Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Tuesday, October 8, 2024

AI Summary. US survey data show large differences in lifetime hours of work, and a calibrated model of labor supply and human capital accumulation implies that nearly 20% of the variance in lifetime earnings is accounted for by these differences, with 90% of that effect due to heterogeneity in preferences for work.

Alexander Bick, Adam Blandin, and Richard Rogerson National Bureau of Economic Research
Date Posted:
Is Database:
Database

Richard Rogerson and team infer 20% of the inequality in lifetime earnings among American men can be explained by differences in hours worked, and that 90% of the difference in hours worked is explained by worker preferences.

How much of lifetime earnings inequality comes from differences in hours worked?

Core argument: A calibrated heterogeneous agent model of labor supply and human capital accumulation, using NLSY79 data, implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work.

We document large differences in lifetime hours of work using data from the NLSY79 and argue that these differences are an important source of inequality in lifetime earnings. To establish this we develop and calibrate a rich heterogeneous agent model of labor supply and human capital accumulation that allows for heterogeneity in preferences for work, initial human capital andlearning ability, as well as idiosyncratic shocks to human capital throughout the life-cycle. Our calibrated model implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work, with 90% of this effect due to heterogeneity in preferences. Higher lifetime hours contribute to lifetime earnings via two channels: a direct channel (more hours spent in production at given productivity) and a human capital channel (more hours spent investing in human capital, which increases future productivity). Between a third and a half of the effect of lifetime hours on lifetime earnings is due to the human capital channel. Our model implies that policies that limit long hours have important effects on both the mean and variance of lifetime earnings.

Takeaways by Macro Roundup® AI

  1. A calibrated heterogeneous agent model of labor supply and human capital accumulation, using NLSY79 data, implies that almost 20% of the variance in lifetime earnings is accounted for by differences in lifetime hours of work.
  2. The model attributes 90% of the effect of lifetime hours on lifetime earnings variance to heterogeneity in preferences for work.
  3. Between a third and a half of the effect of lifetime hours on lifetime earnings operates through the human capital channel, and the model implies that policies limiting long hours affect both the mean and variance of lifetime earnings.

Related Articles:

  • Europeans ‘Less Hard-Working’ Than Americans, Says Norway Oil Fund Boss — Norway's sovereign wealth fund argues that American companies are outpacing European rivals on innovation and technology because the US more readily accepts failure and risk and because Americans work harder and are more ambitious. US shares now make up almost half of the fund's equity holdings, up from 32% a decade earlier, while UK holdings fell from 15% to 6%.
  • America is Still Working — US hours worked per person fell 7% between 2000 and 2022, a decline attributable entirely to the employment rate falling from 70% to 65%. Hours now sit roughly at their level in the first years after World War II, 23% below 1900.
  • Gen Z Really Does Have a Work Ethic Problem — Long-running nationally representative surveys of U.S. 12th graders show the share saying they want to do their best at a job "even if this sometimes means working overtime" fell from 54% to 36%, a relative drop of 33% in two years, after work ethic measures had recovered among Gen Z in the 2010s.

AI Summary. The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, with the decline concentrated among young and small firms while mature and large firms showed little change. All sectors declined, especially construction and manufacturing, though information industries staged a modest rebound after 2010.

J. Daniel Kim, Joonkyu Choi, Nathan Goldschlag et al. Federal Reserve Board
Date Posted:
Is Database:
Database

The share of US firms with growth over 130%/year declined from 18% in 1985 to 12% in 2015, driven by a decline in new firm formation and slower growth among existing firms. @ngoldschlag @JHaltiwanger_UM @jdanielkim

Has the share of high-growth U.S. firms declined across sectors?

Core argument: The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, even as the total number of firms generally increased over the past four decades.

