Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, February 8, 2024

AI Summary. The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.

CBO Staff Congressional Budget Office
Date Posted:

The new @USCBO forecast projects federal net interest costs of 3.1% of GDP in 2024 rising to 3.9% in 2034, vs a mean of 2.1% between 1974-2023.

Are federal deficits projected to far exceed their historical average?

Core argument: CBO projects the federal budget deficit will grow from $1.6 trillion in fiscal year 2024 to $2.6 trillion in 2034, rising from 5.6% of GDP to 6.1% of GDP.

In CBO’s projections, the federal budget deficit grows from $1.6 trillion in fiscal year 2024 to $2.6 trillion in 2034. Deficits also expand in relation to the size of the economy, from 5.6% of gross domestic product (GDP) in 2024, when the collection of certain postponed tax payments temporarily boosts revenues, to 6.1% of GDP in 2025. In 2026 and 2027, revenues increase faster than outlays, causing the deficit to shrink to 5.2% of GDP by 2027. Thereafter, outlays rise faster than revenues. By 2034, the deficit returns to 6.1% of GDP— significantly larger than the 3.7% that deficits have averaged over the past 50 years.

Takeaways by Macro Roundup® AI

  1. CBO projects the federal budget deficit will grow from $1.6 trillion in fiscal year 2024 to $2.6 trillion in 2034, rising from 5.6% of GDP to 6.1% of GDP.
  2. The 6.1% of GDP deficit CBO projects for 2034 is significantly larger than the 3.7% that deficits have averaged over the past 50 years.
  3. CBO projects that revenues will increase faster than outlays in 2026 and 2027, shrinking the deficit to 5.2% of GDP by 2027, after which outlays rise faster than revenues.

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.
  • Interest Expense: A Bigger Impact on Deficits than Debt — The US is running a primary deficit—excluding interest costs—much larger than its historical norm, at a point in the business cycle when deficits would normally be smaller than usual. The average interest rate on federal debt is projected to remain at or below the rate of nominal GDP growth over the next decade.
  • 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.

AI Summary. The Congressional Budget Office projects federal deficits will total $20tn, or 5.7% of GDP, over the next decade, growing to $2.6tn and 6.2% of GDP by 2034. That projected 2034 deficit share would be roughly 70% larger than the 50-year historical average of 3.7% of GDP.

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:

An analysis of the new @USCBO forecast highlights that 2023’s Fiscal Responsibility Act drove $1.4T in less borrowing which implies debt will be 116% of GDP in 2033 as opposed to 119%. @BudgetHawks

How large will federal deficits grow over the next decade?

Core argument: CBO's baseline projects deficits totaling $20 trillion, or 5.7% of GDP, over the next decade, with the annual deficit falling from $1.7 trillion in FY 2023 to $1.5 trillion in 2024 before rising to $2.6 trillion by 2034.

Deficits will total $20T, or 5.7% of GDP, over the next decade under CBO’s baseline. After growing from $1.4T in FY 2022 to $1.7T in 2023, CBO projects deficits will fall to $1.5T in 2024. CBO projects deficits will then grow to $1.8T by 2025, breach $2T by 2031, and grow to $2.6 trillion by 2034. As a share of the economy, CBO projects deficits will fall from 6.3% of GDP in FY 2023 to 5.3% in 2024, and then grow again to 6.1% in 2025. Assuming large parts of the TCJA and other policies expire at the end of 2025, CBO projects deficits will decline to a low of 5% of GDP in 2029, before rising to 6.2% by 2034. These deficits are extremely high by historic standards. At 6.2%, the FY 2034 deficit as a share of GDP will be one-third larger than in the year prior to the pandemic and about 70% larger than the 50-year historical average of 3.7% of GDP. In nominal dollars, the $2.6T deficit will be 2.6 times as large as immediately before the pandemic.

