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


Friday, July 26, 2024

AI Summary. In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.

Eva Vivalt, Elizabeth Rhodes, Alexander Bartik, et al. National Bureau of Economic Research
Date Posted:
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Giving low income individuals $12,000/year for 3 years resulted in reduced market income of $1,500/year, due to a 2ppt reduction in labor force participation and 1.3-1.4 hour/week reduction in labor hours. @evavivalt @AlexBartik @dbroockman

Does a guaranteed income reduce work without boosting human capital?

Core argument: A randomized experiment giving 1,000 low-income individuals $1,000/month unconditionally for three years reduced total individual income, excluding the transfers, by about $1,500/year relative to a control group of 2,000 receiving $50/month.

We study an experiment in which 1,000 low-income individuals were randomized into receiving $1,000 per month unconditionally for three years, with a control group of 2,000 participants receiving $50/ month. The transfer caused total individual income to fall by about $1,500/year relative to the control group, excluding the transfers. Participants also [self]-reported their total household income. The transfers decreased total [self-reported] household income by about $4,100/year relative to the control group. If we adjust this measure using the ratio of the individual calculatedincome and individual aggregate self-reported income, we get about a $2,500 reduction in total household income. We observe no significant effects on investments in human capital, though younger participants may pursue more formal education. Overall, our results suggest a moderate labor supply effect that does not appear offset by other productive activities.

Takeaways by Macro Roundup® AI

  1. A randomized experiment giving 1,000 low-income individuals $1,000/month unconditionally for three years reduced total individual income, excluding the transfers, by about $1,500/year relative to a control group of 2,000 receiving $50/month.
  2. Self-reported total household income fell by about $4,100/year under the $1,000/month transfer, or about $2,500/year when adjusted using the ratio of individual calculated income to individual aggregate self-reported income.
  3. The authors observe no significant effects on human capital investment, though younger participants may pursue more formal education, and conclude the transfers suggest a moderate labor supply effect that does not appear offset by other productive activities.

Related Articles:

  • Pandemic Labor Force Participation and Net Worth Fluctuations — 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.
  • Another Wrong Way to Measure Poverty — The official U.S. poverty measure has barely changed in over 50 years because most social benefits aren't counted as recipient income, even as benefits to the average household in the bottom 20% rose from $9,700 to $45,000 in inflation-adjusted dollars; counting all benefits puts poverty at 2.5%.
  • 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.

AI Summary. Research finds outcomes for Black adults raised poor worsened on several measures including household income, marriage, and mortality, but declined less than for whites raised poor, narrowing the racial gap. Among children raised poor, 4% of Black and 15% of white adults reach the top fifth of household income.

Richard Reeves and Scott Winship American Enterprise Institute
Date Posted:

Reviewing new Chetty research, @swinshi and @RichardvReeves note the outcome gap between Black and white kids who grew up with low-income parents (~50% of Blacks vs.10-15% of whites) has narrowed in part due to poor whites’ deteriorating prospects.

Has the Black-white opportunity gap narrowed because white outcomes worsened more?

Core argument: The black-white gap in mean household income for children raised poor fell by about $5,900 between 2005 and 2019, still leaving a $14,900 gap equal to 37% of the average white 27-year-old's income.

Black outcomes over the study period—2005 to 2019, when adults were 27 years old—actually worsened on several of the measures examined by economist Raj Chetty. They just didn’t deteriorate as badly as among white kids raised poor. This was true of average and median household income, reaching the top fifth of household income, getting married, mothers being married, and mortality. [Yet] the reduction in black-white opportunity gaps leaves a long way to go. The gap in mean household income fell by about $5,900 over these 14 years, [leaving] a $14,900 gap, equal to 37% of the average white 27-year-olds’ income. The black mean in 2019 was 63% of the white mean, compared with 57% in 2005. Black kids raised poor have a 4% chance of reaching the top fifth of household income, while 15% of their white counterparts will end up there. The gap in marriage rates narrowed by a third, but that was because rates fell so much more for whites raised poor than for blacks. In 2019, it was still the case that 27% of whites, but only 7% of blacks who grew up poor had found a spouse at age 27.

