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
  • “…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 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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “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 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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, January 23, 2025

AI Summary. The Congressional Budget Office projects the federal deficit will grow from $1.9tn (6.2% of GDP) to $2.7tn by 2035, well above the 3.8% of GDP average of the past 50 years. Outlays are projected to rise to 24.4% of GDP, driven by growth in Social Security and Medicare spending and rising net interest costs, while revenues reach 18.3%.

CBO Staff Congressional Budget Office
Date Posted:
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.@USCBO projects a deficit of 6.2% of GDP in 2025, down from 6.6% in 2024. Outlays at 23.3% of GDP would exceed the long-term mean by 2.2pp; revenue of 17.1% is just 0.2pp under its long-term mean. Projections beyond 2025 assume the expiration of TCJA.

How large will federal deficits grow over the next decade?

Core argument: CBO projects the federal deficit at $1.9 trillion in fiscal 2025, or 6.2% of GDP, growing to $2.7 trillion by 2035, when the adjusted deficit equals 6.1% of GDP, compared with the 3.8% average of the past 50 years.

In CBO’s baseline projections, the federal budget deficit in fiscal year 2025 is $1.9T. The deficit grows to $2.7 trillion by 2035. It amounts to 6.2% of GDP in 2025 and drops to 5.2% by 2027 as revenues increase faster than outlays. In later years, outlays increase faster than revenues, on average. In 2035, the adjusted deficit equals 6.1% of GDP—significantly more than the 3.8% that deficits have averaged over the past 50 years. Federal outlays in 2025 total $7T, or 23.3% of GDP. They remain close to that level through 2028 and then rise, reaching 24.4% of GDP in 2035. The main reasons for that increase are growth in spending for Social Security and Medicare and rising net interest costs. Revenues total $5.2T, or 17.1% of GDP, in 2025. They rise to 18.2% of GDP by 2027, in part because of the scheduled expiration of provisions of the 2017 tax act. Revenues decline as a share of GDP over the next two years, falling to 17.9% in 2029, but then generally increase, reaching 18.3% in 2035.

Takeaways by Macro Roundup® AI

  1. CBO projects the federal deficit at $1.9 trillion in fiscal 2025, or 6.2% of GDP, growing to $2.7 trillion by 2035, when the adjusted deficit equals 6.1% of GDP, compared with the 3.8% average of the past 50 years.
  2. CBO projects federal outlays of $7 trillion in 2025, or 23.3% of GDP, rising to 24.4% of GDP by 2035, mainly because of growth in Social Security and Medicare spending and rising net interest costs.
  3. CBO projects revenues of $5.2 trillion in 2025, or 17.1% of GDP, rising to 18.2% by 2027, in part because of the scheduled expiration of provisions of the 2017 tax act, then falling to 17.9% in 2029 before reaching 18.3% in 2035.

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.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. The authors find that Congress reduced deficits in response to rising projected deficits from 1984 to 2003 but that this year-to-year response disappeared over 2004-2024. They estimate that holding the debt ratio below 250% with 95% probability would require gradual deficit reduction averaging 0.5%-1.2% of GDP over the next decade.

Alan Auerbach and Danny Yagan National Bureau of Economic Research
Date Posted:
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From 1984 to 2003, Congress offset ~ 1/3 of the changes in the projected 5-year deficit within a year. Post-2004 this policy feedback is absent. Auerbach @dannyyagan believe annual deficits over the next decade should be lowered by 0.5-1.2% of GDP.

How much deficit reduction is needed to stabilize the debt ratio?

Core argument: Congress on average during 2004–2024 did not respond to projected deficits, in contrast with 1984–2003, when rising projected deficits were met with outlay reductions and tax increases.

Previous work found that Congress reduced the deficit during 1984-2003 when projected deficits rose; [e.g.] in the first period of 1991 the projected five-year surplus averaged −3.4% of potential GDP, and Congress enacted outlay reductions and tax increases of similar magnitudes that cumulatively increased the weighted surplus over the five-year window by 0.8% of GDP. We find that this year-to-year feedback has disappeared: Congress on average during 2004-2024 did not respond to the projected deficit. With large transitory deficit shocks like the COVID-19 pandemic and persistent interest rate shocks, keeping the debt ratio below 250% with 95% probability requires strong gradual feedback – 0.5%-1.2% of GDP average deficit reduction in the next decade – though less strong than actually observed during 1984-2003. [Alternatively], successful sudden feedback requires being able to undertake 1.5%-of-GDP deficit reductions twice in twelve-year periods, suggesting that a “wait-and-see” approach to successful deficit reduction sometimes allows little waiting.