Takeaways by Macro Roundup® AI

  1. CBO's baseline projects deficits totaling $20 trillion, or 5.7% of GDP, over the next decade, with the annual deficit falling from $1.7 trillion in FY 2023 to $1.5 trillion in 2024 before rising to $2.6 trillion by 2034.
  2. CBO projects the deficit will fall from 6.3% of GDP in FY 2023 to 5.3% in 2024, rise to 6.1% in 2025, decline to 5% in 2029 assuming large parts of the Tax Cuts and Jobs Act expire, then reach 6.2% by 2034.
  3. CBO's projected FY 2034 deficit of 6.2% of GDP is one-third larger than in the year before the pandemic and about 70% above the 50-year average of 3.7%, with the $2.6 trillion nominal figure 2.6 times the pre-pandemic level.

Related Articles:

  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.
  • 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.
  • 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 Congressional Budget Office projects slightly smaller deficits and debt over the next decade, with the projected primary deficit—non-interest spending minus revenue—as a share of GDP falling substantially, largely because of discretionary spending limits in the debt limit deal. Cutting the primary deficit by about 1.5% of GDP would stabilize debt near 125% of GDP.

Jason Furman @jasonfurman
Date Posted:

Noting the US fiscal outlook is on “an unsustainable course” @jasonfurman argues that cutting the primary deficit by 1.5% of GDP would stabilize the debt at ~125% of GDP, and “should be doable.”

How much deficit reduction would stabilize the debt?

Core argument: Furman notes that cutting the primary deficit by ~1.5% of GDP would stabilize U.S. debt at ~125% of GDP, an adjustment similar in size to those of 1990 or 1993 or what Social Security solvency requires.

The latest CBO outlook is projecting a slightly smaller deficit and debt over the next ten years. This despite the fact that the actual 2023 deficit was well above what CBO had forecast. The most fiscally favorable change is that the forecast for the primary deficit as a share of GDP (that is non-interest spending minus revenue) has fallen dramatically relative to recent forecasts. The biggest improvement is due to the discretionary limits in the debt limit deal. The budget is still on an unsustainable course. But the adjustment needed for sustainability is not especially daunting. In particular cutting the primary deficit by ~1.5% of GDP would stabilize the debt at ~125% of GDP. This is similar to the adjustment from 1990 or 1993 or what is needed for Social Security solvency. To be clear, getting Congress not to extend tax cuts (or worse, extending everything except the limit on the State & Local Tax deduction) could be hard. Another 1.5% of GDP on top of that is hard given the current political climate. Forecast could worsen. But should be doable.

Takeaways by Macro Roundup® AI

  1. Furman notes that cutting the primary deficit by ~1.5% of GDP would stabilize U.S. debt at ~125% of GDP, an adjustment similar in size to those of 1990 or 1993 or what Social Security solvency requires.
  2. CBO's outlook projects a slightly smaller deficit and debt over the next ten years, even though the actual 2023 deficit came in well above CBO's earlier forecast.
  3. The projected primary deficit as a share of GDP has fallen sharply relative to recent CBO forecasts, with the biggest improvement attributed to the discretionary limits in the debt limit deal, though Furman argues the budget remains on an unsustainable course.

Related Articles:

  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.
  • 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.
  • If Markets Are Right About Long Real Rates, Public Debt Ratios Will Increase For Some Time. We Must Make Sure That They Do Not Explode — Stabilizing public debt ratios would require cutting primary deficits to zero, which the author argues no government can do quickly without risking recession and boosting support for populist parties. With a US primary deficit around 4% and a dysfunctional budget process, the debt ratio is likely to keep rising for some time.

AI Summary. The US annual trade deficit narrowed nearly 19% to $773.4bn, the first decline in four years, as companies limited inventory buildup and consumer spending shifted toward services. The merchandise deficit with China shrank 27% to $279.4bn, while the gap with Mexico grew to a record $152.4bn.

Mark Niquette Bloomberg
Date Posted:

The US trade deficit fell 19% in 2023 driven by a decline in imports as firms limited the buildup in inventories and consumers shifted spending towards services.

Did the US trade deficit narrow as trade shifted away from China?

Core argument: The US annual trade deficit shrank nearly 19% to $773.4 billion from a record in 2022, the first narrowing in four years and the largest since 2009, according to Commerce Department data.

