Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, February 20, 2025

AI Summary. Using an alternative cost-of-living adjustment, the typical 40-year-old's pre-tax family income rose 52% between 1979 and 2019, or 73% adjusting for family size, versus 15% under the methods behind widely cited mobility estimates. Absolute mobility is down 20 percentage points since 1979 but stood at 72% in 2023.

Scott Winship University of Texas
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.@swinshi argues that 72% of 40-year-olds exceed their parents’ family income excluding government benefits, using his preferred inflation measure and adjusting for family size.  That matches responses to the GSS survey data.

How much does inflation measurement change estimates of income growth and mobility?

Core argument: The typical 40-year-old's pre-tax family income rose 15% between 1979 and 2019 using Chetty's methods, but 52% when adjusted for the cost of living with the MACPI, and 73% after also adjusting for changing family size.

The [Chetty] data allow for annual estimates of the typical (“median”) 40-year-old’s family income. Using the methods that produced Chetty’s headline results, the income typical of a 40-year-old rose by just 15% between 1979 and 2019 (both business cycle peaks). However, using the MACPI to adjust for the rise in the cost of living, the increase was 52%. If we also adjust for changing family size, the increase was 73%. These estimates all involve pre-tax income and exclude government benefits. It's true that no matter what the measure, absolute mobility has fallen over the long run. While absolute mobility is still down 20 percentage points since 1979, in 2023 the rate was 72%. While doomers may be tempted to take a win (a loss?) where they can get it, equating absolute mobility with the American Dream is a mistake. The [Chetty] research shows that Americans who grew up poor have the highest rates of absolute mobility—over 80% by even their preferred measure, compared with less than 20% for adults who grew up with the richest parents. It is, after all, easier to exceed a low parental income than to exceed a high one. It would be difficult, however, to find adults raised poor who would lament that their children are unfortunate for having a higher living standard than they did but a lower likelihood of moving up even further when they grow up. The odds remain solid that their kids will move up again; to the extent those odds diminish, it’s because the parents rose so high that their children could unlikely repeat such a leap.

Takeaways by Macro Roundup® AI

  1. The typical 40-year-old's pre-tax family income rose 15% between 1979 and 2019 using Chetty's methods, but 52% when adjusted for the cost of living with the MACPI, and 73% after also adjusting for changing family size.
  2. Absolute mobility has fallen over the long run, remaining 20 percentage points below its 1979 level, though the rate stood at 72% in 2023.
  3. Chetty's research shows Americans who grew up poor have absolute mobility rates above 80% by even the preferred measure, compared with under 20% for adults raised by the richest parents, since exceeding a low parental income is easier.

Related Articles:

  • Should We Believe the Economic Data or Americans’ “Lyin’” Eyes? The Answer Is Yes — Gallup polling finds that while roughly 80% of Americans say they are dissatisfied with the way things are going in the country, about 80% are satisfied with the way things are going in their own lives, including 90% satisfied with family life, 88% with housing, and 87% each with education and work.
  • Introducing the “More Accurate Consumer Price Index” — The author argues that standard Consumer Price Index measures overstate inflation—by roughly 0.70 percentage points a year for the unchained series and about 0.40 points for chained indexes—and constructs an alternative index for gauging long-term trends in income, earnings, poverty, and wealth. The correction adjusts for substitution, new products, quality change, and new outlets.
  • The Cost of Thriving Has Fallen: Correcting and Rejecting the American Compass Cost of Thriving Index — The authors recalculate the Cost of Thriving Index and estimate the cost of supporting a family on one male earner's wages rose by just over 10 weeks of work rather than 22 weeks. Accounting for federal taxes—including the child tax credit—and quality improvements in health care and cars, they estimate the cost is now lower than in 1985.

AI Summary. Microsoft unveiled Majorana 1, a quantum chip built on a Topological Core architecture using a new materials stack of indium arsenide and aluminum, which the company expects will enable quantum computers capable of solving industrial-scale problems within years rather than decades. The topological superconductor produces a qubit that is fast, small, stable, and digitally controlled.

Catherine Bolgar Microsoft
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Microsoft introduced Majorana 1, the world’s first quantum chip powered by a new Topological Core architecture that it expects will realize quantum computers capable of solving meaningful, industrial-scale problems in years, not decades.

Can a new materials architecture make quantum computing practical sooner?

Core argument: Microsoft introduced Majorana 1, which it describes as the world's first quantum chip powered by a Topological Core architecture, and expects quantum computers able to solve industrial-scale problems in years rather than decades.

Microsoft introduced Majorana 1, the world’s first quantum chip powered by a new Topological Core architecture that it expects will realize quantum computers capable of solving meaningful, industrial-scale problems in years, not decades. This breakthrough required developing an entirely new materials stack made of indium arsenide and aluminum, much of which Microsoft designed and fabricated atom by atom. The topoconductor, or topological superconductor, is a special category of material that can create an entirely new state of matter – not a solid, liquid or gas but a topological state. This is harnessed to produce a more stable qubit that is fast, small and can be digitally controlled, without the tradeoffs required by current alternatives. A new paper published Wednesday in Nature outlines how Microsoft researchers were able to create the topological qubit’s exotic quantum properties and also accurately measure them, an essential step for practical computing.

