiscal sustainability. As of the latest reports, the debt-to-GDP ratio has surpassed historical averages, driven by increased government spending and slower economic growth. This trend suggests potential challenges in managing future budget deficits and interest payments, which could impact public investment and economic stability. Policymakers are urged to consider strategies to stabilize this ratio, such as fiscal reforms and measures to boost economic growth, to ensure that the debt remains manageable and does not hinder economic progress.

Takeaways by Macro Roundup® AI

  1. Debt held by the public as a share of GDP has surpassed historical averages, driven by increased government spending and slower economic growth, raising concerns among economists and policymakers about long-term fiscal sustainability.
  2. The rising debt-to-GDP ratio suggests potential challenges in managing future budget deficits and interest payments, which could affect public investment and economic stability.
  3. Policymakers are urged to stabilize the debt-to-GDP ratio through fiscal reforms and measures to boost economic growth so that debt remains manageable.

CBO Staff, “Budget And Economic Outlook,” Congressional Budget Office, June 2017 Update, https://www.cbo.gov/about/products/major-recurring-reports

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CBO Staff, “Budget And Economic Outlook,” Congressional Budget Office, January 2019, https://www.cbo.gov/about/products/major-recurring-reports

AI Summary. The top 1% of U.S. earners paid 39% of all federal income taxes while earning 20% of total adjusted gross income, with the top 0.1% alone paying 19%. The bottom 50% of earners accounted for 3% of federal income taxes.

Michael Durkheimer Forbes
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The top 1% of earners in the U.S. paid 39% of all federal income taxes in 2017, despite earning 20% of total adjusted gross income.

How large a share of federal income taxes do top earners pay?

Core argument: The top 1% of U.S. earners paid 39% of all federal income taxes in 2017 while earning 20% of total adjusted gross income.

In 2017, the top 1% of earners in the U.S. paid 39% of all federal income taxes, despite earning 20% of total adjusted gross income. This disproportionate tax burden highlights the significant role high-income earners play in funding government operations. The top 0.1% alone contributed 19% of federal income taxes, underscoring their substantial fiscal impact. Meanwhile, the bottom 50% of earners accounted for only 3% of federal income taxes, reflecting the progressive nature of the U.S. tax system. These figures illustrate the concentration of tax contributions among the wealthiest, raising questions about equity and efficiency in tax policy. As policymakers debate tax reforms, understanding these dynamics is crucial for crafting policies that balance revenue generation with economic fairness.

Takeaways by Macro Roundup® AI

  1. The top 1% of U.S. earners paid 39% of all federal income taxes in 2017 while earning 20% of total adjusted gross income.
  2. The top 0.1% of U.S. earners alone contributed 19% of federal income taxes in 2017.
  3. The bottom 50% of U.S. earners accounted for 3% of federal income taxes in 2017, reflecting the progressive structure of the U.S. tax system.

Michael Durkheimer, “What You Don’t Know About The Top One Percent,” Forbes, May 1, 2018, https://www.forbes.com/sites/michaeldurkheimer/2018/03/01/0-001-percent-one-percent/

What You Don’t Know About The Top One Percent: Extended Excerpt Image 1

Matthew Gardner, “Who Pays Taxes In American In 2017,” Institute On Taxation and Economic Policy,” April 13, 2017, https://itep.org/who-pays-taxes-in-america-in-2017/

Scott Greenberg, “Summary Of The Latest Federal Income tax Data, 2016 Update,” Tax Foundation, February 1, 2017, https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/

Note you also included this link:

Friday, February 8, 2019

AI Summary. Foreign ownership of U.S. government debt has fallen from a peak of 55% during the 2008 financial crisis to below 40%, the first time since 2003, with China's share of outstanding Treasury debt down from 14% in 2011 to just over 7%. Domestic investors have absorbed the debt as foreign creditors retreat.

Daniel Kruger Wall Street Journal
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Foreign ownership of US debt has declined from 58% at 2008 peak to < 40%.

Do domestic investors absorb U.S. debt as foreign creditors retreat?

Core argument: Foreign ownership of U.S. government debt fell below 40% in November, the first time since 2003 and down from a peak of 55% during the 2008 financial crisis.

Foreign ownership of U.S. government debt has decreased significantly from a peak of 55% during the 2008 financial crisis to below 40% in November, marking the first time since 2003. This decline reflects a reversal from the 2000s when foreign investors heavily accumulated U.S. debt as the government shifted from surpluses to record deficits due to tax cuts and increased spending on wars and the financial crisis. Notably, China, once the largest foreign creditor, reduced its holdings from 14% of all outstanding Treasury debt in 2011 to just over 7% today. This shift has led domestic investors to increasingly pick up U.S. debt as foreign creditors retreat, highlighting a significant change in the composition of U.S. debt ownership and its implications for domestic financial markets.

Takeaways by Macro Roundup® AI

  1. Foreign ownership of U.S. government debt fell below 40% in November, the first time since 2003 and down from a peak of 55% during the 2008 financial crisis.
  2. China, once the largest foreign creditor, cut its holdings from 14% of all outstanding Treasury debt in 2011 to just over 7% today.
  3. Domestic investors have increasingly absorbed U.S. debt as foreign creditors retreat, reversing the 2000s pattern when foreign buyers accumulated Treasurys as the government moved from surpluses to record deficits driven by tax cuts, wars, and financial-crisis spending.

"...Foreign ownership of U.S. government debt has been decreasing since it reached a peak of about 55% during the financial crisis in 2008, falling below 40% in November for the first time since 2003, according to the most recent Treasury data. That marks a striking reversal from the substantial accumulation of U.S. debt by foreign investors during the 2000s, when the government swung from surpluses to record deficits tied to tax cuts and increased spending on the wars in Iraq and Afghanistan and, later, the financial crisis.China, the largest foreign creditor to the U.S., owned as much as 14% of all outstanding Treasury debt in 2011. Today the country owns a little more than 7% of U.S. debt...."

Domestic Investors Pick Up U.S. Debt When Foreign Creditors Wont: Extended Excerpt Image 1


Daniel Kruger and Kate Davidson, "Domestic Investors Pick Up U.S. Debt When Foreign Creditors Won’t,"Wall Street Journal, February 6, 2019, https://www.wsj.com/articles/domestic-investors-pick-up-u-s-debt-when-foreign-creditors-wont-11549454400