While there generally has been an increase in the number of firms in the U.S. in the past four decades, the share of firms that are high-growth has steadily decreased from 18% in 1985 to 12% in 2015. This decline is driven by both falling shares of new firms and languishing growth among existing firms. With respect to firm size and age, we find that the decline in the share of high-growth firms is particularly severe for young and small firms. In contrast, mature and large firms do not exhibit substantial changes in high-growth activity over time. In terms of industry, we find that all sectors—especially construction and manufacturing—have shown a general decline in the share of high-growth firms. Interestingly, a few sectors such as Information (e.g., software, media streaming, and computing infrastructure) have shown a modest rebound beginning in 2010. However, all sectors remain far below their shares of high-growth firms from earlier decades.

Takeaways by Macro Roundup® AI

  1. The share of U.S. firms classified as high-growth fell from 18% in 1985 to 12% in 2015, even as the total number of firms generally increased over the past four decades.
  2. The decline in high-growth firms stems from both falling shares of new firms and languishing growth among existing firms, with the drop most severe among young and small firms while mature and large firms show little change.
  3. All sectors, especially construction and manufacturing, show a general decline in high-growth firm shares, and although the Information sector, including software, media streaming, and computing infrastructure, rebounded modestly beginning in 2010, all remain far below earlier decades.

Related Articles:

  • Surging Business Formation in the Pandemic: A Brief Update — New business applications, including those likely to become employer firms, surged during the pandemic and were followed by a rise in establishment and firm creation, consistent with reallocation toward high-tech and pandemic-friendly industries and from city centers to suburbs and the South. Business formation remains elevated relative to pre-pandemic levels, though cooling.
  • High Tech Business Entry In The Pandemic Era — High-tech industries accounted for a disproportionate share of the surge in net new business establishments after 2019, with net entry higher in tech than non-tech industries. The authors find suggestive evidence that tech establishment births rose more for existing firms than new firms, though both categories saw elevated openings.
  • Demographic Origins of the Start-up Deficit — The authors estimate that the slowdown in US labor supply growth can explain up to 52% of the decline in the start-up rate and up to 80% of the decline in start-ups' share of employment. In their model, growing labor supply requires growing labor demand, which comes through entry of new firms or a lower real wage.

AI Summary. U.S. manufacturing employment recovered the 650,000 jobs lost in the 2020 recession, rising above 12.9m workers and exceeding the pre-pandemic level of 12.8m — the first such post-recession recovery since the late 1970s. Even so, manufacturing's share of private-sector employment fell from 31% in 1970 to 9.7%.

August Benzow and Connor O’Brien Economic Innovation Group
Date Posted:

US manufacturing employment is now above its pre-pandemic level; this is the first time since the 1970s that the sector has exceeded pre-recession employment levels. @cojobrien @AugustBenzow

Has manufacturing employment recovered its recession losses while its employment share declines?

Core argument: U.S. manufacturing employment surpassed 12.9 million workers by 2023, recouping the 650,000 jobs lost in 2020 and exceeding the 2019 level of 12.8 million.

In every economic expansion since the late 1970s, the U.S. manufacturing sector has failed to recover the jobs it lost in the preceding recession — until now. The COVID-19 recession dealt a severe blow to the sector, which lost 650,000 jobs in 2020. But by 2023, it had entirely recouped these losses, with total manufacturing employment above 12.9 million workers, just exceeding the 2019 figure of 12.8 million. Despite this encouraging comeback, manufacturing’s overall importance in the U.S. job market continues to wane. In 1970, the sector employed roughly 18 million workers, or 31% of private sector employment. By 2010, manufacturing jobs accounted for only 10.7% of the private workforce. As of 2023, the share was down to 9.7%.

Takeaways by Macro Roundup® AI

  1. U.S. manufacturing employment surpassed 12.9 million workers by 2023, recouping the 650,000 jobs lost in 2020 and exceeding the 2019 level of 12.8 million.
  2. In every economic expansion since the late 1970s, U.S. manufacturing failed to recover the jobs lost in the preceding recession, until the post-COVID recovery.
  3. Manufacturing's share of U.S. private sector employment fell from 31% in 1970, when the sector employed roughly 18 million workers, to 10.7% in 2010 and 9.7% in 2023.