The annual trade shortfall shrank nearly 19% to $773.4 billion from a record in 2022, Commerce Department data showed Wednesday. The narrowing of the US trade gap was the first in four years and reflected efforts by companies to limit the buildup in inventories, restraining demand for imports. American consumers’ spending preferences continued to shift toward services and experiences after a pandemic-driven binge on merchandise. A more complex global trading system is showing through in US bilateral trade figures. The nation’s merchandise deficit with China last year shrank 27% to an unadjusted $279.4 billion, the smallest since 2010. The narrowing was the largest in data back to 2002. At the same time, the gap with Mexico grew to a record $152.4 billion.

Takeaways by Macro Roundup® AI

  1. The US annual trade deficit shrank nearly 19% to $773.4 billion from a record in 2022, the first narrowing in four years and the largest since 2009, according to Commerce Department data.
  2. The US merchandise deficit with China fell 27% to an unadjusted $279.4 billion, the smallest since 2010 and the largest narrowing in data back to 2002, while the gap with Mexico grew to a record $152.4 billion.
  3. Efforts by companies to limit the buildup in inventories restrained demand for imports, while American consumers' spending preferences continued shifting toward services and experiences after a pandemic-driven binge on merchandise.

Related Articles:

  • Can China Reduce Its Internal Balances Without Renewed External Imbalances? — China's headline goods trade surplus is about 5% of its GDP, with the underlying surplus in manufactured goods close to 10% of GDP. The author argues that if China relies on interest rate cuts, exchange rate liberalization, and a weak yuan to offset its property downturn, its trade surplus could reach record levels relative to trading partners' output.
  • China Set To Lose Crown As Top U.S. Exporter After 17 Years — U.S. goods imports from China fell more than 20% year over year, leaving China at 13.9% of total U.S. imports, its smallest share since 2004 after peaking above 21%. Mexico's share topped 15%, positioning it to become the top exporter to the U.S. for the first time since 2000.
  • How America Is Failing To Break Up With China — Research finds that countries with the strongest existing trade ties to China in a given industry have gained the most as direct Chinese exports to the US are redirected, suggesting Chinese supply chains remain central to American imports even in advanced-manufacturing goods officials most want to shield from China.

AI Summary. Researchers at the Joint European Torus facility outside Oxford set a nuclear fusion energy record, generating 69 megajoules from a five-second sustained reaction, up from a previous record of 59 megajoules. The experiment consumed far more power than the reaction produced.

Tom Wilson Financial Times
Date Posted:

European scientists set a new nuclear fusion energy record generating 69 megajoules from a sustained fusion reaction lasting five seconds.

European scientists set a new nuclear fusion energy record generating 69 megajoules from a sustained fusion reaction lasting...

Are scientists increasing the energy produced by nuclear fusion reactions?

Core argument: Researchers at the Joint European Torus facility outside Oxford generated 69 megajoules from a fusion reaction sustained for five seconds, surpassing their previous record of 59 megajoules set in 2021.

European scientists have set a new record for the amount of energy generated from nuclear fusion. Researchers at the Joint European Torus facility outside Oxford generated 69 megajoules from a sustained fusion reaction lasting five seconds — enough energy to boil about 70 kettles — surpassing their previous record of 59 megajoules set in 2021. The JET experiment in December consumed far more power than the reaction produced.

Takeaways by Macro Roundup® AI

  1. Researchers at the Joint European Torus facility outside Oxford generated 69 megajoules from a fusion reaction sustained for five seconds, surpassing their previous record of 59 megajoules set in 2021.
  2. The 69 megajoules produced at the Joint European Torus is enough energy to boil about 70 kettles.
  3. The Joint European Torus experiment consumed far more power than the fusion reaction produced.