Takeaways by Macro Roundup® AI

  1. Congress on average during 2004–2024 did not respond to projected deficits, in contrast with 1984–2003, when rising projected deficits were met with outlay reductions and tax increases.
  2. In the first period of 1991 the projected five-year surplus averaged −3.4% of potential GDP, and Congress enacted outlay reductions and tax increases that cumulatively raised the weighted surplus over the five-year window by 0.8% of GDP.
  3. Keeping the debt ratio below 250% with 95% probability requires gradual deficit reduction averaging 0.5%–1.2% of GDP over the next decade, or alternatively 1.5%-of-GDP deficit reductions twice within twelve-year periods.

Related Articles:

  • Robust Fiscal Stabilization — The authors find that Congress reduced deficits in response to rising projected deficits during 1984–2003 but that this year-to-year response was absent on average during 2004–2024. They estimate that holding the debt ratio below 250% with 95% probability requires gradual deficit reduction averaging 0.5%–1.2% of GDP over the next decade.
  • The Budget and Economic Outlook: 2025 to 2035 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (6.2% of GDP) to $2.7tn by 2035, well above the 3.8% of GDP average of the past 50 years. Outlays are projected to rise to 24.4% of GDP, driven by growth in Social Security and Medicare spending and rising net interest costs, while revenues reach 18.3%.
  • Long Rates Are Too High — A simple model of the relationship between long-term interest rates and Federal Reserve policy expectations shows 10-year rates sitting 40 basis points above what those expectations would predict, consistent with increases in term premium measures from the New York and San Francisco Federal Reserve Banks. Markets worry this extra premium reflects fears about fiscal sustainability.

AI Summary. A survey of Japanese firms and workers finds that firms using artificial intelligence have higher productivity, mean wages, and expected medium-term growth, and that more-educated firms and workers are more likely to use it. Workers using artificial intelligence report their own productivity rose by about 20% on average.

Masayuki Morikawa The Research Institute of Economy, Trade and Industry
Date Posted:

Analyzing new survey evidence from Japan, Masayuki Morikawa finds that “more-educated workers are more likely to use AI, suggesting that AI and education are complementary.” Workers who use AI believe it has raised their productivity by 20% on average.

Do firms and workers using AI report higher productivity and wages?

Core argument: Japanese workers who use AI report their work productivity has risen by approximately 20% on average, which the study suggests indicates AI could have a fairly large productivity-enhancing effect.

Based on an original survey of Japanese firms and workers, this study presents evidence on the use of AI and other automation technologies, the characteristics of the firms and workers who use them, and their views on the effects of AI. The main results are summarized as follows. First, the number of firms using AI is increasing rapidly, and firms with a larger share of highly educated workers, particularly those with a postgraduate education, tend to use AI. Robot-using firms are also increasing, but the relationship between their use and workers’ education is weakly negative, Second, AI-using firms have higher productivity, mean wages, and expected medium-term growth rates. Third, AI-using firms expect that while it will increase their productivity and wages in the long run, it may decrease their number of employees. Fourth, even at the worker level, more-educated workers are more likely to use AI, suggesting that AI and education are complementary. Fifth, workers who use AI evaluate their work productivity to have increased by approximately 20% on average, suggesting that AI could potentially have a fairly large productivity enhancing effect.

Takeaways by Macro Roundup® AI

  1. Japanese workers who use AI report their work productivity has risen by approximately 20% on average, which the study suggests indicates AI could have a fairly large productivity-enhancing effect.
  2. AI-using firms in the survey have higher productivity, mean wages, and expected medium-term growth rates, and expect AI to raise their productivity and wages in the long run while possibly decreasing their number of employees.
  3. Firms with larger shares of highly educated workers, particularly those with postgraduate education, tend to use AI, as do more-educated workers individually, suggesting AI and education are complementary, while robot use relates weakly negatively to workers' education.