Related Articles:

  • Business Spending Is Lining Up to Reinforce Growth — Around 70% of sectors are posting positive year-over-year profit growth, with big tech showing the largest acceleration in demand and profits but strength broadening across the economy. Companies are responding with rising capital spending growth and more optimistic investment plans, as firms typically add capacity with a slight lag after real demand picks up.
  • A US Industrial Renaissance Has Started — US legislation supporting semiconductors, clean energy, and infrastructure has triggered an industrial renaissance in artificial intelligence and energy, and US manufacturing capacity is now growing after declining for decades.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.

AI Summary. Mexico is asking major foreign manufacturers operating in the country—including U.S. carmakers, semiconductor firms, and aerospace and electronics companies—to identify Chinese products and parts that could be made locally, aiming to reduce reliance on imports from China, Malaysia, Vietnam, and Taiwan. China accounts for 20% of Mexico's total imports, according to Mexican government data.

Santiago Pérez Wall Street Journal
Date Posted:

Mexico is launching an import-substitution initiative aimed at replacing Chinese imports with domestically manufactured goods; currently, China’s exports make up about 20% of Mexico’s total imports.

Can Mexico cut Chinese imports by enlisting foreign manufacturers?

Core argument: China's exports to Mexico have risen steadily to reach 20% of Mexico's total imports, according to Mexican government data.

Mexico wants to reduce its dependence on imports from China and is asking some of the world’s biggest manufacturers and tech firms operating in the country to identify Chinese products and parts that could be made locally. The administration of leftist President Claudia Sheinbaum wants U.S. carmakers and semiconductor manufacturers as well as global giants in the aerospace and electronics sectors to substitute some goods and components manufactured in China, Malaysia, Vietnam, and Taiwan. China’s exports to Mexico have also risen steadily in recent years to reach 20% of total imports, according to Mexican government data. About 70% of Mexico’s imports from Asia, primarily Chinese goods and components, are brought in by about 50 foreign companies operating in Mexico. Half of them are U.S. firms in the automotive, semiconductor, and aerospace industries.

Takeaways by Macro Roundup® AI

  1. China's exports to Mexico have risen steadily to reach 20% of Mexico's total imports, according to Mexican government data.
  2. About 70% of Mexico's imports from Asia, primarily Chinese goods and components, are brought in by roughly 50 foreign companies operating in Mexico, half of them U.S. firms in automotive, semiconductor, and aerospace industries.
  3. President Claudia Sheinbaum's administration is asking U.S. carmakers, semiconductor manufacturers, and global aerospace and electronics firms to substitute goods and components made in China, Malaysia, Vietnam, and Taiwan with locally produced ones.

Related Articles:

  • Mexico’s Investment Boom — Mexico's export boom is largely genuine rather than a channel for tariff avoidance, since much of the growth comes from industries like motor vehicles where China has little presence in the North American market. Mexican manufacturing output has risen 5% since 2018, with computer output up nearly 25% and appliance and electrical equipment output up 15%.
  • China Circumvents US Tariffs By Shipping More Goods Via Mexico — An analysis of trade data indicates China is shipping more goods to the US via Mexico, circumventing US tariffs, with containers shipped from China to Mexico rising to 881,000 from 689,000 over comparable nine-month periods. Mexico has overtaken China as the largest exporter of goods to the US.
  • Mexico Targets Chinese Steel Imports With Increased Tariff Of Nearly 80% — Mexico imposed a tariff of nearly 80% on some steel imports, including certain Vietnamese exports of cold-rolled steel sheets, after local producers said Chinese steelmakers had strangled their production. Exporters that prove the steel originates outside China are exempt.

AI Summary. The 12-month US recession probability has been cut to the long-term average of 15%, after the unemployment rate fell to 4.051%, marginally below the level that activates the "Sahm rule" recession signal. Strong payroll growth and upward revisions imply an underlying jobs trend of 196k, above the estimated breakeven rate of 150-180k.

