Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason 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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, July 12, 2023

AI Summary. The number of U.S. child care workers was about 6% below pre-pandemic levels while child care costs were up 14%, and the share of parents of young children citing child care as the main reason for low work hours rose from about 15% to 18%. Even so, labor force participation among partnered women with young children surpassed its pre-pandemic level.

Alexander Bick, Victoria Gregory, and Oksana Leukhina Federal Reserve Bank Of St. Louis
Date Posted:

As of February 2023, the labor force participation rate of women with young children has rebounded, despite the cost of childcare rising by 14% vs. pre-pandemic. @stlouisfed @oksana_leukhina

Do higher child care costs hold back parents' labor force participation?

Core argument: As of February 2023, U.S. child care employment stood about 6% below its pre-pandemic level while child care costs were up 14%, factors deemed partly responsible for the lackluster rebound in labor force participation.

As of February 2023, the number of child care workers in the U.S. was about 6% below its pre-pandemic level while the cost of child care was up by 14%. The shortage of child care workers and rising child care prices have been deemed partly responsible for the lackluster rebound of labor force participation rates. Consistent with this hypothesis, a larger share of nonworking parents of young children and those working only part time currently report child care needs as the main reason for their low work hours. This fraction increased from about 15% prior to the pandemic to 18% in February 2023. Interestingly, women with a partner and young children—the group we expected to be most sensitive to child care prices—showed the strongest rebound with their LFP index having surpassed its pre-pandemic level. As a result, we do not see clear evidence for weaker labor supply rebounds among households with small children by early 2023.

Takeaways by Macro Roundup® AI

  1. As of February 2023, U.S. child care employment stood about 6% below its pre-pandemic level while child care costs were up 14%, factors deemed partly responsible for the lackluster rebound in labor force participation.
  2. The share of nonworking or part-time parents of young children citing child care needs as the main reason for low work hours rose from about 15% before the pandemic to 18% in February 2023.
  3. Women with a partner and young children showed the strongest rebound, with their labor force participation index surpassing its pre-pandemic level, leaving no clear evidence of weaker labor supply rebounds among households with small children by early 2023.

Related Articles:

  • Understanding The Missing Millions — A combined 7% of US survey respondents who were not working cited caregiving as the reason — 5% caring for children and 2% for elderly relatives. Daycare and preschool costs have risen more than 10% since the start of the pandemic, and Bank of America internal data show 7% fewer customers making childcare payments than at the start of 2020.

AI Summary. The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.

Connor O’Brien Economic Innovation Group
Date Posted:

Families with young children continue to migrate out of America’s large urban areas. The under-five population in large urban counties shrank 1.8% last year, vs. a 0.7% decline nationwide.

Are large cities losing young families faster than population overall?

Core argument: The under-five population in large urban U.S. counties fell 6.1% between April 2020 and July 2022, while those counties' overall population declined just 0.9%.

Since the beginning of the pandemic, the cumulative decline of under-five populations in large urban counties is now more than 6% —nearly twice the rate of decline nationally. Large urban areas are losing families with young children substantially faster than they are losing population overall. While the under-five population in such counties fell 6.1% between April 2020 and July 2022, the overall population declined by just 0.9%. In some of the country’s very largest counties, including New York, Cook County, IL, and Los Angeles, the population of young children is more than 10% smaller than in April 2020. Out-migration of young families from large and small urban counties has been more severe in the Mid-Atlantic and West Coast, while the under-five population actually grew in urban counties in the Southeast last year.

Takeaways by Macro Roundup® AI

  1. The under-five population in large urban U.S. counties fell 6.1% between April 2020 and July 2022, while those counties' overall population declined just 0.9%.
  2. In some of the country's very largest counties, including New York, Cook County, IL, and Los Angeles, the population of young children is more than 10% smaller than in April 2020.
  3. Out-migration of young families from large and small urban counties has been more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.

