Macro Roundup

Good observation and shocking chart from Gavyn Davies, the slump in US consumer spending has been driven by a surge in savings, not a decline in personal income. “…much of the slump in US consumer spending has been accompanied not by declining personal incomes but by a surge in savings, which suggests consumers may remain cautious during the recovery… Despite this income support, consumer spending has collapsed, especially in service sectors and on discretionary goods such as autos. As a result, the savings ratio could well rise to about 20 per cent of household income. The key question for the economic recovery is how much of this increase will be reversed as the lockdowns are eased. Part of the decline in spending has been involuntary and will be restored as restaurants and stores re­open and work patterns return to normal. But the decline in discretionary spending on big-ticket and other items may last longer, especially if the emergency rise in unemployment benefits ends after the end of July, as planned….”

"...LHS: Let’s take the global dimension first. We have done too much management of globalization for the benefit of those in Davos, and too little for the benefit of those in Detroit or Dusseldorf. Over the last two decades, better intellectual property protection for Mickey Mouse and Hollywood movies has been an A level economic issue. Better global tax cooperation, so that tech companies’ profits do not locate themselves in cyberspace and entirely escape taxation, has been a B-level issue….. More broadly, we need a reconsideration of what economists would call the role of high-powered incentives. The profit motive is a very positive thing. It drives businesses to be more efficient. It drives businesses to create new product. It drives economies forward. But profit can also be an incentive to the exploitation of workers. It can be an incentive to the exploitation of consumers. In a world where firms compete too ruthlessly for market share, if somebody cuts a corner, there can be overwhelming pressure for everyone to cut that corner in order to survive—whether it is maintaining insufficient capital in a financial institution, using a deceptive marketing practice that addicts customers, or producing in a way that is invisibly unsafe. So the case for regulation is not to be anti-business. Regulation needs to be supported because it enables the vast majority of businesses who want to do right by society to do so and still be able to compete. That’s how the case for regulation needs to be framed. We should not be waging jihad against business. We should be waging jihad against those who put profit ahead of every other value in the society. And that’s where in the emphasis on profit, we have gone a bit awry...."
Lawrence Summers, "How to Fix Globalization—for Detroit, Not Davos,"The American Interest, May 22, 2020, https://www.the-american-interest.com/2020/05/22/how-to-fix-globalization-for-detroit-not-davos/

Summers interview, he continues to bash the wealth tax but this is the most interesting bit

Adrien Auclert, Hannes Malmberg, Frederic Martenet and Matthew Rognlie, “Demographics, Wealth, and Global Imbalances in the Twenty-First Century,” Virtual Macro Seminar, May 2020, https://www.youtube.com/watch

Video of paper’s seminar:

new Rognlie on the relationship btw demographic change and the interest rates, implies a decline in the real interest rate of 63bps for US. Also imply the global savings glut is going to grow

"....We use a sufficient statistic approach to quantify the effects of population aging on wealth accumulation and equilibrium interest rates.... The model predicts a fall in the real interest rate, a rise in the world W/Y, and an expansion of global imbalances.... A simple calculation that rolls forward projected population distributions over fixed age profiles of assets and income constitutes a sufficient statistic for the transition dynamics of the wealth-to-GDP ratio in a special case of our model, and remains a very useful input into the calculation of equilibrium wealth and interest rates away from this special case. Our sufficient statistic approach shows that the macroeconomic effect of aging on aggregate wealth accumulation is large, but equilibrium interest rate adjustment, disciplined by external evidence on asset supply and demand sensitivities to the interest rate, makes the ultimate effect on interest rates and wealth more modest. Our baseline projections for the United States imply a long-run rise in W/Y of 35 percentage points, and a decline in real interest rates of 63 basis points..... Combining population projections with household survey data from the US and 24 other countries, we project the evolution of wealth-to-GDP ratios by changing the age distribution, holding life-cycle asset and income profiles constant. We find that this compositional effect of aging is large and heterogeneous across countries, ranging from 85 percentage points in Japan to 310 percentage points in India over the rest of the twenty-first century. In a general equilibrium overlapping generations model, our shift-share provides a very good approximation to the evolution of the wealth-to-GDP ratio due to demographic change when interest rates remain constant. In an integrated world economy, aging generates large global imbalances in the twenty-first century, pushing net foreign asset positions to levels several times larger than those observed until today....Figure 11 shows the relationship between historical compositional effects and historical changes in net foreign asset positions. The 45 degree line shows the demeaned compositional effect. Historically, most countries have had similar compositional effects. However, for Japan and Ireland that have substantial deviations, the net foreign asset positions change in the predicted direction, with Japan accumulating a large positive position, and Ireland a large negative position.26 Overall, there is a positive correlation between compositional effects and the change in net foreign asset positions.…"

