Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
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  • “…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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, May 15, 2024

AI Summary. The US is raising tariffs on Chinese semiconductors, batteries, solar cells, critical minerals, steel, aluminum, and electric vehicles, affecting a projected $18bn in current annual imports, while leaving prior tariffs in place. Semiconductor tariffs double from 25% to 50%, electric vehicle tariffs rise from 27.5% to 102.5%, and certain critical minerals and ship-to-shore cranes face new 25% rates.

Josh Wingrove Bloomberg
Date Posted:

The Biden administration is raising tariffs on strategic goods doubling the tariff rate on semiconductors from 25% to 50% by 2025. Tariffs on EVs will rise to 102.5% from 27.5% to protect US automakers from low-cost Chinese competition.

How much in Chinese imports do the new tariffs cover?

Core argument: Biden's tariff increases on Chinese semiconductors, batteries, solar cells, critical minerals, steel, aluminum, and electric vehicles are projected to affect roughly $18 billion in current annual imports, with none of Trump's existing tariffs reduced.

Biden is raising levies on semiconductors, batteries, solar cells, and critical minerals, in addition to previously reported increases on steel, aluminum, and electric vehicles. The changes are projected to affect around $18 billion in current annual imports. None of Trump’s tariffs will be reduced. Biden will ratchet up rates on goods the US struggled to import during the coronavirus pandemic, and for industries, like chips and green energy, that he’s sought to bolster since he took office. The tariff rate on semiconductors doubles from 25% to 50% by 2025. The levies aim to counter China’s rush into so-called legacy chips, older-generation components still essential to the global economy. Certain critical minerals will see a new 25% tariff this year, while natural graphite and permanent magnets will be hit with that rate in 2026. Ship-to-shore cranes also face a new 25% tariff this year. The electric vehicle tariff takes effect this year, with a final tariff rate of 102.5%, up from 27.5% now. And tariffs on certain steel and aluminum from China — currently facing a 0% or 7.5% tariff — will rise to 25% this year.

Takeaways by Macro Roundup® AI

  1. Biden's tariff increases on Chinese semiconductors, batteries, solar cells, critical minerals, steel, aluminum, and electric vehicles are projected to affect roughly $18 billion in current annual imports, with none of Trump's existing tariffs reduced.
  2. The US tariff rate on Chinese semiconductors doubles from 25% to 50% by 2025, aimed at countering China's rush into legacy chips, older-generation components still essential to the global economy.
  3. US tariffs on Chinese electric vehicles rise to 102.5% from 27.5%, certain Chinese steel and aluminum move from 0% or 7.5% to 25%, and ship-to-shore cranes face a new 25% rate.

Related Articles:

  • China’s Plan to Reshape World Trade On Its Own Terms — Countries covered by China's free trade agreement network took about 38% of its merchandise exports, roughly $1.3tn out of some $3.43tn shipped worldwide over a 12-month period. That free trade footprint exceeds the total worldwide exports of the Netherlands or Japan, the world's fourth- and fifth-biggest exporters.
  • The World Is In For Another China Shock — Weak demand and overcapacity have pushed Chinese producer prices down for 16 months, and that disinflationary impulse is spreading abroad: US import prices from China fell 2.9% year over year while prices of imports from the European Union, Japan, and Mexico rose. Western protectionism could redirect the deflationary impact toward poorer markets.
  • As Long As The US Is Outlet For China’s Surplus Rumors Of Decoupling Are Overstated — With Europe's current account near balance and Japan back in surplus, the question of which economy absorbs China's current account surplus remains open, and the US external deficit exceeds what G-7 countries can finance. The global economy stays relatively integrated despite frictions, even as global politics is more fractured.

AI Summary. A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.

Greg Ip Wall Street Journal
Date Posted:
Is Database:
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Robert Lighthizer argues that a universal tariff would better manage America’s chronic deficits than either capital controls or Warren Buffett’s proposed import certificates. “Every country should be exporting in order to import.” @greg_ip

Are chronic trade surpluses evidence of protectionism requiring tariffs?

Core argument: Lighthizer backs Trump's proposed universal 10% tariff plus a higher tariff on China, preferring tariffs for their simplicity, flexibility, and familiarity over alternative mechanisms for balancing trade.

“What we really need is balanced trade. Not balanced every year and with every country, but over time and globally. Every country should be exporting in order to import. If you’re running chronic surpluses for decades, then you are by definition a protectionist. You’re engaging in industrial policy to help yourself, you’re transferring resources from your consumers to your producers, you’re trying to…acquire other countries’ assets." Lighthizer backs Trump’s proposed universal tariff of 10% plus a higher tariff on China. There are two other possibilities. Warren Buffett proposes that imports require a certificate issued only with a corresponding export. The other is a “market access charge” on any country investing the proceeds of its trade surplus into U.S. assets such as Treasury bills. This amounts to reimposing capital controls, controls and could destabilize the Treasury market. Open to both ideas, Lighthizer prefers the simplicity, flexibility, and familiarity of tariffs.