Related Articles:

  • Sunbelt Cities Nashville and Austin Are Nation’s Hottest Job Markets — An assessment of about 380 U.S. metro areas ranked Nashville, Tennessee as the country's hottest job market, followed by Austin, Texas and Jacksonville, Florida. The rankings were based on five factors: the unemployment rate, labor-force participation rate, changes in employment levels, labor-force size, and wages.

AI Summary. Headline consumer price inflation fell to 3.0%, largely reflecting a 17% drop in energy prices over the past year, while core inflation registered its lowest reading of the inflationary period as service price growth gradually slowed and goods price growth turned back down.

Jason Furman @JasonFurman
Date Posted:

.@JasonFurman notes headline CPI inflation fell to an annual rate of 3% year-over-year. He cautions that “Fed should still do more.”

Is falling headline inflation driven by energy prices rather than underlying moderation?

Core argument: Headline CPI inflation fell to 3.0%, which Jason Furman attributes mostly to the large June 2022 reading dropping out and an almost certainly transitory 17% fall in energy prices over the past year.

The headline is CPI inflation fell to 3.0%. But mostly this is the huge June 2022 # dropping out & what is almost certainly a transitory 17% fall in energy prices over the last yr. But underneath the #s show moderation, with the lowest core reading of the inflationary period. Overall what is happening is that service price growth is gradually slowing--as was predictable and predicted given the lags in the shelter measure. And goods price growth which was unusually (and likely transitorily) high in recent months turned back down again. The collapsing of "supercore," which excludes food, energy, shelter, and used cars (the narrowest category BLS publishes) is even more dramatic. Overall, core PCE inflation is still running well above Fed's target. Economy is very strong. Interest rates are not that high & most of the relevant increases happened a while ago. The banking sector stabilized. Fiscal policy may be mildly expansionary. Fed should still do more.

Takeaways by Macro Roundup® AI

  1. Headline CPI inflation fell to 3.0%, which Jason Furman attributes mostly to the large June 2022 reading dropping out and an almost certainly transitory 17% fall in energy prices over the past year.
  2. Furman notes core inflation posted the lowest reading of the inflationary period, with service price growth gradually slowing given shelter measure lags and goods price growth turning back down after unusually high recent months.
  3. Furman argues the Fed should do more, citing core PCE inflation still running well above the Fed's target, a very strong economy, interest rates that are not that high, a stabilized banking sector, and possibly mildly expansionary fiscal policy.

AI Summary. A simulation using a variant of the Federal Reserve's FRB/US model of the US economy estimates that a 5% increase in the federal funds rate lowers the level of gross domestic product with a lag of 12 to 18 months. The author argues this lagged drag makes a recession a more likely outcome than a soft landing.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal argues that the impact of monetary policy will peak in Q3 of next year.

How long do rate hikes take to slow growth?

Core argument: A simulation on a variant of the Fed's FRB/US model shows a 5% increase in the Fed funds rate depressing the level of GDP, with monetary policy transmission taking 12 to 18 months.

The Fed has raised the Fed funds rate to 5%, and the lagged effects of Fed hikes will continue to drag down growth over the coming 12 months. See chart above, which shows a simulation with the impact of a 5% increase in the Fed funds rate on the level of GDP done on a variant of the Fed’s FR/BUS model of the US economy. In other words, the transmission mechanism of monetary policy takes time, and the drag on growth from lagged Fed hikes over the coming year will be significant. That is why a recession is a more likely outcome than a soft landing, no matter what happens to inflation.

Takeaways by Macro Roundup® AI

  1. A simulation on a variant of the Fed's FRB/US model shows a 5% increase in the Fed funds rate depressing the level of GDP, with monetary policy transmission taking 12 to 18 months.
  2. With the Fed funds rate raised to 5%, the lagged effects of the hikes will continue to drag down growth significantly over the coming 12 months.
  3. Because of the lagged drag from prior Fed hikes, recession is a more likely outcome than a soft landing, no matter what happens to inflation.

AI Summary. The author describes "slow burn Minsky moments" as unsustainable processes or systemic vulnerabilities that accumulate during good times and either collapse of their own accord or amplify external shocks. A private-sector-debt-to-GDP ratio above 150% has been proposed as an important threshold, and the US has been at or above that level for most of the past 20 years.