Pew’s deep dive on second generations Americans

“…By then, the nation’s “immigrant stock” (first and second generations combined, adults and children combined) could grow from 76 million now to more than 160 million, at which point it would comprise a record share (37%) of the U.S. population.1 The focus of this report is on the 20 million adult members of the second generation (an additional 16 million U.S-born children of immigrants are under the age of 18)…”

Taylor, Paul, D’Vera Cohn, Gretchen Livingston, Cary Funk, and Rich Morin. February 7, 2013. “Second-Generations Americas: A Portrait of the Adult Children of Immigrants.” Pew Research Center.https://www.pewsocialtrends.org/2013/02/07/second-generation-americans/

Population Projections. Immigrants tend to have higher birth rates than do native-born Americans.4 If current immigration flows and birth rates continue, then by 2050, an estimated 37% of the U.S. population—highest in modern history—will be immigrants or the children of immigrants, according to a 2008 Pew Research population projection. That projection also shows that, because of the aging of the Baby Boomer generation, as much as 93% of the growth of the working-age population between now and then will be accounted for by immigrants (43%) or their U.S.-born children (50%).

The modern immigration wave to this country began with the passage of landmark legislation in 1965 that had the effect, for the first time in the nation’s history, of opening U.S. borders on a roughly equal basis to non-Europeans as well as Europeans. Half of the 44 million immigrants who have come since then have been from Latin America, about a quarter (27%) from Asia, and the remainder from other regions.5 In the nation’s two previous immigration waves during the late 19th and early 20th centuries, nearly nine-in-ten new arrivals were Europeans.

Hispanics and Asian Americans are the focus of the Pew Research survey research findings in this report. Each of these groups include immigrants from more than a dozen countries, all with unique cultures, characteristics and migration histories.6

Despite these country-of-origin differences, some broad patterns are evident. The bulk of Hispanic immigrants have relatively low levels of formal education and work in low-skilled, low-paying jobs, while the majority of Asian immigrants (especially those who have arrived in the past few decades) have relatively high levels of education and skills that help position them for jobs in higher-skilled occupations.

These large racial or ethnic group differences in the human capital of recent immigrants are echoed in the socioeconomic profile of the second generation. For example, some 55% of second-generation Asian Americans have a bachelor’s degree or more, compared with 21% of Hispanics. There are also gaps in household income and poverty rates among second-generation Hispanics and Asian Americans.

But while large gaps remain between groups, it is also the case that within each group, the second generation is doing better than the first on most key measures of economic success.

Intergenerational Mobility, Now and Then

The skeptics cite many factors: Most modern immigrants are non-white and thus face deeply ingrained social and cultural barriers; about a quarter of today’s immigrants (the vast majority of whom are Hispanic) have arrived illegally and thus must navigate their lives in the shadows of the law; globalization and technology may have eliminated many of the jobs that provided pathways to the middle class for earlier generations of hard-working but low-skilled immigrants; the relative ease of travel and communication have enabled today’s immigrants to retain their ties to their countries of origin and may have reduced incentives to adapt to American customs and mores.

It is beyond the scope of this report to make definitive statements about the success of today’s second-generation immigrants compared with those of earlier eras. Most of our data trends do not extend that far back in history. Moreover, with so many of today’s second generation just now starting to age into adulthood (16 million are under the age of 18), and with more than a million new immigrants continuing to arrive each year, it will take decades before one can attempt a comprehensive generational scorecard of the modern wave of immigrants and their children.

What we can say with certainty is that members of the second generation will have a major impact on this nation’s destiny for decades. And at this stage of their journey, we can provide some empirical assessments of their economic circumstances. For Hispanics and Asian Americans—the groups that comprise the bulk of the modern immigration wave—we can also provide some empirical assessments of their attitudes and beliefs, based on data gathered from our own surveys and those of the Census Bureau.

