Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, July 24, 2019

AI Summary. A bipartisan budget agreement extends the debt ceiling for two years and raises spending caps, avoiding $126bn in automatic cuts, with a $320bn total that exceeds a prior $296bn deal and includes no significant offsets. The Committee for a Responsible Federal Budget called it the worst budget agreement in the nation's history.

Rick Berger American Enterprise Institute
Date Posted:
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Fiscal hawks emerged as clear losers in the recent bipartisan budget agreement, which extends the debt ceiling for two years & raises spending caps, avoiding $126bn in automatic cuts.

Does a bipartisan budget deal raising spending caps sideline fiscal hawks?

Core argument: The bipartisan budget agreement totals $320bn, exceeding the prior $296bn deal, and avoids $126bn in automatic spending cuts while extending the debt ceiling for two years and raising spending caps.

Fiscal hawks emerged as clear losers in the recent bipartisan budget agreement, which extends the debt ceiling for two years and raises spending caps, avoiding $126bn in automatic cuts. The deal, totaling $320bn, surpasses the previous $296bn agreement and lacks significant offsets, prompting the Committee on a Responsible Federal Budget to label it "the worst budget agreement in our nation's history." Many House Republicans and Senate GOP deficit hawks criticized the substantial increases in non-defense discretionary spending, marking it as one of the most challenging votes of their careers. This agreement highlights a shift away from fiscal conservatism, as it prioritizes stability and political compromise over deficit reduction, leaving fiscal hawks with diminished influence in shaping budgetary policy.

Takeaways by Macro Roundup® AI

  1. The bipartisan budget agreement totals $320bn, exceeding the prior $296bn deal, and avoids $126bn in automatic spending cuts while extending the debt ceiling for two years and raising spending caps.
  2. The Committee on a Responsible Federal Budget called the agreement "the worst budget agreement in our nation's history," and the deal lacks significant offsets.
  3. Many House Republicans and Senate GOP deficit hawks criticized the increases in non-defense discretionary spending, describing the vote as one of the most difficult of their careers.

Rick Berger, "Winners and losers of the bipartisan budget agreement," American Enterprise Institute, July 23, 2019, https://www.aei.org/foreign-and-defense-policy/defense/winners-and-losers-of-the-bipartisan-budget-agreement/

Winners and losers of the bipartisan budget agreement

Yesterday, President Trump and congressional leaders announced a deal to extend the debt ceiling for two years and raise the Budget Control Act spending caps for two years, avoiding $126 billion in automatic across-the-board cuts set to take effect in January of 2020. This $320 billion deal builds on the last pact, which raised spending by $296 billion. While this agreement represents a surprising breakthrough, this was the easy part, and much work remains to actually pass 12 appropriations bills. Most importantly, the president has yet to announce his explicit support of the accord, and he will gauge public reaction before doing so. Congressional leaders must now figure out how to thread the needle of packaging appropriations bills.

Winners

Speaker Pelosi: The leader of the Democratic House played a bad hand into a good deal; in one conservative’s take, she “played like a fiddle.” Beyond avoiding sequestration and a debt ceiling showdown, the speaker desired a significant increase in non-defense discretionary spending — and she delivered in spades. With the addition of $22 billion in unpaid VA bills, Pelosi and Democratic leadership can now credibly claim to have broken the longstanding principle of “parity” in budget deals in which each dollar for defense is matched on the non-defense side.

Mitch McConnell: With the prospect of chaos looming, the Senate majority leader always wanted stability above all else. This arrangement buys him that stability, avoiding a sequester, a shutdown, or a one-year continuing resolution and further budget games, as Acting White House Chief of Staff Mick Mulvaney and OMB Director Russ Vought wanted. McConnell also shields his caucus from a brutal standalone debt ceiling vote and retains the option to disavow the handshake agreement, calling it the “Administration-Pelosi” deal. In addition, by extending the debt ceiling for two years rather than a short-term extension or an elimination, McConnell plays the long game. The new July 2021 debt ceiling deadline sets up either a chance for a newly re-elected Trump to work with Senate Republicans on a true debt reduction pact or to force a Democratic president to squander the most valuable first-term political capital.

Losers

Fiscal hawks: The reaction from fiscal hawks can be summed up by Rep. Mark Walker’s tweet featuring the Joker standing next to a pile of money on fire. Many House Republicans and Senate GOP deficit hawks said voting for the massive increases in non-defense discretionary spending in the last budget agreement clocked in as the worst vote of their tenures in Congress. This deal is simultaneously larger than the last one and possesses fewer offsets, leading the deficit-battling Committee on a Responsible Federal Budget to brand it “the worst budget agreement in our nation’s history.”

Progressives: Left-leaning Democrats in Congress aren’t thrilled about this agreement because it includes a verbal agreement from Speaker Pelosi to eschew using poison-pill policy riders in appropriations bills to restrict the president’s latitude on border wall issues. Progressive Dems in the House are still smarting after a betrayal by Senate Minority Leader Schumer on the humanitarian aid package for the border, which included no restrictions on the administration. After helping to pass the National Defense Authorization Act on party lines — a bill most progressive never vote for — they’re unlikely to go quietly into that good night.