Takeaways by Macro Roundup® AI

  1. The black-white gap in mean household income for children raised poor fell by about $5,900 between 2005 and 2019, still leaving a $14,900 gap equal to 37% of the average white 27-year-old's income.
  2. Black outcomes in Raj Chetty's data worsened from 2005 to 2019 on average and median household income, reaching the top income fifth, marriage, mothers' marriage, and mortality, but deteriorated less than for white children raised poor.
  3. Black children raised poor have a 4% chance of reaching the top fifth of household income versus 15% for their white counterparts, and 7% of blacks versus 27% of whites raised poor had married by age 27 in 2019.

Related Articles:

  • Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility* — The authors find that children's economic mobility improves across birth cohorts in communities where parental employment rates increase, with larger effects for children who move to such communities at younger ages. The relationship is strongest for the parental employment rates of peers in a child's own birth cohort, suggesting it is mediated by social interaction.
  • Understanding Trends in Worker Pay over the Past 50 Years — Productivity growth has been unequal across industries, across firms within industries, and across workers within firms, slowing growth in both the productivity and the pay of the median worker. The authors argue that working- and middle-class men earlier received "breadwinner rents"—pay above their marginal value to employers—and then endured slow wage growth as women's workforce participation rose.
  • Measuring Social Capital: Can We Tell If Some Places Are Richer in Social Capital Than Others? — The Joint Economic Committee's Social Capital Index ranks Louisiana, Nevada, New Mexico, Florida, and Arizona lowest and Utah, Minnesota, Wisconsin, New Hampshire, Vermont, and Colorado highest, with low- and high-ranking states falling consistently below or above the median across subindexes. All but one of the 21 cross-state correlations among the seven subindexes are positive.

AI Summary. Market depth—the quantity of US Treasury securities participants will buy or sell at given prices—is a widely cited gauge of Treasury market health. One bank's depth measure plunged and, despite rising over the past couple of years, remains well below pre-pandemic levels amid policy uncertainty and regulatory constraints on intermediaries.

David Wessel Brookings Institution
Date Posted:

Citing bids for newly issued Treasuries in the secondary market, @davidmwessel notes market depth is under its historical mean, suggesting the market has grown more illiquid since the pandemic.

How can we tell if the Treasury faces trouble borrowing?

Core argument: J.P. Morgan's Treasury market-depth measure, which reflects the size of bids and offers across maturities between 8:30 a.m. and 10:30 a.m., plunged in March 2020 and remains significantly below pre-COVID levels despite rising over the past couple of years.

Wall Street analysts have several ways to gauge the health of the secondary market. A widely cited one is market depth—the quantity of Treasury securities that market participants are willing to buy or sell at particular prices. As the chart illustrates, J.P. Morgan’s market-depth measure (which reflects the size of bids and offers in the market for U.S. Treasuries at various maturities between 8:30 a.m., when economic data is often released, and 10:30 a.m., when European markets close) plunged in March 2020. It has risen in the past couple of years, but remains significantly below pre-COVID levels in part because of uncertainty about Fed policy and regulatory impediments that have kept intermediaries from growing as fast as the growth in the size of the Treasury market.

Takeaways by Macro Roundup® AI

  1. J.P. Morgan's Treasury market-depth measure, which reflects the size of bids and offers across maturities between 8:30 a.m. and 10:30 a.m., plunged in March 2020 and remains significantly below pre-COVID levels despite rising over the past couple of years.
  2. Market depth—the quantity of Treasury securities market participants are willing to buy or sell at particular prices—is a widely cited gauge Wall Street analysts use to assess the health of the secondary market.
  3. Uncertainty about Federal Reserve policy and regulatory impediments that have kept intermediaries from growing as fast as the Treasury market account in part for the depressed level of Treasury market depth.

Related Articles:

  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.
  • Who Buys Treasuries When the Fed Reduces its Holdings — Analysis of Federal Reserve balance sheet reduction finds that households and broker-dealers absorbed the additional supply of Treasury securities during the 2017–2019 episode, with household holdings correlated with hedge fund holdings. In the first year of the reduction begun in 2022, households purchased a large share while hedge funds did not, and insurance companies and foreign investors also increased holdings.
  • Rapid Increase in T-Bill Supply Is a Growing Risk — The supply of short-term US Treasury bills has risen by $2tn over 12 months, and bills have grown as a share of total debt outstanding. Absorbing this supply requires continued demand from banks, money market funds, and households, and falling appetite could push short-term rates higher and raise the risk of funding-market strains.