James Montier GMO
Date Posted:

James Montier of GMO argues that elevated debt levels in the US over the past 20 years have created a cascading “slow burn Minsky moments.”

How do vulnerabilities built up in good times amplify later shocks?

Core argument: Richard Vague suggests that private sector debt exceeding 150% of GDP is an important threshold, and the U.S. has spent most of the last 20 years at or above that level, a period marked by a litany of financial crises.

The late, great Rudi Dornbusch once opined, “The crisis takes a much longer time in coming than you think, and then it happens much faster than you would have thought.”. This idea got me thinking about what I am calling “slow burn Minsky moments.” Recall that Minsky’s financial instability hypothesis holds that stability begets instability. In essence, I am referring to situations characterized by economically unsustainable processes or systemic vulnerabilities that build up during “good times” but carry within them either the seeds of their own destruction or create fragilities that exacerbate any external shock far beyond what may have been commonly expected. Richard Vague suggests that a ratio of private sector debt to GDP in excess of 150% is an important threshold. As Exhibit 1 shows, the U.S. has spent most of the last 20 years at or above this level! No wonder we have experienced a litany of financial crises over this period.

Takeaways by Macro Roundup® AI

  1. Richard Vague suggests that private sector debt exceeding 150% of GDP is an important threshold, and the U.S. has spent most of the last 20 years at or above that level, a period marked by a litany of financial crises.
  2. "Slow burn Minsky moments" describe economically unsustainable processes or systemic vulnerabilities that build during good times and either carry the seeds of their own destruction or amplify external shocks far beyond what was commonly expected.
  3. Minsky's financial instability hypothesis holds that stability begets instability, while Rudi Dornbusch opined that a crisis takes much longer to arrive than expected and then happens much faster than anticipated.

AI Summary. Retail employment in New York City is down 38,000 jobs (11%) from its pre-pandemic level of 340,000, with Manhattan off 20% and clothing stores down 34%, according to the Center for an Urban Future. The sector's struggles are cited as a key reason for the city's 12.2% Black unemployment rate.

Greg David The City
Date Posted:

Manhattan has 20% fewer store employees than before the pandemic and NYC overall is down 11%. Subsectors facing the stiffest online competition are hardest-hit: clothing employment is down 34%, and department stores down 20%.

Manhattan has 20% fewer store employees than before the pandemic and NYC overall is down 11%. Subsectors facing the stiffest...

Are retail job losses holding back a recovering city economy?

Core argument: New York City retail employment stood 38,000 jobs (11%) below its pre-pandemic level of 340,000 as of February with no gain since, according to the Center for an Urban Future, after peaking at 360,000 jobs in 2015.

As of February, retail employment in New York City sagged 38,000 jobs (11%) from its pre-pandemic level of 340,000 with no gain since, according to the Center for an Urban Future. The sector has declined since peaking at 360,000 jobs in 2015. Manhattan has been hardest hit, with a 20% decline. The other boroughs had single-digit declines. Subsectors facing the stiffest online competition have been hardest hit, with clothing employment down 34%, department stores off 20%, and general merchandise declining about 13%. The sector’s struggles are a key reason for the city’s high Black unemployment rate of 12.2%, compared to just over 1% for white workers. Workers of color account for 7 of 10 retail employees in the city.

Takeaways by Macro Roundup® AI

  1. New York City retail employment stood 38,000 jobs (11%) below its pre-pandemic level of 340,000 as of February with no gain since, according to the Center for an Urban Future, after peaking at 360,000 jobs in 2015.
  2. Manhattan posted a 20% retail employment decline, versus single-digit declines in the other boroughs, while subsectors facing the stiffest online competition fell hardest: clothing down 34%, department stores down 20%, and general merchandise down about 13%.
  3. The Center for an Urban Future identifies retail's struggles as a key reason for New York City's 12.2% Black unemployment rate, compared with just over 1% for white workers, with workers of color accounting for 7 of 10 city retail employees.