Related Articles:

  • Microsoft Bets That Fusion Power Is Closer Than Many Think — Microsoft has agreed to buy fusion-generated electricity from startup Helion Energy in what is believed to be the first commercial fusion power agreement, even as many experts view fusion as decades away. Helion committed to begin producing fusion electricity within about five years and to supply at least 50 megawatts or pay penalties.
  • US Scientists Repeat Fusion Power Breakthrough — Scientists at the Lawrence Livermore National Laboratory achieved net energy gain in a fusion reaction for a second time, with preliminary results indicating the experiment produced a higher energy output than the first ignition.
  • How US Scientists Moved One Step Closer to Dream of Fusion Power — A US fusion experiment produced about 3.15 megajoules of energy from 2.05 megajoules delivered by its lasers, achieving energy gain long seen as a key step toward commercial fusion power. That comparison excludes the 330 megajoules of electricity drawn to power each shot, and scientists estimate commercial fusion requires reactions yielding 30x to 100x the energy put in.

AI Summary. Scientists report that global warming exceeded 1.5C above pre-industrial levels over a 12-month period for the first time, alongside record global sea surface temperatures of 21.12C. The El Niño phenomenon, which warms the Pacific Ocean surface, has contributed to sea temperature rises on top of greenhouse gas–driven warming.

Attracta Mooney, Jana Tauschinski, and Steven Bernard Financial Times
Date Posted:

Mean sea surface temperatures are at a record high at the start of 2024 hitting 69.7F in January. The El Niño phenomenon is amplifying elevated sea surface temperatures.

Has global warming exceeded 1.5C over a 12-month period?

Core argument: Global sea surface temperature hit a record high of almost 20.97C for January, the second-hottest reading for any month, trailing only August 2023's 20.98C, according to scientists.

Scientists said the global sea surface temperature reached a record high of almost 20.97C for January. It was the second-hottest sea surface temperature recorded for any month ever, with only August 2023 surpassing it at 20.98C. The El Niño phenomenon, which heats the Pacific Ocean surface and exacerbates global warming caused by greenhouse gas emissions, has contributed to sea temperature rises in recent months. But they warned that sea surface temperatures had already reached “new absolute records”, with a level of 21.12C recorded on February 4 surpassing the previous high reached last August. Last May the World Meteorological Organization said there was a 66 percent chance that the mean global temperature would temporarily surpass 1.5C above pre-industrial levels in “at least” one year by 2027.

Takeaways by Macro Roundup® AI

  1. Global sea surface temperature hit a record high of almost 20.97C for January, the second-hottest reading for any month, trailing only August 2023's 20.98C, according to scientists.
  2. Scientists recorded a new absolute record sea surface temperature of 21.12C on February 4, surpassing the previous high set the prior August.
  3. The World Meteorological Organization put the chance that the mean global temperature would temporarily exceed 1.5C above pre-industrial levels in at least one year by 2027 at 66 percent.

Related Articles:

  • Gulf Coast Temperatures Surge to Highest Levels Ever Observed — Sea surface temperatures in the Gulf of Mexico have warmed more than 3 degrees above the norm for the date, with temperatures near 88°F common down to depths of 165 feet. Though the Gulf as a whole has cooled slightly from record levels, it remains near all-time highs.
  • Long-term Surface Impact of Hunga Tonga-Hunga Ha’apai-like Stratospheric Water Vapor Injection — A volcanic eruption that injected large amounts of water vapor — a strong greenhouse gas — into the stratosphere is estimated to have raised surface temperatures by more than 1.5°C across large regions for several years, while cooling some areas by close to 1°C. The authors suggest a possible link to tropical Pacific sea surface temperatures that warrants further investigation.
  • Observed Increases in North Atlantic Tropical Cyclone Peak Intensification Rates — An analysis of North Atlantic tropical cyclones finds mean maximum intensification rates up to 28.7% greater in 2001–2020 than in 1971–1990. The number of storms strengthening from a Category 1 hurricane or weaker into a major hurricane within 36 hours has more than doubled between those periods.

AI Summary. Chinese researchers have built a truck-mounted high-power microwave weapon powered by four compact Stirling engines, designed to emit electromagnetic waves capable of suppressing drones, military aircraft, and satellites. Preliminary tests by the project team indicate it uses one-fifth of the energy of current methods to generate a strong magnetic field and can run continuously for four hours without attenuation.