A Roadmap to the Report

The remainder of this report is organized as follows: Chapter 2 presents a detailed analysis of U.S. Census Bureau data on the second generation in comparison with immigrants, with third and higher generations and with the U.S. adult population. Generational patterns are also examined separately for each of four racial and ethnic groups: Hispanics, Asian Americans, non-Hispanic whites and non-Hispanic blacks.

Chapters 3 through 7 supplement this demographic portrait with an analysis of recent Pew Research Center surveys conducted with a nationally representative sample of Hispanics and a separate representative survey of Asian Americans on a range of topics. These chapters compare the second generation with the first generation in each group. No analysis of third-and higher-generation Hispanics or Asian Americans is included due to the small sample sizes of those subgroups in the survey data. Comparisons to the general public using data from other recent Pew Research Center surveys are included wherever possible. Survey data with an adequate number of second-generation whites and blacks for analysis is not available. Thus, the survey comparisons are limited to the two race or ethnic groups comprising the bulk of the modern immigration wave. These comparisons help illuminate the ways in which the second generation tends to be similar and dissimilar to the first generation within each race or ethnic group, but they cannot be used to characterize the second generation in the U.S. as a whole.

Chapter 3 looks at questions of self-identity, proficiency in English and attitudes about maintaining their ancestral language. Chapter 4 examines how the generations see their quality of life in relation to their parents, their expectations for their children, and their perception of their financial well-being. Chapter 5 examines attitudes about intergroup relations and intergroup marriage. This chapter includes a detailed analysis of data from the U.S. Census Bureau on the rate of intergroup marriage for all adults in the U.S. and separately for Hispanics, Asian Americans, whites and blacks. Chapter 6 focuses on attitudes about political party, ideology and social issues. Chapter 7 considers a wide array of other topics, including views about discrimination, personal goals, values and comparisons between the U.S. and their ancestral country. The appendices provide a detailed explanation of the methodologies used and a topline summary of the survey findings for Hispanics and Asian Americans. They also provide detailed tables, drawn from 2012 census data, that show the socioeconomic characteristics of first, second and third and higher generations of whites, blacks, Hispanics and Asian Americans.

About the Authors

This report is a joint effort of survey researchers, demographers and writers in the Pew Research Center. Paul Taylor, executive vice president of the Pew Research Center, wrote the overview and provided editorial guidance for the report. Senior writer D’Vera Cohn wrote the demographic analysis in Chapter 2 with data analysis and advice from research associate Ana Gonzalez-Barrera, senior demographer Jeffrey S. Passel and senior researcher Gretchen M. Livingston. Wendy Wang, research associate, number-checked Chapter 2 along with the detailed demographic tables in Appendix 1 and the analysis of intermarriage in Chapter 5. Chapter 3 was written by Livingston. Chapters 4 and 6 were written by senior researcher Cary Funk. Rich Morin, senior editor, wrote Chapters 5 and 7 with the assistance of Funk and Livingston. The analysis of intermarriage in Chapter 5 also benefited from the advice of Passel and Wang. Research assistant Eileen Patten number-checked Chapters 1, 3, 4 and 5. Research assistant Seth Motel number-checked Chapters 6 and 7 and prepared charts and tables for Chapters 1 and 2. Patten, Motel and Gonzalez-Barrera also assisted with other aspects of the report including compiling and checking the topline of findings, preparing charts and formatting the final report. The report was copy-edited by Marcia Kramer of Kramer Editing Services.

The report also benefited from the advice and guidance of Mark Hugo Lopez, associate director of Pew Research Hispanic Center; Rakesh Kochhar, associate director of research of Pew Research Hispanic Center; Kim Parker, associate director of Pew Research’s Social & Demographic Trends project; Phillip Connor, research associate in the Pew Research Center’s Forum on Religion & Public Life; Scott Keeter, the Pew Research Center’s director of survey research; and Leah Christian, senior researcher in the Pew Research Center.

Notes on Terminology

All references to whites, blacks and others are to the non-Hispanic components of those populations. Asians include a small number of Hispanics. Whites, blacks and Asians are single-race-only groups. “Others” includes persons reporting single races not listed separately and persons reporting more than one race.