Takeaways by Macro Roundup® AI

  1. Lighthizer backs Trump's proposed universal 10% tariff plus a higher tariff on China, preferring tariffs for their simplicity, flexibility, and familiarity over alternative mechanisms for balancing trade.
  2. Lighthizer argues that countries running chronic trade surpluses for decades are by definition protectionist, transferring resources from their consumers to their producers and seeking to acquire other countries' assets.
  3. Two alternatives to tariffs are Warren Buffett's proposal requiring import certificates issued only with a corresponding export, and a "market access charge" on countries investing trade-surplus proceeds in U.S. assets such as Treasury bills, which amounts to reimposing capital controls.

Related Articles:

  • Can Trade Intervention Lead to Freer Trade? — China accounts for over 31% of global manufacturing but under 13% of global consumption, while the United States accounts for under 17% of manufacturing and nearly 27% of consumption. The author argues persistent surpluses reflect household subsidies to producers, and that the US could counter them with tariffs or taxes on capital inflows.
  • Chinese “Overcapacity” Is Not the Problem. Underconsumption Is. — Chinese households spend only 37% of national income on goods and services, the lowest share in the world, while employee compensation at Chinese nonfinancial corporations is about 44% of gross value added versus roughly 60% in the US, Europe, and Japan. Chinese manufacturers appear to be adding production capacity far faster than actual output.
  • A Second Dose of Trump On Trade Would Differ From The First — A second Trump administration would pair a 10 percentage point tariff increase on all US trading partners with a tariff of at least 60% on Chinese imports, with advisers arguing a broad import tax addresses America's persistent pattern of trade deficits rather than bilateral imbalances. Researchers estimate China's manufacturing goods surplus reached a record of almost 2% of world GDP.

AI Summary. The authors argue that a purely inflationary supply shock that raises workers' cost of living without changing their productivity gives wage-posting firms little reason to raise wages. Because few American workers quit into unemployment, firms set wages mainly to avoid losing employees to other firms, and a higher cost of living does not change that competition.

Jacob Weber Federal Reserve Bank of New York
Date Posted:

A model developed by @NewYork Fed researchers suggests that wage-posting firms have no incentive to raise wages in response to inflationary supply shocks since these shocks don’t increase the risk of employees being poached by other firms.

Do inflationary supply shocks lead firms to raise wages?

Core argument: The authors argue that wage-posting firms have little reason to raise wages after a "pure" inflationary supply shock that raises workers' cost of living without affecting their productivity.

There is little reason for wage-posting firms to change wages in response to a “pure” inflationary supply shock that raises workers’ cost of living without affecting their productivity. A wage-posting firm will thus raise wages [only] if it perceives a heightened need to defend itself from losing employees to other firms or to unemployment. Does an inflationary supply shock that raises workers’ cost of living heighten these concerns? We think not. In practice few American workers quit into unemployment, so firms primarily view other firms as their competition when posting wages. And if the cost of living is irrelevant to a worker choosing between wage offers at different firms, then an inflationary shock that raises the cost of living doesn’t make it any easier or harder for a higher-wage firm to poach workers than before.

Takeaways by Macro Roundup® AI

  1. The authors argue that wage-posting firms have little reason to raise wages after a "pure" inflationary supply shock that raises workers' cost of living without affecting their productivity.
  2. A wage-posting firm raises wages only when it perceives a heightened need to defend against losing employees to other firms or to unemployment, and the authors contend an inflationary cost-of-living shock does not heighten those concerns.
  3. Because few American workers quit into unemployment, firms primarily view other firms as competition when posting wages, and a cost-of-living shock leaves poaching by higher-wage firms no easier or harder than before.

Related Articles:

  • Has Pay Kept Up With Inflation? — All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.
  • Credit Bidenomics for Rising US Wages — Inflation-adjusted wages for US workers in the middle pay range, between the 40th and 60th percentiles, were 6.6% higher than before the pandemic, slightly above what 2015-19 trends would predict. The US is the only G7 country with substantial real wage gains, ranging elsewhere from a 0.2% rise in Canada to a 9% decline in Italy.
  • Are You Better Off Than You Were Four Years Ago? — Inflation-adjusted wages rose over the past four years, including when measured from just before the pandemic, at roughly the same pace as in the preceding years: about 3% cumulative growth adjusted by the consumer price index versus about 4% in 2015-2019, and about 5% growth adjusted by personal consumption prices.

AI Summary. Bank of America internal data indicate that Gen Z and Millennials account for the net population growth in metropolitan areas where growth is accelerating, most notably Columbus and Austin. In shrinking metro areas such as New York and Washington D.C., population is declining faster among older generations than younger ones.

David Michael Tinsley Bank of America
Date Posted:

According to @BankofAmerica internal data, net population outflows from cities in the Northeast and West are largely driven by Gen Z and Millennials, with Miami and Orlando also showing declines.

Are younger generations driving population growth in expanding metro areas?

Core argument: Gen Z and Millennials appear to be driving net population growth in metropolitan statistical areas where growth is accelerating, most notably Columbus and Austin, according to Bank of America internal data.