Related Articles:

  • The Rapid Adoption of Generative AI — A nationally representative U.S. survey found 39% of people aged 18-64 used generative AI, with more than 24% of workers using it in the prior week and nearly one in nine using it every workday. The authors estimate 0.5-3.5% of U.S. work hours are currently assisted by generative AI.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.

AI Summary. The US economy is described as in a sweet spot of healthy growth and gradual disinflation, with real gross domestic product estimated to have grown 2.6% in the fourth quarter and projected to continue at a similar pace. That forecast sits ½ percentage point above consensus, based on expectations for solid real disposable personal income growth and sturdy business investment.

Jan Hatzius Goldman Sachs
Date Posted:

Jan Hatzius forecasts US GDP growth of ~ 2.6% in 2025, above consensus, because of his confidence that real disposable personal income will grow solidly in 2025 and a “sturdy forecast for business investment.”

Is the US economy in a sweet spot of growth and disinflation?

Core argument: The authors estimate US real GDP grew 2.6% in Q4 and expect a similar pace in 2025, describing the economy as in a sweet spot of healthy growth and gradual disinflation.

The US economy is in the sweet spot of healthy growth and gradual disinflation. We estimate that real GDP grew 2.6% in Q4 and expect a similar pace in 2025. Our forecast is ½pp above the latest Bloomberg consensus, in part because we are still more confident than others that real disposable personal income will grow solidly in 2025 and in part because of a sturdy forecast for business investment. That said, we are not as far above consensus as for most of the last two years because other forecasters have become more optimistic given ongoing strength in the data and, in some cases, high expectations for the growth-positive aspects of the Trump agenda.

Takeaways by Macro Roundup® AI

  1. The authors estimate US real GDP grew 2.6% in Q4 and expect a similar pace in 2025, describing the economy as in a sweet spot of healthy growth and gradual disinflation.
  2. The authors' 2025 growth forecast sits ½pp above the latest Bloomberg consensus, reflecting greater confidence in solid real disposable personal income growth and a sturdy business investment forecast.
  3. The gap between the authors' forecast and consensus is narrower than for most of the past two years, as other forecasters turned more optimistic on ongoing data strength and, in some cases, growth-positive aspects of the Trump agenda.

Related Articles:

  • US Share of Global Foreign Direct Investment Surges to Record — The US share of newly announced global greenfield foreign direct investment projects rose to 14.3% from 11.6%, with the estimated value of new US projects up by more than $100bn to $227bn. Over the same period China secured just under 400 new projects, close to a record low, while Germany's fell to 470, an 18-year low.
  • 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.
  • The AI Boom’s Economic Impact Is Starting to Show Up — Spending on software, technology hardware, industrial equipment and data center structures tied to the artificial intelligence boom amounts to nearly 6% of US GDP and is likely to rise further. At close to 7% of the economy, such spending would exceed the peak share reached by the late-1990s tech, industrial and telecom boom and rival housing investment's peak share.

AI Summary. Bank of America internal customer account data show women's median annual income rising faster than men's, and women who change jobs receiving larger pay raises than men. The bank attributes the narrowing gender pay gap in part to more opportunities for higher-paying work and faster wage growth in lower-paying, female-dominated sectors.

Taylor Bowley Bank of America
Date Posted:

.@BankofAmerica customer account data indicates that women’s annual median income growth has outpaced men’s since April 2020, driven particularly by a “rising, positive difference in pay increases for women changing jobs” versus male job switchers.

Is the gender pay gap narrowing as women's incomes rise faster?

Core argument: Women's median annual income has been rising faster than men's for the past few years, according to Bank of America internal customer account data.

Using Bank of America internal customer account data, we find that women’s median annual income has been rising faster than men’s for the past few years. Moreover, for those women who have changed jobs, the associated rise in pay has been relatively strong. Though the overall percentage raise associated with a job-to-job change has been slowing, the raises women have received from a job change have been higher than men since 2019, per Bank of America internal data. Plus, these raises have recently been steadily increasing, reaching the highest rate in over three years. This rising, positive difference in pay increases for women changing jobs suggests women are narrowing the gender pay gap, likely due in part to more opportunities for higher-paying work as well as accelerated wage growth in lower-paying sectors in female-dominated professions.