Jan Hatzius Goldman Sachs
Date Posted:

Citing the unemployment rate falling to 4.05%, Jan Hatzius has moved the @GoldmanSachs 12-month recession probability back to 15%, the firm’s long-term average.

Do falling unemployment and strong job gains lower recession odds?

Core argument: The 12-month US recession probability has been cut to the unconditional long-term average of 15%, where it stood before the unemployment rate's rise from 4.054% in June to 4.253% in July.

We have cut our 12-month US recession probability back to the unconditional long-term average of 15%, where it stood before the jump in the unemployment rate from 4.054% in June to 4.253% in July. The most important reason is that the unemployment rate fell to 4.051% in September, marginally below both the June level and the threshold that activates the “Sahm rule.” Moreover, with nonfarm payroll growth of 254k surprising sharply to the upside, prior months revised higher, and household employment also solid, we now estimate an underlying jobs trend of 196k, well above our pre-payrolls estimate of 140k and modestly above our estimated “breakeven rate” of 150-180k. The upshot is that the fundamental upward pressure on the unemployment rate may have ended via a combination of stronger labor demand growth and weaker labor supply growth (because of slowing immigration).

Takeaways by Macro Roundup® AI

  1. The 12-month US recession probability has been cut to the unconditional long-term average of 15%, where it stood before the unemployment rate's rise from 4.054% in June to 4.253% in July.
  2. The US unemployment rate fell to 4.051% in September, marginally below both its June level and the threshold that activates the "Sahm rule," the most important reason cited for the lower recession odds.
  3. Nonfarm payroll growth of 254k surprised sharply to the upside with prior months revised higher, lifting the estimated underlying jobs trend to 196k from a pre-payrolls estimate of 140k and modestly above the estimated breakeven rate of 150-180k.

Related Articles:

  • An Update from Our CIOs: How Durable Is the Economy? — Central banks will likely struggle to deliver the stimulus already priced into rate markets, and the cost of capital must rise enough to offset structurally higher government borrowing and durable private demand. Artificial intelligence spending is inflationary near-term while building capacity, but its deflationary potential is massive and could arrive fast.
  • Surging Business Formation in the Pandemic: A Brief Update — New business applications, including those likely to become employer firms, surged during the pandemic and were followed by a rise in establishment and firm creation, consistent with reallocation toward high-tech and pandemic-friendly industries and from city centers to suburbs and the South. Business formation remains elevated relative to pre-pandemic levels, though cooling.
  • U.S. Inflation Is Still Hotter than Pre-Pandemic. And that’s Okay — If underlying services inflation holds near 2% a year and prior relationships reassert themselves, total yearly personal consumption inflation could settle near 3% rather than returning to 2%. That would carry implications for interest rate pricing, and traders assuming a reversion to pre-pandemic inflation norms may be surprised.

AI Summary. Medicare's projected doubling of cost as a share of GDP is accounted for by increased use of healthcare services, especially newly developed procedures and therapies; without that expansion, spending would fall from 3.2% to 2.4% of GDP rather than rise to 5.4%. The author argues beneficiaries wanting these added services should pay supplemental premiums.

Andrew Biggs and Chris Pope American Enterprise Institute
Date Posted:
Is Database:
Database

Slowing the uptake of new healthcare services by Medicare would mean “Medicare’s expenditures would shrink from 3.2% to 2.4% of GDP, rather than increasing to 5.4%.” @biggsag and @CPopeHC suggest a supplemental premium to cover new services.

Can supplemental premiums cover Medicare's growing cost of new treatments?

Core argument: The projected doubling of Medicare's cost from 3.2% to 5.4% of GDP is accounted for by increased use of healthcare services, particularly newly developed procedures and therapies not previously available.