Generationally Gen Z and Millennials appear to be driving the net population growth in metropolitan statistical areas (MSAs) where this is accelerating, most notably in Columbus and Austin. Interestingly, though, many of the MSAs where populations are shrinking YoY are seeing some significant outflows of older generations (Traditionalists/Baby Boomers), as well as the younger generations. For example, in New York and Washington D.C., the populace is declining faster among these older generations, according to Bank of America internal data.

Takeaways by Macro Roundup® AI

  1. Gen Z and Millennials appear to be driving net population growth in metropolitan statistical areas where growth is accelerating, most notably Columbus and Austin, according to Bank of America internal data.
  2. Metropolitan statistical areas with year-over-year population declines are seeing significant outflows of Traditionalists and Baby Boomers as well as younger generations, according to Bank of America internal data.
  3. In New York and Washington D.C., population is declining faster among Traditionalists and Baby Boomers, according to Bank of America internal data.

Related Articles:

  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • Miami Sees Its First Population Drop in Decades — Miami-Dade County lost 79,535 residents to net migration to other parts of Florida and other states over a recent multiyear stretch, an analysis of U.S. Census Bureau data by the Brookings Institution found, and the county's population shrank despite partial offset from foreign immigration. Miami home prices rose 53%.
  • Southern Comforts — Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.

AI Summary. Insurers lost money on homeowners coverage in 18 states, up from 12 states five years earlier and eight a decade earlier, according to a New York Times analysis of financial data. In response, insurers are raising premiums by as much as 50% or more, cutting coverage, or exiting entire states.

Christopher Flavelle New York Times
Date Posted:

In 2023 insurers lost money on homeowners coverage in 18 states – more than 1/3 the country – up from 12 states five years ago and 8 states in 2013. In response, insurers are raising premiums by as much as 50% or more.

How are insurer losses on homeowners coverage affecting premiums and availability?

Core argument: Insurers lost money on homeowners coverage in 18 states in 2023, more than a third of the country, up from 12 states five years earlier and eight states in 2013, according to a New York Times analysis of financial data.

The insurance turmoil caused by climate change — which had been concentrated in Florida, California, and Louisiana — is fast becoming a contagion, spreading to states like Iowa, Arkansas, Ohio, Utah, and Washington. Even in the Northeast, where homeowners insurance was still generally profitable last year, the trends are worsening. In 2023, insurers lost money on homeowners coverage in 18 states, more than a third of the country, according to a New York Times analysis of newly available financial data. That’s up from 12 states five years ago, and eight states in 2013. The result is that insurance companies are raising premiums by as much as 50% or more, cutting back on coverage or leaving entire states altogether. Nationally, over the last decade, insurers paid out more in claims than they received in premiums, according to the ratings firm Moody’s, and those losses are increasing. Last year, storms, wildfires, and other disasters pushed 2.5mm American adults out of their homes, according to census data, including at least 830,000 people who were displaced for six months or longer.

Takeaways by Macro Roundup® AI

  1. Insurers lost money on homeowners coverage in 18 states in 2023, more than a third of the country, up from 12 states five years earlier and eight states in 2013, according to a New York Times analysis of financial data.
  2. Insurance turmoil once concentrated in Florida, California, and Louisiana is spreading to states including Iowa, Arkansas, Ohio, Utah, and Washington, with insurers raising premiums by as much as 50% or more, cutting back coverage, or leaving entire states.

Related Articles:

  • April Flowers, Not Showers — Bank of America internal payments data show average household property insurance payments up 23% relative to 2019, and average per-customer payments up 25%, with a three-month average year-over-year increase of 11%. The data cannot separate auto from home insurance payments.
  • A Hidden Crisis In US Housing — State-run "last resort" home insurance programs, which cover properties the private market won't, have more than doubled their market share since 2018, with liabilities passing $1tn; Florida's plan faces potential losses of $525bn and California's at least $290bn, six times its 2018 level. Of 36 such plans covering natural catastrophes, 21 do not explicitly detail how they would pay deficits.
  • As Texas Burns, Property Insurance Costs Soar — Rising property insurance premiums are attributed to climate-related damage, higher rebuilding costs, and costlier reinsurance protection for insurers, which is passed on to homeowners. The insurance industry says rebuilding and replacement costs rose 55% over a three-year span, driven by raw materials, wages, supply-chain bottlenecks, and a rising share of larger homes.

AI Summary. The composition of the Federal Reserve's balance sheet matters at least as much as its size: duration-adjusted holdings have declined barely at all despite substantial drops in the face value of the bond portfolio, with average Treasury duration lengthening from 6 to 6.5 years. Changes in bank reserve balances appear more important for risk-taking conditions than other Fed liabilities.

Matthew Klein The Overshoot
Date Posted:

.@Matt_Klein notes that recent Fed balance sheet shrinkage has apparently not cooled the economy because it has primarily been driven by sales of bonds of under 5 years duration, while the composition of the Fed’s liabilities has become more liquid.

Does the Fed's balance sheet composition matter more than its size?

Core argument: Between mid-2014 and mid-2016, the Fed's bondholdings shrank by 30% in duration-adjusted terms even though the portfolio's face value was unchanged, illustrating that composition matters at least as much as balance-sheet size.