Takeaways by Macro Roundup® AI

  1. Microsoft introduced Majorana 1, which it describes as the world's first quantum chip powered by a Topological Core architecture, and expects quantum computers able to solve industrial-scale problems in years rather than decades.
  2. Building Majorana 1 required an entirely new materials stack of indium arsenide and aluminum, much of which Microsoft designed and fabricated atom by atom to create a topoconductor supporting a topological state of matter.
  3. A paper published in Nature outlines how Microsoft researchers created the topological qubit's exotic quantum properties and accurately measured them, an essential step for practical computing, yielding a qubit that is fast, small and digitally controlled.

Related Articles:

  • Interferometric Single-Shot Parity Measurement In InAs–Al Hybrid Devices — Researchers demonstrated a single-shot interferometric measurement of fermion parity in indium arsenide–aluminium hybrid devices with a gate-defined superconducting nanowire, achieving a parity assignment error probability of 1%. The authors note the results admit both topologically trivial and non-trivial interpretations, and the architecture is compatible with future tests of anyon fusion rules.
  • Quantum Error Correction Below the Surface Code Threshold — Researchers report superconducting quantum processors running surface code memories below the error-correction threshold, with the logical error rate suppressed 2.14x per two-step increase in code distance and a 101-qubit code reaching 0.143% error per cycle. The logical memory outlived its best physical qubit by 2.4x.
  • Meet Willow, Our State-of-the-Art Quantum Chip — Google reports that its Willow quantum chip completed a random circuit sampling benchmark computation in under five minutes that one of today's fastest supercomputers would take an estimated 10^25 years to perform. The benchmark is described as the classically hardest test currently runnable on a quantum computer.

AI Summary. Researchers demonstrated a single-shot interferometric measurement of fermion parity in indium arsenide–aluminium hybrid devices with a gate-defined superconducting nanowire, achieving a parity assignment error probability of 1%. The authors note the results admit both topologically trivial and non-trivial interpretations, and the architecture is compatible with future tests of anyon fusion rules.

Microsoft Azure Quantum Nature
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Microsoft researchers document a technical breakthrough that could accelerate the development of scalable quantum computers.

Can fermion parity be measured in a single shot?

Core argument: A single-shot interferometric measurement of fermion parity in indium arsenide–aluminium heterostructures achieves an assignment error probability of 1%, enabled by a quantum-capacitance shift of up to 1 fF and a long poisoning time.

The fusion of non-Abelian anyons is a fundamental operation in measurement-only topological quantum computation. In one-dimensional topological superconductors (1DTSs) fusion amounts to a determination of the shared fermion parity of Majorana zero modes (MZMs). Here we introduce a device architecture that is compatible with future tests of fusion rules. We implement a single-shot interferometric measurement of fermion parity in indium arsenide–aluminium heterostructures with a gate-defined superconducting nanowire. The interferometer is formed by tunnel-coupling the proximitized nanowire to quantum dots. The nanowire causes a state-dependent shift of the quantum capacitance of these quantum dots of up to 1 fF. Our quantum-capacitance measurements show flux h/2e-periodic bimodality with a signal-to-noise ratio (SNR) of 1 in 3.6 μs at optimal flux values. From the time traces of the quantum-capacitance measurements, we extract a dwell time in the two associated states that is longer than 1 ms at in-plane magnetic fields of approximately 2 T. We discuss the interpretation of our measurements in terms of both topologically trivial and non-trivial origins. The large capacitance shift and long poisoning time enable a parity measurement with an assignment error probability of 1%.

Takeaways by Macro Roundup® AI

  1. A single-shot interferometric measurement of fermion parity in indium arsenide–aluminium heterostructures achieves an assignment error probability of 1%, enabled by a quantum-capacitance shift of up to 1 fF and a long poisoning time.
  2. Quantum-capacitance measurements in an interferometer formed by tunnel-coupling a gate-defined proximitized nanowire to quantum dots show flux h/2e-periodic bimodality with a signal-to-noise ratio of 1 in 3.6 μs at optimal flux values.
  3. Time traces of the quantum-capacitance measurements yield a dwell time in the two associated states longer than 1 ms at in-plane magnetic fields of approximately 2 T, and the authors discuss both topologically trivial and non-trivial interpretations.

