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, February 14, 2024

AI Summary. A proposed mathematical approach to choosing a spouse starts with a wide "calibration" pool of suitable candidates, dating a third of them at random without marrying any, to set a standard. In the evaluation phase, you marry the first person who exceeds that standard, or the last candidate if none does.

Justin Rowlatt BBC
Date Posted:

Happy Valentine’s Day! @EdwardConard explains the optimal process for finding love, “sequential selection, no turning back” to the @BBCWorld.

Happy Valentine’s Day! @EdwardConard explains the optimal process for finding love, “sequential selection, no...

How can a mathematical rule guide choosing a spouse?

Core argument: Conard's mate-selection formula begins with a "calibration" phase in which a person dates roughly a third of a pool of promising candidates chosen at random, marrying none of them and treating the best among them as the benchmark.

You start off by "calibrating" your choice. That means meeting as many suitable partners as possible. Cast your net wide, he urges, but initially you must forget about lust and even love: "That's evolution trying to get us to have babies," cautions Mr Conard. You won't date anyone now, you are just gathering people who might make the grade. There probably won't be that many, maybe a handful or two. Once you've got a set of promising candidates, you move to phase two. You're going to date a third of this subset, choosing them pretty much at random. You won't marry any of these people, according to his rules, so be prepared to be hard-hearted, moving on however attractive a potential partner seems. The most suitable person in this period "calibrates" your choice, setting the standard for the next stage in the process. What follows is what Mr Conard calls the "evaluation" period: this is when you actually choose your future spouse. Once again, you've got to drop potential partners like a stone if you can't resolve problems fairly easily. "You have to be ruthless," he insists. "If you are not highly confident that that person is a person you can be successfully married to… you have to get rid of them." Here's Mr Conard's key rule: "When you find someone better than the best person in the calibration period, you marry them. And if you haven't found anyone by the end, you marry the last person."

Takeaways by Macro Roundup® AI

  1. Conard's mate-selection formula begins with a "calibration" phase in which a person dates roughly a third of a pool of promising candidates chosen at random, marrying none of them and treating the best among them as the benchmark.
  2. In Conard's "evaluation" period, a person marries the first candidate who surpasses the best partner from the calibration phase, and marries the last person encountered if no one surpasses that standard.
  3. Conard urges casting a wide net while setting aside lust and love during initial screening, calling those impulses "evolution trying to get us to have babies," and insists on being "ruthless" in dropping partners whose problems cannot be resolved easily.

Related Articles:

  • Intermarriage in America Post-Loving v. Virginia — US interracial marriage rates showed no decline despite heightened public discourse about racial tension, a metric where increased racial tension would be expected to register. The author argues America's ethnoracial composition is more mixed than it has ever been, resembling a Latin American country more than a European one.
  • Fortunate Families? The Effects of Wealth on Marriage and Fertility — Using lottery winners, the authors estimate that wealth windfalls raise the short- and medium-run probability of marriage, an effect driven by male winners. The estimated average effect on marriage dissolution is not statistically distinguishable from zero, but for married women a 1M-SEK windfall nearly doubles the short-run divorce rate, with the effect fading over the long run.
  • China’s Collapsing Birth and Marriage Rates Reflect a People’s Deep Pessimism — China recorded about 9.6m births, roughly half the 17.9m recorded six years earlier, and millions of young people have joined movements expressing alienation from work ("lying flat") and from Chinese society itself ("let it rot"). A viral video of a man telling pandemic enforcers "we are the last generation" spread the despairing hashtag #Lastgeneration.

AI Summary. A survey of 552 heterosexual college students found that men paid for all or most first dates about 90% of the time, women about 2%, with costs split around 8% of the time. The authors report that traditional or progressive views on gender roles made little difference to these expectations.

Santul Nerkar New York Times
Date Posted:

Tonight American men will likely be reaching for the check. According to a 2023 survey of heterosexual college students, men paid for dates 90% of the time, couples split the check 8% of the time and women picked up the check 2% of the time.

Tonight American men will likely be reaching for the check. According to a 2023 survey of heterosexual college students, men...

Do views on gender roles change who pays for dates?

Core argument: In Dr. Shanhong Luo's survey of 552 heterosexual college students, published in Psychological Reports in 2023, young men paid for all or most first dates about 90% of the time, women about 2%, and couples split roughly 8%.