The terms “Latino” and “Hispanic” are used interchangeably in this report.

“Foreign born” refers to people born outside of the United States, Puerto Rico or other U.S. territories to parents neither of whom was a U.S. citizen. “Foreign born” and “immigrant” and “first generation” are used interchangeably. Unauthorized immigrants are included in this group.

“Native born” or “U.S. born” refer to people who are U.S. citizens at birth, including those born in the United States, Puerto Rico or other U.S. territories and those born abroad to parents at least one of whom was a U.S. citizen.

“Multi-generational family households” refer to those that include at least two adult generations (with the younger generation including at least one adult who is 25 years old or older) or households consisting of grandparents and grandchildren, with no parent present.

References to demographic data for all adults or the total population are to the civilian noninstitutional population included in the Current Population Survey. See Methodology for more information.

Immigrant Generations

“First generation” or “foreign born” refers to people born outside of the United States to parents neither of whom was a U.S. citizen. For this report, people born in Puerto Rico or other U.S. territories are not considered foreign born.

“Second generation” refers to people born in the United States, with at least one first-generation (immigrant) parent. People born in Puerto Rico or other U.S. territories with at least one parent born in a different country are considered second generation.

“Third and higher generation” refers to people born in the United States, including Puerto Rico or other U.S. territories with both parents born in the United States, including Puerto Rico or other U.S. territories.

Comparisons with Parents’ Country of Origin: Seven-in-ten second-generation Asian Americans and eight-in-ten (81%) second-generation Hispanics say that conditions for raising children are better in the U.S. than in their parents’ country of origin. Like immigrants, they also rate the U.S more favorably than their ancestral country in terms of treatment of the poor and the opportunity to get ahead. Less than half of both generations rate the U.S. as better than their ancestral country as a place to maintain strong family ties.

Perceptions of Generational Mobility. By lopsided margins, most second-generation Hispanics (67%) and Asian Americans (75%) say their standard of living is better than that of their parents at the same stage of life. Similar shares of the immigrant generations of both groups say the same. By contrast, 60% of the full U.S. population feel the same way. Looking ahead, two-thirds of second-generation Hispanics, but 41% of Asians, believe their own children will eventually surpass their current standard of living. Overall, 48% of American adults say the same.

Nonmarital Childbearing: In what some scholars have described as a pattern of negative assimilation, 41% of second-generation women who recently gave birth were unmarried, compared with 23% of immigrant women who recently gave birth. The higher share of nonmarital childbearing among the second generation has been driven mostly by second-generation Hispanic women (52% of these women with a recent birth were unmarried). Among the U.S. population as a whole, 36% of women who recently gave birth were not married.3

Political and Social Values: Second-generation Hispanics and Asian Americans, as well the first generation of each group, identify more with the Democratic Party than the Republican Party and characterize themselves as liberals at higher rates than the general public. About half or more of the second generation believe that abortion should be legal, and more than two-thirds say homosexuality should be accepted by society. The relative youth of the second generation contributes to, but does not fully explain, their liberal political leanings.

Intermarriage. About one-in-six (15%) married second-generation adults have a spouse of a different race or ethnicity from themselves, compared with 8% of all immigrants and 8% of all U.S. adults. Intermarriage rates are especially high for second-generation Hispanics (26%) and Asian Americans (23%).

Second-Generation Americans

A Portrait of the Adult Children of Immigrants

Chapter 1: Overview

Second-generation Americans—the 20 million adult U.S.-born children of immigrants—are substantially better off than immigrants themselves on key measures of socioeconomic attainment, according to a new Pew Research Center analysis of U.S. Census Bureau data. They have higher incomes; more are college graduates and homeowners; and fewer live in poverty. In all of these measures, their characteristics resemble those of the full U.S. adult population.

The Pew Research surveys also find that second-generation Hispanics and Asian Americans place more importance than does the general public on hard work and career success. They are more inclined to call themselves liberal and less likely to identify as Republicans. And for the most part they are more likely to say their standard of living is higher than that of their parents at the same stage of life. In all of these measures, the second generation resembles the immigrant generation more closely than the general public.

As the U.S. Congress gears up to consider immigration legislation, this new Pew Research report on second-generation Americans looks at the attitudes, values, life priorities, economic experiences, intergroup relations and identity markers of a group that will have a significant impact on the nation’s economy and politics for decades to come.

