Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “…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
  • “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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, November 19, 2024

AI Summary. Counties where government transfer programs such as Social Security, Medicare, Medicaid, and unemployment insurance make up at least a quarter of personal income gave Trump 63% of the vote, while counties where transfers account for less than 15% gave Harris 56%. Transfers supplied 18% of total US personal income.

Sarah Eckardt, Connor O'Brien, and Ben Glasner Agglomerations
Date Posted:

Trump won 63% of the vote in counties where transfer payments made up >25% of personal income in 2022. In counties where transfers were <15%, Harris won 56%. On average, transfers made up 18% of personal income in 2022. @BenGlasner @cojobrien

Do places more reliant on government transfers vote differently?

Core argument: Trump received 63% of the vote in counties significantly reliant on government transfers, where residents draw at least 25% of personal income from programs such as Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.

Places that rely more on government transfers tended to vote for Trump, while less reliant places tended to vote for Harris. (Transfers include programs like Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.) As of 2022, 18% of total personal income in the United States came from government transfers. Trump received 63% of the vote among significantly reliant counties, whose residents receive at least a quarter of their personal income from transfers. Harris received 56% of the vote among minimally reliant counties, where less than 15% of total personal income is from transfers.

Takeaways by Macro Roundup® AI

  1. Trump received 63% of the vote in counties significantly reliant on government transfers, where residents draw at least 25% of personal income from programs such as Social Security, Medicare, Medicaid, Unemployment Insurance, and the Earned Income Tax Credit.
  2. Harris received 56% of the vote in minimally reliant counties, where government transfers account for less than 15% of total personal income.
  3. Government transfers accounted for 18% of total personal income in the United States as of 2022.

Related Articles:

  • 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.
  • “Compensate the Losers?” Economic Policy and Partisan Realignment in the US — The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.
  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.

AI Summary. The authors argue that partisan realignment by education reflects Democrats' declining supply of "predistribution" policies such as job guarantees, higher minimum wages, protectionism, and stronger unions, which less-educated Americans favor while more-educated Americans prefer taxes and transfers. They estimate changing views of the parties' economic policies explain roughly half the shift.

Ilyana Kuziemko, Nicolas Longuet-Marx and Suresh Naidu National Bureau of Economic Research
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.@ikuziemko et al. find that less-educated US voters have consistently favored “predistribution” policies such as protectionism and strong labor unions, while more-educated Democratic elites have reduced support for “predistribution” since the 1970s.

How does a party's shift away from predistribution explain educational realignment?

Core argument: The authors estimate that roughly half of the shift of less-educated Americans away from the Democratic Party since the 1970s can be explained by their changing views of the parties' economic policies.

We argue that the Democratic Party’s evolution on economic policy helps explain partisan realignment by education. We show that less-educated Americans differentially demand “predistribution” policies (e.g., a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions), while more-educated Americans differentially favor redistribution (taxes and transfers). This educational gradient in policy preferences has been largely unchanged since the 1940s. We then show the Democrats’ supply of predistribution has declined since the 1970s. We tie this decline to the rise of a self-described “New Democrat” party faction who court more educated voters and are explicitly skeptical of predistribution. Less-educated Americans began to leave the Democratic Party in the 1970s, after decades of serving as the party’s base. Roughly half of the total shift can be explained by their changing views of the parties’ economic policies. We also show that in the crucial transition period of the 1970s and 1980s, New Democrat-aligned candidates draw disproportionately from more-educated voters in both survey questions and actual Congressional elections.

Takeaways by Macro Roundup® AI

  1. The authors estimate that roughly half of the shift of less-educated Americans away from the Democratic Party since the 1970s can be explained by their changing views of the parties' economic policies.
  2. Less-educated Americans differentially demand predistribution policies such as a federal jobs guarantee, higher minimum wages, protectionism, and stronger unions, while more-educated Americans differentially favor redistribution through taxes and transfers, a gradient largely unchanged since the 1940s.
  3. The authors tie the decline in Democrats' supply of predistribution since the 1970s to the rise of a self-described "New Democrat" faction skeptical of predistribution, whose aligned candidates drew disproportionately from more-educated voters in 1970s–1980s survey questions and Congressional elections.

