Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, February 1, 2024

AI Summary. Levels of GDP per working-age adult differ across countries with no sign of convergence, and these countries' ratio of working-age to total population peaked in 2010 and is heading downward, with Japan peaking in 1990. Which measure of economic performance is "right" depends on the question being asked.

John Cochrane The Grumpy Economist
Date Posted:

Responding to “The Wealth of Working Nations” @JohnHCochrane notes the lack of convergence in the level of GDP per working-age adult in advanced economies.

Does GDP per working-age adult converge across countries?

Core argument: GDP per working-age adult still differs across these countries, leaving the puzzling lack of convergence unresolved.

The level of GDP per working age adult varies across these countries. The somewhat puzzling lack of convergence remains. Note everyone’s ratio of working age to total population peaked in 2010 and is headed downward. Japan just leads the trend, having peaked in 1990. The “right” number depends on what question you want to ask, what version of “how well is an economy doing?” If you want to know how many aircraft carriers a country can build, or if the government can repay its debts, you want GDP. If you want to measure labor productivity, the fundamental efficiency of its businesses, you want GDP per hour. If you want to measure overall average standard of living, GDP per person is a good beginning. GDP per working-age person is a measure of productivity that includes all the impediments from high taxes to regulations that discourage people working. It leaves out fertility, a country’s crucial ability to produce workers to pay for everyone else. That is an important issue, but it is at least a very long run issue, and not one on which we have well understood policies.

Takeaways by Macro Roundup® AI

  1. GDP per working-age adult still differs across these countries, leaving the puzzling lack of convergence unresolved.
  2. The ratio of working-age to total population peaked in 2010 in all of these countries and is declining, with Japan leading the trend after peaking in 1990.
  3. The appropriate GDP measure depends on the question: total GDP for aircraft-carrier capacity or debt repayment, GDP per hour for labor productivity, GDP per person for average living standards, and GDP per working-age person for productivity including work disincentives from taxes and regulation, while omitting fertility.

Related Articles:

  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
  • What’s the Matter With Europe? — Prime-age employment rates are somewhat higher in major European nations than in the US, and output per hour worked is nearly identical. US real GDP grew 53% versus Europe's 31% over two decades, but almost all the gap reflects faster US working-age population growth: real GDP per working-age adult rose 31% in the US and 29% in the euro area.
  • Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag? — The authors estimate that a 1% increase in the working-age share of the population raises income per capita by about 1%, with an added 0.1–0.4% boost to growth in later periods. They project population aging will slow annual income per capita growth in advanced economies by 0.4–0.8 percentage points through 2050, while spurring growth in less developed countries.

AI Summary. Comparing accounting returns with costs of capital shows that no sector or region has a majority of firms earning returns above their hurdle rates once money-losing companies are included. Close to 80% of firms globally earned returns on capital below their costs of capital.

Aswath Damodaran Musings on Markets
Date Posted:

.@AswathDamodaran finds that in 2023, 73% of profitable US public firms had returns on equity that exceeded their cost of equity, vs 50% of profitable global public firms. However, only 37% of US public firms were profitable vs. 54% of global firms.

Do most firms worldwide earn returns above their cost of capital?

Core argument: Close to 80% of all firms globally earned returns on capital that lagged their costs of capital in 2023.

I bring together the costs of equity and capital and the accounting returns to answer a critical question that every business faces; whether the returns earned on its investment exceed its hurdle rate. In computing excess returns, I did add a qualifier, which is that I would do the comparison only among money-making companies; after all, money-losing companies will have accounting returns that are negative and less than hurdle rates. With each sector, to assess profitability, you have to look at the percentage of companies that make money and then at the percent of these money-making firms that earn more than the hurdle rate. In the most sobering statistic, if you aggregate money-losers with the companies that earn less than their hurdle rates, as you should, there is not a single sector or region of the world, where a majority of firms earn more than their hurdle rates. In 2023, close to 80% of all firms globally earned returns on capital that lagged their costs of capital.