The composition of the balance sheet matters at least as much [as its size]. Between mid-2014 and mid-2016, the Fed’s bondholdings shrank by 30% in duration-adjusted terms even as the face value of the portfolio was unchanged. More recently, the duration-adjusted decline has been barely visible despite substantial declines in the par value of the bond portfolio. Since October 2022, the average duration of the Fed’s Treasury portfolio has lengthened from 6 to 6.5 years. [Turning from the asset to the liability side], not all Fed liabilities are equally important. Reserves held by banks as deposits at the Fed play a different role in the financial system than the federal government’s deposits in the Treasury General Account. And both are different from the Fed’s reverse repo facility, which lets money market funds earn a competitive interest rate while lending to the Fed overnight. Changes in reserve balances seem to be more important than the others for risk-taking conditions.

Takeaways by Macro Roundup® AI

  1. Between mid-2014 and mid-2016, the Fed's bondholdings shrank by 30% in duration-adjusted terms even though the portfolio's face value was unchanged, illustrating that composition matters at least as much as balance-sheet size.
  2. The average duration of the Fed's Treasury portfolio has lengthened from 6 to 6.5 years since October 2022, leaving the duration-adjusted decline barely visible despite substantial declines in the par value of the bond portfolio.
  3. Bank reserves, the Treasury General Account, and the Fed's reverse repo facility play different roles in the financial system, and changes in reserve balances appear more important than the others for risk-taking conditions.

Related Articles:

  • Is the Fed Preparing to Taper Its Bond Redemptions? — Federal Reserve officials aim both to shrink the central bank's bond holdings, especially mortgage bonds, on the view that portfolio size and composition affect how others price risky assets, and to reduce bank reserves to "ample" rather than "abundant" levels. Aggregate reserve estimates may overstate ampleness by ignoring concentration across institutions.
  • The Fed Is Tightening More Than It Says — The authors estimate that the Federal Reserve's balance-sheet runoff makes its current policy rate of 5.375% equivalent in its effect on financial conditions to a rate of 5.763% without runoff, a gap of 39 basis points. They project that gap to widen to a full percentage point as assets continue rolling off at $95bn a month.
  • When Will Balance Sheet Runoff End and How Will the Fed Know When to Stop? — Analysts estimate that each 1% of GDP of Federal Reserve balance sheet reduction is associated with roughly a 2 basis point rise in 10-year Treasury yields, implying about 20bp of upward pressure in total. That is equivalent in its effect on financial conditions and growth to a little under one interest rate hike.

AI Summary. The H5N1 bird flu virus spreads among wild aquatic birds before passing to domesticated animals, with highly pathogenic strains killing 90%-100% of infected poultry within 48 hours and causing the death or culling of 82m US poultry and $2-$3bn in losses. The virus has also spread to US cattle, reducing milk production in infected herds.

J.P. Morgan Michael Cembalest
Date Posted:

Michael Cembalest @jpmorgan notes that the economic impact of the H5N1 outbreak could grow. At least 82mm American poultry livestock have been culled in an effort to control the spread, so far less than 1% of annual production.

How costly is bird flu for US poultry and cattle?

Core argument: Highly pathogenic H5N1 strains kill 90%–100% of infected poultry within 48 hours, and the virus has caused the death or culling of 82m poultry and $2–$3bn in losses, since entire flocks are slaughtered when the disease is found.

H5N1 spreads among wild aquatic birds and is then passed to domesticated animals. The highly pathogenic strains result in 90%-100% poultry mortality rates within 48 hours. H5N1 has led to the death or culling of 82 million poultry livestock and $2-$3 billion in losses (when the disease is found, the entire flock is slaughtered). For context, the US poultry industry produces more than 9 billion chickens and turkeys each year. H5N1 has also spread to US cattle (36 herds in 9 states); farmers report reduced milk production in infected cattle, although the impact on milk supply has been limited so far and most infected cows do not develop severe symptoms or die. The global implications of H5N1 could be substantial now that poultry has surpassed pigs in terms of global consumption.

Takeaways by Macro Roundup® AI

  1. Highly pathogenic H5N1 strains kill 90%–100% of infected poultry within 48 hours, and the virus has caused the death or culling of 82m poultry and $2–$3bn in losses, since entire flocks are slaughtered when the disease is found.
  2. H5N1 spreads among wild aquatic birds before passing to domesticated animals, and has reached US cattle in 36 herds across 9 states, with farmers reporting reduced milk production though most infected cows do not develop severe symptoms or die.
  3. The US poultry industry produces more than 9bn chickens and turkeys each year, and the global implications of H5N1 could be substantial now that poultry has surpassed pigs in global consumption.