Related Articles:

  • Welfare Is What’s Eating the Budget — The U.S. redistributes 29.4% of its gross domestic product through transfers and taxes, a larger share than any developed country except France at 30.1%. Counting transfers as income and taxes as income lost and adjusting for household size, average households in the bottom, second, and middle income fifths have roughly equal incomes despite large differences in work effort.
  • 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.
  • Americans Are More Reliant Than Ever on Government Aid — Research from the Economic Innovation Group finds that in 1970, fewer than 1% of US counties drew at least 25% of personal income from government safety-net and social programs, compared with 53% of counties by 2022, a shift the group associates with population aging.

AI Summary. Americans without a four-year college degree earn about $1m less over their lifetimes and live about eight years less than college graduates, and they have higher rates of obesity, divorce, out-of-wedlock births, and opioid deaths. Nearly a quarter report having no close friends, compared with 10% of college graduates.

David Brooks The Atlantic
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.@nytdavidbrooks argues that efforts to reward merit over social class in elite university admissions have resulted in “an American caste system” in which the winners feel less obligated to the losers, who in turn are reacting in a “populist backlash.”

How wide are the gaps between college graduates and nongraduates?

Core argument: The average high-school graduate will earn about $1 million less over a lifetime than the average four-year college graduate and lives about eight years less.

The average high-school graduate will earn about $1 million less over their lifetime than the average four-year college graduate. The average person without a four-year college degree lives about eight years less than the average four-year college grad. 35% of high-school graduates are obese, compared with 27% of four-year college grads. High-school grads are much less likely to get married, and women with high-school degrees are about twice as likely to divorce within 10 years of marrying as women with college degrees. Nearly 60% of births to women with a high-school degree or less happen out of wedlock; that’s roughly five times higher than the rate for women with at least a bachelor’s degree. The opioid death rate for those with a high-school degree is about 10 times higher than for those with at least a bachelor’s degree. The most significant gap may be social. According to an American Enterprise Institute study, nearly a quarter of people with a high-school degree or less say they have no close friends, whereas only 10% of those with college degrees or more say that.

Takeaways by Macro Roundup® AI

  1. The average high-school graduate will earn about $1 million less over a lifetime than the average four-year college graduate and lives about eight years less.
  2. The opioid death rate for those with a high-school degree is about 10 times that of those with at least a bachelor's degree, and 35% of high-school graduates are obese, compared with 27% of four-year college graduates.
  3. Nearly a quarter of people with a high-school degree or less say they have no close friends, compared with 10% of those with college degrees or more, according to an American Enterprise Institute study.

Related Articles:

  • Disconnected: The Growing Class Divide in American Civic Life — 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.
  • The Marriage Paradox: Understanding And Remedying The Paradoxical Place Of Marriage In America — The U.S. marriage rate has fallen more than 60% since 1970, from 85.9 to 30.5 marriages per 1,000 unmarried Americans aged 15 and older, and the share of adults who are married has dropped from 72% to about 50%. Demographers project roughly one in three young adults may never marry.
  • Marriage Market Sorting in the U.S. — Using U.S. survey and census data, the authors find people are most selective on race in marriage markets, followed by education and age, and are more selective on the combination of income and skill than on either alone. They estimate that increased assortative matching accounts for about half of the rise in household income inequality between 1980 and 2020.

AI Summary. Estimates based on labor market tightness measures — job vacancies relative to unemployment and to all job searchers — imply excess demand peaked at a contribution of 0.75 to 1.15 percentage points to inflation, and has since declined to a contribution of 0.3 to 0.4 percentage point.

Regis Barnichon and Adam Shapiro Federal Reserve Bank of San Francisco
Date Posted:

A @sffed analysis finds that labor market tightness as measured by vacancy ratios was still contributing 0.3-0.4pp to inflation as of September 2024, down from 0.75pp in Q1 2024.

How much has cooling labor demand reduced inflation?

Core argument: Estimates based on the vacancies-to-unemployment (V-U) and vacancies-to-total-searchers (V-S) ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation.

We assess the impact of excess demand on inflation through the lens of the job vacancies to unemployment (V-U) ratio and the more comprehensive (V - S) [vacancies to total searchers]. [Our estimation uses] the San Francisco Fed’s cyclical core personal consumption expenditures inflation measure [which] includes only categories with prices highly responsive to the business cycle, [excluding] prices tend to be driven by supply-related factors. Figure 3 shows the contribution of labor market tightness as measured by the unemployment rate and the V-U and V-S ratios to excess inflation over 1995–2024. Our estimates using these two ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation. Both ratios have declined since their 2022 peak, [but] as of September 2024, both ratios implied that excess demand was still contributing between 0.3 to 0.4 percentage point to inflation.