Takeaways by Macro Roundup® AI

  1. Close to 80% of all firms globally earned returns on capital that lagged their costs of capital in 2023.
  2. Aggregating money-losing firms with those earning less than their hurdle rates leaves no single sector or region of the world where a majority of firms earn more than their hurdle rates.
  3. Assessing sector profitability requires two steps: the percentage of companies that make money, and the percentage of those money-making firms that earn more than their hurdle rate.

Related Articles:

  • Data Update 3 for 2024: A Rule-breaking Year for Interest Rates — Central bank influence on interest rates is strongest at the shortest maturities and decays at longer ones, so long-term rates are better understood through the Fisher decomposition of a nominal rate into expected inflation plus an expected real rate. Assuming the expected real rate converges on real economic growth yields an "intrinsic risk-free rate" estimated as inflation plus real growth.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.
  • Stocks For The Long Run? Sometimes Yes, Sometimes No — Revised historical data that correct for survivorship bias—most notably including the Second Bank of the United States, which reached nearly 30% of US market capitalization before collapsing—show 19th-century stock returns differed from 20th-century returns, with repeated periods in which stocks underperformed bonds.

AI Summary. Growth in real disposable income per person over the two quarters before a vote, adjusted for how long a party has held the White House, predicts the governing party's vote share with striking accuracy. Real disposable income per person grew at a 1.9% annualized rate, a pace associated with a comfortable winning margin if sustained.

Economist Staff The Economist
Date Posted:

The historical relationship between the incumbent party’s vote share and real disposable income growth in the two quarters before an election suggests Biden’s reelection prospects may be stronger than current polling suggests.

Does short-term income growth predict the governing party's vote share?

Core argument: Increases in real disposable income per person in only the two quarters before a vote, adjusted for tenure in the White House, predict the vote share of America's governing parties to a striking degree of accuracy.

Increases in real disposable income per person in only the two quarters before a vote can, with an adjustment for tenure in the White House, predict the vote share of parties that are governing America to a striking degree of accuracy. Because inflation has fallen without a recession, tight labor markets continue to produce strong real wage growth. In the last quarter of 2023, real disposable income per person grew at an annualised rate of 1.9%. If maintained until the election, that pace would be associated with a winning margin equivalent to Bill Clinton’s in 1996.

Takeaways by Macro Roundup® AI

  1. Increases in real disposable income per person in only the two quarters before a vote, adjusted for tenure in the White House, predict the vote share of America's governing parties to a striking degree of accuracy.
  2. Inflation has fallen without a recession, and tight labour markets continue to produce strong real wage growth.
  3. Real disposable income per person grew at an annualised rate of 1.9% in the last quarter of 2023, a pace that, if maintained until the election, would be associated with a winning margin equivalent to Bill Clinton's in 1996.

Related Articles:

  • Consistent Signs of Erosion in Black and Hispanic Support for Biden — Polling shows the Democratic presidential candidate's support among nonwhite voters running well below his prior election standing across racial groups, with leads of 72-11 among Black voters, 47-35 among Hispanic registrants, and 40-39 among other nonwhite voters. About 5% of his former nonwhite voters now back the Republican candidate, including 8% of Hispanic voters.
  • Americans Are Suddenly a Lot More Upbeat About the Economy — The University of Michigan's consumer sentiment survey recorded a 29% rise over two months, the largest two-month increase since 1991. The improvement was broad-based across consumers of different ages, incomes, education levels, and regions.
  • What’s Behind the Recent Slump in Consumer Sentiment? — Since 1980, annual real income growth and consumer sentiment have generally peaked and troughed in step, and real personal income growth has run below its long-term average since early 2020, which may have weighed on sentiment. As inflation slowed and real income growth picked up, sentiment showed signs of improving.

AI Summary. Saudi Aramco scrapped plans to raise production capacity to 13mm barrels a day from 12mm, a cancellation expected to save $20–40bn in capital spending over five years and signaling insufficient demand for additional Saudi oil. Saudi Arabia, pumping about 9mm barrels a day under OPEC+ cuts, appears set on lower output to support higher prices.