AI Summary. The share of U.S. adults under 50 without children who say they are unlikely to ever have kids rose 10 percentage points to 47%. Among this younger group, the most common reason given is simply not wanting children, cited by 64% of women versus 50% of men, while adults 50 and older most often say it just didn't happen.

Rachel Minkin, Juliana Menasch Horowitz and Carolina Aragao Pew Research Center
Date Posted:

In 2023, 47% of US adults aged 18-49 say they’re unlikely to ever have kids, up from 37% in 2018. An increasing number of childless adults, particularly women under 50, report they “just don’t want to have children.” @pewresearch

Why are more U.S. adults under 50 unlikely to have children?

Core argument: The share of U.S. adults under 50 without children who say they are unlikely to ever have kids rose 10 percentage points between 2018 and 2023, from 37% to 47%.

The share of U.S. adults younger than 50 without children who say they are unlikely to ever have kids rose 10 percentage points between 2018 and 2023 (from 37% to 47%). About four-in-ten of those in the older [50+] group (38%) say there was a time when they wanted to have children. A smaller but sizable share (32%) say they never wanted children, and 25% say they weren’t sure one way or the other. Few say they frequently felt pressure to have children from family, friends or society in general. Reasons for not having children – or being unlikely to ever have them – differ between the older and younger groups. The top response for those ages 50 and older is that it just didn’t happen, while those in the younger group are most likely to say they just don’t want to have kids. Women younger than 50 are especially likely to say they just don’t want to have children (64% vs. 50% of men in this group).

Takeaways by Macro Roundup® AI

  1. The share of U.S. adults under 50 without children who say they are unlikely to ever have kids rose 10 percentage points between 2018 and 2023, from 37% to 47%.
  2. Among U.S. adults 50 and older without children, 38% say there was a time when they wanted children, 32% say they never wanted them, and 25% say they weren't sure either way.
  3. Adults 50 and older without children most often say it just didn't happen, while those under 50 most often say they just don't want kids — 64% of women in that group versus 50% of men.

Related Articles:

  • Why Americans Aren’t Having Babies — An analysis of Census Bureau survey data finds that women having no children at all, rather than mothers having fewer, accounted for more than two-thirds of the 6.5% decline in average births among 35- to 44-year-olds between 2012 and 2022. Some demographers and economists expect rising childlessness to be sustained as attitudes toward family shift.
  • 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.
  • The Wealthy Are Starting to Have More Babies Than the Poor Again — In developed countries, men's income and education are now generally positively associated with fatherhood, with 70.1% of US men holding graduate or professional degrees having children versus 48.8% of those without a high school diploma. Among advanced economies, those where men take on more housework and child care have higher fertility rates.

AI Summary. The correlation between US county population growth or net migration and historical extreme heat and cold days has declined over roughly the past 50 years, and in 2010–2020 was essentially zero. The authors argue this pivoting is likely to continue and reverse the 20th-century Snow Belt to Sun Belt migration pattern.

Sylvain Leduc and Daniel Wilson Federal Reserve Bank of San Francisco
Date Posted:

Migration from the “Snow Belt” or coldest places in the US to the “Sun Belt” has steadily declined since the 1970s, and had essentially halted by 2010-20. @sylvainecon @wilson_daniel_j

Is climate no longer driving Americans to move south?

Core argument: In 2010–2020, U.S. county population growth and net migration rates were essentially uncorrelated with historical means of extreme heat days or extreme cold days, after a 50-year steady decline in the Snow Belt to Sun Belt tendency.

Over the course of the past 50 years, the tendency of Americans to move from the coldest places (“Snow Belt”), which have become warmer, to the hottest places (“Sun Belt”), which have become hotter, has steadily declined. In the latest full decade, 2010-2020, both county population growth and county net migration rates were essentially uncorrelated with the historical means of either extreme heat days or extreme cold days. The decline in these correlations holds for all educational groups, with the sharpest decline in correlations for those with four or more years of college. Among age groups, the pattern is strongest for age groups 20-29 and 60-69, suggestive of climate being an especially important factor for those in life stages involving long-term location choices. Given climate change projections for coming decades, our findings suggest the “pivoting” in the U.S. climate-migration correlation over the past 50 years is likely to continue, leading to a reversal of the 20th century Snow Belt to Sun Belt migration pattern.