Given current immigration trends and birth rates, virtually all (93%) of the growth of the nation’s working-age population between now and 2050 will be accounted for by immigrants and their U.S.-born children, according to a population projection by the Pew Research Center.

The focus of this report is on the 20 million adult members of the second generation (an additional 16 million U.S-born children of immigrants are under the age of 18).

This is a heterogeneous group that includes many younger Hispanic, Asian-American and white adults who are the children of modern-era immigrants as well as many older adults who are mostly the children of European immigrants who arrived as part of an earlier immigration wave that peaked a century ago.

Given the diversity of this population, two caveats are in order. First, the data presented here should not be interpreted as proving or disproving that there has been upward mobility between immigrant parents and their children.2 That’s because many of today’s second generation are not the children of today’s immigrants; many are the children of early 20th-century immigrants, now deceased. Second, the aggregate data on today’s second generation conceal what are often large subgroup differences by race and ethnicity. Whenever possible in this report, we disaggregate findings by these and other relevant demographic characteristics.

Here is a summary of key findings:

Identity: Pew Research surveys of Hispanics and Asian Americans—the groups that comprise the bulk of the modern immigration wave—find that roughly six-in-ten adults in the second generation consider themselves to be a “typical American,” about double the share of immigrants who say the same. Still, most in the second generation also have a strong sense of identity with their ancestral roots. Majorities say they identify themselves most often by their family’s country of origin (i.e., Mexican, Chinese American) or by a pan-ethnic or racial label (i.e., Hispanic or Asian American). Some 37% of second-generation Hispanics and 27% of second-generation Asian Americans say they most often describe themselves simply as “American.”

Organisation for Economic Co-operation and Development. Accessed October 2, 2019. “Education at a Glance 2019, Indicator A5 What are the financial incentives to invest in education.”https://www.oecd-ilibrary.org/education/education-at-a-glance-2019_f8d7880d-en

Highlights

Adults who complete tertiary education benefit from high returns on investment because they are more likely to be employed and to earn more than adults without tertiary education.

Not only does education pay off for individuals financially, but the public sector also benefits from having a large proportion of tertiary-educated individuals, for example through greater tax revenues and social contributions.

Across OECD countries on average, a man invests around USD 45 100 (direct costs plus foregone earnings) to earn a tertiary degree, while a woman invests around USD 34 800. Because men tend to have higher earnings and employment rates, they also have higher total benefits over their career: USD 341 000 for men, compared to USD 262 400 for women.

Investing time and money in education is an investment in human capital. Better chances of employment (see Indicator A3) and higher earnings (see Indicator A4) are strong incentives for adults to invest in education and postpone employment. Although women currently have higher levels of education than men on average (see Indicator A1), men reap more benefits from their investment, as they have better employment and earning outcomes from education, on average.

Countries benefit from more highly educated individuals through higher revenues from taxes and social contributions paid once individuals enter the labour market. As both individuals and governments benefit from higher levels of educational attainment, it is important to consider the financial returns to education alongside other indicators, such as access to and completion of higher education (see Indicator B5).

Other factors not reflected in this indicator also affect the returns to education. The financial returns may be affected by the field of study and by the country-specific economic, labour-market and institutional context, as well as by social and cultural factors. Furthermore, returns to education are not limited to financial returns, but also include other economic outcomes, such as increased productivity, and social outcomes, such as greater participation in cultural or sport activities (see Indicator A6).

Other findings

In most OECD countries, the main cost of tertiary education is not direct payments, such as tuition fees and living expenses, but the earnings individuals forego while they are in education. This is true even when taking students’ earnings into account.

The private benefits from investing in education depend on countries’ tax and social contributions systems. For instance, in Chile, Estonia and Korea, income taxes and social contributions amount to less than one-quarter of the gross earnings benefits for a man attaining tertiary education, while in Belgium and the Netherlands they add up to more than half of the gross earnings benefits.

For nearly all countries with available data, the private and public net financial returns from obtaining a bachelor’s, master’s or doctoral degree are greater than the returns from obtaining a short-cycle tertiary degree.