Thursday, July 13, 2023

AI Summary. Manufacturing's share of global economic output has fallen from 19% in 1997 to 16%, with the steepest declines in rich countries, and industry's share has slipped in recent years even in China and India. Among OECD countries in recent decades, there has been next to no relationship between economic growth and manufacturing's share of the economy.

Economist Staff The Economist
Date Posted:
Is Database:
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.@TheEconomist argues that policymakers are overestimating the importance of manufacturing. In recent years, there has been no significant relationship between economic growth and manufacturing’s share of the economy in OECD countries.

Does a larger manufacturing sector drive faster economic growth?

Core argument: Manufacturing's share of global economic output fell from 19% in 1997 to 16% today, with the steepest declines in rich countries.

As a share of global economic output, manufacturing has dropped from 19% in 1997 to 16% today, with the fall steepest in rich countries. In China and India industry’s share of economic output appears to be roughly where it was three decades ago, but even in these countries, it has slipped in recent years. In recent decades there has been next to no relationship between economic growth and manufacturing’s share of the economy among countries in the OECD.

Takeaways by Macro Roundup® AI

  1. Manufacturing's share of global economic output fell from 19% in 1997 to 16% today, with the steepest declines in rich countries.
  2. In China and India, industry's share of economic output appears to be roughly where it was three decades ago, though it has slipped in both countries recently.
  3. Among OECD countries, there has been next to no relationship between economic growth and manufacturing's share of the economy in recent decades.

Related Articles:

  • Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities — State audits and independent evaluations of corporate tax incentive programs have found poor targeting, weak oversight, and excessive costs that harmed rather than benefited local governments. Examples include $5.5bn in New York tax credits for a Micron facility and up to $1.75bn in Michigan incentives for a Ford electric vehicle plant.
  • New York State Built Elon Musk a $1 Billion Factory. ‘It Was a Bad Deal.’ — New York state spent about $1bn building a 1.2m-square-foot Buffalo factory it owns and leases to Tesla for $1 a year, plus $240m of solar-panel manufacturing equipment. A state comptroller's audit found 54 cents of economic benefit per subsidy dollar, and external auditors have written down nearly all of the investment.

AI Summary. Investment in manufacturing structures has grown at an average annualized rate of 43% over three quarters, driven by battery and semiconductor facilities, partly offsetting headwinds to overall structures investment. Companies have pledged $365bn of such investments, of which only about $90bn has been tallied in construction spending, suggesting elevated spending can persist.

Ronnie Walker Goldman Sachs
Date Posted:

Ronnie Walker of @GoldmanSachs estimates that only 25% of $365B in pledged new semiconductor and battery investments has been spent.

Will factory construction spending stay elevated for years to come?

Core argument: Manufacturing structures investment has grown at an average annualized rate of 43% over the last three quarters on the back of battery and semiconductor facilities, which should at least partly offset headwinds to structures investment.

Continued strength in manufacturing structures investment—which has grown at an average annualized rate of 43% over the last three quarters on the back of investment in battery and semiconductor facilities—should at least partly offset these headwinds to structures investment. The White House reports that companies have pledged $365bn of new battery and semiconductor investments over the last two years. So far, only $90bn of investment has been tallied in the relevant construction spending category for battery and semiconductor facilities since the start of 2021, suggesting that the level of spending could remain elevated for quite some time (the current monthly annualized rate stands at $112bn vs. ~$10bn two years ago, or 0.40% of annual GDP vs. 0.05% of GDP).

Takeaways by Macro Roundup® AI

  1. Manufacturing structures investment has grown at an average annualized rate of 43% over the last three quarters on the back of battery and semiconductor facilities, which should at least partly offset headwinds to structures investment.
  2. The White House reports companies have pledged $365bn of new battery and semiconductor investments over the last two years, while only $90bn has been tallied in the relevant construction spending category since the start of 2021.
  3. Construction spending on battery and semiconductor facilities runs at a monthly annualized rate of $112bn, or 0.40% of annual GDP, versus roughly $10bn, or 0.05% of GDP, two years ago.