Related Articles:

  • Bird Flu Outbreak in US Cows: Why Scientists Are Concerned — The H5N1 bird flu virus has been detected in cows from 16 herds across six US states, the first widespread outbreak in cattle after only sporadic prior infections with closely related flu viruses. One infected dairy worker is recovering, and the worker's viral variant carries a mutation linked to more efficient spread in mammals.
  • Bird Flu Is Infecting More Mammals. What Does That Mean for Us? — The H5N1 bird flu strain now circulating globally has spread not only among farmed and wild birds but into many other animals, unlike earlier versions of the virus. Outbreaks in mink and in South American sea mammals suggest the virus most likely adapted to spread between mammals.
  • This May Be Our Last Chance to Halt Bird Flu in Humans and We Are Blowing It — An outbreak of H5N1 avian influenza in U.S. dairy cattle has spread to at least 33 herds across eight states with one confirmed human case, and Texas's agriculture commissioner suspects it began earlier and may have infected up to 40% of Texas Panhandle herds. An H5N1 expert argues containment becomes unlikely once around 10 human cases are detected.

Thursday, May 16, 2024

AI Summary. Following the 2017 US tax law, real economic output, consumption, business investment, and payrolls grew faster than pre-law forecasts and nearly matched post-law projections, and an analysis of administrative corporate tax return data estimates firms with the average tax change raised domestic investment about 20% relative to firms with no change.

Kyle Pomerleau and Donald Schneider American Enterprise Institute
Date Posted:
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Database

Evidence from CBO projections suggests the TCJA corporate tax cut increased business investment, driving economic growth. @kpomerleau and @DonFSchneider present two revenue-neutral options to finance a permanent extension of the TCJA .

Did corporate tax cuts boost investment and economic growth?

Core argument: Gabriel Chodorow-Reich et al., using administrative US corporate tax return data, find the Tax Cuts and Jobs Act caused domestic investment of firms with the mean tax change to rise roughly 20% relative to firms with no tax change.

As Figure 1 indicates, real GDP, consumption, business investment, and payrolls grew more rapidly than expected in the 2017 forecast and in a manner consistent with CBO’s post-TCJA 2018 projections. On net, actual economic performance nearly matched CBO’s projections. These macroeconomic outcomes are also consistent with microeconomic data finding that companies benefiting from TCJA increased investment. For example, according to an analysis by Gabriel Chodorow-Reich et al. using administrative data for US corporate tax returns, “the TCJA caused domestic investment of firms with the mean tax change to increase by roughly 20% relative to firms experiencing no tax change.” The primary issue with the TCJA is that it was not stable given that much of the law was temporary: 100 percent bonus depreciation is temporary and will fully phase out by 2027.

Takeaways by Macro Roundup® AI

  1. Gabriel Chodorow-Reich et al., using administrative US corporate tax return data, find the Tax Cuts and Jobs Act caused domestic investment of firms with the mean tax change to rise roughly 20% relative to firms with no tax change.
  2. Real GDP, consumption, business investment, and payrolls grew faster than the 2017 forecast expected and in line with CBO's post-TCJA 2018 projections, with actual performance on net nearly matching those projections.
  3. The primary issue with the Tax Cuts and Jobs Act is its instability, as much of the law was temporary, including 100 percent bonus depreciation, which fully phases out by 2027.

Related Articles:

  • Tax Policy and Investment in a Global Economy — Using administrative tax data, the authors estimate that firms experiencing the mean corporate tax change under the 2017 US tax law increased investment by 20% relative to firms with no change, with long-run domestic and total capital up 7% and 13%. They find higher depreciation deductions largely offset added revenue from capital accumulation.
  • Who Gains from Corporate Tax Cuts? — The authors estimate that corporate tax cuts boost overall investment and employment, with goods-producing firms such as manufacturers raising capital expenditure and wage bills without changing dividends, and a 1% cut in the marginal tax rate lifting their capital spending by as much as 8%. Service-sector firms instead direct most of the windfall to dividends.
  • End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns — The authors estimate that declining interest and corporate tax rates accounted for over 40% of real corporate profit growth from 1989 to 2019, while falling risk-free rates explain the entire expansion in price-to-earnings multiples. Real earnings before interest and taxes grew slightly more slowly than in 1962–1989, at 2.2% versus 2.4% per year.

AI Summary. The Congressional Budget Office estimates that income after transfers and taxes grew faster than consumption prices for all income groups, lowering the share of income needed to buy the same goods by 2% for the lowest-income fifth and 6.3% for the highest-income fifth.

Dorian Carloni Congressional Budget Office
Date Posted:

.@USCBO analysis shows that household purchasing power has increased since 2019, as incomes have outpaced inflation across all income groups.

Has income growth outpaced inflation for all income groups?

Core argument: CBO estimates that from 2019 to 2023, adjusted income after transfers and taxes grew more than the price of consumption for all income groups, reducing the share of household income needed to buy the same bundle of goods and services.

By CBO’s estimate, adjusted income after transfers and taxes grew more than the price of consumption from 2019 to 2023 for all income groups. As a result, the portion of household income required to purchase the same bundle of goods and services declined. For households in the lowest income quintile, CBO estimates, the share of their adjusted income after transfers and taxes required to purchase their 2019 consumption bundle decreased by 2%. For households in the top income quintile, that share declined by 6.3%, the largest decline of any quintile. The difference in those percentage changes reflects two factors: Price increases were greater for the typical consumption bundle purchased by lower-income households than they were for that purchased by higher-income households, and the income of households in the highest income quintile grew more in percentage terms than the income of other households did.