Note

This indicator provides information on the incentives to invest in further education by considering its costs and benefits, including net financial returns and internal rates of return. It examines the choice between pursuing higher levels of education and entering the labour market, focusing on two scenarios: 1) investing in tertiary education versus entering the labour market with an upper secondary qualification; and 2) investing in upper secondary education versus entering the labour market without an upper secondary qualification (available on line).

It considers two types of investors: 1) the individuals (referred to here as “private”) who choose to pursue higher levels of education and the additional net earnings and costs they can expect; and 2) the government (referred to here as “public”) that decides to invest in education and the additional revenue it would receive (e.g. as tax revenues) and the costs involved.

This indicator estimates the financial returns on investment in education only up to a theoretical retirement age of 64 and, therefore, does not take pensions into account. The direct costs of education presented in this indicator do not take into account student loans.

Please note that due to continuous improvements to this indicator’s methodology, the values presented in this edition of Education at a Glance are not comparable with those in previous editions.

Education at a Glance 2019, Indicator A5 What are the financial incentives to invest in education

National Venture Capital Association. 2019. “2019 Yearbook, National Venture Capital Association.”https://nvca.org/wp-content/uploads/2019/08/NVCA-2019-Yearbook.pdf

“….This paper presents results from the fourth year of a multi-year, pre-committed research design for analyzing recent minimum wage changes. Using ACS and CPS data through 2018, we find that relatively large minimum wage increases reduced employment among low-skilled individuals by roughly 2.5 percentage points.The effects of smaller statutory increases and inflation-indexed increases vary across data sets and specifications, but are generally not distinguishable from zero. The relationship between minimum wage increases and employment is quite strongly negative in states that began enacting substantial increases between 2013 and 2015. In states that began enacting increases later in the economic expansion, estimates are more variable and tend towards zero….”

Jeffrey Clemens and Michael Strain, “Minimum Wage Analysis Using A Pre-Committed Research Design: Evidence Through 2018,” Institute of Labor Economics, https://www.iza.org/publications/dp/13286/minimum-wage-analysis-using-a-pre-committed-research-design-evidence-through-2018

US Department of Education. Accessed October 14, 2019. “Long Term-Trend Mathematics Assessments.” National Center for Education Statistics.https://nces.ed.gov/nationsreportcard/ltt/

“….This article discusses how to move antitrust enforcement forward in a constructive manner during a time of widespread and growing concern over the political and economic power of large corporations in the United States. Three themes are emphasized. First, a body of economic evidence supports more vigorous merger enforcement in the United States. This can and should be done in a manner consistent with sound economic principles. Tighter merger control can be achieved by utilizing the existing legal presumption against highly concentrating mergers and by reinvigorating the potential competition doctrine to block mergers between firms that may well become important direct rivals in the foreseeable future. Second, close antitrust scrutiny is appropriate for today’s largest and most powerful firms, including those in the tech sector. However, the coherence and integrity of antitrust require that successful firms not be attacked simply because they obtain dominant positions. Proper antitrust enforcement regarding unilateral conduct by dominant firms should continue to focus on identifying specific conduct that harms customers or disrupts the competitive process, especially conduct that excludes pesky, disruptive rivals. Third, while antitrust enforcement has a vital role to play in keeping markets competitive, antitrust law and antitrust institutions are ill suited to directly address concerns associated with the political power of large corporations or other public policy goals such as income inequality or job creation. Campaign finance reform, tax policy, labor, education, and other policies are far better suited to address those critical public policy goals….”

Shapiro, Carl. October 25, 2017. “Antitrust in a Time of Populism.” Social Science Research Network.https://papers.ssrn.com/sol3/papers.cfm

“…Basically, the data driving these curves show a truly eye-popping divergence of big-, medium-, small-sized communities’ growth progress—one that’s getting worse. On population growth, for example, the 53 very largest metro areas (those with populations over one million residents) have accounted for fully 93.3 percent of the nation’s population growth since the crisis, but an incredible 96.4 percent of it since 2014 (though they account for just 56 percent of the overall population). Even more significantly, the biggest metros generated fully two-thirds of output growth on the economic front and 73 percent of employment gains between 2010 and 2016—figures that actually have increased since 2014, when they reached nearly 72 and 74 percent. By contrast, smaller metropolitan areas with less than 250,000 people—representing 9 percent of the nation’s population—have lost ground. Since 2010, in fact, these communities made a negative contribution of -6.5 percent to the nation’s growth, with their contribution ticking up modestly in the last two years and their output and employment growth contributions declining to less than 3 percent and 5 percent of the national total, respectively. As for the rural tier, the trends have been even worse. By the 2014 to 2016 period, rural communities’ contribution to national population growth had turned negative and the ebbing of the earlier oil and gas boom saw output and employment growth decline precipitously as a share of national gains…”

CNN’s Ron Brownstein posted a strong comment this morning on the spatial politics of economic power, using data from Brookings on the nation’s uneven growth map.