The projected doubling of Medicare’s cost as a share of GDP is entirely accounted for by the increased use of healthcare services—particularly newly-developed procedures and therapies, which haven’t previously been available. Without this expanded provision of medical services, Medicare’s expenditures would shrink from 3.2% to 2.4% of GDP, rather than increasing to 5.4%. This is not to say that Medicare should never cover newly developed healthcare services. But which new medical technologies are developed reflects what Medicare promises to pay for. If beneficiaries want to receive additional services which increase the cost of the program, they should pay supplemental premiums to cover the expense.

Takeaways by Macro Roundup® AI

  1. The projected doubling of Medicare's cost from 3.2% to 5.4% of GDP is accounted for by increased use of healthcare services, particularly newly developed procedures and therapies not previously available.
  2. Without the expanded provision of medical services, Medicare's expenditures would fall from 3.2% to 2.4% of GDP rather than rising to 5.4%.
  3. Which new medical technologies are developed reflects what Medicare promises to pay for, and beneficiaries who want additional services that increase the program's cost should pay supplemental premiums to cover the expense.

Related Articles:

  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.
  • Has the Medicare Cost Problem Gone Away? — Average annual real per capita spending growth in the US Medicare program fell from 5.2% in 1987-1996 to 2.7% in 1996-2005 and 0.7% in 2006-2022, a slowdown most plausibly attributed to congressionally mandated payment reforms and cuts. With enrollment projected to rise from 66m to 83m by 2040, aggregate costs are expected to grow rapidly.

AI Summary. A New York Times/Siena national poll of 3,385 likely voters found Kamala Harris leading Donald Trump 49% to 46%, a margin within the poll's margin of error. Battleground-state surveys show one of the closest presidential races in modern history.

Adam Nagourney, Ruth Igielnik, and Camille Baker New York Times
Date Posted:

NYT/Siena finds the race for the White House remains a dead heat with Harris leading Trump by 3pp nationally, within the poll’s margin of error. Trump is leading by 13pp in Florida.

Is the presidential race one of the closest in modern history?

Core argument: The Times/Siena poll of 3,385 likely voters, conducted Sept. 29 to Oct. 6, found Kamala Harris leading Donald Trump 49% to 46%, a lead within the poll's margin of error.

The finding is the first time Ms. Harris has led Mr. Trump in the Times/Siena poll since July when President Biden dropped out of the race and Democrats rallied behind Ms. Harris as his replacement. It comes as the contest moves into its final month, and surveys from the battleground states find the race to be one of the closest in modern history. While the Times/Siena poll shows some solid advantages for Mr. Trump, the results suggest Ms. Harris is making gains, if small ones, on questions about temperament, trust, and change that can be critical in a presidential race. The poll, conducted from Sept. 29 to Oct. 6 among 3,385 likely voters, found that Ms. Harris led Mr. Trump, the Republican, by 49% to 46%, a slight lead that is within the poll’s margin of error.

Takeaways by Macro Roundup® AI

  1. The Times/Siena poll of 3,385 likely voters, conducted Sept. 29 to Oct. 6, found Kamala Harris leading Donald Trump 49% to 46%, a lead within the poll's margin of error.
  2. The result marks the first time Harris has led Trump in the Times/Siena poll since July, when President Biden dropped out and Democrats rallied behind Harris as his replacement.
  3. The Times/Siena poll shows some solid advantages for Trump while suggesting Harris is making small gains on questions of temperament, trust, and change, with battleground-state surveys finding one of the closest races in modern history.

Related Articles:

Wednesday, October 9, 2024

AI Summary. The authors estimate that U.S. counties with larger Chinese population shares before the 1882 Chinese Exclusion Act, which barred Chinese laborers from entry and Chinese immigrants from naturalization, saw increasingly negative effects on both Chinese and white labor supply after its passage. Declines in manufacturing output and the number of establishments followed the labor declines.