In a paper published in 2023 in Psychological Reports, a peer-reviewed journal, Dr. Shanhong Luo surveyed 552 heterosexual college students and asked them whether they expected men or women to pay for dates — and whether they, as a man or a woman, typically paid more. The researchers found that young men paid for all or most of the dates around 90% of the time, while women paid only about 2% (they split around 8% of the time). On subsequent dates, splitting the check was more common, though men still paid a majority of the time while women rarely did. Nearly 80% of men expected that they would pay on the first date, while just over half of women (55%) expected men to pay. Surprisingly, views on gender norms didn’t make much of a difference: On average, both men and women in the sample expected the man to pay, whether they had more traditional views of gender roles or more progressive ones.

Takeaways by Macro Roundup® AI

  1. In Dr. Shanhong Luo's survey of 552 heterosexual college students, published in Psychological Reports in 2023, young men paid for all or most first dates about 90% of the time, women about 2%, and couples split roughly 8%.
  2. Nearly 80% of the men surveyed expected to pay on the first date, compared with 55% of women who expected the man to pay.
  3. Both men and women in the sample expected the man to pay on average, whether their views of gender roles were traditional or progressive, and splitting the check became more common on subsequent dates.

Related Articles:

  • Post-Pandemic Recovery for America’s Prime Age Labor Force: A Tale of Two Sexes — Prime-age women's labor force participation climbed about 5 points above its pre-pandemic level over a decade, while prime-age men's rose barely a point, only just regaining pre-pandemic levels. Despite economic expansion and labor shortages, work rates for prime-age American men are barely as high as at the trough of the severe Reagan-era recession.
  • Men’s Falling Labor Force Participation Across Generations — Each successive generation of prime-age men has shown higher rates of not participating in the labor force, with millennials starting at a higher level and declining more steeply into their mid-30s, a pattern driven by school enrollment. Given rising educational attainment, the authors suggest the sustained rise in male nonparticipation may slow, which could benefit economic growth.
  • Econ Focus: Melissa Kearney — The decline in marriage and the rise in children raised in one-parent homes have occurred predominantly outside the college-educated class, whose members continue to marry, often to each other, while earnings for adults without a college degree have stagnated or risen only slightly. These divergent family-structure trends mean household inequality has widened by more than earnings inequality alone would imply.

AI Summary. A “cost-of-loving index” built from the Economist Intelligence Unit's cost-of-living data ranks Shanghai as the world's most expensive city for a romantic night out, at roughly $600 for hotel drinks, a two-course meal, cinema, a taxi home and a bottle of wine. The underlying prices are gathered with expatriates and business travellers in mind rather than local residents.

Economist Staff The Economist
Date Posted:

According to @TheEconomist’s “cost of loving index,” a night out in NYC starting with drinks at a swanky hotel, a two-course meal and a movie, and a taxi home followed by a bottle of wine will set you back $567 dollars tonight.

Which city is the world's most expensive for a romantic night out?

Core argument: Shanghai ranks as the world's most expensive city for a date night, where couples might spend roughly $600, according to Economist Intelligence Unit data.

Using data from the latest cost-of-living index by the Economist Intelligence Unit, our sister company, we created our own “cost-of-loving index”. It ranks the world’s most expensive cities in which to go on a romantic night out: we start with drinks at a swanky hotel, followed by a lavish two-course meal and a trip to the cinema, a taxi home, and a nice bottle of wine to cap things off. (Before you swear off dating, remember that EIU gathers prices with expatriates and business travellers in mind, not local love birds grabbing a cheap bite.) Couples in Shanghai spend the most on a date night, according to EIU data. Residents there might expect to blow roughly $600 on our fancy evening.

Takeaways by Macro Roundup® AI

  1. Shanghai ranks as the world's most expensive city for a date night, where couples might spend roughly $600, according to Economist Intelligence Unit data.
  2. The Economist's "cost-of-loving index" prices a romantic evening as drinks at a swanky hotel, a lavish two-course meal, a cinema trip, a taxi home, and a bottle of wine.
  3. The Economist Intelligence Unit gathers its price data with expatriates and business travellers in mind, not local couples grabbing a cheap bite.

Related Articles:

  • Is There Really a Generational Difference in Identifying as Lesbian, Gay, or Bisexual? — General Social Survey data show that increases among young American adults appear in same-sex sexual behavior as well as in identification, with 20% reporting a same-sex partner versus 18.5% identifying as lesbian, gay, or bisexual. The increases are larger among 27- to 41-year-olds.
  • Online Daters Are Less Open-Minded Than Their Filters Suggest — Data from an online dating service covering 80,000 users across ten cities show women block 70% of potential matches versus 55% for men, largely by excluding shorter or younger users. Among both sexes, the 10% with the strictest filters like 11-13 percentage points fewer of their remaining candidates than the 10% with the broadest filters.