Javier Blas Bloomberg
Date Posted:

Saudi Aramco abandoned a $20-40B plan to increase capacity to 13mm bpd from their current 12mm bpd as the US takes on the role of the world’s marginal producer. @JavierBlas

Saudi Aramco abandoned a $20-40B plan to increase capacity to 13mm bpd from their current 12mm bpd as the US takes on the...

Does scrapping Saudi capacity expansion signal insufficient demand for its oil?

Core argument: Saudi Aramco scrapped its plan to raise production capacity from 12mm to 13mm barrels a day, a cancellation likely to save $20–40bn in capital expenditure over five years.

Saudi Aramco abandoned a plan to boost its production capacity to 13mm barrels a day, from 12mm barrels currently. Due to OPEC+ output cuts, Riyadh is well below its maximum output potential, currently pumping about 9mm barrels a day. The cancellation will likely to save Aramco somewhere between $20-40 billion in capex over the next five years. By scrapping the expansion plan, Riyadh has conceded what was already an open secret: There’s insufficient demand for so much extra Saudi oil in the foreseeable future. Riyadh appears determined – or resigned – to keep production lower-for-longer to keep oil prices higher-for-longer. Only if the kingdom were ready to accept much lower prices there would be demand for extra Saudi oil because, over time, investment would drop elsewhere, notably in the US shale industry. Saudi Arabia’s problem is that high oil prices encouraged – some would even say subsidized — surging production elsewhere, from the North Sea in the 1980s to the American shale basins in the 2020s.

Takeaways by Macro Roundup® AI

  1. Saudi Aramco scrapped its plan to raise production capacity from 12mm to 13mm barrels a day, a cancellation likely to save $20–40bn in capital expenditure over five years.
  2. Saudi Arabia pumps about 9mm barrels a day, well below its maximum potential, due to OPEC+ output cuts, and appears determined or resigned to keep production lower-for-longer to keep oil prices higher-for-longer.
  3. High oil prices encouraged surging production elsewhere, from the North Sea in the 1980s to the American shale basins in the 2020s, and demand for extra Saudi oil would emerge only if Riyadh accepted much lower prices.

Related Articles:

  • US Shale: The Marginal Supplier Matures — The responsiveness of US oil supply to prices has declined and is estimated to be much smaller for publicly traded producers than private ones, with a 10% price increase raising US liquids output by roughly 1%, or 200,000 barrels a day. That implies US supply would offset only about 20-25% of a geopolitical supply shock.
  • US Oil and Gas Boom Doesn’t Feel Like One to Workers — US oil and natural gas production has been setting records, yet industry employment is 128,700 below its mid-2014 peak and 41,200 below pre-pandemic levels, with job gains stalling after rising from an early-2021 low. Productivity in the US oil and gas industry has risen dramatically.
  • Oil Market Caught By Surprise As US Output Surges — US crude oil production reached an all-time high of 13.2mn barrels a day, more than any other country and about one in eight barrels of global output, outpacing official forecasts. The International Energy Agency attributes 80% of this year's growth in global oil supply to the US, complicating OPEC+ efforts to prop up prices through output cuts.

Friday, February 2, 2024

AI Summary. Europe's regulators tend to act on the mere possibility of harm rather than evidence of it, an approach that can throttle innovation early. The McKinsey Global Institute found that among companies with over $1bn in revenue, U.S. firms spent 80% more on research and development, had 30% higher return on capital, and grew revenue 1.3 percentage points faster.

Greg Ip Wall Street Journal
Date Posted:

European firms with at least $1B in revenue spent 3.7% of revenue on R&D vs. 6.8% for comparable US firms, and earned 14% ROIC vs. 17.8% for US firms. @greg_ip points to European competition policy as a driver.

Does regulating against possible harm leave Europe behind on innovation?