Joe Long, Carlo Medici, Nancy Qian, and Marco Tabellini National Bureau of Economic Research
Date Posted:

The Exclusion Act reduced Chinese labor supply in the U.S. by 64%, the number of manufacturing establishments by 54-69%, and total manufacturing output by 62%. It “slowed economic growth in western states until at least 1940.” @carlomedici

Did excluding Chinese immigrants reduce white labor supply and manufacturing output?

Core argument: Counties with higher Chinese population shares on the eve of the 1882 Chinese Exclusion Act show increasingly negative estimated effects on white and total labor supply after the Act, with coefficients at zero beforehand.

The 1882 Chinese Exclusion Act barred all China-born “laborers” from entering the United States and all individuals of Chinese ethnicity from naturalization for ten years. [It] was renewed for ten more years in 1892, made indefinite in 1902 [and] repealed in 1943. We exploit two sources of variation: time variation in the introduction of the Act and cross-sectional variation ina county’s Chinese population share on the eve of the Act. The latter influences the intensity of treatment: counties with a higher Chinese population share will be more affected by the Act than counties with fewer Chinese immigrants. To understand the evolution of the effects, we estimate a dynamic specification. Figure 3a presents the estimates for the labor supply of Chinese, white and all races. For white and all labor, the coefficients are zero prior to the Act and become increasingly negative afterwards. The timing of the trend break coincides with the Act. Figure 3c plots the estimates for total manufacturing output and the number of establishments. The negative effects on manufacturing trail the negative effects on labor. We find no evidence of pre-trends.

Takeaways by Macro Roundup® AI

  1. Counties with higher Chinese population shares on the eve of the 1882 Chinese Exclusion Act show increasingly negative estimated effects on white and total labor supply after the Act, with coefficients at zero beforehand.
  2. Estimates show negative effects on total manufacturing output and the number of establishments that trail the negative labor supply effects, with no evidence of pre-trends.
  3. The Chinese Exclusion Act barred China-born laborers from entry and all individuals of Chinese ethnicity from naturalization for ten years, was renewed in 1892, made indefinite in 1902, and repealed in 1943.

Related Articles:

  • Creating and Connecting US and China Science: Chinese Diaspora and Returnee Researchers — The authors estimate that China-born researchers working in the US contributed to 27% of US-addressed scientific papers, while China-born researchers with US experience who returned home contributed to 38% of China-addressed papers. Papers with these authors averaged more citations and appeared more often in high-impact journals than other papers.
  • The Global AI Talent Tracker 2.0 — The United States remains the leading destination for the world's most elite AI talent and hosts 60% of top AI institutions. China's share of top AI researchers working domestically rose from 29% in 2019 to 47% in 2022, and India retained one-fifth of its top AI researchers in 2022 versus nearly none in 2019.
  • Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology — Among top scorers on India's Joint Entrance Exam for the Indian Institutes of Technology, 62% of the top 100 and 36% of the top 1,000 migrated abroad within eight years, primarily to the U.S. for graduate school. The authors argue elite schools shape migration by signaling ability and providing access to networks.

AI Summary. If the average interest rate on US federal debt crept up to 4.4% by 2034 rather than staying below the 3.4% the Congressional Budget Office forecasts, interest payments would consume 29.7% of federal revenues, or 40.4% excluding Social Security payroll taxes. Those payroll taxes are projected to cover only 83% of benefits from 2035.

Joshua Rauh Liberty Lens
Date Posted:
Is Database:
Database

.@joshrauh forecasts that “if the average interest rate the federal government paid on its debt crept up to just 4.4%,” interest payments would exceed 29.7% of federal revenue in 2034. He argues the US is “playing with fire.”

How much of federal revenue would a one-point higher interest rate consume?

Core argument: If the average interest rate on US federal debt rises to 4.4% by 2034 rather than staying below 3.4% as the CBO forecasts, interest payments would consume 29.7% of federal revenues under current law.