Stephen Chen South China Morning Post
Date Posted:

A Chinese team has developed a new direct-energy weapon that uses one-fifth of the energy required by previous methods. It can be fired from a moving truck and is powerful enough to suppress drones, military aircraft, and even satellites. @SCMPNews

A Chinese team has developed a new direct-energy weapon that uses one-fifth of the energy required by previous methods. It...

Can a truck-mounted microwave weapon suppress drones, aircraft, and satellites?

Core argument: A Chinese research team's high-power microwave weapon consumes only one-fifth of the energy required by current methods to generate a strong magnetic field and runs continuously for four hours without attenuation, according to the project team's preliminary tests.

A research team in China has developed a high-power microwave (HPM) weapon driven by four compact and efficient Stirling engines…to drive high-frequency electromagnetic waves that are powerful enough to suppress drones, military aircraft, and even satellites. The weapon system, which can easily fit into a truck, and boasts a significant reduction in energy consumption for generating a strong magnetic field compared with existing technologies. According to the project team’s preliminary tests, it consumes only one-fifth of the energy required by current methods and can operate continuously for four hours without attenuation.

Takeaways by Macro Roundup® AI

  1. A Chinese research team's high-power microwave weapon consumes only one-fifth of the energy required by current methods to generate a strong magnetic field and runs continuously for four hours without attenuation, according to the project team's preliminary tests.
  2. The weapon is driven by four compact Stirling engines that produce high-frequency electromagnetic waves the research team says are powerful enough to suppress drones, military aircraft, and satellites.
  3. The Chinese high-power microwave weapon system fits into a truck and can fire from a moving vehicle.

Related Articles:

  • Chinese Tech Could Break Barrier to Making Crucial Defence and Aerospace Material — China has developed technology for mass production of ultra-strong carbon fibre, with a production line capable of 1,700 tonnes a year, potentially breaking international monopolies on a material used in aerospace, defence, transport, new energy and marine engineering. China had been largely blocked from carbon fibre production by US and Japanese bans on exports of manufacturing equipment.
  • 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.
  • America, Jump-Started: World War II R&D and the Takeoff of the US Innovation System — From 1940 to 1945, the US Office of Scientific Research and Development engaged industrial and academic contractors in more than 2,200 research contracts worth over $9bn in 2022 dollars, despite no pre-war tradition of funding externally performed research. At the war's height, the US government funded the research behind nearly 1 in 8 US patents.

Friday, February 9, 2024

AI Summary. The Congressional Budget Office projects net interest payments on federal debt will reach $870bn, or 3.1% of GDP, exceeding spending on national defense ($822bn) and net Medicare ($851bn). That would make interest the second-largest federal budget item after Social Security, up from $223bn in 2015 and $659bn in 2023.

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:

According to the new @USCBO numbers, in 2024 the US will spend more on interest than on defense or Medicare. Interest on the debt is the fastest-growing part of the budget. @BudgetHawks @MarcGoldwein

Are interest payments on federal debt now exceeding defense and Medicare spending?

Core argument: CBO projects net interest payments will total $870 billion in FY2024, a near-record 3.1% of GDP, exceeding spending on national defense ($822 billion) and net Medicare ($851 billion).

Net interest payments will exceed both defense and Medicare spending this year, in Fiscal Year (FY) 2024, according to new projections from the Congressional Budget Office (CBO). That will make interest the second largest government expenditure. Net interest has been exploding over the past few years, with payments rising from $223B in 2015 to $352B in 2021 before nearly doubling to $659B in 2023. In 2024, CBO projects net interest will total $870B, a near-record 3.1% of GDP. Spending on interest already topped the Medicaid budget and all spending on children last year. At a projected $870B, interest will surpass total spending on national defense ($822B) in 2024 and grow well beyond the defense budget over time. Interest costs will also slightly exceed net Medicare spending ($851B) this year and remain in line with Medicare costs in future years. That would make interest the second largest line item in the budget after Social Security.