Takeaways by Macro Roundup® AI

  1. Women's median annual income has been rising faster than men's for the past few years, according to Bank of America internal customer account data.
  2. Bank of America internal data show that pay raises associated with job-to-job changes have been higher for women than for men since 2019, and women's job-switching raises have recently climbed to their highest rate in over three years, even as overall job-switching raises slow.
  3. The rising positive difference in pay increases for women changing jobs suggests women are narrowing the gender pay gap, likely due in part to more opportunities for higher-paying work and accelerated wage growth in lower-paying, female-dominated sectors.

Related Articles:

  • One Cohort at a Time: A New Perspective on the Declining Gender Pay Gap — The authors find the entire decline in the gender pay gap comes from newer cohorts entering with smaller-than-average gaps and older cohorts exiting with larger ones, with entry convergence driven by younger men's positional losses in the wage distribution, especially at higher-paying firms. They find labor-market exit became the sole contributor, implying no full convergence ahead.
  • 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.
  • Bringing Home the Bacon: Have Trends in Men’s Pay Weakened the Traditional Family? — Using the 25th percentile of pretax earnings among married sole-breadwinner fathers aged 25–29 as a marriageability threshold, the author estimates the share of young single men earning below it moved from 63% to 58% over four decades. Using an earlier baseline year instead yields a larger change, from 72% to 57%.

AI Summary. Homeowners insurance costs have risen steadily and substantially since the 1970s across essentially every US state, with construction cost inflation, larger homes, insurer profits, and population shifts explaining little of the increase. The largest driver of rising expected losses over the past two decades is the increasing severity and frequency of water damage rather than climate-related events.

Brian Potter Construction Physics
Date Posted:

.@_brianpotter argues that an increase in claims for water damage and freezing is responsible for ~75% of the rise in expected annual homeowners insurance payouts since 2005. This excluded flood damage, which is typically not covered.

What is driving the long-run rise in homeowners insurance costs?

Core argument: The increasing severity and frequency of water damage, rather than anything climate-related, is by far the biggest driver of rising homeowners insurance expected losses over the past two decades, for reasons that remain unclear.

Homeowners insurance costs have risen steadily and substantially since the 1970s. Construction cost inflation and increasing home size can probably only explain a small portion of the increase. Insurers’ profits don’t seem to be a driver, and neither does state-level population shifts: the cost increases are across the board, in essentially every state. Increasingly destructive weather events and climate-related disasters are probably part of the explanation, with the cost in risky regions being spread over the rest of the country, but it’s hard to tell how much this is occurring. Over the past two decades, by far the biggest driver of rising homeowners insurance expected losses isn’t anything climate-related, but is instead due to the increasing severity and frequency of water damage. But it’s unclear to me why this is occurring, and to what extent whatever’s behind it can explain increasing severity of other sorts of claims (fire, hail, wind, etc.)

Takeaways by Macro Roundup® AI

  1. The increasing severity and frequency of water damage, rather than anything climate-related, is by far the biggest driver of rising homeowners insurance expected losses over the past two decades, for reasons that remain unclear.
  2. Homeowners insurance costs have risen steadily and substantially since the 1970s in essentially every state, which argues against state-level population shifts as a driver, while construction cost inflation and larger homes probably explain only a small portion.
  3. Insurers' profits do not appear to drive rising homeowners insurance costs, while increasingly destructive weather events and climate-related disasters are probably part of the explanation, with costs in risky regions spread over the rest of the country.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • More Americans, Risking Ruin, Drop Their Home Insurance — U.S. Treasury Department data covering 246m home insurance policies from 330 insurers show that homeowners in areas most exposed to climate disasters are increasingly dropping coverage by failing to pay premiums. In more than 150 ZIP codes, insurers canceled at least 10% of home insurance policies for nonpayment.
  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.

AI Summary. Chinese shipbuilder Hengli Heavy Industry is seeking to hire 30,000 workers for a new Dalian shipyard spanning over 2m square metres across 17 workshops. Once fully operational the facility will employ 50,000 and build very large crude carriers, ultra-large containerships, gas carriers, offshore drilling units and alternative-fuel engines.