Brownstein doubts that the current red-blue political standoff in the country is sustainable. Which seems like an understatement.

Yet while Brownstein’s political take is compelling, there’s another aspect of the underlying economic dynamics in the country that bears noting: that they are all about size. Quite simply, the sharp divergence of large and small communities’ economic fortunes since the financial crisis—something we’ve written about here, here, and here—is becoming even starker than it has been.

Here’s what’s going on in tabular form. And here’s how it looks over time:

By contrast, smaller metropolitan areas with less than 250,000 people—representing 9 percent of the nation’s population—have lost ground. Since 2010, in fact, these communities made a negative contribution of -6.5 percent to the nation’s growth, with their contribution ticking up modestly in the last two years and their output and employment growth contributions declining to less than 3 percent and 5 percent of the national total, respectively. As for the rural tier, the trends have been even worse. By the 2014 to 2016 period, rural communities’ contribution to national population growth had turned negative and the ebbing of the earlier oil and gas boom saw output and employment growth decline precipitously as a share of national gains. All of which looks like this:

Nor are these dynamics solely a national story. Similar trends are affecting the 50 states, though with greater variation, shaped by industrial composition and historical settlement patterns. (See Appendix tables linked below). In New York, for example, 95 percent of the state’s 2010 to 2016 employment growth emanated from large metro counties, while in Alabama just 29 percent did.

What does all this mean for the country? Surely nothing good. To be sure, most Americans now live in big metropolitan population hubs that tend to be more economically efficient than other places. But for all of that, 9 percent of the population lives in smaller metros that are stagnant or slipping as a group and another 14 percent live in rural places that are almost all declining. And these places are losing their economic purchase. One year after the Trump administration’s takeover, in fact, the frustration and narrowed possibilities of these places is now broadly recognized as a threat to the nation’s prosperity—as Ron Brownstein argues.

And yet, it is unclear what should be done to slow the decline of the nation’s small cities and rural tier. Numerous voices, ranging from investor Steve Case and memoirist J.D. Vance to Eduardo Porter, Paul Krugman, EIG, and Emily Badger, as well as Richard Florida, Noah Smith, Conor Sen, John Austin, and The Economist, have all confirmed a state of near-emergency and advanced tentative responses. However, the fact remains that the dynamics underway are at least in part an ineluctable expression of a fundamental change in the nation’s economic order, likely tied to the increased power of tech-related agglomeration economies, which select for large and dense places and that are likely biased against small ones.

In view of that, the political problems dramatized by CNN this week are only going to complicate the work of beginning to push back against the drift toward increasingly uneven community outcomes. To be sure, the drastic divides that Brownstein, we, and others are highlighting are at least now beginning to be recognized as a national problem with sources in need of response. Accordingly, we have offered a few ideas here and here for doing something rather than nothing, while others like Case and EIG are focusing on their own parallel initiatives.

Still, none of us is under any illusion that more and bolder responses—from government, the private sector, and philanthropy—are anything but imperative, even as the politics highlighted by Brownstein make them more challenging. As the evidence of big-city pull-away and small-town and rural decline accumulates, it doesn’t seem right that a great nation would leave the shape of its long-term economic geography entirely to the vagaries of today’s tech-fueled market. Notwithstanding the “economic civil war” detailed by Ron Brownstein, it’s time to get serious about addressing the nation’s dire development trends.

Geographic Gaps Are Widening While US Economic Growth Increases

Mark Muro and Jacob Whiton, “Geographic Gaps Are Widening While US Economic Growth Increases,” Brookings Institution, January 23, 2018, https://www.brookings.edu/blog/the-avenue/2018/01/22/uneven-growth/