Takeaways by Macro Roundup® AI

  1. CBO projects net interest payments will total $870 billion in FY2024, a near-record 3.1% of GDP, exceeding spending on national defense ($822 billion) and net Medicare ($851 billion).
  2. Net interest would become the second largest line item in the federal budget after Social Security, and CBO projects it will grow well beyond the defense budget over time while remaining in line with Medicare costs.
  3. Net interest payments rose from $223 billion in 2015 to $352 billion in 2021 before nearly doubling to $659 billion in 2023, already topping Medicaid and all spending on children last year.

Related Articles:

  • The Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects the federal budget deficit will grow from $1.6tn to $2.6tn over a decade, rising from 5.6% to 6.1% of gross domestic product. That end-point is well above the 3.7% average of the past 50 years, as outlays are projected to rise faster than revenues over most of the period.
  • 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.

AI Summary. US-based multinational companies account for about one-third of H-1B skilled-worker visa applications and 80% of research and development done by US firms. H-1B use is concentrated in a few industries, led by professional, scientific, and technical services, with five firms accounting for nearly 10% of approvals and California employers 22.5%.

Britta Glennon Journal of Economic Perspectives
Date Posted:

Firms seeking skilled workers are a key driver of skilled immigration to the US; US-based multinational companies account for about 1/3 of H-1B visa applications. @BrittaGlennon

How concentrated is skilled-worker visa use among firms and industries?

Core argument: US-based multinational companies account for about one-third of H-1B visa applications, excluding foreign multinationals that also hire H-1B workers, and account for 80% of the research and development done by US firms.

In the US economy, US-based multinational companies account for about one-third of H-1B visa applications, not including foreign multinational companies who also hire H-1B workers. Not coincidentally, US multinational companies account for 80% of the research and development done by US firms. A relatively small group of industries accounts for most of the H-1B visas. Figure 1 illustrates that most firms utilizing the program are in the same industry— Professional, Scientific, and Technical Services—with Manufacturing a distant second. In 2022 five firms Tata Consultancy, Amazon, Google, Microsoft, and Infosys accounted for nearly 10% of all H-1B approvals. This skewness has increased over time. The skewness is apparent geographically as well; 22.5% of approved H-1B petitions were allocated to employers in California alone.

Takeaways by Macro Roundup® AI

  1. US-based multinational companies account for about one-third of H-1B visa applications, excluding foreign multinationals that also hire H-1B workers, and account for 80% of the research and development done by US firms.
  2. Five firms — Tata Consultancy, Amazon, Google, Microsoft, and Infosys — accounted for nearly 10% of all H-1B approvals in 2022, and this skewness has increased over time.
  3. California employers received 22.5% of approved H-1B petitions, and most firms using the program are in Professional, Scientific, and Technical Services, with Manufacturing a distant second.

Related Articles:

AI Summary. The seven largest US technology companies — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla — added $5.1tn in combined market value in a single year, accounting for more than 50% of the increase in the entire US equity market's capitalization. US equities returned 23.25% including them and 12.6% without them.

Aswath Damodaran Musings on Markets
Date Posted:

In 2012 the Magnificent 7 made up 8% of the market capitalization of all US public firms; by the end of 2023 they made up 24%. Their $12T market cap is worth more than all Chinese public equities. @AswathDamodaran

How much of US equity market gains came from seven tech giants?

Core argument: The Magnificent Seven — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — added $5.1 trillion in combined market capitalization in 2023, accounting for more than 50% of the increase in the entire US equity market's value.

Let's look at the performance of the Mag 7 [AAPL, MSFT, GOOGL, AMZN, NVDA, META, TSLA] in 2023 when their collective market capitalization increased by a staggering $5.1T. Nvidia and Meta were the best performers, with the former more than and the latter almost tripling in value over the period. In terms of dollar value added, Microsoft and Apple each added a trillion dollars to their market capitalizations. These seven companies accounted for more than 50% of the increase in market capitalization of the entire US equity market. With them, US equities had price appreciation of 23.25% for the year, but without them, the year would have been an average one, with returns on 12.6%. Over the eleven-year period, the cumulative market capitalization of the seven companies has risen from $1.1 trillion in 2012 to $12 trillion in 2023. To put these numbers in perspective, the Mag Seven companies now have a market capitalization larger than that of all listed stocks in China.