Lloyd’s List Staff Lloyds List
Date Posted:

Hengli Heavy is hiring 30,000 workers as it opens its new shipyard in Dalian. When fully operational, the “Future Factory” will employ 50,000 workers.

Is China expanding shipbuilding capacity with massive new shipyards?

Core argument: Hengli Heavy Industry is seeking to hire 30,000 workers for its newly inaugurated "Future Factory" shipyard on Changxing Island in Dalian, China, which will employ a total workforce of 50,000 once fully operational.

Chinese shipbuilder Hengli Heavy Industry is looking to hire 30,000 workers as it launches a new shipyard in Dalian, China. The newly inaugurated “Future Factory”, completed in just 153 days on Changxing Island, spans over 2m square metres of building space across 17 large workshops, said Hengli in a statement. Once fully operational, the facility will employ a total workforce of 50,000 and deliver impressive production capabilities allowing it to build high-value products, including very large crude carriers, ultra-large containerships, very large gas carriers and offshore drilling units, as well as alternative-fuel engines.

Takeaways by Macro Roundup® AI

  1. Hengli Heavy Industry is seeking to hire 30,000 workers for its newly inaugurated "Future Factory" shipyard on Changxing Island in Dalian, China, which will employ a total workforce of 50,000 once fully operational.
  2. Hengli says the Dalian shipyard was completed in 153 days and spans over 2m square metres of building space across 17 large workshops.
  3. The facility will be able to build very large crude carriers, ultra-large containerships, very large gas carriers, offshore drilling units and alternative-fuel engines, according to Hengli.

Related Articles:

  • Fear That China Rules the Waves Jolts U.S. to Pursue Maritime Revival — Bipartisan legislation proposed in the US Congress, the Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act, would be the first major maritime law since 1936, aiming to revitalize shipbuilding and shipping over more than a decade while rebuilding the merchant marine. It calls for resources and White House-level involvement comparable to policies on energy, semiconductors, and aviation.
  • 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.
  • China Is Rapidly Building Warships. Satellite Images Reveal The Scale — 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.

Friday, January 24, 2025

AI Summary. Among early 20th-century US immigrants, the authors find that new Polish Catholic church openings are associated with slower economic assimilation for Polish residents — lower income scores and a shift toward manual occupations — alongside stronger communal ties such as more within-group marriage and Polish names. These patterns persist into the second generation and are not found for Italians.

Ran Abramitzky, Leah Platt Boustan and Osea Giuntella National Bureau of Economic Research
Date Posted:

.@leah_boustan @Osea82 find Polish church-centered ethnic enclaves established from 1900-30 in the US hindered immigrants’ economic mobility, with an estimated “7% decline in earnings associated with a 10pp increase in own-ethnicity population share.”

Do ethnic enclaves slow immigrants' economic assimilation?

Core argument: New Polish Catholic church openings in the early 20th-century US led Polish residents to assimilate more slowly economically, with falling income scores and a shift toward manual occupations.

We compare two Catholic ethnic groups that moved to the US in large numbers in the early 20th century: Italians and Poles. Historians argue that Poles were more likely to center their communal life around church activity. Consistent with this qualitative evidence, we find that new Polish Catholic church openings lead Polish residents to experience slower economic assimilation, including falling income scores and a shift toward manual occupations, counterbalanced with stronger communal ties, as measured by heightened within-group marriage and greater use of Polish names. These patterns persist into the second generation, and are not apparent for Italians, who were less focused on the church. We do not find any evidence that Polish church openings affect other residents of the neighborhood (Polish likely Jews or other Catholics), suggesting that the church was not placed in a neighborhood that was otherwise on a downswing. Our paper documents that living in an ethnic enclave can hinder the economic mobility of immigrants.

Takeaways by Macro Roundup® AI

  1. New Polish Catholic church openings in the early 20th-century US led Polish residents to assimilate more slowly economically, with falling income scores and a shift toward manual occupations.
  2. Polish church openings coincided with stronger communal ties among Polish residents, measured by heightened within-group marriage and greater use of Polish names, patterns that persisted into the second generation.
  3. Polish church openings show no effect on other neighborhood residents, including likely Polish Jews and other Catholics, suggesting churches were not placed in neighborhoods already on a downswing; no comparable patterns appear for Italians, who were less focused on the church.