AI Summary. Applying the pre-pandemic peak labor force participation rate to the adult population implies about 3.73m "missing workers" and 3.27m "excess retirees" in the US economy. The authors estimate that wealth effects on retirement decisions among those aged 55 and over account for over 50% of the aggregate participation decline and more than 80% of excess retirements.

Miguel Faria-e-Castro and Samuel Jordan-Wood Federal Reserve Bank of St. Louis
Date Posted:

In December of 2022, the US LFP rate was 62.2%, 1.4pp under its pre-pandemic peak, driven by exits of workers >55. @mfariacastro @samajordanwood argue that a wealth effect explain 80% of “excess retirements” among older workers.

How much of the labor force participation decline reflects wealth-driven retirements?

Core argument: Applying the pre-pandemic peak labor force participation rate to the December 2022 civilian noninstitutional population aged 16 and over implies about 3.73 million "missing workers," while a statistical model of retirement trends implies 3.27 million "excess retirees.".

Applying the pre-pandemic peak LFPR to the level of the civilian noninstitutional population aged 16 and over as of December 2022 suggests that there were about 3.73 million “missing workers” in the US economy. Comparing actual retirements with those predicted by a statistical model that allows for such trends leads us to conclude that there were 3.27 million “excess retirees” in the US economy as of December 2022. In our baseline, most conservative exercise, we focus on people aged 55-70, whose retirement decision is plausibly more sensitive to wealth effects. We find that the predicted change in the LFPR for this group accounts for almost 30% of the drop in aggregate LFPR between 2020 and 2021. If we expand the analysis to all those 55 and older, we can explain over 50% of the drop in aggregate LFPR over the same period. In terms of “excess retirements,” we can explain close to half of the observed excess retirements by considering only the 55-70 age group and close to more than 80% when focusing on all those 55 and older.

Takeaways by Macro Roundup® AI

  1. Applying the pre-pandemic peak labor force participation rate to the December 2022 civilian noninstitutional population aged 16 and over implies about 3.73 million "missing workers," while a statistical model of retirement trends implies 3.27 million "excess retirees.".
  2. Predicted changes in labor force participation for those aged 55–70, whose retirement decisions are plausibly more sensitive to wealth effects, account for almost 30% of the aggregate LFPR drop between 2020 and 2021.
  3. Expanding the analysis to all those aged 55 and older explains over 50% of the 2020–2021 aggregate LFPR decline and more than 80% of observed excess retirements, versus close to half for the 55–70 group.

Related Articles:

  • Another ‘Great Retirement’ Wave Hits the US After Stocks Rally — 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.
  • 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. Florida homeowners paid about $6,000 a year for insurance on average, roughly triple what they paid in 2019 and compared with about $1,700 for the average US homeowner. Insurers and state regulators attribute the increases to widespread lawsuits and fraud, and a Category 5 hurricane led some insurers to exit the state or limit new policies.

Michael Sasso Bloomberg
Date Posted:

Housing prices are falling in southwest Florida as higher insurance costs start to bite; the mean Florida homeowners insurance premium has tripled since 2019 to $6,000/year.

Are rising home insurance costs deterring homebuyers in hurricane-prone states?

Core argument: Florida homeowners paid an average of about $6,000 for insurance last year, roughly triple their 2019 cost, while the average US homeowner paid about $1,700 in 2023, according to the Insurance Information Institute.

Homeowners policies across Florida started soaring in 2020 because of what insurers and state regulators attributed to rampant lawsuits and fraud. Rates in the state climbed as much as 33% annually, then shot up another 42% last year in the aftermath of Hurricane Ian, according to the industry-funded Insurance Information Institute. Ian, a Category 5 storm that was the third-costliest in US history, led some insurers to pull out of the state or limit new policies. Floridians paid $6,000 on average for insurance last year, about triple what they paid in 2019. By comparison, the average US homeowner paid about $1,700 in 2023, the III said. In Fort Myers, where hundreds of homes and businesses were destroyed by Ian, “we’re seeing anywhere from a 50-to-100% increase in spending depending on the age of the home,” said Marlissa Gervasoni, head of that area’s Realtors board.

Takeaways by Macro Roundup® AI

  1. Florida homeowners paid an average of about $6,000 for insurance last year, roughly triple their 2019 cost, while the average US homeowner paid about $1,700 in 2023, according to the Insurance Information Institute.
  2. Florida homeowners policy rates climbed as much as 33% annually beginning in 2020, which insurers and state regulators attributed to rampant lawsuits and fraud, then rose another 42% last year in the aftermath of Hurricane Ian.
  3. Hurricane Ian, a Category 5 storm and the third-costliest in US history, led some insurers to pull out of Florida or limit new policies, and Fort Myers Realtors board head Marlissa Gervasoni reports 50-to-100% increases in spending depending on a home's age.