Takeaways by Macro Roundup® AI

  1. The Magnificent Seven — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — added $5.1 trillion in combined market capitalization in 2023, accounting for more than 50% of the increase in the entire US equity market's value.
  2. US equities appreciated 23.25% in 2023 with the Magnificent Seven included, versus 12.6% without them, as Nvidia more than tripled and Meta almost tripled in value and Microsoft and Apple each added $1 trillion.
  3. The Magnificent Seven's cumulative market capitalization rose from $1.1 trillion in 2012 to $12 trillion in 2023, exceeding the market capitalization of all listed stocks in China.

Related Articles:

  • 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.
  • P/E Ratio for S&P7 vs S&P 493 — The price-to-earnings ratio of the largest seven S&P 500 stocks rose from 29 to 45 while the other 493 fluctuated around 19, with index returns driven by those seven. The author argues that, given higher long-term interest rates, either stock prices or those rates must fall.

AI Summary. The rally in the seven largest US technology stocks has been driven by earnings rather than valuation: of the group's 28% return, 21 percentage points came from sales growth, 6 from margin expansion, and 1 from multiple expansion. Market concentration has reached its highest level since 1972, and large spikes in concentration have frequently coincided with or preceded prior recessions.

Michael Cembalest J.P. Morgan
Date Posted:

Michael Cembalest @jpmorgan notes the 28% rally of the Magnificent 7 since 2019 has been driven by earnings: “21% is attributable to sales growth, 6% from margin expansion and just 1% from multiple expansion.”

Is the largest tech stock rally driven by earnings or valuation?

Core argument: Of the Magnificent 7's 28% return since 2019, 21 points came from sales growth, 6 points from margin expansion, and just 1 point from multiple expansion, unlike the margin-less bubble of 2000–2001.

The Mag 7 [AAPL, MSFT, GOOGL, AMZN, NVDA, META, TSLA] rally has been earnings-driven rather than relying on multiple expansion. Of the group’s 28% return since 2019, 21% is attributable to sales growth, 6% from margin expansion, and just 1% from multiple expansion. This is quite different than the margin-less bubble in 2000-2001. But there are challenges as well, market concentration has reached its highest level since 1972. The top 10 stocks have broken away from stocks #11-#50 to an even greater degree than during the tech bubble in 2000-2001. Large spikes in market concentration have frequently coincided with or preceded prior recessions. Antitrust issues are the primary Achilles heel I can imagine that could disrupt the continued domination of the largest stocks. While Tesla has run into a pricing buzzsaw and lower volumes, the rest continue to thrive.

Takeaways by Macro Roundup® AI

  1. Of the Magnificent 7's 28% return since 2019, 21 points came from sales growth, 6 points from margin expansion, and just 1 point from multiple expansion, unlike the margin-less bubble of 2000–2001.
  2. Market concentration has reached its highest level since 1972, with the top 10 stocks separating from stocks #11–#50 by a wider margin than during the 2000–2001 tech bubble.
  3. Large spikes in market concentration have frequently coincided with or preceded prior recessions, and antitrust is the primary risk identified to continued domination by the largest stocks.

Related Articles:

  • 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.
  • A Few Stocks Drive the Stock Market: Dot.com Vs. Today Vs. the Last 100 Years — Seven large technology stocks account for nearly 30% of the S&P 500's total value, but the rise of both hyped stocks and the broader market was more extreme during the dot-com era. Historically, only a few stocks have generated most of the stock market's value creation in the US and internationally.
  • Five Lessons From 2023 — The total market value of the S&P 500's 500 companies rose $8tn, or 24.2%, but excluding seven large technology stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — the gain was $3tn, or 11.7%. Those seven account for 52% of the index's increase in market value.

AI Summary. The US has roughly 2.7m more retirees than predicted by a Federal Reserve Bank of St. Louis model, with the number of retirees reaching a post-pandemic record. Financial market performance appears to have played a role, as stocks rebounded 24% and home prices rose across most US metro areas, bolstering older Americans' wealth.