Takeaways by Macro Roundup® AI

  1. In 2010–2020, U.S. county population growth and net migration rates were essentially uncorrelated with historical means of extreme heat days or extreme cold days, after a 50-year steady decline in the Snow Belt to Sun Belt tendency.
  2. The weakening link between climate and U.S. migration holds across all educational groups, with the sharpest decline in correlations among those with four or more years of college.
  3. The pattern is strongest for ages 20–29 and 60–69, and the authors suggest the pivoting in the U.S. climate-migration correlation is likely to continue, reversing the 20th century Snow Belt to Sun Belt migration pattern.

Related Articles:

  • Climate Change and the Geography of the U.S. Economy — The positive association between extreme heat and U.S. county population growth weakened over recent decades and disappeared entirely in the 2010s, as hot counties grew hotter. Projected climate change is predicted to shift population from the Southeast and parts of the Southwest toward the North, Mountain West, and Pacific coast.
  • Don’t Flee the American Southwest Just Yet — Arizona uses 3% less water than in 1957 despite population growth of more than 555%, and the state may be better positioned to adapt to climate change than many U.S. coastal areas. The Center for Climate Integrity estimates sea walls for U.S. coastal regions will cost at least $400bn, far more than conserving water in a desert.
  • Movers And Money: Mapping the Flow of Income During the Pandemic — Manhattan recorded the largest county-level income outflow to other states at $16.5bn, with 27.7 cents of every dollar leaving—$4.6bn—going to Florida, including $2.9bn to Miami-Dade County and $1.1bn to Palm Beach County. California had the largest state-level losses, while Florida was the biggest beneficiary with a net gain of $39bn.

AI Summary. California's share of US tech jobs has fallen to about 18.1% from 20.7%, barely above the post-1990 low of 18%. Its share of global venture capital investment, at 24%, would mark a new high in data going back to 2015 if sustained for a full year.

Justin Fox Bloomberg
Date Posted:

California’s share of US tech jobs had fallen from 20.7% in May 2020 to 18.1% in May of 2024, but the state’s share of global venture capital investment is on track for a record high of 24% in 2024. @foxjust

Is California losing its tech dominance as its job share falls?

Core argument: California's share of US tech jobs fell from 20.7% in May 2020 to 18.1% as of this May, barely above the post-1990 low of 18% set in 2009.

California’s share of US tech jobs had fallen from 20.7% in May 2020 to 18.1% as of this May (national numbers aren’t available yet for June for a couple of the tech sectors), barely above the post-1990 low of 18% set in 2009. Given the recent trajectory, it seems inevitable that this share will hit new lows soon. In venture capital, not so much — according to PitchBook-NVCA data that goes back to 2015, California’s 24% share of global VC investment in the first half of 2024 would, if sustained for the full year, mark a new high.

Takeaways by Macro Roundup® AI

  1. California's share of US tech jobs fell from 20.7% in May 2020 to 18.1% as of this May, barely above the post-1990 low of 18% set in 2009.
  2. California's 24% share of global venture capital investment in the first half of 2024 would mark a new high in PitchBook-NVCA data going back to 2015 if sustained for the full year.

Related Articles:

  • California is Losing Tech Jobs — California has lost tech jobs across computer systems design, streaming and social networks, software publishing, and web search, and its share of US tech industry jobs has fallen to the lowest level in more than a decade after peaking near 19% in late 2019. California still receives 31% of the industry's total compensation.
  • California Mints Millionaires Faster Than They Can Leave — The number of California residents with incomes of $1m or more grew by 61,900, or 66%, from 2019 to 2021, lifting the state's share of US millionaires to 17.9% from 17% while the shares of New York, Texas, and Florida fell. Rising in-state incomes minted more new millionaires than the net outflow of higher-earning taxpayers to other states.
  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.