Takeaways by Macro Roundup® AI

  1. Estimates based on the vacancies-to-unemployment (V-U) and vacancies-to-total-searchers (V-S) ratios imply that excess demand peaked in the first quarter of 2022, contributing between 0.75 and 1.15 percentage points to inflation.
  2. As of September 2024, both the V-U and V-S ratios implied that excess demand was still contributing between 0.3 and 0.4 percentage point to inflation, down from the 2022 peak.
  3. The estimation uses the San Francisco Fed's cyclical core personal consumption expenditures inflation measure, which includes only categories with prices highly responsive to the business cycle and excludes prices driven by supply-related factors, over 1995–2024.

Related Articles:

  • Economic Policy Before and After the 2024 Election — Market expectations for the Federal Reserve's interest-rate path have shifted, with the expected endpoint moving from about 2.8% to 3.8%. The author argues that enacting the campaign agenda—larger deficits from tax cuts, tariffs on all imports, a weaker currency, mass deportations, and pressure on central-bank independence—would produce a substantially larger inflation shock.
  • Revisiting the Phillips and Beveridge Curves: Insights from the 2020s Inflation Surge — The authors identify a "Beveridge threshold" level of labor market tightness—the ratio of job vacancies to unemployed workers—below which the relationship between inflation and economic activity steepens and labor market adjustment occurs mainly through vacancies rather than unemployment. They estimate that during the post-pandemic inflation surge the unemployment rate fell as much as 1.08 percentage points below this threshold.
  • The U.S. Economy Is Not Slowing Down — U.S. household incomes have been rising at a 6% annualized rate for two years, with no sign of slowing, while measures of underlying inflation run about 1 to 1.5 percentage points faster on an annualized basis than before the pandemic. Productivity and employment also appear to be rising faster.

AI Summary. U.S. venture firms returned $26bn worth of shares to their investors in a year, the lowest amount since 2011, according to data provider PitchBook, and invested $60bn more than they collected — the largest such deficit in 26 years of PitchBook data. Investment remains high while acquisitions and initial public offerings are few.

Berber Jin Wall Street Journal
Date Posted:

In 2023, US venture firms paid $26B in profits to their investors, the lowest amount since 2011, while drawing $86B for new investments. The trend has continued in 2024, with high levels of investment and few acquisition deals or IPOs.

Are venture firms returning less cash to investors than they invest?

Core argument: U.S. venture firms returned $26 billion worth of shares to their investors last year, the lowest amount since 2011, according to PitchBook.

Last year, U.S. venture firms returned $26 billion worth of shares back to their investors, the lowest amount since 2011, according to the data provider PitchBook. Startup investors say 2024 has continued the trend, with high levels of investment and few acquisition deals or initial public offerings. “We’ve raised a lot of money, and we’ve given very little back,” Thomas Laffont, co-founder of investment firm Coatue Management, said at a recent conference. “We are bleeding cash as an industry.” Last year, U.S. venture firms invested $60 billion more than they collected, the highest such deficit in PitchBook’s 26 years of data. As a result, the investors that back VC firms, such as university endowments and pension funds, aren’t seeing the type of profits the industry has long delivered.

Takeaways by Macro Roundup® AI

  1. U.S. venture firms returned $26 billion worth of shares to their investors last year, the lowest amount since 2011, according to PitchBook.
  2. U.S. venture firms invested $60 billion more than they collected last year, the highest such deficit in PitchBook's 26 years of data.
  3. Startup investors say high investment levels alongside few acquisitions or initial public offerings have continued into 2024, leaving university endowments and pension funds that back venture firms without the profits the industry has long delivered.