Related Articles:

  • The Uninsurable World: What Climate Change Is Costing Homeowners — Global insurance losses from natural catastrophes have topped $100bn for four straight years, a level once considered the mark of an exceptionally bad year, and US insurers have repriced risk with significant premium increases. Reinsurer Swiss Re predicts a growing number of areas where buying insurance becomes uneconomical.
  • How a Small Group of Firms Changed the Math for Insuring Against Natural Disasters — Reinsurance prices rose as much as 40% year over year, according to a report by brokerage Gallagher Re, prompting insurers to change where and what they cover. State Farm and Allstate cited reinsurance market conditions and costs in curtailing some California business, and agricultural reinsurers announced exits from Iowa.
  • Critical 1.5C Threshold Breached Over 12-Month Period for First Time — 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.

AI Summary. Home prices in Las Vegas, Phoenix, Orlando, and Tampa now stand at 6 to 7x incomes, exceeding the ratios reached at the peak of the early 2000s housing bubble in each of those metro areas. All four shifted from affordable, to unaffordable, back to affordable, and into unaffordable territory again.

Jeremy Horpedahl Economist Writing Every Day
Date Posted:

The recent housing market boom has driven median home values in four “housing bubble” cities to over 6 times median income, higher than the “bubble” era peak. @jmhorp

Are home price-to-income ratios now higher than at the bubble's peak?

Core argument: Home prices in Las Vegas, Phoenix, Orlando and Tampa stand at 6 to 7 times incomes, higher than the peak price-to-income ratios those four metros reached during the 2003–2007 housing bubble.

The old “zone of affordability” is largely gone. Let's consider four cities that are generally considered the epicenter of the early 2000s “housing bubble” in the US [Las Vegas, Phoenix, Orlando and Tampa]. These MSAs went from affordable in 1999, to unaffordable in 2003-2007, then back to affordability for a few years. Now they are clearly back to unaffordable territory, with home prices at 6 or even 7 times incomes. For each of these four cities, that’s even higher than the peak of “housing bubble.”

Takeaways by Macro Roundup® AI

  1. Home prices in Las Vegas, Phoenix, Orlando and Tampa stand at 6 to 7 times incomes, higher than the peak price-to-income ratios those four metros reached during the 2003–2007 housing bubble.
  2. Las Vegas, Phoenix, Orlando and Tampa were affordable in 1999, unaffordable from 2003 to 2007, affordable again for a few years, and are now back in unaffordable territory.
  3. The old "zone of affordability" in the US housing market is largely gone, based on the four metros considered the epicenter of the early 2000s housing bubble.

Related Articles:

  • On The Move: West Side Story — The West's share of US population has flattened and appears to be falling, with relative housing affordability cited as a key part of the story. Metropolitan areas with median mortgage payments above the US average generally show negative or weakly positive population growth, and Pacific-state metros all have above-average mortgage payments.
  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.
  • Higher For Longer and The 2024 Housing Outlook — Sustained higher mortgage rates are expected to weigh most on housing turnover, since nearly all borrowers hold rates below market levels, discouraging moves; the authors project existing home sales of 3.8mn, the fewest annual sales since the early 1990s. Housing starts are projected to fall 4% to 1.34mn.

AI Summary. Violent crime in large US cities and some of the largest suburban counties fell 2.6% and homicides fell 10.4% after three straight years of increases, but both remained above pre-pandemic levels, according to the Major Cities Chiefs Association. Federal Bureau of Investigation data show a milder pattern because they also cover suburbs, small towns, and rural areas.

Justin Fox Bloomberg
Date Posted:

The uptick in violent crime associated with the pandemic is receding but homicide rates remain above pre-pandemic levels. @foxjust

Has falling violent crime returned big cities to pre-pandemic levels?

Core argument: Violent crime in big US cities and some of the largest suburban counties fell 2.6% in 2023 after three consecutive years of increases, with homicides down 10.4%, according to Major Cities Chiefs Association statistics.

Violent crime fell 2.6% in big US cities and a few of the largest suburban counties in 2023 after three consecutive years of increases, with homicides down 10.4%. But both remained higher than before the pandemic in 2019. That’s according to new statistics from the Major Cities Chiefs Association, which paint a somewhat different picture of the past few years than the crime data maintained by the Federal Bureau of Investigation. According to the FBI, total violent crime — homicide, rape, robbery, and aggravated assault — rose in 2020 but fell in 2021 and 2022, and if it falls at the 8.2% rate it did over the first nine months of 2023 (full-year FBI data won’t be available for a while yet), it will hit its lowest level relative to population since 1969. The difference is mainly because the pandemic crime wave was concentrated in big cities while the FBI data cover suburbs, small towns, and rural areas, too.