Meh

Defense hawks: Without a confirmed defense secretary to provide a strong voice in the room, defense spending was not a priority for White House negotiators. Leading defense hawks, such as Sen. Jim Inhofe and Rep. Mac Thornberry, had called $750 billion the bare minimum to carry out the president’s National Defense Strategy. This budget deal provides $738 billion in 2020, only $5 billion more than the House Democrats’ preferred level and about 1% real growth. In 2021, the $741 billion defense budget will actually represent a decrease in buying power, given inflation. However, defense hawks notched a win in avoiding a one-year continuing resolution or across-the-board cuts to the military twice the size of the 2013 sequester, which devastated readiness. Sen. Inhofe and Rep. Thornberry have already announced their reluctant support of the deal to maintain momentum on readiness recovery, but this deal was a pyrrhic victory for defense hawks.

The President: Facing advisers split on a negotiating strategy, the president tentatively agreed to a compromise, which he could ditch at any moment. The Mnuchin wing avoids a potential default and sequestration, while the Mulvaney/Vought wing sets up a premier fiscal fight early on in a second term, should the president win next November. The president also retains his freedom on his number-one issue — the border wall — with transfer authority intact and a promise from Pelosi to ban immigration-related policy riders on appropriations bills.

Friday, July 26, 2019

AI Summary. Estimates from administrative tax data indicate the top 0.1% of US wealth holders control about 15% of total wealth, and that the top 1% holds as much as the bottom 90%. Accounting for differences across asset classes gives private business wealth a larger role and fixed income a smaller one, altering projected wealth-tax revenue.

Matthew Smith National Bureau of Economic Research
Date Posted:
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According to @MatthewSmith, the top 0.1% of US wealth holders control approximately 15% of total wealth, highlighting stark wealth inequality.

How much wealth do the richest Americans hold?

Core argument: Estimates using administrative tax data place the top 0.1% of US wealth holders at roughly 15% of total wealth, with the top 1% holding as much wealth as the bottom 90%.

The latest estimates using administrative tax data reveal that the top 0.1% of wealth holders in the US control approximately 15% of total wealth, a significant concentration that underscores the economic power of this elite group. This analysis, which refines the capitalization approach by accounting for asset class heterogeneity, suggests a larger role for private business wealth and a smaller role for fixed income wealth among the wealthiest. The top 1% holds as much wealth as the bottom 90%, highlighting stark wealth inequality. However, the P90-99 class holds more wealth than either group when heterogeneity is considered. These findings imply that top portfolios are less reliant on fixed income and public equity, focusing more on private equity and housing. Consequently, this impacts revenue estimates from wealth taxes and capital income shares in distributional national accounts, emphasizing the need for precise wealth measurement in policy formulation.

Takeaways by Macro Roundup® AI

  1. Estimates using administrative tax data place the top 0.1% of US wealth holders at roughly 15% of total wealth, with the top 1% holding as much wealth as the bottom 90%.
  2. Refining the capitalization approach to account for asset class heterogeneity assigns a larger role to private business wealth and a smaller role to fixed income wealth among the wealthiest households, with the P90-99 class holding more than either group.
  3. Top portfolios appear to rely more on private equity and housing and less on fixed income and public equity, which affects revenue estimates from wealth taxes and capital income shares in distributional national accounts.

breaking rule as I though you would want to be aware of this new NBER from 3 of the 4 "Capitalists in the Twenty-First Century" guys. Paper argues that Saex Zucman likely overstates the money at the very top,

"...This paper uses administrative tax data to estimate top wealth in the United States. We build on the capitalization approach in Saez and Zucman (2016) while accounting for heterogeneity within asset classes when mapping income flows to wealth. Our approach reduces bias in wealth estimates because wealth and rates of return are correlated..... We find a larger role for private business wealth and a smaller role for fixed income wealth, consistent with the composition of top wealth in the SCF and estate tax data. Less than half of top wealth takes the form of liquid securities with clear market values.....Overall, wealth is very concentrated: the top 1% holds as much wealth as the bottom 90%. However, the “P90-99” class holds more wealth than either group after accounting for heterogeneity. Relative to a top 0.1% wealth share of more than 20% under equal returns, we estimate a top 0.1% wealth share of and find that the rise since 1980 in top wealth shares falls by. Top portfolios depend less on fixed income and public equity, depend more on private equity and housing, and more closely match the composition reported in the SCF and estate tax returns. Our adjustments reduce mechanical revenue estimates from a wealth tax and top capital income shares in distributional national accounts, which depend on well-measured estimates of top wealth.Though the capitalization approach has advantages over other methods of estimating top wealth, we emphasize that considerable uncertainty remains inherent to the approach by showing the sensitivity of estimates to different assumptions...."

Matthew Smith, Owen Zidar and Eric Zwick, "Top Wealth in the United States: New Estimates and Implications for Taxing the Rich," National Bureau of Economic Research, July 19, 2019, http://ericzwick.com/wealth/wealth.pdf