Related Articles:

  • It’s Mostly a Paper Moon: Alternative Investments Review — Venture capital financing has tightened: the median time between funding rounds has lengthened, more startups have shut down through bankruptcy, and the share of "down rounds" — new financing at a lower valuation — rose from 8% to nearly 20%, with those rounds cutting post-money valuations by more than 50%.
  • Venture Capital Reckons With The End of ‘Megafund’ Era — Venture capital fundraising has slowed sharply, from $555bn at its peak to about a third of that the following year, leaving venture investors on course for their worst fundraising year since 2015. Firms holding large pre-downturn funds have been reluctant to back start-ups whose valuations were hit by higher interest rates.
  • Monetary Policy and Innovation — The authors estimate that a 100bps monetary tightening reduces investment in intellectual property by about 1%, research and development spending at public firms by about 3%, venture capital investment by up to 25%, and patenting in important technologies by up to 9%.

AI Summary. Chinese technology groups including Alibaba, ByteDance and Meituan are expanding California offices to build artificial intelligence teams and recruit US talent, despite US export bans on the highest-end Nvidia AI chips. US-based entities owned by Chinese tech companies face no restrictions on accessing high-end AI chips through US data centres.

Eleanor Olcott Financial Times
Date Posted:

Alibaba, ByteDance, and Meituan are building AI teams in Silicon Valley to access US talent and circumvent export controls designed to slow Chinese AI development.

Are Chinese tech groups using US offices for AI talent and chips?

Core argument: Alibaba, ByteDance and Meituan have expanded their California offices to build AI teams and poach staff from rival US groups, seeking to make up ground in the race to profit from generative AI.

China’s biggest technology groups are building artificial intelligence teams in Silicon Valley, seeking to hire top US talent despite Washington’s efforts to curb the country’s development of the cutting-edge technology. Alibaba, ByteDance and Meituan have been expanding their offices in California in recent months, seeking to poach staff from rival US groups who could help them make up ground in the race to profit from generative AI. The push comes despite US efforts to stymie their work. Chinese groups have been hit by a US ban on exports of the highest-end Nvidia AI chips, which are crucial for developing AI models. There are currently no restrictions on US-based entities related to or owned by Chinese tech companies accessing high-end AI chips through data centres located in the US. However, the Department of Commerce proposed introducing a rule in January that cloud providers have to verify the identity of users training AI models and report their activities.

Takeaways by Macro Roundup® AI

  1. Alibaba, ByteDance and Meituan have expanded their California offices to build AI teams and poach staff from rival US groups, seeking to make up ground in the race to profit from generative AI.
  2. US export bans on Nvidia's highest-end AI chips have hit Chinese technology groups, while US-based entities related to or owned by Chinese tech companies face no restrictions on accessing high-end chips through data centres located in the US.
  3. The US Department of Commerce proposed a rule requiring cloud providers to verify the identity of users training AI models and report their activities.

Related Articles:

  • 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.
  • Microsoft Asks Hundreds of China-Based AI Staff to Consider Relocating Amid U.S.-China Tensions — Microsoft has asked roughly 700 to 800 employees in its China-based cloud-computing and artificial intelligence operations, mostly Chinese-national engineers working on machine learning, to consider transferring to countries including the U.S., Ireland, Australia, and New Zealand amid escalating U.S.-China tensions.
  • Chinese Companies Resort To Repurposing Nvidia Gaming Chips For AI — Chinese firms are developing artificial intelligence tools using processors stripped from Nvidia consumer gaming graphics cards and remounted on new circuit boards, after US export controls blocked sales of high-performance chips. Industry experts describe the practice as a rough workaround for China's shortage of high-end processors.

AI Summary. China has passed the European Union to become the second-largest source of cumulative historical greenhouse gas emissions, behind the United States. Projections based on the International Energy Agency's "stated policies scenario," which tracks nations' current climate actions, show China may nearly catch up with the US.

Brad Plumer and Mira Rojanasakul New York Times
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China’s cumulative carbon emissions since 1850 have outpaced Europe’s but are still 60% of the US’s level. China has been the world’s #1 carbon emitter since 2006.

Is China now the second-largest source of historical emissions?

Core argument: China has passed the European Union's 27 current member states to become the world's second-largest source of cumulative greenhouse gas emissions.

The United States has burned more fossil fuels than anywhere else in history. Europe has long ranked No. 2 in total historical greenhouse gas emissions. Until now. And projections show that China may nearly catch up with the United States. Data for carbon dioxide-equivalent emissions from 1850 to 2023 is from Jones et al (2024); data for 2024 from Carbon Brief; projected data for 2025 to 2100 is based on the International Energy Agency’s “stated policies scenario” tracking nations’ climate actions. European Union totals were calculated for the current 27 member countries. Lines show cumulative territorial CO2 emissions from fossil fuels, cement, land use, land use change and forestry.