Takeaways by Macro Roundup® AI

  1. Violent crime in big US cities and some of the largest suburban counties fell 2.6% in 2023 after three consecutive years of increases, with homicides down 10.4%, according to Major Cities Chiefs Association statistics.
  2. Violent crime and homicides in those big cities and suburban counties remained higher in 2023 than in 2019, before the pandemic.
  3. FBI data show total violent crime rose in 2020 but fell in 2021 and 2022, and if it falls at the 8.2% rate recorded over the first nine months of 2023, it will reach its lowest level relative to population since 1969.

Related Articles:

  • The Collapse of Broken-Windows Policing in New York City, Los Angeles, and Washington, DC, 2013–22 — Arrests for minor "broken-windows" offenses—counted as misdemeanors, violations, and infractions per 100,000 residents—fell 74% in New York, 77% in Washington, DC, and 81% in Los Angeles over the period studied, declining steadily in New York and Los Angeles.
  • New York’s Subways Have Less Crime but More Violence — Major crime on New York's subways is on track to run 13.4% below 2019 levels, but ridership remains down about a third, so crime per rider is much higher this year than from 2006 through 2019. Property crime has not risen; violent incidents account for the increase.
  • Spotty Crime Data Make It Hard to Judge Public Safety — City-level violent crime statistics in the US are inconsistent and of questionable reliability, though at the national level Federal Bureau of Investigation data usually show trends similar to the Bureau of Justice Statistics' annual crime victimization surveys. In one year, however, the FBI data showed a decline in violent crime while the victimization survey showed a substantial increase.

AI Summary. The U.S. Navy has been firing Tomahawk land-attack cruise missiles faster than it can replace them, with opening-day strikes in Yemen expending more than 80 missiles against 30 targets. An entire year's purchase of 55 Tomahawks accounted for 68% of the precision munitions fired at the Houthis in a single day.

Mackenzie Eaglen The National Interest
Date Posted:

The US Navy has been depleting its Tomahawk stockpile by firing the missiles faster than it can replace them. On the first day of strikes in Yemen it used 80 missiles relative to the 55 procured in 2023. @MEaglen @AEI

Is the Navy firing cruise missiles faster than it can replace them?

Core argument: The U.S. Navy expended more than 80 Tomahawks against 30 targets in Yemen on opening day of strikes, exceeding its entire prior-year purchase of 55 Tomahawks.

While the Navy does have a large existing stockpile of Tomahawks to sustain its land-attack capability, it has recently been firing the missiles faster than it can replace them. According to the Navy, opening day strikes alone expended more than 80 Tomahawks to hit 30 targets within Yemen. Last year’s entire Tomahawk purchase of 55 missiles accounted for 68% of the precision munitions fired at the Houthis in one day. This is an unsustainable rate of expenditure. However, this represents adherence to, rather than deviation from, the norm. Prior strikes in Syria expended fifty-nine Tomahawks in 2017 and an additional sixty-six in 2018. The Navy bought just 100 Tomahawks in 2018 and then zero Tomahawks in 2019—failing to offset the expenditure rate of the Syria strikes.

Takeaways by Macro Roundup® AI

  1. The U.S. Navy expended more than 80 Tomahawks against 30 targets in Yemen on opening day of strikes, exceeding its entire prior-year purchase of 55 Tomahawks.
  2. Last year's full Tomahawk buy of 55 missiles equaled 68% of the precision munitions the Navy fired at the Houthis in a single day, an unsustainable rate of expenditure.
  3. Strikes in Syria consumed 59 Tomahawks in 2017 and 66 in 2018, while the Navy purchased 100 Tomahawks in 2018 and none in 2019, failing to offset that expenditure rate.

Related Articles:

  • The West Badly Needs More Missiles—But The Wait To Buy Them Is Years Long — Each Nasams air-defense system, made by Norway's Kongsberg, takes two years to build and new buyers face a multiyear backlog, prompting the plant to run 24-hour, seven-day shifts. The defense industry faces a prolonged labor crunch, struggling to find workers with niche skills willing to undergo lengthy security checks.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.
  • Japan Raises Military Spending To Counter China With More Missiles and Ships — Japan's defense budget rises 13% over the prior fiscal year's planned spending, part of a five-year, ¥43tn plan to lift military spending to roughly 2% of gross domestic product, versus the roughly 1% cap maintained since the 1960s. Purchases include Aegis-equipped destroyers and Tomahawk cruise missiles, with the largest share directed at the Self-Defense Forces' sustainability and resilience.