Alexandre Tanzi Bloomberg
Date Posted:

Retirements are rising again in line with American equity markets. According to @mfariacastro, the US has seen 2.7mm “excess” retirements.

Are rising stock and home prices pushing more Americans into retirement?

Core argument: The US has roughly 2.7 million more retirees than predicted by a model built by St. Louis Fed economist Miguel Faria-e-Castro, with the number of retirees reaching a post-pandemic record in December.

Economists long expected the share of retirees in the population to soar as baby boomers aged. Covid-19 then caused the number to spike well beyond expectations, a surge dubbed the “Great Retirement Boom.” But just as they seemed to be coming back down, the numbers surged again in recent months, reaching a post-pandemic record in December. The US now has around 2.7 million more retirees than predicted in a model designed by Miguel Faria-e-Castro, an economist at the Federal Reserve Bank of St. Louis. Financial market performance looks to have played a role. The gap in the model appeared to be closing earlier last year following a 19% drop in the S&P 500 in 2022. But in 2023 the index rebounded, jumping 24%, with most of the gain coming in the fourth quarter. On top of that housing across the vast majority of US metro areas continued to rise last quarter, bolstering the wealth of older Americans.

Takeaways by Macro Roundup® AI

  1. The US has roughly 2.7 million more retirees than predicted by a model built by St. Louis Fed economist Miguel Faria-e-Castro, with the number of retirees reaching a post-pandemic record in December.
  2. The gap in Faria-e-Castro's model appeared to be closing after the S&P 500 fell 19% in 2022, but the index rebounded 24% in 2023, with most of that gain in the fourth quarter.
  3. Housing prices across the vast majority of US metro areas continued to rise in the most recent quarter, bolstering the wealth of older Americans.

Related Articles:

  • Excess Retirements Continue Despite Ebbing COVID-19 Pandemic — The share of U.S. adults who are retired rose above its predicted trend during the COVID-19 pandemic, with excess retirees peaking at an estimated 2.95m and standing at roughly 2.4m thereafter. The authors suggest these excess retirements may be contributing to continued labor market tightness and a low unemployment rate.
  • Pandemic Labor Force Participation and Net Worth Fluctuations — The shortfall in U.S. labor force participation relative to its pre-pandemic peak is attributed mostly to a decline in participation among workers older than 55. The authors estimate that wealth effects from rising net worth can explain between 20% and 36% of the 3.3m excess retirements over the full period studied.
  • Retirements, Net Worth, and the Fall and Rise of Labor Force Participation — Households aged 55–74 lost an average of over $100,000 in net worth amid falling asset returns, reversing part of their earlier gains, reflecting their large holdings of stocks and bonds. The authors estimate this decline in asset values may have drawn an extra 170,000 people aged 51–65 back into the labor force.

AI Summary. China's number of workers per retiree fell from 10 in 2000 to 5 in 2024 and is projected to fall to 3 by 2034, matching the current US level.

Torsten Sløk, Jyoti Agarwal, and Rajvi Shah Apollo
Date Posted:

A Torsten Sløk chart shows the number of workers per retiree in China has fallen from 10 in 2000 to 5 in 2024. By 2034, this is projected to fall to 3, the current level in the US.

Related Articles:

  • Can China Catch Up with Greece? — Declining contributions from labor and capital are projected to hold China's income growth below 4% unless total factor productivity growth accelerates, which the authors argue is unlikely given that China's productivity growth has already averaged 1.8% since 2009. Only five of the 43 countries that previously reached China's income level sustained that pace over the following 13 years.
  • A Brighter Demographic Story for China — China's annual college graduates rose from about 1m at the turn of the century, roughly 6% of the age cohort, to 11.6m, about 63% of the cohort, with over 40% studying science, technology, engineering, or math, compared with 18% in the US, 35% in Germany, and 26% across the OECD.
  • China Economy Memo: Tempest in a Teapot or Crisis A-Brewing? — The authors argue China is heading into a protracted debt crisis in which about 40% of local government financing vehicles default, hitting regional banks most exposed to such lending. They estimate total losses for these creditors at roughly $5tn, or about 30% of China's GDP.