AI Summary. A New York Times/Siena poll found 48% of registered voters held a favorable view of Trump, up from 42% in the prior poll and his highest in that series, while Harris's favorable rating rose to 46% from 36%. Harris's favorable rating exceeded Biden's.

Nate Cohn New York Times
Date Posted:

Trump’s lead over Harris (48% to 47%) among likely voters is within the 3.4pt margin of error of the lastest Times/Siena poll. @Nate_Cohn notes that both candidates had rising favorability ratings vs. prior polls.

Are both major presidential candidates' favorability ratings rising simultaneously?

Core argument: Trump's favorable rating among registered voters reached 48% in the Times/Siena poll, up from 42% in the prior poll and above the 39%–45% range found in all previous Times/Siena surveys.

While the overall result between Ms. Harris and Mr. Trump may look familiar, the poll is full of signs that there’s a lot of dust still in the political air. Mr. Trump hits a high in popularity. Overall, 48% of registered voters say they have a favorable view of him, up from 42% in our last poll (taken after the debate but before the convention and assassination attempt). It’s his highest favorable number in a Times/Siena poll, which previously always found his favorable ratings between 39% and 45%. Ms. Harris is surging. In fact, her ratings have increased even more than Mr. Trump’s. Overall, 46% of registered voters have a favorable view of her, up from 36% when we last asked about her in February. Only 49% have an unfavorable view, down from 54% in our last measure. As important, her favorable rating is higher than Mr. Biden’s. In fact, it’s higher than his standing in any Times/Siena poll since September 2022, which so happens to be the last time Mr. Biden led a Times/Siena national poll of registered voters.

Takeaways by Macro Roundup® AI

  1. Trump's favorable rating among registered voters reached 48% in the Times/Siena poll, up from 42% in the prior poll and above the 39%–45% range found in all previous Times/Siena surveys.
  2. Harris's favorable rating rose to 46% from 36% in February, with her unfavorable rating falling to 49% from 54%, a larger improvement than Trump's.
  3. Harris's favorable rating exceeds Biden's standing in any Times/Siena poll since September 2022, the last time Biden led a Times/Siena national poll of registered voters.

Related Articles:

Monday, July 29, 2024

AI Summary. The authors estimate that a 1 percentage point increase in reported consumer price inflation is associated with a roughly 0.6 percentage point rise in firms' expectations for their own prices over the year ahead, with the effect appearing only after the inflation data is published.

Ivan Yotzov, Nicholas Bloom, Philip Bunn, et al. National Bureau of Economic Research
Date Posted:

UK survey data shows that the day after the release of a 1 ppt increase in CPI, firms updated their expected own-price growth by 0.6 ppt and also expected higher cost growth and lower sales volume growth. @iyotzov @I_Am_NickBloom

How quickly do firms raise price expectations after inflation data?

Core argument: A 1 percentage point increase in CPI inflation is associated with a 0.6 percentage point rise in firms' year-ahead own-price expectations one day after the CPI release, with the coefficient remaining near 0.6 on the second day, significant at the 5% level.

After documenting that firms are attentive to CPI inflation changes, we analyse whether these changes have meaningful effects on their own-price expectations. We begin by estimating the event study specification [using daily data] with own-price expectations as the dependent variable. The results are presented in Figure 7. We find no significant effect of CPI inflation changes on own-price expectations prior to the release. However, following the release, the coefficients become positive and statistically significant. At t + 1, the result suggests that a 1 ppt increase in CPI inflation is associated with a 0.6 percentage point increase in year-ahead own-price expectations. On the second day after the release, the coefficient remains around 0.6, and is significant at the 5% level. The significant effects on t + 1 coincide with the day when firms receive a reminder email, which leads to more responses and hence more precisely estimated coefficients.

Takeaways by Macro Roundup® AI

  1. A 1 percentage point increase in CPI inflation is associated with a 0.6 percentage point rise in firms' year-ahead own-price expectations one day after the CPI release, with the coefficient remaining near 0.6 on the second day, significant at the 5% level.
  2. An event study using daily data finds no significant effect of CPI inflation changes on firms' own-price expectations before the release, with coefficients turning positive and statistically significant afterward.
  3. The significant day-after effect coincides with the day firms receive a reminder email, which leads to more responses and hence more precisely estimated coefficients.