Thursday, February 15, 2024

AI Summary. The Federal Reserve describes the US as on an unsustainable fiscal path, with federal debt up from 70% of GDP after the financial crisis to nearly 100% and spending at 23% of GDP versus 19% before. Heavy tax increases on top earners are estimated to yield under 2% of GDP.

Edward Conard Wall Street Journal
Date Posted:

.@EdwardConard argues that “Americans are wisely alarmed” about the economy with Federal deficits running at 6% of GDP deep in the business cycle. “Without greatly accelerating productivity growth, this is reckless driving.”

.@EdwardConard argues that “Americans are wisely alarmed” about the economy with Federal deficits running at 6% of GDP deep...

Can higher taxes on top earners close the fiscal gap?

Core argument: The U.S. is pumping fiscal stimulus equal to 6% of GDP and a quarter of all government spending into the economy well into the business cycle, on what Federal Reserve Chairman Jerome Powell calls "an unsustainable fiscal path.".

America is on what Federal Reserve Chairman Jerome Powell calls “an unsustainable fiscal path.” Well into the business cycle, we are pumping fiscal stimulus equal to an unprecedented 6% of GDP and a quarter of all government spending into the economy, with no end in sight. Federal debt has risen from 70% of GDP after the financial crisis to nearly 100% today, following $5 trillion of pandemic spending to close what was likely a $1 trillion shortfall. Tax revenues as a share of GDP are projected to remain above their 50-year average, but spending has grown to a historically high 23% of GDP from 19% before the financial crisis. Only half that increase is driven by retiring baby boomers, whose growth is expected to increase spending by another 2% of GDP over 10 years. A political resolution doesn’t seem likely. Retirees have pitted Democrats against Republicans to avoid benefit cuts. Policy makers are unlikely to raise middle-class taxes—they are engineering cuts by expanding the child tax credit. Heavy tax increases on the highest earners are estimated to contribute less than 2% of GDP. Without greatly accelerating productivity growth, this is reckless driving. Americans are wisely alarmed.

Takeaways by Macro Roundup® AI

  1. The U.S. is pumping fiscal stimulus equal to 6% of GDP and a quarter of all government spending into the economy well into the business cycle, on what Federal Reserve Chairman Jerome Powell calls "an unsustainable fiscal path.".
  2. Federal debt has risen from 70% of GDP after the financial crisis to nearly 100% today, following $5 trillion of pandemic spending to close what was likely a $1 trillion shortfall.
  3. Federal spending has grown to 23% of GDP from 19% before the financial crisis, with only half that increase driven by retiring baby boomers, whose growth is expected to add another 2% of GDP over 10 years.

Related Articles:

  • Sea Change — The rising US fiscal deficit is attributed largely to a secular increase in spending — driven by retirement-related outlays and interest expense that are politically difficult to change — rather than to revenue changes. The author argues the resulting growth in Treasury supply will weigh on long-dated interest rates while adding upward pressure on consumer and asset prices.
  • Interest Costs Will Leapfrog Medicare and Defense This Year — 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.
  • 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.

AI Summary. The Congressional Budget Office projects federal deficits will grow from $1.7tn to $2.6tn and spending from $6.4tn to $10.1tn over a decade, with net interest costs more than doubling from $870bn to $1.6tn. Health care (35%), Social Security (28%), and interest (21%) account for 84% of projected spending growth.

CRFB Staff Committee for a Responsible Federal Budget
Date Posted:

Transfer payments such as health care and retirement spending, and interest costs make up 84% of the projected spending growth over the next decade. @BudgetHawks

What will drive federal spending growth over the next decade?

Core argument: The Congressional Budget Office projects 84% of the increase in nominal federal spending this decade will come from health care (35%, $1.3 trillion), Social Security (28%, $1.0 trillion), and interest (21%, $758 billion), with the remaining 16% split across defense, nondefense discretionary, and other mandatory programs.

Budget deficits are projected to grow from $1.7 trillion in Fiscal Year (FY) 2023 to $2.6 trillion by 2034 according to the Congressional Budget Office’s latest projections. Nominal spending will rise from $6.4 trillion this year to $10.1 trillion by FY 2034. Net interest costs will more than double from $870 billion this year to $1.6 trillion by 2034, after costs nearly doubled between 2020 and 2023. Interest on the debt is the fastest growing part of the budget and will be the second largest government expenditure this year, surpassing both defense and Medicare. Of the projected increase in nominal spending this decade, interest alone will make up 21 percent ($758 billion), Social Security will make up 28 percent ($1.0 trillion), and health care will make up 35 percent ($1.3 trillion). The remaining 16% is split between defense, nondefense discretionary spending, and all other mandatory spending such as the Supplemental Nutrition Assistance Program, Supplemental Security Income, and veterans' benefits.