Related Articles:

  • White Flight from Asian Immigration: Evidence from California Public Schools — In California public schools, the authors estimate that the arrival of one Asian student in a high-socioeconomic-status suburban district is associated with the departure of 1.5 white students, alongside rising academic performance. They suggest this reflects parental concerns about academic competition rather than housing market dynamics or direct racial animus.
  • Recent Immigration Surge Has Been Largest in U.S. History — An analysis of government data finds the recent U.S. immigration surge is the largest on record, with net migration averaging 2.4m people a year from 2021 to 2023 and the foreign-born share of the population reaching 15.2% in 2023, up from 13.6% in 2020. About 60% of immigrants arriving since 2021 entered without legal authorization.

AI Summary. US living standards have grown an average 2.5% per year since the cohort born in the late 1990s reached adulthood, giving this generation faster-improving living standards and more upward mobility than the millennials before them. Americans born in 1995 show more upward mobility relative to their parents than those born in 1965, and are also outpacing millennials in home ownership.

John Burn-Murdoch Financial Times
Date Posted:

Gen Z Americans aged 22-34 are seeing higher growth in mean actual individual consumption per capita than previous US generations and their European counterparts, even as their home ownership rates have decreased. @jburnmurdoch

Are younger Americans seeing faster income gains and more upward mobility?

Core argument: US living standards have grown an average 2.5% per year since the cohort born in the late 1990s reached adulthood, giving Gen Z Americans faster-improving living standards than young boomers had at the same age.

Gen Z are motoring ahead. US living standards have grown at an average 2.5% per year since the cohort born in the late 1990s entered adulthood, blessing this generation not only with far more upward mobility than their millennial elders, but with more rapidly improving living standards than young boomers had at the same age. And it’s not just incomes: Gen Z Americans are also outpacing millennials in their climb up the housing ladder. All the signs are that in the US, the decades-long slowdown in generation-on-generation economic progress has not only stopped but gone into reverse. Americans born in 1995 are enjoying even more upward mobility relative to their parents than those born in 1965. Zoomers by name, zoomers by socio-economic nature.

Takeaways by Macro Roundup® AI

  1. US living standards have grown an average 2.5% per year since the cohort born in the late 1990s reached adulthood, giving Gen Z Americans faster-improving living standards than young boomers had at the same age.
  2. Americans born in 1995 are enjoying more upward mobility relative to their parents than those born in 1965, a sign that the decades-long slowdown in generation-on-generation economic progress in the US has gone into reverse.
  3. Gen Z Americans are outpacing millennials in upward mobility and in their climb up the housing ladder.

Related Articles:

AI Summary. The Congressional Budget Office projects federal debt held by the public will climb from about 98% of GDP to 118% by 2035, with deficits totaling $22tn over the decade and interest costs rising to 4.1% of GDP. Real growth is projected to average 1.8%, with inflation near 2%.

CRFB Staff Committee For A Responsible Federal Budget
Date Posted:

CBO’s 2025 baseline, assuming the expiration of TCJA, projects debt growing from 98% of GDP today to 118% by 2035. Extension of the TCJA would bring debt to 129% of GDP by 2035. @MarcGoldwein

How high will federal debt and interest costs rise by 2035?

Core argument: CBO projects debt held by the public will rise from nearly $29 trillion, roughly 98% of GDP, to $52 trillion, or 118% of GDP, by 2035, with deficits totaling $22 trillion (5.8% of GDP) over the decade.

Debt held by the public will rise from nearly $29 trillion today, or roughly 98% of GDP, to $52 trillion by 2035, or 118% of GDP. Deficits will total $22 trillion (5.8% of GDP) over the next decade. Spending will grow from 23.3% of GDP in 2025 to 24% by 2035, while revenue will grow from 17.1% of GDP in 2025 to 18.3% by 2035 under current law, which assumes the expiration of the 2017 tax cuts at the end of this year. Interest costs will match their record as a share of GDP in 2025 – 3.2%– and rise to 4.1% of GDP by FY 2035. The economy will continue growing at a steady clip, with real GDP growth averaging 1.8% over the decade, unemployment and inflation normalizing around 4.4% and 2%, respectively, and 10-year Treasury notes averaging 3.8% by the end of the decade.