Takeaways by Macro Roundup® AI

  1. CBO estimates that from 2019 to 2023, adjusted income after transfers and taxes grew more than the price of consumption for all income groups, reducing the share of household income needed to buy the same bundle of goods and services.
  2. For households in the top income quintile, CBO estimates the share of adjusted income after transfers and taxes required to purchase their 2019 consumption bundle fell 6.3%, the largest decline of any quintile, versus 2% for the lowest quintile.
  3. CBO attributes that difference to two factors: price increases were greater for the typical consumption bundle purchased by lower-income households, and income in the highest quintile grew more in percentage terms than income of other households.

Related Articles:

  • Has Pay Kept Up With Inflation? — All four measures of typical and aggregate pay have grown since 2019 when adjusted using the personal consumption expenditures price index, but show smaller increases in three measures and a decline in one when adjusted using the consumer price index. This pattern of smaller gains under consumer price index adjustment holds across time periods.
  • Credit Bidenomics for Rising US Wages — Inflation-adjusted wages for US workers in the middle pay range, between the 40th and 60th percentiles, were 6.6% higher than before the pandemic, slightly above what 2015-19 trends would predict. The US is the only G7 country with substantial real wage gains, ranging elsewhere from a 0.2% rise in Canada to a 9% decline in Italy.
  • Are You Better Off Than You Were Four Years Ago? — Inflation-adjusted wages rose over the past four years, including when measured from just before the pandemic, at roughly the same pace as in the preceding years: about 3% cumulative growth adjusted by the consumer price index versus about 4% in 2015-2019, and about 5% growth adjusted by personal consumption prices.

AI Summary. Aggregate markups have stayed roughly constant during the current recovery and the recoveries following the 1991, 2001, and 2008 recessions, making their recent path unexceptional by historical standards.

Sylvain Leduc, Huiyu Li and Zheng Liu Federal Reserve Bank of San Francisco
Date Posted:

.@sffed analysis shows that “markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery.” @huiyu_li @zliu001

Are markups driving the ups and downs of inflation?

Core argument: Aggregate markups have stayed roughly constant throughout the current recovery and the recoveries following the 1991, 2001, and 2008 recessions, making the path of the past three years not unusual by historical comparison.

The path of aggregate markups over the past three years is not unusual compared with previous recoveries. Figure 4 shows the cumulative changes in aggregate markups since the start of the current recovery (dark blue line), alongside aggregate markups following the 1991 (green line), 2001 (yellow line), and 2008 (light blue line) recessions. Aggregate markups have stayed roughly constant throughout all four recoveries.

Takeaways by Macro Roundup® AI

  1. Aggregate markups have stayed roughly constant throughout the current recovery and the recoveries following the 1991, 2001, and 2008 recessions, making the path of the past three years not unusual by historical comparison.

Related Articles:

  • How Do Firms Adjust Prices in a High Inflation Environment? — Interviews and a survey of about 700 businesses find average cost-to-price passthrough in the 60% range during a period of elevated inflation, with wide variation and some firms reporting passthrough above one. Firms report that demand strength, steady profit margins, labor and nonlabor costs, and competitors' prices shape pricing decisions.
  • “Greedflation” and the Profits Equation — The increase in nominal pretax U.S. business income since late 2019 equals about 17% of the increase in consumer spending excluding imputed rent over the same period, below the roughly 21% share of such spending that quarterly pretax business income has historically represented. On this measure, profit growth has been slightly low relative to a naive expectation.
  • Corporate Profits in the Aftermath of COVID-19 — Nonfinancial corporate profit margins—profits as a share of gross value added—rose to about 19% before easing to 15%, compared with about 13% before the pandemic. The authors attribute much of the increase to large direct government support for small and medium-sized U.S. businesses and to lower net interest expenses under accommodative monetary policy.

AI Summary. Population growth since 2020 has been concentrated in southern cities and across most of the West except its largest metros such as San Francisco, San Jose, and Portland, while the Midwest and Northeast have lost population, especially in smaller towns. Larger places continue to grow faster than smaller ones, though by a narrower margin than before 2020.

Aziz Sunderji Home Economics
Date Posted:

New 2020-23 Census data shows growth in cities is outpacing that of smaller towns. Big southern cities grew the most, while New York City showed a net loss of 500,000, depopulating faster than it did during the 1970s. @AzizSunderji

Where is population growing and shrinking across US regions and city sizes?

Core argument: Population change since 2020, ranked by place size within each Census division, shows the strongest growth in southern cities and shrinking populations across the Midwest and Northeast, especially in smaller towns.

A clear trend is that smaller towns are generally shrinking more rapidly, or growing more slowly, than large cities. That said, this trend predates the pandemic, and the differential has shrunk. In other words, big places are growing faster than small places, but by a smaller margin than before 2020. Putting all of these trends together—the growing South, New York City cratering, and the larger cities generally growing faster than smaller ones—we get the figure above. It ranks places by size, within each Census division, and measures percent population changes since 2020. Places with the strongest population growth are in green: The hottest growth is a distillation of all of these trends: southern cities are booming. The West is growing in all but the largest places, like San Francisco, San Jose, and Portland. Meanwhile, the population has been shrinking in the Midwest and Northeast, especially in smaller towns.