Core argument: The McKinsey Global Institute found that among companies with more than $1 billion in revenue, U.S. firms spent 80% more on research and development, earned 30% higher return on capital, and grew revenue 1.3 percentage points faster than European peers.

Europe’s economy underperforms for lots of reasons, from demographics to energy costs, not just regulation. And U.S. regulators aren’t exactly hands-off. Still, they tend to act on evidence of harm, whereas Europe’s will act on the mere possibility. This precautionary principle can throttle innovation in its cradle. The McKinsey Global Institute noted Europe’s internal market is larger than China’s and almost as big as the U.S.’s. But when it compared companies with more than $1 billion in revenue, the U.S. firms spent 80% more on research and development, boasted 30% higher return on capital, and 1.3-percentage points faster revenue growth.

Takeaways by Macro Roundup® AI

  1. The McKinsey Global Institute found that among companies with more than $1 billion in revenue, U.S. firms spent 80% more on research and development, earned 30% higher return on capital, and grew revenue 1.3 percentage points faster than European peers.
  2. Europe's internal market is larger than China's and almost as big as the U.S.'s, according to the McKinsey Global Institute, yet Europe's economy underperforms for reasons ranging from demographics to energy costs, not regulation alone.
  3. European regulators act on the mere possibility of harm while U.S. regulators tend to act on evidence of harm, and this precautionary principle can throttle innovation in its cradle.

Related Articles:

  • EU’s New AI Act Risks Hampering Innovation, Warns Emmanuel Macron — France has warned that the European Union's new artificial intelligence law would impose the world's toughest regime on the foundation models underpinning generative AI products and risk hampering innovation. The rules impose transparency requirements on powerful AI models, restrict facial recognition, and prohibit "social scoring" of people based on behavior or personal characteristics.
  • Attenuating Innovation (AI) — AI regulation locks in incumbents, and the early AI winners promoting alarm in Washington about AI risks are engaged in regulatory capture, seeking rules that hobble future competitors while continuing their own development. Such an executive order is proscriptive rather than adaptive and presumes knowledge of an unknowable future.
  • Erik Brynjolfsson: ‘This Could Be The Best Decade in History — Or The Worst’ — Studies of large language models across tasks including software coding, consulting, and writing find double-digit productivity gains appearing within months, with less-skilled workers typically benefiting most. Given the large share of modern work these tools can augment, the author projects US productivity growth near 3% annually in the 2020s, roughly double the Congressional Budget Office's 1.4% projection.

AI Summary. Europe's fragmented financial sector struggles to supply enough capital and liquidity to support European companies and economic growth, with the gap between US and European financial sectors widening since the 2008-2009 crisis. The total market value of European banks fell from $2.7tn to $1.4tn, while US bank market value rose from $1.6tn to $2.6tn.

Rebecca Patterson Financial Times
Date Posted:

Between 2009-23 the S&P 500 saw gains 5x of the Euro Stoxx 50 in local currency terms. Rebecca Patterson argues Europe’s financial sector is dragging down economic growth by failing to “pump sufficient capital and liquidity” into European firms.

Is Europe's fragmented financial sector holding back its economic growth?

Core argument: The total market capitalisation of European banks, including the UK and Switzerland, fell from $2.7tn in 2007 to $1.4tn by 2021, according to a study by the Official Monetary and Financial Institutions Forum.

Europe’s relatively narrow and fragmented financial industry is like a weak financial heart that struggles to pump sufficient capital and liquidity to support healthy European companies and economic growth. The gap between US and European financial sectors has widened steadily since the 2008-2009 crisis, after which banking regulations were notably tightened. Indeed, the total market capitalisation of European banks (including the UK and Switzerland) fell from $2.7tn in 2007 to $1.4tn by 2021, according to a recent study by the Official Monetary and Financial Institutions Forum, a think-tank. Europe’s decline is even more striking when compared with the increase in US bank market capitalisation: from $1.6tn to $2.6tn.