Takeaways by Macro Roundup® AI

  1. CBO projects debt held by the public will rise from nearly $29 trillion, roughly 98% of GDP, to $52 trillion, or 118% of GDP, by 2035, with deficits totaling $22 trillion (5.8% of GDP) over the decade.
  2. CBO projects interest costs will match their record share of GDP at 3.2% in 2025 and rise to 4.1% of GDP by fiscal year 2035.
  3. CBO projects spending will grow from 23.3% of GDP in 2025 to 24% by 2035 while revenue rises from 17.1% to 18.3%, under current law, which assumes the 2017 tax cuts expire at the end of this year.

Related Articles:

  • The Budget and Economic Outlook: 2025 to 2035 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (6.2% of GDP) to $2.7tn by 2035, well above the 3.8% of GDP average of the past 50 years. Outlays are projected to rise to 24.4% of GDP, driven by growth in Social Security and Medicare spending and rising net interest costs, while revenues reach 18.3%.
  • The Long-Term Budget Outlook Under Alternative Scenarios for the Economy and the Budget — The Congressional Budget Office projects that if private investment were more sensitive to federal deficits, debt held by the public would exceed 250% of GDP and real national income per person would be 18% ($21,300) lower than its baseline, with the average interest rate on federal debt 2pp higher.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. Meta plans to spend as much as $65bn on artificial intelligence projects in a single year, including a data center the company says would cover a significant part of Manhattan and increased hiring on AI teams. Meta expects to bring roughly a gigawatt of computing power online and to hold more than 1.3m graphics processing units.

Dana Wollman and Kurt Wagner Bloomberg
Date Posted:

Meta plans to spend $65B on AI-related projects in 2025. Mark Zuckerberg acknowledges the risk of over-investment, but argues the level is rational to avoid being “out of position for the most important technology for the next 10 to 15 years.”

How much is a major tech company investing in AI annually?

Core argument: Meta plans to spend as much as $65 billion on AI-related projects in 2025, including a data center Mark Zuckerberg said would be "so large that it would cover a significant part of Manhattan," plus increased AI hiring.

Meta plans to invest as much as $65 billion on projects related to artificial intelligence in 2025, including building a giant new data center and increasing hiring in AI teams. The company intends to use the funds to build a data center “so large that it would cover a significant part of Manhattan,” Mark Zuckerberg said. Meta plans to bring around a gigawatt of computing power online in 2025 and is projected to end the year with more than 1.3 million graphics processing units. Meta has invested significantly in AI over the last several years, and recently announced a new $10 billion data center in Louisiana. “I think that there’s a meaningful chance that a lot of the companies are over-building now, and that you’ll look back and you’re like, ‘oh, we maybe all spent some number of billions of dollars more than we had to,’” Zuckerberg told Bloomberg in July. “On the flip side, I actually think all the companies that are investing are making a rational decision, because the downside of being behind is that you’re out of position for like the most important technology for the next 10 to 15 years.”

Takeaways by Macro Roundup® AI

  1. Meta plans to spend as much as $65 billion on AI-related projects in 2025, including a data center Mark Zuckerberg said would be "so large that it would cover a significant part of Manhattan," plus increased AI hiring.
  2. Meta plans to bring around a gigawatt of computing power online in 2025 and is projected to end the year with more than 1.3 million graphics processing units, having recently announced a $10 billion data center in Louisiana.
  3. Mark Zuckerberg told Bloomberg in July that there is "a meaningful chance" many companies are over-building by some billions of dollars, while arguing the investments are rational because falling behind leaves a company out of position on the most important technology for the next 10 to 15 years.