Takeaways by Macro Roundup® AI

  1. Population change since 2020, ranked by place size within each Census division, shows the strongest growth in southern cities and shrinking populations across the Midwest and Northeast, especially in smaller towns.
  2. Larger places continue to grow faster than smaller towns, a pattern that predates the pandemic, though the differential between big and small places has narrowed since 2020.
  3. The West is growing in all but its largest places, such as San Francisco, San Jose, and Portland, while New York City's population has cratered.

Related Articles:

  • Young Families Have Not Returned to Large Cities Post-Pandemic — The under-five population in large urban U.S. counties fell 6.1% while overall population in those counties fell 0.9%, with declines exceeding 10% in the largest counties including New York, Cook County, Illinois, and Los Angeles. Losses of young families were more severe in the Mid-Atlantic and West Coast, while the under-five population grew in Southeastern urban counties.
  • Southern Comforts — Migration into southern metropolitan areas such as Austin, San Antonio, Jacksonville, and Tampa has continued, and the South also has a higher birth rate than other census regions. Growth has been uneven: Florida's GDP rose 20% and Texas and Tennessee 15% against a US average of 11%, while Oklahoma and Louisiana contracted.
  • On the Move: Homebuyer Insights and the Housing Challenge — Bank of America internal data indicate that Gen Z and Millennials account for the net population growth in metropolitan areas where growth is accelerating, most notably Columbus and Austin. In shrinking metro areas such as New York and Washington D.C., population is declining faster among older generations than younger ones.

AI Summary. Motor vehicle insurance prices rose more than 22% over a year, the fastest pace since the 1970s, according to the Bureau of Labor Statistics. Insurers' personal auto businesses recorded losses of $4bn, $33bn, and roughly $17bn in successive years, and industry analysts say many companies still need higher prices to offset them.

Emily Flitter New York Times
Date Posted:

Motor vehicle insurance costs rose 22% in the 12 months through April 2024, the fastest pace since the 1970s, as insurers offset a $50B industry loss in 2022-23.

Are car insurance prices rising to offset insurers' losses?

Core argument: Motor vehicle insurance prices rose more than 22% in the year through April, the fastest pace since the 1970s, according to the Bureau of Labor Statistics.

The price of motor vehicle insurance rose more than 22% in the year through April, the fastest pace since the 1970s, according to the Bureau of Labor Statistics. According to calculations by the Insurance Information Institute, a trade group, the average 12-month premium for car insurance was $1,280 in 2023, the industry’s most recent figures. In 2021, insurers’ personal auto businesses started recording losses. According to David Blades, an analyst for AM Best, the industry lost $4 billion in 2021, $33 billion in 2022, and roughly $17 billion last year. According to Dale Porfilio, the chief insurance officer at the Insurance Information Institute, the trade group, many companies still need to raise prices to make up for those bad years. Last year, insurers raised auto premiums by 14%, the biggest increase in over 15 years. Mr. Porfilio’s best guess is that premiums this year will rise another 13%.

Takeaways by Macro Roundup® AI

  1. Motor vehicle insurance prices rose more than 22% in the year through April, the fastest pace since the 1970s, according to the Bureau of Labor Statistics.
  2. Insurers' personal auto businesses lost $4 billion in 2021, $33 billion in 2022, and roughly $17 billion last year, according to AM Best analyst David Blades.
  3. Insurers raised auto premiums by 14% last year, the biggest increase in over 15 years, and Dale Porfilio of the Insurance Information Institute estimates premiums will rise another 13% this year.

Related Articles:

  • April Flowers, Not Showers — Bank of America internal payments data show average household property insurance payments up 23% relative to 2019, and average per-customer payments up 25%, with a three-month average year-over-year increase of 11%. The data cannot separate auto from home insurance payments.
  • Buying Home and Auto Insurance Is Becoming Impossible — Car insurance premiums rose 19.2% over 12 months, about six times the rise in overall consumer prices, marking the 15th consecutive month of double-digit year-over-year increases and the longest such stretch since the mid-1980s. Reinsurance prices rose 30%–50%, leaving home insurers to absorb more risk themselves.
  • Just How Bad Is the US Cost-of-Living Squeeze? We Did the Math — It now takes $119.27 to buy what $100 purchased before the pandemic, with prices rising about as much since early 2020 as in the preceding decade. Groceries and electricity are each up 25% since January 2020, used cars 35%, auto insurance 33%, and rents roughly 20%.

AI Summary. U.S. overdose deaths fell about 3% to roughly 107,500, the first annual decline in five years, according to preliminary Centers for Disease Control and Prevention estimates. Deaths involving synthetic opioids, a category largely fueled by fentanyl, fell 2% to about 74,700 and accounted for 7 of every 10 overdose deaths.

Jon Kamp Wall Street Journal
Date Posted:

Preliminary @CDCgov data shows US overdose deaths in 2023 declined 3% vs. 2022 to 107,500, the first decline in five years. Deaths due to synthetic opioids, including fentanyl, declined 2% to 74,700.

Are U.S. overdose deaths starting to decline?