Related Articles:

  • Making Manufacturing Great Again — US manufacturing construction spending has more than doubled over the past year and risen as a share of gross domestic product, a surge attributed to two laws: the Inflation Reduction Act, whose core is green energy subsidies, and the CHIPS Act, which promotes domestic semiconductor production.
  • Unpacking the Boom in U.S. Construction of Manufacturing Facilities — The computer and electronics segment is the dominant component of U.S. manufacturing facility construction, and its boom has not come at the expense of other segments, with chemical, transportation, and food and beverage construction also up, though by much less. Roughly comparable data show no similar surge in other advanced economies.

AI Summary. The labor force participation rate of partnered women with children rose 1.06 percentage points in a six-month span, and the authors estimate that rising child care worker wages held back an even larger increase. They suggest the greater availability of telecommuting jobs, which this group strongly prefers, may explain the rise despite higher child care prices.

Alexander Bick, Victoria Gregory, and Oksana Leukhina Federal Reserve Bank of St. Louis
Date Posted:
Is Database:
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Higher child care costs do not explain the labor force participation sluggishness. @stlouisfed @oksana_leukhina

Do rising child care wages restrain mothers' labor force participation?

Core argument: The labor force participation rate of partnered women with children rose 1.06 percentage points during the first half of 2022.

During the first half of 2022, the LFP rate of partnered women with children increased by 1.06 percentage points. Our results suggest that had it not been for rising child care worker wages, we would have likely seen an even stronger LFP rate of partnered women with children today. One reason why this group dramatically increased their market work, despite the rising child care prices, may be related to the rise in the prevalence of telecommuting jobs for which this particular group has a high preference.

Takeaways by Macro Roundup® AI

  1. The labor force participation rate of partnered women with children rose 1.06 percentage points during the first half of 2022.
  2. The authors' results suggest that absent rising child care worker wages, the labor force participation rate of partnered women with children would likely be even stronger today.
  3. The authors point to the rising prevalence of telecommuting jobs, for which partnered women with children have a high preference, as one possible reason this group increased market work despite rising child care prices.

Related Articles:

  • How Child Care Impacts Parents’ Labor Force Participation — The number of U.S. child care workers was about 6% below pre-pandemic levels while child care costs were up 14%, and the share of parents of young children citing child care as the main reason for low work hours rose from about 15% to 18%. Even so, labor force participation among partnered women with young children surpassed its pre-pandemic level.

AI Summary. Farmers Insurance is limiting homeowners policy sales in Florida and California, hurricane- and wildfire-prone states, joining other large insurers in pulling back. In Florida it is ending sales of home, auto, and umbrella policies under its own brand — about 30% of the policies it sells there, affecting roughly 89,000 policies.

Jean Eaglesham Wall Street Journal
Date Posted:

Farmers Insurance is pulling out of Florida ending home, auto, and umbrella insurance policies. Farmers is also limiting sales in California.

Farmers Insurance is pulling out of Florida ending home, auto, and umbrella insurance policies. Farmers is also limiting...

Are insurers pulling back from disaster-prone states?

Core argument: Farmers Insurance is ending sales of Farmers-branded home, auto, and umbrella policies in Florida, about 30% of the policies it sells in the state, affecting roughly 89,000 policies, according to a person familiar with the matter.

Farmers Insurance is limiting sales of homeowners policies in Florida and California, becoming the latest big insurer to pull back from the hurricane- and wildfire-prone states. In Florida, Farmers is ending sales of home, auto, and umbrella insurance policies under its own brand, representing about 30% of the policies it sells in the state, the company said. It will continue offering insurance through other brands, including those for high-risk drivers, according to the statement. The ending of Farmers-branded sales in Florida affects around 89,000 policies, a person familiar with the matter said.

Takeaways by Macro Roundup® AI

  1. Farmers Insurance is ending sales of Farmers-branded home, auto, and umbrella policies in Florida, about 30% of the policies it sells in the state, affecting roughly 89,000 policies, according to a person familiar with the matter.
  2. Farmers Insurance is limiting homeowners policy sales in Florida and California, becoming the latest large insurer to pull back from states prone to hurricanes and wildfires.
  3. Farmers Insurance said it will continue offering insurance in Florida through other brands, including those serving high-risk drivers.