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.
  • Big Profits and High Prices: There Is a Connection — Nonfinancial corporate profit margins rose from 13.4% to 17% before easing to 16.4%, the highest outside the pandemic period since the 1960s, with prices up 17% and profits up 41%. Had profits grown at the slower pace of labor costs, cumulative price increases would have been 12.5%.

AI Summary. A survey experiment with 9,013 Americans finds widespread misperceptions about billionaires, including a tendency to underestimate the value of a billionaire's home. Contrary to expert predictions, most informational treatments had null or negative effects on demand for taxing the ultra-wealthy, while showing a billionaire's lavish lifestyle raised support for higher taxes.

Ricardo Perez-Truglia and Jeffrey Yusof National Bureau of Economic Research
Date Posted:

A survey primed 9,013 Americans with information about American billionaires’ earnings, tax rates, tax avoidance strategies, and lavish lifestyles. In all cases, the effects on preferred tax rates were far lower than expert predictions.

How does information about billionaires affect public support for taxing them?

Core argument: In a survey experiment with 9,013 Americans, most treatments designed to raise support for taxing the ultra-wealthy had null or negative effects, contrary to expert predictions that all treatments would increase demand for taxation.

We conducted a survey experiment with a sample of 9,013Americans. We designed multiple treatments based on research on preferences for redistribution and arguments made by academics, journalists, and the general public to increase taxes on the ultra-wealthy. Our findings reveal significant misperceptions about billionaires which tend to be skewed. For example, individuals are [most] likely to under-estimate the value of the billionaire’s home. Contrary to expert predictions that all treatments would positively affect the demand for taxation, most treatments have a null or negative effect. The luxury treatment, which included visual and narrative elements about a billionaire’s lavish lifestyle, significantly increased policy support and demand for higher taxes. In contrast, the earnings treatment, which provided statistical information about the billionaire’s income, had a weaker effect on policy support and tax preferences.

Takeaways by Macro Roundup® AI

  1. In a survey experiment with 9,013 Americans, most treatments designed to raise support for taxing the ultra-wealthy had null or negative effects, contrary to expert predictions that all treatments would increase demand for taxation.
  2. The luxury treatment, combining visual and narrative elements about a billionaire's lavish lifestyle, significantly increased policy support and demand for higher taxes, while the earnings treatment providing statistical income information had a weaker effect.
  3. Survey respondents held significant, skewed misperceptions about billionaires, and were most likely to under-estimate the value of the billionaire's home.

Related Articles:

  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.
  • Income Inequality in the United States: Using Tax Data to Measure Long-Term Trends — Using administrative tax data with the Survey of Consumer Finances, the authors estimate the top 1% pre-tax income share fell from 11.1% in 1962 to 9.4% in 1979, then rose to 13.8% by 2019, a 3 percentage point rise over the full period. Their after-tax measure shows increases of only 1.4 points since 1979 and 0.2 points since 1962.
  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.

AI Summary. Broad measures of the dollar's real exchange rate, adjusted for inflation in major trading partners, place the currency far above historical norms, with only two earlier peaks comparable — each followed by sharp declines. Across many currency pairs, real exchange rates far out of line tend to revert toward their mean, with overvaluation typically halving in about three years.

Ken Rogoff Project Syndicate
Date Posted:

.@krogoff notes that the real dollar exchange rate is far above normal levels and investors should expect “convergence back to the mean.” A second Trump administration likely won’t have to engineer a weaker dollar.

Is the dollar overvalued enough to revert toward its historical average?

Core argument: Broad measures of the real dollar exchange rate, adjusted for relative inflation among major U.S. trading partners, show the greenback far above normal historical levels, with only the 1985 and 2002 peaks remotely comparable.

Any broad measure of the “real dollar exchange rate” adjusted for relative inflation in America’s major trading partners shows that the greenback is far above normal historical levels. Only the 1985 and 2002 peaks look remotely comparable, and on both occasions, the dollar fell sharply in the following years. Exchange rates are famously difficult to explain, much less predict, but one empirical regularity across a wide range of currency pairs and historical circumstances is that there tends to be some convergence back to mean whenever the real exchange rate is far out of line. The pace is not necessarily rapid, typically taking around three years for a real exchange rate overvaluation to reduce by half, but it is nevertheless quite discernable in the data.