Takeaways by Macro Roundup® AI

  1. The total market capitalisation of European banks, including the UK and Switzerland, fell from $2.7tn in 2007 to $1.4tn by 2021, according to a study by the Official Monetary and Financial Institutions Forum.
  2. US bank market capitalisation rose from $1.6tn to $2.6tn, according to the Official Monetary and Financial Institutions Forum study, contrasting with the decline in Europe.
  3. Europe's narrow and fragmented financial industry struggles to supply sufficient capital and liquidity to support European companies and economic growth, with the gap versus the US widening steadily since the 2008–2009 crisis, after which banking regulations were tightened.

Related Articles:

  • How The US Is Crushing Europe’s Domestic Exchanges — US equities make up nearly 70% of the MSCI World index, and its 10 largest constituents — all US companies — exceed the combined market capitalization of Japan, the UK, France, Canada, and Germany. That depth and liquidity attracts new listings from both US and overseas issuers.
  • Europe Has Fallen Behind America and the Gap is Growing — The EU economy was somewhat larger than the US in 2008 ($16.2tn versus $14.7tn), but by 2022 the US had grown to $25tn while the EU and UK combined reached only $19.8tn. The dollar's status as the world's reserve currency allows the US to finance its ambitions without unsettling markets.
  • From Strength To Strength — The US produced $25.5tn in GDP, about 25% of the world total—roughly its 1990 share—while China's share stands at 18%; the US share of the G7's nominal GDP rose from 40% in 1990 to 58%. Income per person is now about 30% above western Europe and 54% above Japan, adjusted for purchasing power.

AI Summary. US government interest payments have doubled from about $350bn in 2021 to over $700bn annually, reflecting higher interest rates and debt levels.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk @apolloglobal notes since 2021 US government interest payments have doubled to over $700B annually, driven by higher interest rates and debt levels.

Have government interest payments doubled with higher rates and debt?

Core argument: US government interest payments have doubled from roughly $350 billion in 2021 to above $700 billion on an annualized basis, according to Torsten Sløk of Apollo Global.

In 2021, US government interest payments were around $350 billion. Because of the increase in interest rates and debt levels, annualized debt servicing costs are now above $700 billion.

Takeaways by Macro Roundup® AI

  1. US government interest payments have doubled from roughly $350 billion in 2021 to above $700 billion on an annualized basis, according to Torsten Sløk of Apollo Global.
  2. Torsten Sløk attributes the doubling of US annualized debt servicing costs to increases in both interest rates and debt levels.

Related Articles:

  • Why We Should, but Won’t, Reduce the Budget Deficit — High interest rates will likely crowd out private investment and weaken long-term growth prospects. Because Social Security, health care, other safety-net programs, defense, and interest payments make up most federal spending, leaving only a small and already squeezed slice of nondefense discretionary spending, deficit reduction requires either cutting popular benefits or raising taxes.
  • Who Benefits from Higher Yields? — Higher interest rates raise cash flows to fixed income holders, but the Federal Reserve and foreign investors hold 50% of outstanding Treasuries and foreigners hold 28% of outstanding corporate credit, so much of that added income does not boost US growth. The author argues higher rates are a net negative for the US economy.
  • The High Cost of Borrowing at Low Rates — The authors estimate that nearly 60% of US debt originated when the average ten-year Treasury rate was below 3%, and 75% when three-month Treasuries paid below 3%. That debt is now being rolled over into Treasuries paying 4.5%–5.6%, a rollover risk the authors argue policymakers failed to account for.

AI Summary. US federal debt held by the public stood at 95.4% of GDP, down from a peak of 103.2% in mid-2020 and up from a low of 21.9% in 1974. The author argues that if the US matches program spending to taxes—borrowing only to pay interest, a deficit of about 3% of GDP—the debt burden would likely gradually diminish.

Brad DeLong Brad DeLong's Grasping Reality
Date Posted:

.@delong proposes roughly matching federal program spending with taxes and running a deficit of ~ 3% of GDP to pay interest on federal debt. He is bearish on the prospect of building a legislative coalition to get there.

Would matching program spending to taxes shrink the debt burden over time?