Related Articles:

  • Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse — State Farm, California's largest homeowner insurer, stopped accepting applications for most new home insurance policies statewide, citing rapidly growing catastrophe exposure. Florida faced a similar retreat by national carriers after Hurricane Andrew and responded with a market of small insurers backed by a state-mandated company providing windstorm coverage to homeowners who cannot obtain private insurance.
  • Florida Ocean Temperatures At ‘Downright Shocking’ Levels — Much of Florida is recording its warmest year on record, with temperatures 3–5 degrees above normal and coastal waters in the Florida Keys reaching 92–96 degrees versus the more typical upper 80s. The National Oceanic and Atmospheric Administration reports about 40% of the world's oceans face a marine heat wave, the highest share on record.

AI Summary. An ultra-white paint developed at Purdue University can make surfaces up to 8°F cooler than surrounding air at midday and up to 19°F cooler at night, cutting air-conditioning needs by as much as 40% without using energy or warming outside air. One researcher calculates that coating 1–2% of Earth's surface with such materials would halt the rise in global temperatures.

Cara Buckley New York Times
Date Posted:
Is Database:
Database

A team at Purdue University has created a white paint that reflects the sun’s rays. The paint can make surfaces as much as 8° cooler than ambient air temperatures during the day and up to 19° cooler at night.

A team at Purdue University has created a white paint that reflects the sun’s rays. The paint can make surfaces as...

Can ultra-white paint cool buildings and slow global warming?

Core argument: Purdue's ultra-white paint makes surfaces up to 8°F cooler than ambient air at midday and up to 19°F cooler at night, reducing indoor temperatures and air-conditioning needs by as much as 40%.

The paint’s properties are almost superheroic. It can make surfaces as much as eight degrees Fahrenheit cooler than ambient air temperatures at midday, and up to 19° cooler at night, reducing temperatures inside buildings and decreasing air-conditioning needs by as much as 40%. It is cool to the touch, even under a blazing sun, Dr. Ruan said. Unlike air-conditioners, the paint doesn’t need any energy to work, and it doesn’t warm the outside air. Jeremy Munday, a professor of electrical and computer engineering at the University of California, Davis, calculated that if materials such as Purdue’s ultra-white paint were to coat between 1% and 2% of the Earth’s surface, slightly more than half the size of the Sahara, the planet would no longer absorb more heat than it was emitting, and global temperatures would stop rising.

Takeaways by Macro Roundup® AI

  1. Purdue's ultra-white paint makes surfaces up to 8°F cooler than ambient air at midday and up to 19°F cooler at night, reducing indoor temperatures and air-conditioning needs by as much as 40%.
  2. Jeremy Munday, a professor of electrical and computer engineering at the University of California, Davis, calculated that coating 1% to 2% of the Earth's surface — slightly more than half the size of the Sahara — with materials such as the paint would stop global temperatures from rising.
  3. Unlike air-conditioners, the ultra-white paint requires no energy to operate and does not warm the outside air, and Dr. Ruan said it is cool to the touch even under a blazing sun.

AI Summary. New York state spent about $1bn building a 1.2m-square-foot Buffalo factory it owns and leases to Tesla for $1 a year, plus $240m of solar-panel manufacturing equipment. A state comptroller's audit found 54 cents of economic benefit per subsidy dollar, and external auditors have written down nearly all of the investment.

Julie Bykowicz and Ted Mann Wall Street Journal
Date Posted:
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New York state’s foray into industrial policy was a white elephant; $1 billion investment in a Tesla facility earned 0.54 cents on the dollar. External auditors have written down nearly all of New York’s investment.

New York state’s foray into industrial policy was a white elephant; $1 billion investment in a Tesla facility earned 0.54...

Do state-funded factory subsidies deliver returns for taxpayers?