Takeaways by Macro Roundup® AI

  1. China has passed the European Union's 27 current member states to become the world's second-largest source of cumulative greenhouse gas emissions.
  2. Projections based on the International Energy Agency's "stated policies scenario" show China may nearly catch up with the United States, which has burned more fossil fuels than anywhere else in history.
  3. The emissions series combines carbon dioxide-equivalent data from Jones et al (2024) for 1850–2023, Carbon Brief for 2024, and IEA-based projections for 2025–2100, covering fossil fuels, cement, and land use, land use change and forestry.

Related Articles:

  • Halfway Between Kyoto and 2050: Zero Carbon Is A Highly Unlikely Outcome — Fossil fuels' share of global primary energy fell only from about 86% to 82% over 25 years, while absolute fossil fuel consumption rose nearly 55%. Emission cuts in the EU (-23%) and US (-9%) were outweighed by China's 3.3x and India's 3x increases, with energy-sector carbon dioxide emissions up 54%.
  • Take the Under — Downward revisions to global population and GDP projections make climate change appear more tractable, the author argues, since the scenarios used to model emissions rely on socio-economic assumptions that are more extreme than real-world observations. With slower population and economic growth, even partial policy successes could bring emissions consistent with a 2C target within reach.
  • The Energy Transition Will Be Much Cheaper Than You Think — Economic models have overestimated adoption of carbon capture and storage while underestimating cost declines in solar panels and lithium batteries. Researchers modelling solar, wind, batteries and hydrogen electrolysers under "Wright's law" — where each doubling of production cuts unit costs by a fixed percentage — estimate emissions fall fast enough to meet the 1.5°C target at minimal cost.

Wednesday, November 20, 2024

AI Summary. A century-long dataset on the socioeconomic backgrounds of US college students finds that lower-income students' representation at elite private and public colleges has remained at similarly low levels, even as their share of the overall college-going population rose sharply. Upper-income representation fell after World War II but has since returned to high levels.

Ran Abramitzky, Jennifer Kowalski, Santiago Pérez and Joseph Price National Bureau of Economic Research
Date Posted:

The share of students from the bottom income quintile at elite private and public colleges was steady at about 5% between 1915 and 2017. The share from the top quintile fell sharply from 1930-80 before reverting to 1915 levels. @seperez84 @joepricebyu

Has the socioeconomic makeup of elite US colleges changed over a century?

Core argument: Drawing on the largest dataset assembled on the socioeconomic backgrounds of American college students over the past century, the authors find that lower-income students' representation at elite private and public colleges has remained at similarly low levels, despite their rising share of all college-goers.

We assemble the largest dataset on the socioeconomic backgrounds of students at American colleges spanning the last 100 years. We document the following: First, despite a large increase in the share of lower-income students in the overall college-going population, the representation of these students at elite private or public colleges has remained at similarly low levels throughout the last century. Second, the representation of upper-income students at elite colleges decreased after World War II, but this group has regained its high representation since the 1980s. Third, while there has been no increase in the economic diversity of elite private and public colleges, these colleges have become more racially and geographically diverse. Fourth, two major policy changes in the history of American higher education, namely the G.I. Bill after World War II and the introduction of standardized tests for admissions, had little success in increasing the representation of lower- and middle-income students at elite colleges.

Takeaways by Macro Roundup® AI

  1. Drawing on the largest dataset assembled on the socioeconomic backgrounds of American college students over the past century, the authors find that lower-income students' representation at elite private and public colleges has remained at similarly low levels, despite their rising share of all college-goers.
  2. Upper-income students' representation at elite colleges declined after World War II but has regained its high level since the 1980s.
  3. The G.I. Bill and the introduction of standardized admissions tests had little success in increasing the representation of lower- and middle-income students at elite colleges, which became more racially and geographically diverse without becoming more economically diverse.

Related Articles:

AI Summary. The trade balance reflects the gap between national income and spending, so it will not change unless domestic saving and investment do. With foreign savings inflows averaging 3.9% of GDP while households and corporations ran savings surpluses, the author argues eliminating the external deficit requires shrinking the government's 6.7%-of-GDP deficit.