Takeaways by Macro Roundup® AI

  1. Broad measures of the real dollar exchange rate, adjusted for relative inflation among major U.S. trading partners, show the greenback far above normal historical levels, with only the 1985 and 2002 peaks remotely comparable.
  2. The dollar fell sharply in the years following both the 1985 and 2002 real exchange rate peaks.
  3. Across a wide range of currency pairs and historical circumstances, real exchange rates tend to converge back toward the mean when far out of line, typically halving an overvaluation in about three years.

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  • He Helped Trump Remake Global Trade. His Work Isn’t Done — 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.
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AI Summary. US home insurers posted a $15.2bn net underwriting loss, the worst since at least 2000 and more than double the prior year's, according to rating agency AM Best, amid natural disasters, inflation and population growth in at-risk areas. Such conditions have prompted insurers to exit disaster-hit markets or raise prices, creating an affordability crisis for many homeowners.

Ian Smith Financial Times
Date Posted:

US home insurers suffered net underwriting losses of $15.2B in 2023, twice their 2022 losses, driven by “a toxic mix of natural disasters, inflation, and population growth in at-risk areas.” @FT

Why are US home insurers pulling back from disaster-prone markets?

Core argument: US home insurers posted a $15.2bn net underwriting loss last year, the worst since at least 2000 and more than double the prior year's losses, according to rating agency AM Best.

US home insurers last year suffered their worst underwriting loss this century as a toxic mix of natural disasters, inflation and population growth in at-risk areas put a vital financial market under acute pressure. Insurers providing policies to homeowners suffered a $15.2bn net underwriting loss last year, according to figures from rating agency AM Best, a figure it said was the worst since at least 2000 and more than double the previous year’s losses. AM Best’s net underwriting profit measure shows premiums less claims and costs and net of reinsurance. Such performance is a big contributor to insurers’ profits alongside investment returns. The figures lay bare the underwriting conditions that have sparked a pullback by US insurers from disaster-hit areas, either exiting markets or driving up prices, creating an affordability crisis for many homeowners.

Takeaways by Macro Roundup® AI

  1. US home insurers posted a $15.2bn net underwriting loss last year, the worst since at least 2000 and more than double the prior year's losses, according to rating agency AM Best.
  2. AM Best's net underwriting profit measure counts premiums less claims and costs, net of reinsurance, and such performance contributes substantially to insurers' profits alongside investment returns.
  3. Underwriting conditions have prompted US insurers to pull back from disaster-hit areas by exiting markets or raising prices, creating an affordability crisis for many homeowners.

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  • Climate Change and the Geography of the U.S. Economy — The positive association between extreme heat and U.S. county population growth weakened over recent decades and disappeared entirely in the 2010s, as hot counties grew hotter. Projected climate change is predicted to shift population from the Southeast and parts of the Southwest toward the North, Mountain West, and Pacific coast.
  • Home Insurance Premiums Are Surging—and States Are Allowing It — Home insurers recorded a $16bn underwriting loss, the largest since at least 2000, according to AM Best, which expects losses to continue. An analysis by S&P Global Market Intelligence finds state-approved rate increases have averaged just 0.2 percentage point below what insurers requested, with California approving an average 21% increase.
  • Red States Will Suffer From Homeowners’ Insurance Woes — Effective homeowners' insurance rates rose 34% nationally between 2018 and 2023, with increases of 43% in Florida and 60% in Texas, and premiums equal to 5% of per capita disposable income in Louisiana, the highest in the US. Loss exposure of Florida's two state insurance backstops is estimated at 1% of the state's economic output.

AI Summary. The US Treasury disputes a paper alleging it manipulated bill issuance, saying the paper relied on outdated projections from an outside advisory panel rather than actual issuance and omitted a quarter when tax revenue let the Treasury pay down about $300bn of bills. The authors defend both choices.

Christopher Condon Bloomberg
Date Posted:

Yellen rejected the @SteveMiran @Nouriel argument that Treasury’s issuance policies are purposefully easing financial conditions to offset the Fed’s rate hikes, “There is no such strategy.”