Core argument: Federal debt held by the public stands at 95.4% of GDP, versus 94.0% at the start of Biden's first budget-year, a peak of 103.2% in mid-2020, and a low of 21.9% in the third quarter of 1974.

Federal debt held by the public reached a low point as a percentage of GDP reached a low point of 21.9% in the third quarter of 1974. Debt-to-GDP reached a peak of 103.2% in the middle of the COVID plague in mid-2020. It stood at 94.0% at the start of Biden’s first budget-year. And it stands at 95.4% today. If the United States can roughly match government program spending to taxes in the future while it rolls over its debt as it matures and borrows more money to pay the interest, the debt is highly likely to gradually diminish, and eventually fade away. Such a policy is a “deficit gamble”, but it is one on very favorable terms. That is if the United States matches program spending to taxes: and attains an average level of zero for what economists call the primary deficit. That does not mean a balanced budget. It means borrowing more only to pay the interest owed on what had been borrowed before. It means a current-cash deficit of around 3% of GDP—of approximately $800 billion a year.

Takeaways by Macro Roundup® AI

  1. Federal debt held by the public stands at 95.4% of GDP, versus 94.0% at the start of Biden's first budget-year, a peak of 103.2% in mid-2020, and a low of 21.9% in the third quarter of 1974.
  2. Holding the primary deficit at an average of zero—borrowing only to pay interest on existing debt—would make it highly likely that the debt gradually diminishes and eventually fades away.
  3. A zero average primary deficit means not a balanced budget but a current-cash deficit of around 3% of GDP, roughly $800 billion a year, a "deficit gamble" on very favorable terms.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
  • R versus G and the National Debt — National debt is considered sustainable when it grows more slowly than gross domestic product, so when the average interest rate on government debt (R) is below the economy's growth rate (G), debt can be sustainable even if non-interest spending exceeds revenue. R has been below G over the past 15 years.

AI Summary. Reversing the fiscal deterioration by returning to pre-2001 tax law would mean higher rates, smaller credits and more taxpayers, while pre-2001 spending law would mean no Medicare drug benefit and deep military and domestic cuts. With more seniors and higher health costs, matching pre-2001 levels would require dramatic per-person benefit cuts and tax increases above 15%.

Marc Goldwein Committee For A Responsible Federal Budget
Date Posted:

Deficits have grown by 7.5% of GDP since 2001. @MarcGoldwein notes 2/3 of the increase is higher spending, mainly on health care and retirement.

What would returning to earlier tax and spending law require?

Core argument: Reverting to pre-2001 tax law would mean higher rates, smaller credits, more taxpayers owing tax, and roughly a quarter of taxpayers on the alternative minimum tax.

Can we get out of this mess the way we got into it? We could revert to pre-2001 law, but we can’t change the past. A lot of the costs were temporary (wars, COVID relief, TCJA). Pre-2001 law means way higher taxes for everyone – higher rates, smaller credits, more taxpayers, ¼ of taxpayers on AMT. Pre-2001 law means no Medicare drug benefit, big military cuts, no homeland security dept, big domestic cuts, etc. We could revert to pre-2001 levels, but with more seniors & higher health costs, per-person Social Security & Medicare benefits would have to be cut dramatically. Taxes would have to go up >15% a big tax hike.

Takeaways by Macro Roundup® AI

  1. Reverting to pre-2001 tax law would mean higher rates, smaller credits, more taxpayers owing tax, and roughly a quarter of taxpayers on the alternative minimum tax.
  2. Returning to pre-2001 spending law would eliminate the Medicare drug benefit and the Department of Homeland Security while imposing large military and domestic cuts.
  3. Reverting to pre-2001 fiscal levels, with more seniors and higher health costs, would require dramatic cuts to per-person Social Security and Medicare benefits and tax increases of more than 15%.