Takeaways by Macro Roundup® AI

  1. The Congressional Budget Office projects 84% of the increase in nominal federal spending this decade will come from health care (35%, $1.3 trillion), Social Security (28%, $1.0 trillion), and interest (21%, $758 billion), with the remaining 16% split across defense, nondefense discretionary, and other mandatory programs.
  2. Net interest costs are projected to more than double from $870 billion this year to $1.6 trillion by FY 2034, after nearly doubling between 2020 and 2023; interest is the fastest growing part of the budget.
  3. The Congressional Budget Office projects deficits will grow from $1.7 trillion in FY 2023 to $2.6 trillion by 2034 as nominal spending rises from $6.4 trillion to $10.1 trillion, with interest the second largest government expenditure this year, surpassing defense and Medicare.

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  • 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.
  • 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.
  • The Limits of Taxing the Rich — Stabilizing US federal debt at 100% of GDP would require non-interest savings starting at 2% of GDP and rising to 5% of GDP over three decades, assuming no new spending, tax cuts, or crises. Taxing the rich cannot close more than a small fraction of this gap.

AI Summary. Labor productivity, measured as output per hour worked, rose 0.8% quarter over quarter and 2.7% year over year, compared with average paces of 0.3% and 1.3% in the decade before the pandemic. Productivity growth is volatile and can turn negative even outside recessions.

John O'Trakoun Federal Reserve Bank of Richmond
Date Posted:

From 2010-2019 labor productivity growth averaged 1.3%/year. In 2023 labor productivity grew by 2.7% helping to dampen the inflationary impact of strong wage growth. @RichFedResearch

Is labor productivity growth running faster than before the pandemic?

Core argument: Labor productivity, measured as output per hour worked, rose 0.8% quarter over quarter in the fourth quarter and 2.7% year over year.

Labor productivity (measured as output per hour worked) rose 0.8% quarter over quarter in the fourth quarter and is up 2.7% year over year, as seen in Figure 2 below. This growth in productivity has been robust compared to recent history. In the decade before the pandemic (2010-2019), productivity rose at average paces of 0.3% quarter over quarter and 1.3% year over year. Figure 2 also shows that productivity growth is volatile and can swing from positive to negative even in nonrecessionary quarters. Nevertheless, the past three quarters have seen robust productivity growth.

Takeaways by Macro Roundup® AI

  1. Labor productivity, measured as output per hour worked, rose 0.8% quarter over quarter in the fourth quarter and 2.7% year over year.
  2. In the decade before the pandemic, 2010–2019, productivity rose at average paces of 0.3% quarter over quarter and 1.3% year over year, below the fourth quarter's pace.
  3. Productivity growth is volatile and can swing from positive to negative even in nonrecessionary quarters, though the past three quarters have seen robust growth.

Related Articles:

AI Summary. Quarterly growth in the Employment Cost Index has slowed continuously and now runs roughly 1 percentage point faster on an annualized basis than just before the pandemic, while hourly private-sector pay growth has stayed stable. Despite the normalization of job-market churn, both measures of pay gains remain much faster than pre-pandemic.

Matt Klein The Overshoot
Date Posted:

While the quit rate is under the pre-pandemic level, hourly private-sector pay growth remains robust and may be accelerating. This suggests Fed cuts will not be forthcoming. @M_C_Klein

Is pay growth still running faster than before the pandemic?

Core argument: Quarterly growth in the Employment Cost Index has slowed continuously and now runs only about 1 percentage point faster in annualized terms than immediately before the pandemic, with an even narrower gap relative to 2006–2007.

Quarterly growth in the Employment Cost Index (ECI) has been slowing continuously, and is now rising only about 1 percentage point faster (annualized) than immediately before the pandemic. Relative to 2006-2007, the gap is even narrower. On the other side is the remarkably stable growth of hourly private-sector pay over the past 18 months, which if anything has accelerated in recent months. Zooming out, the growth rate in nonmanagerial pay—excluding leisure, hospitality, and retail—has tended to move in line with the Atlanta Fed’s measure of median 12-month changes in hourly pay among continously-employed workers. Despite the normalization of job market churn since the end of 2021, which was supposed to remove much of the upward pressure on wage growth, both measures of pay gains are still much faster than before the pandemic.