What would happen to interest coverage if the average interest rate on the federal debt were to reach its 1982 level of 9.2%, or even its 1991 level of 7.2%. Instead, let’s just consider what would happen if over the coming decade interest rates were slightly higher each year, cumulating in a 1% rate difference in 2034. That is, instead of ending the next 10 years exactly where we’re starting, at less than 3.4% as the CBO forecasts, what if the average interest rate the federal government paid on its debt crept up to just 4.4%? If this happens under current law, interest payments will consume 29.7% of revenues and 40.4% of revenues excluding Social Security OASDI payroll tax revenues. If you think there’s going to be appetite for accessing the Social Security payroll tax revenues for non-Social Security purposes, keep in mind that starting in 2035 the revenues from those taxes will only be able to fund 83% of the benefits.

Takeaways by Macro Roundup® AI

  1. If the average interest rate on US federal debt rises to 4.4% by 2034 rather than staying below 3.4% as the CBO forecasts, interest payments would consume 29.7% of federal revenues under current law.
  2. Under that 4.4% average interest rate scenario, interest payments would take 40.4% of federal revenues excluding Social Security OASDI payroll tax revenues.
  3. Starting in 2035, Social Security payroll tax revenues will be able to fund only 83% of benefits.

Related Articles:

  • An Update to the Budget and Economic Outlook: 2024 to 2034 — The Congressional Budget Office projects a federal budget deficit of $1.9tn in fiscal 2024, or $2tn excluding payment-timing shifts, rising to $2.8tn by 2034. On that adjusted basis, deficits equal 7% of gross domestic product in 2024, dip to 5.5% by 2027, and reach 6.9% by 2034, versus a 3.7% average over the past 50 years.
  • When Does Federal Debt Reach Unsustainable Levels? — The authors estimate that U.S. debt held by the public cannot exceed roughly 200% of GDP even under favorable market conditions, and that under current policy the ratio reaches 175–200% within about 20 years. After that point, they argue, no tax increases or spending cuts could avert default or inflationary debt monetization.
  • From Riches to Rags: Causes of Fiscal Deterioration Since 2001 — Federal debt held by the public rose from 32% to 98% of GDP over roughly two decades, despite earlier Congressional Budget Office projections that the debt would be paid off. The authors attribute 37 percentage points to major tax cuts, 33 to discretionary spending and Medicare expansions, and 28 to recession and pandemic responses.

AI Summary. The Congressional Budget Office projects that authorizing Medicare coverage of anti-obesity medications would raise federal spending by about $35bn on net over 2026–2034, with direct costs rising from $1.6bn to $7.1bn a year. Offsetting savings from improved beneficiary health would be small, under $50m initially and reaching $1.0bn.

Austin Barselau, Noelia Duchovny, Jared Maeda, et al. Congressional Budget Office
Date Posted:

Federal savings from extending Medicare coverage to include weight loss drugs like Ozempic and Wegovy won’t remotely offset the cost, which @USCO forecasts at $35B between 2026-2034. Over ⅔ of current Medicare beneficiaries are overweight or obese.

How would Medicare coverage of anti-obesity drugs affect federal spending?

Core argument: Authorizing Medicare coverage of anti-obesity medications would raise net federal spending by about $35 billion over 2026–2034, with total direct federal costs rising from $1.6 billion in 2026 to $7.1 billion in 2034.

Authorizing coverage of anti-obesity medications (AOMs) in Medicare would increase federal spending, on net, by about $35 billion from 2026 to 2034. Total direct federal costs of covering AOMs would increase from $1.6 billion in 2026 to $7.1 billion in 2034. Relative to the direct costs of the medications, total savings from beneficiaries’ improved health would be small—less than $50 million in 2026 and rising to $1.0 billion in 2034. Weight loss is associated with reductions in health-related spending per user that are less than the estimated federal cost per user of covering AOMs throughout the 2026–2034 period. Per AOM user, the average direct federal cost would be roughly $5,600 in 2026, decreasing to $4,300 in 2034. And average offsetting federal savings would be about $50 in 2026, reaching $650 in 2034.