Related Articles:

  • From Riches to Rags: Causes of Fiscal Deterioration Since 2001 — Federal debt held by the public rose from 32% to 98% of GDP over roughly two decades, despite earlier Congressional Budget Office projections that the debt would be paid off. The authors attribute 37 percentage points to major tax cuts, 33 to discretionary spending and Medicare expansions, and 28 to recession and pandemic responses.
  • Living with High Public Debt — High public debt ratios are likely to persist because large sustained primary budget surpluses are politically unrealistic, real interest rates are already very low, faster global growth is hard to engineer, inflation is not a sustainable route to reducing debt, and financial repression is less feasible amid liberalized markets.
  • Olivier Blanchard on Debt Explosions — The author argues that rising long-term US Treasury yields reflect a term premium driven by heavy bond supply and weaker demand, including the Federal Reserve shrinking its holdings, rather than a risk premium, since inflation-indexed yields have also risen. Risks include a failed auction or debt monetization producing high inflation.

AI Summary. The U.S. government said it disrupted a Chinese hacking operation that hijacked hundreds of infected routers to covertly target American and allied critical infrastructure networks. Officials described it as part of a campaign by Beijing to gain a foothold in networks running water treatment, the electrical grid, pipelines, and transportation so it could launch damaging cyberattacks in a future conflict.

Dustin Volz Wall Street Journal
Date Posted:

The US government is attempting to disrupt Chinese cyber capacity to attack US and allied critical civilian infrastructure networks, including air traffic control and utilities.

The US government is attempting to disrupt Chinese cyber capacity to attack US and allied critical civilian infrastructure...

Is China embedding itself in U.S. critical infrastructure networks?

Core argument: The U.S. government said it disrupted a Chinese hacking operation that hijacked hundreds of infected routers to covertly target American and allied critical infrastructure networks, describing it as uniquely dangerous and potentially life-threatening.

The U.S. government said it had disrupted a uniquely dangerous and potentially life-threatening Chinese hacking operation that hijacked hundreds of infected routers and used them to covertly target American and allied critical infrastructure networks. Senior officials described the operation in unusually blunt terms as part of an evolving and increasingly worrisome campaign by Beijing to get a foothold in U.S. computer networks responsible for everything from safe drinking water to aviation traffic so it could detonate, at a moment’s notice, damaging cyberattacks during a future conflict. [FBI Director] Wray said Chinese hackers had recently been spotted targeting “our water treatment plants, our electrical grid, our oil and natural gas pipelines, our transportation systems.”

Takeaways by Macro Roundup® AI

  1. The U.S. government said it disrupted a Chinese hacking operation that hijacked hundreds of infected routers to covertly target American and allied critical infrastructure networks, describing it as uniquely dangerous and potentially life-threatening.
  2. Senior U.S. officials said Beijing's campaign seeks a foothold in U.S. networks running everything from safe drinking water to aviation traffic so it could launch damaging cyberattacks at a moment's notice during a future conflict.
  3. FBI Director Wray said Chinese hackers had recently been spotted targeting U.S. water treatment plants, the electrical grid, oil and natural gas pipelines, and transportation systems.

Related Articles:

  • Volt Typhoon Targets US Critical Infrastructure with Living-Off-The-Land Techniques — Microsoft has identified stealthy intrusions by Volt Typhoon, a Chinese state-sponsored actor, against US critical infrastructure organizations spanning communications, manufacturing, utilities, transportation, maritime, government, information technology, and education. Microsoft assesses with moderate confidence that the campaign is developing capabilities that could disrupt critical communications infrastructure between the US and Asia during future crises.
  • The Next Global War — The authors argue the US-led international order faces three linked regional challenges — China's military buildup in the western Pacific, Russia's war in Ukraine, and Iran and its proxies in the Middle East — united by autocratic governance and grievance. They contend larger defense spending is essential but politically difficult and slow to take effect.
  • Why Xi Can No Longer Brag About the Chinese Economy — China's shipyards build 46% of the world's ships, letting it produce several warships and submarines a year, while the U.S. holds under 1% of capacity and its Navy faces late, over-budget deliveries from a few yards lacking workers. China is also the largest drone producer.