Martin Wolf Financial Times
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Martin Wolf argues that protectionism won’t balance US trade as household and corporate saving of 2.8% of GDP is offset by a government deficit of 6.7%. Domestic sectors must adjust, “with the biggest adjustment coming from these huge fiscal deficits.”

Does eliminating the trade deficit require shrinking the government deficit?

Core argument: Among US domestic sectors between the second quarter of 2021 and 2024, households ran a savings surplus averaging 2.3% of GDP and corporations 0.5%, while the government ran a deficit averaging 6.7% of GDP.

The balance of trade is the difference between aggregate incomes and spending (or savings and investment). So long as this is unchanged, the trade balance will be unchanged, too. The US has spent appreciably more than its income for a long time. This is shown in the consistent net supply of foreign savings, which averaged 3.9% of GDP, between the second quarter of 2021 and 2024. So domestic sectors must in aggregate have been running counterpart deficits. In fact, the surplus of savings over investment in the household sector averaged 2.3% of GDP and that of the corporate sector 0.5%. In sum, only the government ran a deficit, which averaged an enormous 6.7% of GDP. If one wants to eliminate the external deficits, domestic sectors must adjust in the opposite direction, towards higher surpluses of savings, with the biggest adjustment surely coming from these huge fiscal deficits.

Takeaways by Macro Roundup® AI

  1. Among US domestic sectors between the second quarter of 2021 and 2024, households ran a savings surplus averaging 2.3% of GDP and corporations 0.5%, while the government ran a deficit averaging 6.7% of GDP.
  2. Eliminating the US external deficit would require domestic sectors to move toward higher savings surpluses, with the largest adjustment coming from the fiscal deficit.

Related Articles:

  • How will Trumponomics Work Out? — With US federal debt at 100% of GDP and primary deficits projected near 3%, the measures under consideration would add 1–2 points, implying a sustained 4–5% primary deficit and rapid debt growth. Stabilizing the debt ratio would require an adjustment worth 16–20% of the federal budget.
  • Trade Intervention for Freer Trade — The authors argue the United States should counter surplus countries' trade policies either by restricting their goods exports through tariffs or by restricting their capital inflows through taxes, volume limits, reserve requirements, transaction approvals, or investor eligibility rules. They contend capital controls are a more targeted alternative to uniform tariffs, which impose equal costs on more and less mercantilist countries.
  • Manufacturing Fetishism is Destined to Fail — The US goods trade deficit with China equals about 1% of GDP, while the overall US goods deficit has run near 4% of GDP since after the 2008 financial crisis. Eliminating it would raise domestic goods output, likely at the expense of services, but at most would return manufacturing employment shares to levels of a decade or two earlier.

AI Summary. Medicaid enrollment reached 87m people, boosted by pandemic legislation requiring states to keep people enrolled longer than normal and by additional states adopting the Affordable Care Act expansion, under which the federal government covers 90% of costs for expansion enrollees. The Congressional Budget Office projected states would receive nearly $60bn less in federal Medicaid funds year over year.

Sarah Kliff and Noah Weiland New York Times
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Medicaid now covers ~ 20% of all Americans and consumes 10% of Federal spending. States and the Federal government spent $880B on the program in 2023. Prior to ACA, the program largely covered children, mothers, and people with disabilities.

Will Medicaid enrollment growth reverse as federal funding falls?

Core argument: Medicaid enrollment rose to 87 million people under President Biden, after emergency pandemic legislation required states to keep enrollees on the program longer than normal.

Medicaid enrollment swelled to 87 million people under President Biden, with emergency pandemic legislation that required states to keep people on the program longer than normal. Some longtime holdout states also opted into the Affordable Care Act’s Medicaid expansion, which offered the coverage to adults with family earnings up to $43,000 a year for a family of four. The federal government pays states 90% of the costs for Obamacare expansion enrollees. The Congressional Budget Office has projected that in the fiscal year 2024 states are set to receive almost $60 billion less in federal Medicaid funds than they did in 2023.

Takeaways by Macro Roundup® AI

  1. Medicaid enrollment rose to 87 million people under President Biden, after emergency pandemic legislation required states to keep enrollees on the program longer than normal.
  2. The Congressional Budget Office projects states will receive nearly $60 billion less in federal Medicaid funds in fiscal year 2024 than in 2023.
  3. The federal government pays states 90% of the costs for Affordable Care Act expansion enrollees, coverage offered to adults with family earnings up to $43,000 a year for a family of four.