Core argument: U.S. overdose deaths fell about 3% to roughly 107,500 in 2023, the first decline in five years, according to preliminary CDC estimates.

The U.S. saw a slight decline in the number of new overdose deaths last year, marking a rare improvement in a still-raging national fentanyl crisis, preliminary federal data show. There were about 107,500 overdose deaths in 2023, down 3% from the year before and the first decline in five years, according to estimates from the Centers for Disease Control and Prevention. The preliminary data show deaths involving synthetic opioids—a category largely fueled by fentanyl—declined 2% to about 74,700 last year. Seven of every 10 U.S. overdose deaths involved these drugs.

Takeaways by Macro Roundup® AI

  1. U.S. overdose deaths fell about 3% to roughly 107,500 in 2023, the first decline in five years, according to preliminary CDC estimates.
  2. Deaths involving synthetic opioids, a category largely fueled by fentanyl, declined 2% to about 74,700 in 2023, according to preliminary CDC data.
  3. Synthetic opioids were involved in seven of every 10 U.S. overdose deaths.

Related Articles:

  • How Fentanyl Laid Waste to Guatemala’s Time-Worn Opium Trade — Opium prices in Guatemala's poppy-growing highlands have collapsed from $64 an ounce to about $9.60, with growers reporting a fall from roughly $2,310 to $256 per kilo. Eradication patrols now find only scattered small plots where cultivation once blanketed the land.
  • Importing the Opioid Crisis? International Trade and Fentanyl Overdoses — A study using U.S. mortality and import data finds a positive state-level association between imports per resident and drug overdose death rates, driven by fentanyl and accounting for an estimated 15,000–20,000 deaths per year. The authors estimate that 10% higher imports per resident is associated with an 8.1% higher fentanyl death rate.
  • The Global Network Behind The Fentanyl Crisis — Nearly 110,000 Americans died of drug overdoses in a year, with more than two-thirds of those deaths caused by fentanyl, a synthetic opioid 50x as potent as heroin. A kilogram of precursor chemicals bought from Chinese manufacturers for about $800 can produce 415,000 fentanyl pills, which sell wholesale for as little as 50 cents each.

AI Summary. The United States and China each logged their highest-ever annual launch rates, at 103 and 66 launches, while Russia fell to 19 and Europe recorded three. The US accounted for roughly half of global launches but 81% of effective launch capacity, since Falcon 9 and Falcon Heavy comprised 93% of US launches.

Todd Harrison American Enterprise Institute
Date Posted:

The US had 81% of global effective launch capacity in 2023, and 78% of satellite launches, largely driven by SpaceX’s Starlink constellation. @ToddHarrisonDC

Does the US lead the world in space launch capacity?

Core argument: The United States accounted for roughly half of global launches in 2023 but 81% of effective launch capacity, a theoretical measure of the equivalent mass that would reach low Earth orbit if every vehicle carried its maximum payload.

United States and China both logged their highest launch rate ever in 2023 at 103 and 66 launches, respectively, Russia fell to 19, and Europe recorded just three successful launches for the year. While the number of launches is a useful metric, another way to compare overall launch capabilities among nations is by their effective launch capacity, shown in Figure 3. This is a theoretical measure of the equivalent mass that would have been placed in orbit if each launch vehicle was used to deliver its maximum payload (measured in metric tons) to low Earth orbit (LEO). While the United States accounted for roughly half of global launches in 2023, it made up 81% of effective launch capacity. This is because the Falcon 9 and Falcon Heavy—relatively large payload capacity vehicles—comprised the vast majority (93%) of US launches.

Takeaways by Macro Roundup® AI

  1. The United States accounted for roughly half of global launches in 2023 but 81% of effective launch capacity, a theoretical measure of the equivalent mass that would reach low Earth orbit if every vehicle carried its maximum payload.
  2. The United States and China each logged their highest launch rates ever in 2023, at 103 and 66 launches respectively, while Russia fell to 19 and Europe recorded three successful launches.
  3. The Falcon 9 and Falcon Heavy, vehicles with relatively large payload capacity, comprised 93% of US launches in 2023, accounting for the US share of effective launch capacity exceeding its share of launches.

Related Articles:

  • SpaceX Starship Nears Orbit, But Is Lost Before Return to Earth — SpaceX's Starship rocket flew farther and faster than in its previous test flights, separating from its Super Heavy booster and reaching near-orbit before contact was lost during its return to Earth. SpaceX confirmed the vehicle was lost, likely destroyed, cutting the mission short.
  • Space: The Missing Element of Your Strategy — Private-sector funding of space-related companies has topped $10bn, close to a tenfold rise over the past decade, though the US government remains the largest source of space funding. If current momentum continues, commercial funding for space ventures could surpass government funding within 20 years.
  • How War in Europe Boosts the U.S. Economy — Federal Reserve data show U.S. defense and space industrial production has risen 17.5% since Russia's full-scale invasion of Ukraine. U.S. officials say 64% of the $60.7bn earmarked for Ukraine will flow back to the U.S. defense industrial base, and the State Department reported over $80bn in major arms deals, about $50bn to European allies.