Does the claim that the Treasury manipulated short-term debt issuance hold up?

Core argument: A senior Treasury official said the Roubini paper's bill-issuance figures come from outdated Treasury Borrowing Advisory Committee predictions rather than actual issuance, and exclude the second quarter, when tax revenue let the Treasury pay down about $300 billion of bills.

A senior Treasury official criticized the Roubini paper on several levels, including factual mistakes about the volume of Treasury bill issuance over the last year. The number provided in the paper is based not on actual issuance but on outdated predictions from the Treasury Borrowing Advisory Committee (TBAC) — an outside panel of market participants that counsels the Treasury. It also left out the second quarter of this calendar year, when tax revenue allowed the Treasury to pay down bills by about $300 billion. Miran, in an emailed response to questions, said the TBAC estimates are appropriate because those are the ones that get “priced into forward-looking markets.” He said the reason for leaving out the second quarter was because that’s when the Treasury has a surge of revenues due to tax due dates, and bill issuance naturally contracts. Miran said he and Roubini didn’t claim the Treasury was being activist in its issuance in that quarter.

Takeaways by Macro Roundup® AI

  1. A senior Treasury official said the Roubini paper's bill-issuance figures come from outdated Treasury Borrowing Advisory Committee predictions rather than actual issuance, and exclude the second quarter, when tax revenue let the Treasury pay down about $300 billion of bills.
  2. Miran defended using TBAC estimates on the grounds that those projections are what get priced into forward-looking markets, and said the second quarter was excluded because tax-due-date revenue surges naturally contract bill issuance.
  3. Miran said he and Roubini did not claim the Treasury was being activist in its issuance during the second quarter.

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  • ATI: Activist Treasury Issuance and the Tug-of-War Over Monetary Policy — The authors argue that by shifting its debt issuance toward shorter maturities, the US Treasury is managing financial conditions in a way that takes on core Federal Reserve functions, a practice they call "activist Treasury issuance." They estimate it has lowered 10-year yields by about 0.25 percentage points, comparable to a one-point cut in the Federal Reserve's policy rate.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.
  • How To Tell If The US Treasury Is Having Trouble Borrowing In The Bond Market — Market depth—the quantity of US Treasury securities participants will buy or sell at given prices—is a widely cited gauge of Treasury market health. One bank's depth measure plunged and, despite rising over the past couple of years, remains well below pre-pandemic levels amid policy uncertainty and regulatory constraints on intermediaries.

AI Summary. The U.S. is establishing a new military command in Japan, initially led by a three-star general, to coordinate military operations with Japanese forces, plan joint exercises, and participate in Japan's defense if hostilities break out. The move is intended to keep pace with Japan's buildup of its own military capabilities, including a planned joint command.

Michael Gordon Wall Street Journal
Date Posted:

The US established a new military command in Japan which will have operational control of American forces in the region. The command will mirror a new joint military command that Tokyo is establishing,

Is the US deepening military coordination with Japan through a new command?

Core argument: The U.S. will establish a military command in Japan, initially led by a three-star general, to coordinate military operations with Japanese forces, plan joint exercises, and take part in Japan's defense if hostilities erupt.

The U.S. will establish a new military command in Japan to bolster security ties. The new American command, which will initially be led by a three-star general, will coordinate military operations with the Japanese side, plan joint exercises, and participate in the defense of the country if hostilities erupt. “This is actually a new type of cooperation for the U.S. and Japan, and so it’s going to take a lot of effort and we’re going to have to build some new muscles to be able to do that,” said Zack Cooper of AEI. The move is intended to keep pace with Japan’s efforts to build up its military capabilities, including a new joint military command that Japanese authorities are planning to stand up early next year.

Takeaways by Macro Roundup® AI

  1. The U.S. will establish a military command in Japan, initially led by a three-star general, to coordinate military operations with Japanese forces, plan joint exercises, and take part in Japan's defense if hostilities erupt.
  2. The U.S. command is intended to keep pace with Japan's military buildup, including a joint military command Japanese authorities plan to stand up early next year.
  3. Zack Cooper of AEI describes the arrangement as a new type of U.S.-Japan cooperation that will require considerable effort and building "new muscles.".

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