Related Articles:

  • SoftBank and OpenAI Back Sweeping AI Infrastructure Project In US — OpenAI and SoftBank plan a US artificial intelligence infrastructure joint venture called Stargate, intending to spend $100bn initially and as much as $500bn over four years. SoftBank holds financial responsibility and OpenAI operational responsibility, with Abu Dhabi state fund MGX and Oracle also funding and Arm, Microsoft and Nvidia as technology partners.
  • A Severe Case of COVIDIA: Prognosis For An AI-Driven US Equity Market — Computing cycles move from infrastructure to platforms to applications, and NVIDIA data center revenues as a share of market-wide capital spending are projected to reach levels last seen at the 1969 mainframe peak and the dot-com boom. Large cloud providers spend more than twice as much training foundational models as running them for customers.
  • 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.

AI Summary. Chinese developer DeepSeek trained its V3 large language model using fewer than 3m chip-hours at an estimated cost under $6m—roughly a tenth of the computing power and expense of Meta's Llama 3.1—through a series of marginal efficiency improvements rather than one breakthrough. The model was trained on chips constrained by American export sanctions.

Economist Staff The Economist
Date Posted:

Despite US export controls, Chinese AI firms like Alibaba & DeepSeek have released open-source models rivaling OpenAI and Google, at much lower costs. DeepSeek plans to charge ~10% of the cost of leading-edge models from OpenAI, Google, and Anthropic

Can export controls stop Chinese AI models from matching American efficiency?

Core argument: DeepSeek trained V3's billions of parameters in fewer than 3m chip-hours at an estimated cost below $6m, roughly a tenth of the computing power and expense used for Llama 3.1, using chips that were not the most powerful because of American sanctions.

DeepSeek’s gargantuan LLM is notable not just for its scale, but for the efficiency of its training, whereby the model is fed data from which it infers its parameters. This success derived not from a single, big innovation, says Nic Lane of Cambridge University, but from a series of marginal improvements. The training process, for instance, often used rounding to make calculations easier, but kept numbers precise when necessary. The server farm was reconfigured to let individual chips speak to each other more efficiently. And after the model had been trained, it was fine-tuned on output from DeepSeek R1, the reasoning system, learning how to mimic its quality at a lower cost. Thanks to these and other innovations, coming up with V3’s billions of parameters took fewer than 3m chip-hours, at an estimated cost of less than $6m—about a tenth of the computing power and expense that went into Llama 3.1. And because of America’s sanctions, the chips v3 used weren’t even the most powerful ones. In February, when DeepSeek starts to let other firms create services that make use of V3, it will charge less than a tenth of what Anthropic does for use of Claude, its LLM. “If the models are indeed of equivalent quality this is a dramatic new twist in the ongoing LLM pricing wars,” says Simon Willison, an AI expert.

Takeaways by Macro Roundup® AI

  1. DeepSeek trained V3's billions of parameters in fewer than 3m chip-hours at an estimated cost below $6m, roughly a tenth of the computing power and expense used for Llama 3.1, using chips that were not the most powerful because of American sanctions.
  2. Nic Lane of Cambridge University attributes DeepSeek's success not to a single big innovation but to a series of marginal improvements, including selective rounding in calculations, server-farm reconfiguration for more efficient chip-to-chip communication, and fine-tuning on output from the R1 reasoning system.
  3. DeepSeek will charge firms building services on V3 less than a tenth of what Anthropic charges for Claude, which AI expert Simon Willison says would be a dramatic new twist in the LLM pricing wars if the models are of equivalent quality.

Related Articles:

  • The Year-End Wake-Up: The ‘Chinese Sputnik’ That Demands Our Attention — Chinese AI company DeepSeek trained its Version 3 large language model for roughly $5.6m, about 100x cheaper than Meta's Llama 3, with performance comparable to Claude 3.5 Sonnet and interface access costing 12x less than Anthropic's. The author argues US chip export controls backfired by spurring leaner engineering, and that the gap between open-source and closed-source models is narrowing rapidly.
  • 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.
  • 2025 AI Diffusion Export Controls – Microsoft Regulatory Capture, Oracle Tears, Impacts Quantified, Model Restrictions — The US Framework for Artificial Intelligence Diffusion imposes export restrictions aimed at preventing China from accessing the computing power needed to build frontier AI models. It sorts the world into three tiers — the US and 18 allies, 23 arms-embargoed nations plus Macau, and all other countries — with differing access to AI chips and caps on graphics processor purchases.