Related Articles:

  • Revisiting the Connection Between State Medicaid Expansions and Adult Mortality — Using synthetic control methods on eight state Medicaid expansions to parents and childless adults, the authors find no statistically significant effects on all-cause, healthcare-amenable, non-healthcare-amenable, or HIV-related adult mortality in any treated state or in the states combined.
  • Are Medicaid and Medicare Patients Treated Equally? — Tracking the same patients as they age from Medicaid into Medicare at 65, the authors find higher provider acceptance rates are associated with larger increases in primary care and specialist visits, especially new-patient specialist visits. They conclude Medicaid's smaller provider network plays a large role in limiting service provision.
  • Why Is Europe More Equal Than The United States — The US redistributes a larger share of national income to the bottom 50% than any European country, with net transfers of 6% of national income versus about 4% in Western and Northern Europe. Europe taxes and redistributes more overall, 47% of national income versus 35%, relying more on indirect taxes.

AI Summary. The International Energy Agency has revised its solar deployment forecasts upward every year this decade, with actual installations running as much as 3x higher than it predicted five years earlier. Costs for solar panels, wind, and batteries have fallen roughly 10% per year for decades, while inflation-adjusted fossil fuel prices are about the same as 140 years ago.

Nat Bullard Exponential View
Date Posted:

.@NatBullard argues that market forecasts for consistently improving technologies like semiconductors, solar panels, and batteries need to reflect heuristics such as Wright’s Law, not projections of recent trends.

Do energy forecasters underestimate solar because it behaves like technology?

Core argument: Actual global solar installations have run as much as three times higher than the International Energy Agency predicted five years earlier, and the agency has revised its solar deployment forecasts upwards every year this decade.

Every year this decade, the International Energy Agency has had to revise its solar deployment forecasts upwards. And not just by small amounts. Actual installations have been as much as three times higher than the agency predicted five years ago. Part of the confusion may lie in the fact that energy is transitioning from a commodity to a technology. Consistently improving technologies have historically followed predictable heuristics such as Wright’s Law or Moore’s Law. This is also happening in energy as evidenced by solar PV, wind, and batteries, where costs have fallen by around 10% per year for decades. Commodities such as fossil fuels, however, exhibit entirely different patterns – prices tend to be volatile in the short term, but show mean reversion over longer periods, making them more amenable to autoregressive forecasting models. In fact, the inflation-adjusted prices of fossil fuels are essentially the same today as they were 140 years ago.

Takeaways by Macro Roundup® AI

  1. Actual global solar installations have run as much as three times higher than the International Energy Agency predicted five years earlier, and the agency has revised its solar deployment forecasts upwards every year this decade.
  2. Solar PV, wind, and battery costs have fallen by around 10% per year for decades, following technology heuristics such as Wright's Law or Moore's Law rather than commodity price patterns.
  3. Inflation-adjusted fossil fuel prices are essentially the same today as they were 140 years ago, with short-term volatility and longer-run mean reversion that make them more amenable to autoregressive forecasting models.

Related Articles:

  • The Energy Transition Will Be Much Cheaper Than You Think — Economic models have overestimated adoption of carbon capture and storage while underestimating cost declines in solar panels and lithium batteries. Researchers modelling solar, wind, batteries and hydrogen electrolysers under "Wright's law" — where each doubling of production cuts unit costs by a fixed percentage — estimate emissions fall fast enough to meet the 1.5°C target at minimal cost.

AI Summary. Asian arms makers and naval shipbuilders are leading a global surge in defence stocks, with triple-digit share price gains for large South Korean and Japanese defence companies placing them among the top 20 gainers on the MSCI All-Country World index, as investors bet the region will lead a rearmament boom.

Joseph Cotterill Financial Times
Date Posted:

The stock price of Japan’s largest defense contractor, Mitsubishi Heavy Industries, is up 180% this year. Kawasaki Heavy, the second largest, is up 100%, and the largest South Korean defense contractor, Hanwha Aerospace, tripled in value this year.

Are Asian arms makers leading the global rally in defence stocks?

Core argument: Triple-digit share price gains for large South Korean and Japanese arms companies have pushed them into the top 20 gainers on the MSCI All-Country World index for 2024.