Takeaways by Macro Roundup® AI

  1. Quarterly growth in the Employment Cost Index has slowed continuously and now runs only about 1 percentage point faster in annualized terms than immediately before the pandemic, with an even narrower gap relative to 2006–2007.
  2. Growth in hourly private-sector pay has been remarkably stable over the past 18 months and, if anything, has accelerated in recent months, contrasting with the Employment Cost Index slowdown.
  3. Nonmanagerial pay growth excluding leisure, hospitality, and retail has tended to track the Atlanta Fed's measure of median 12-month pay changes among continuously employed workers, and both remain much faster than before the pandemic despite job-market churn normalizing since the end of 2021.

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  • Wages Are Rising Faster than We Thought — Core wage growth is running slightly faster than in the late 1990s and 2005-2007, about 2-3 percentage points faster than before the pandemic. The author argues a steady state near 5% annual wage growth need not be inflationary if workers save more or productivity gains let businesses expand output to meet demand.
  • Is Post-Pandemic Wage Growth Fueling Inflation? — A model forecasts no statistically significant additional wage pressure on prices if year-over-year employment cost growth runs between 3.78% and 4.25%, a range above the Federal Reserve's 2% inflation target plus average productivity growth. Because inflation has outpaced productivity-adjusted wages, wages have room to catch up without adding inflation.
  • The Labor Market Is Primed For a Soft Landing — Elevated wage growth can threaten a strong labor market if it raises inflation concerns and leads the Federal Reserve to hold monetary policy tighter, though productivity growth eases that concern. After wage growth exceeded a sustainable benchmark of productivity growth plus the Federal Reserve's 2% inflation target, rebounding productivity and moderating wage growth have narrowed the gap.

AI Summary. China's producers of wafer-fabrication tools have increased their domestic market share from 4% to an estimated 14%, according to broker Bernstein. Even if Huawei and SMIC reach 5nm chip production, they would remain behind Samsung and TSMC, which have mass-produced 3nm chips.

Economist Staff The Economist
Date Posted:

China’s semiconductor “self-reliance” campaign is gaining steam. Domestic producers of wafer-fabrication tools had a 14% market share in 2023 up from 4% in 2019 according to Bernstein. @TheEconomist

Is China reducing its reliance on foreign chipmaking technology?

Core argument: Chinese producers of wafer-fabrication tools have raised their domestic market share from 4% in 2019 to an estimated 14% last year, according to Bernstein, a broker.

Even if Huawei and SMIC eventually succeed at producing 5nm chips, they will remain well behind Samsung and TSMC, both of which began mass-producing 3nm chips as far back as 2022. Look away from the bleeding edge, however, and China is steadily chipping away at its reliance on foreign semiconductor technology. Huawei, which was burned in 2019 by sanctions that cut off its access to American technology, has been cultivating China’s wider chipmaking ecosystem. The domestic market share of Chinese producers of wafer-fabrication tools has risen from 4% in 2019 to an estimated 14% last year, according to Bernstein, a broker.

Takeaways by Macro Roundup® AI

  1. Chinese producers of wafer-fabrication tools have raised their domestic market share from 4% in 2019 to an estimated 14% last year, according to Bernstein, a broker.
  2. Even if Huawei and SMIC eventually produce 5nm chips, they will remain well behind Samsung and TSMC, which began mass-producing 3nm chips as far back as 2022.
  3. Huawei, cut off from American technology by sanctions in 2019, has been cultivating China's wider chipmaking ecosystem.

Related Articles:

  • Assessing China’s Efforts to Increase Self-Reliance — China's import growth has been notably weaker than export growth over the past five years, and the correlation between GDP growth and import growth has run below that between GDP growth and export growth for about a decade, which could be an early sign of increasing self-reliance. China is reducing reliance on imported inputs while maintaining reliance on foreign demand.
  • China AI & Semiconductors Rise: US Sanctions Have Failed — China's Kirin 9000S is a better-designed, leading-edge chip than the West realizes, developed without access to extreme ultraviolet lithography or cutting-edge US intellectual property, indicating existing export controls have not worked. The authors argue only decisive, full-scale measures—not half measures—could prevent China from mass-manufacturing chips needed for high-end military applications.
  • Raimondo Says Commerce Needs More Money to Halt China Chip Drive — The US Commerce Department says its roughly $200m budget is inadequate to enforce semiconductor export controls aimed at limiting China's access to artificial intelligence chips, and has called for greater funding. It has warned that chips redesigned to fall just below existing thresholds will themselves be restricted, arguing national security outweighs chipmakers' short-term revenue.