Core argument: A New York state comptroller's audit found just 54 cents of economic benefit for every subsidy dollar spent on the $1 billion Buffalo factory the state built and now leases to Tesla for $1 a year.

New York state paid to build a quarter-mile-long facility with 1.2 million square feet of industrial space, which it now owns and leases to Tesla for $1 a year. It bought $240 million worth of solar-panel manufacturing equipment. Musk had said that by 2020 the Buffalo plant each week would churn out enough solar-panel shingles to cover 1,000 roofs. A state comptroller’s audit found just 54 cents of economic benefit for every subsidy dollar spent on the factory, which rose on the site of an old steel mill. External auditors have written down nearly all of New York’s investment.

Takeaways by Macro Roundup® AI

  1. A New York state comptroller's audit found just 54 cents of economic benefit for every subsidy dollar spent on the $1 billion Buffalo factory the state built and now leases to Tesla for $1 a year.
  2. New York owns the quarter-mile-long Buffalo plant with 1.2 million square feet of industrial space and bought $240 million of solar-panel manufacturing equipment, and external auditors have written down nearly all of the state's investment.
  3. Elon Musk had said the Buffalo plant would churn out enough solar-panel shingles each week by 2020 to cover 1,000 roofs.

Related Articles:

  • Making Manufacturing Great Again — US manufacturing construction spending has more than doubled over the past year and risen as a share of gross domestic product, a surge attributed to two laws: the Inflation Reduction Act, whose core is green energy subsidies, and the CHIPS Act, which promotes domestic semiconductor production.
  • Why Laws Meant To Create Jobs Can Be So Destructive For Our Cities — State audits and independent evaluations of corporate tax incentive programs have found poor targeting, weak oversight, and excessive costs that harmed rather than benefited local governments. Examples include $5.5bn in New York tax credits for a Micron facility and up to $1.75bn in Michigan incentives for a Ford electric vehicle plant.

AI Summary. The US holds net external debt of about 50% of its GDP but earns roughly 4% on its foreign lending while paying about 3% on its borrowing, leaving an implied net interest rate of 2.4%. This slows, without eliminating, the balance-of-payments adjustment to higher interest rates as net interest payments rise further.

Brad Setser @Brad_Setser
Date Posted:
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.@Brad_Setser argues that net interest payments will top their pre-crisis level of 1.5% of GDP.

Do favorable interest rates on foreign assets slow US balance-of-payments adjustment?

Core argument: The US carries net external debt of around 50% of GDP as the world's big net debtor, earning 4% on average on its foreign loans while paying 3% on its borrowing, mostly bonds.

The US is the world's big net debtor -- with net external debt of around 50% of its GDP. The US is now getting 4% on average on its loans, while only paying 3% on its borrowing (mostly bonds) the implied net interest rate on US external debt works out to be 2.4% -- well below any current US interest rate. And as a result, net interest payments as a share of US GDP are only up 15 bps of US GDP or so (not much really). These predictable dynamics slow the adjustment in the U.S. balance of payments to higher interest rates, but they don't eliminate it. Net interest payments have a lot further to rise. They certainly will top their pre-GFC peak as a share of US GDP (1.5% or so).

Takeaways by Macro Roundup® AI

  1. The US carries net external debt of around 50% of GDP as the world's big net debtor, earning 4% on average on its foreign loans while paying 3% on its borrowing, mostly bonds.
  2. The implied net interest rate on US external debt works out to 2.4%, below any current US interest rate, leaving net interest payments up only about 15 basis points of GDP.
  3. These dynamics slow the adjustment in the US balance of payments to higher interest rates without eliminating it, and net interest payments are expected to rise further and exceed their pre-GFC peak of roughly 1.5% of US GDP.

Related Articles:

  • Interest Costs Will Grow The Fastest Over The Next 30 Years — The Congressional Budget Office projects federal spending will reach 29.1% of GDP over three decades, with net interest on the national debt rising from 1.9% of GDP to 6.7%, or $5.4tn. Under that projection, interest becomes the largest single federal budget line item, surpassing Social Security, Medicare, and Medicaid.
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