Asia’s arms makers and naval shipbuilders are leading a global surge in defence stocks this year as investors bet that the region’s companies are primed to lead a rearmament boom. Triple-digit share price increases for big arms companies listed in South Korea and Japan have pushed them into the top 20 gainers on the MSCI All-Country World index for 2024, as defence-related stocks have gone on the march globally from Norway to Brazil this year. The share moves underline a darkening in the global security order.

Takeaways by Macro Roundup® AI

  1. Triple-digit share price gains for large South Korean and Japanese arms companies have pushed them into the top 20 gainers on the MSCI All-Country World index for 2024.
  2. Asia's arms makers and naval shipbuilders are leading a global surge in defence stocks as investors bet the region's companies are positioned to lead a rearmament boom.
  3. Defence-related stocks have risen globally from Norway to Brazil, share moves that underline a darkening in the global security order.

Related Articles:

  • The US and Its Allies Face a $10 Trillion Reckoning in the Race to Rearm — World defense spending reached a record $2.2tn, and security officials say military budgets may need to reach Cold War levels of as high as 4% of economic output to deliver on NATO's plans. Bloomberg Economics calculates that US and Group of Seven allies hitting that level would mean over $10tn in additional commitments over a decade.
  • 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.
  • Global Defence Groups Hiring At Fastest Rate In Decades Amid Record Orders — A survey of 20 large and medium-sized US and European defence and aerospace companies found they plan to recruit tens of thousands of workers, with 10 of them seeking to add almost 37,000 positions, or nearly 10% of their combined workforce. Demand spans apprentices to executives, including engineers, software developers, cyber security analysts, welders, and mechanics.

AI Summary. SpaceX's Starship, the largest and most powerful rocket ever developed, is under contract as a lunar lander for NASA's effort to return people to the moon and is central to plans for a Mars settlement. SpaceX says the fully reusable design will be far cheaper to fly and will eventually replace its Falcon 9 and Falcon Heavy rockets.

Loren Grush and Hadriana Lowenkron Bloomberg
Date Posted:

The 6th launch of @SpaceX Starship was largely successful, including the first reignition of one of its Raptor engines during a flight test.

Will a fully reusable rocket lower launch costs and reach the moon?

Core argument: SpaceX launched Starship, the largest and most powerful rocket ever developed, with President Trump and Elon Musk looking on; the vehicle is under contract to serve as the lunar lander NASA will use to return people to the moon for the first time in half a century.

The largest and most powerful rocket ever developed, Starship is under contract to function as a lunar lander that NASA will use to put people back on the moon for the first time in half a century. It’s the centerpiece of Musk’s ambition to start a settlement on Mars. The vehicle is also meant to revolutionize SpaceX’s business plan. Designed to be fully reusable, Starship will be much cheaper to fly than any other rocket, according to SpaceX, and will eventually replace the company’s industry-leading Falcon 9 and Falcon Heavy rockets. But to meet that promise of delivering a fully reusable rocket, SpaceX must refine its technique for recovering all of the pieces of Starship after launch.

Takeaways by Macro Roundup® AI

  1. SpaceX launched Starship, the largest and most powerful rocket ever developed, with President Trump and Elon Musk looking on; the vehicle is under contract to serve as the lunar lander NASA will use to return people to the moon for the first time in half a century.
  2. SpaceX says the fully reusable Starship will be much cheaper to fly than any other rocket and will eventually replace the company's industry-leading Falcon 9 and Falcon Heavy vehicles.
  3. Meeting Starship's promise of full reusability requires SpaceX to refine its technique for recovering all of the rocket's pieces after launch, and the vehicle is the centerpiece of Musk's ambition to start a settlement on Mars.

Related Articles:

  • It’s Not a Space Race, It’s the Space Olympics — The US operates 81% of commercial satellites in orbit and 86% of global effective launch capacity, with NATO allies second in satellites at 11% and China second in launch capacity at 9%. China is pursuing mega satellite constellations and reusable rockets, in many cases copying approaches already proven by US companies.
  • Building an Enduring Advantage in the Third Space Age — 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.
  • The Rockets Are Nifty, But It Is Satellites That Make SpaceX Valuable — SpaceX's reusable Falcon rockets can send a tonne into space at about a tenth of the cost of a decade ago, according to a Citigroup estimate. Analysis from BryceTech shows the company launched almost 7x as much mass into orbit as all private and national rivals combined in a quarter.