Takeaways by Macro Roundup® AI

  1. Authorizing Medicare coverage of anti-obesity medications would raise net federal spending by about $35 billion over 2026–2034, with total direct federal costs rising from $1.6 billion in 2026 to $7.1 billion in 2034.
  2. Savings from beneficiaries' improved health would be small relative to the direct costs of the medications, at less than $50 million in 2026 and rising to $1.0 billion in 2034.
  3. The average direct federal cost per anti-obesity medication user would fall from roughly $5,600 in 2026 to $4,300 in 2034, while average offsetting federal savings would rise from about $50 to $650.

Related Articles:

  • We May Have Passed Peak Obesity — Newly released data show the US adult obesity rate fell by about two percentage points between 2020 and 2023, with the steepest decline among college graduates. The author argues the new generation of diabetes and weight-loss drugs is highly likely behind the reversal, as one in eight US adults have used them.
  • The Year of Ozempic — GLP-1 medications act on receptors in the gut, liver, muscles, and brain, and studies report they reduce heart attacks and strokes, slow kidney disease progression, and shrink liver fat deposits. Users have also reported diminished cravings for alcohol, tobacco, gambling, and other compulsive behaviors, though anecdotal reports outpace clinical studies.
  • Today’s Most Important Technology — The share of patients taking semaglutide for weight control rather than type 2 diabetes rose from under 10% in 2019 to 41.7%. Obesity and overweight, affecting 1 in 8 people worldwide, cost the global economy $2tn — nearly 70 cents on the dollar from premature mortality and lost productivity — an impact projected to double by 2035 absent intervention.

AI Summary. China's shipbuilding capacity now exceeds the United States' by such a margin that it can build more ships in a month than American yards build in a year, with a workforce estimated at nearly 5x the US level. Chinese yards handled more than 1,700 orders in a year, compared with fewer than five for American shipyards.

Brady Africk and Mackenzie Eaglen Washington Post
Date Posted:

Chinese military spending was likely 3.9% of GDP in 2022, compared to the United States’ 2.9%. @MEaglen and @bradyafr note that “China can now build more ships in a month than the United States can in a year.” @AEIecon

How large is China's shipbuilding advantage over the United States?

Core argument: China can now build more ships in a month than the United States builds in a year, after 18 years of shipbuilding investment, and Beijing aims to keep widening that advantage.

China has been investing so much in shipbuilding over the past 18 years that it can now build more ships in a month than the United States can in a year — and Beijing aims to keep widening its advantage. The data shows a stark divide: China’s shipbuilding workforce is estimated to be nearly five times that of the United States and supports more than 7,000 vessels. Fewer than 200 are serviced by American shipyards — which fulfilled fewer than five orders in 2023, while their Chinese counterparts handled more than 1,700.

Takeaways by Macro Roundup® AI

  1. China can now build more ships in a month than the United States builds in a year, after 18 years of shipbuilding investment, and Beijing aims to keep widening that advantage.
  2. China's shipbuilding workforce is estimated at nearly five times that of the United States and supports more than 7,000 vessels, while American shipyards service fewer than 200.
  3. American shipyards fulfilled fewer than five orders in 2023, compared with more than 1,700 handled by their Chinese counterparts.

Related Articles:

  • China Is Ready for War — China's state-owned defense enterprises now account for four of the world's ten largest companies by combined defense and nondefense revenue — including the two largest, Aviation Industry Corporation of China and China State Shipbuilding — and five of the top 12 by defense revenue alone, up from none in the top 100 a decade earlier.
  • Keeping Up with the Pacing Threat: Unveiling the True Size of Beijing’s Military Spending — China's publicly released military budget understates its spending; adjusting for purchasing power and adding uncounted expenditures, the authors estimate the buying power of China's military budget at $711bn, roughly triple Beijing's stated figure and nearly equal to the United States'. Such parity favors China, whose spending concentrates on Asia while US resources are spread across multiple theaters.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.