Related Articles:

  • Microsoft’s Majorana 1 Chip Carves New Path for Quantum Computing — Microsoft unveiled Majorana 1, a quantum chip built on a Topological Core architecture using a new materials stack of indium arsenide and aluminum, which the company expects will enable quantum computers capable of solving industrial-scale problems within years rather than decades. The topological superconductor produces a qubit that is fast, small, stable, and digitally controlled.
  • Quantum Error Correction Below the Surface Code Threshold — Researchers report superconducting quantum processors running surface code memories below the error-correction threshold, with the logical error rate suppressed 2.14x per two-step increase in code distance and a 101-qubit code reaching 0.143% error per cycle. The logical memory outlived its best physical qubit by 2.4x.
  • Meet Willow, Our State-of-the-Art Quantum Chip — Google reports that its Willow quantum chip completed a random circuit sampling benchmark computation in under five minutes that one of today's fastest supercomputers would take an estimated 10^25 years to perform. The benchmark is described as the classically hardest test currently runnable on a quantum computer.

AI Summary. US electricity prices have risen at a compound annual rate of 5.7% over five years, after being roughly flat in the prior five years. Transformers could become a chokepoint: analysts estimate only about 20% of US transformer demand can be met domestically, with prices up 70%–100% on higher electrical steel and copper costs.

Jinjoo Lee Wall Street Journal
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Prices for transformers have surged 70–100% since 2020, and US domestic supply meets just 20% of demand. New tariffs could further inflate transformer prices, worsening grid bottlenecks as AI data centers push demand higher.

How do transformer shortages and import costs drive electricity prices higher?

Core argument: U.S. electricity prices have risen at a 5.7% compound annual growth rate over the last five years, an acceleration from the preceding five years, when prices were roughly flat.

Nationwide, electricity prices have increased at a compound annual growth rate of 5.7% over the last five years, a considerable acceleration since the preceding five years when prices were roughly flat. The National Renewable Energy Laboratory estimates that about 55% of in-service distribution transformer units are older than 33 years and approaching their end of life. Distribution transformer capacity might need to increase 160% to 260% by 2050 compared with 2021 levels to meet demand, according to the NREL. Transformers could become a chokepoint. Only about 20% of transformer demand can be met by the domestic supply chain, according to Wood Mackenzie, which also estimated that transformer prices have already risen 70% to 100% since January 2020 because of inflation for raw materials such as electrical steel and copper. In 2024, China accounted for over 32% of U.S. low-voltage transformer equipment imports and Mexico accounted for 36% of high-voltage transformer imports, according to Wood Mackenzie. Canada accounted for about 16% of U.S. imports of high-voltage switchgear and 100% of imported utility poles.

Takeaways by Macro Roundup® AI

  1. U.S. electricity prices have risen at a 5.7% compound annual growth rate over the last five years, an acceleration from the preceding five years, when prices were roughly flat.
  2. Wood Mackenzie estimates only about 20% of U.S. transformer demand can be met by the domestic supply chain, with transformer prices already up 70% to 100% since January 2020 on raw material inflation in electrical steel and copper.
  3. The National Renewable Energy Laboratory estimates about 55% of in-service distribution transformer units are older than 33 years and approaching end of life, and that capacity may need to rise 160% to 260% by 2050 versus 2021 levels.

Related Articles:

  • Electricity 2025 — US electricity demand is projected to grow about 2% annually over 2025-2027, an upward revision from an earlier 1% forecast. A study commissioned by the US Department of Energy found data centre electricity use rose from about 60 TWh in 2014 to 176 TWh in 2023, and could reach 325-580 TWh by 2028.
  • World’s Largest Transformer Maker Warns of Supply Crunch — Hitachi Energy, the world's largest transformer maker, says the industry is overwhelmed and cannot keep pace with demand for grid equipment, with utilities that have not pre-reserved units now facing waits of three to four years versus six to eight months previously. Demand has been strained partly by data centres running generative artificial intelligence.
  • Grid Infrastructure Investments Drive Increase in Utility Spending Over Last Two Decades — Annual spending by major US utilities to produce and deliver electricity rose 12% over two decades to $320bn in inflation-adjusted terms, driven mainly by capital investment in infrastructure, which more than doubled. Capital spending on the distribution system that delivers power to end users increased 160%, or $31.4bn.

AI Summary. A study by 35 research teams found that glaciers in the Alps and Pyrenees lost about 40% of their volume in less than a quarter of a century. Excluding the Antarctic and Greenland ice sheets, glaciers elsewhere in the world lost 5% of their volume over roughly the same period.

Attracta Mooney and Steven Bernard Financial Times
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Glaciers, excluding the world’s largest in Greenland and the Antarctic, lost 5% of their volume over the past 25 years. Glaciers in the Alps and Pyrenees were most impacted, losing 40% of their volume over the past 25 years.

Have European glaciers lost more volume than glaciers elsewhere?

Core argument: Glaciers in the Alps and Pyrenees lost about 40% of their volume in less than a quarter of a century, according to a study published in Nature and carried out by 35 teams.

The study, carried out by 35 teams and published in the Nature, found that glaciers in the Alps and Pyrenees had lost about 40% of their volume in less than a quarter of a century. The research excluded the continental sheets of the Antarctic and Greenland, the world’s biggest ice masses, but concluded that glaciers in the rest of the world had lost 5% of their volume between 2000 and 2023.

Takeaways by Macro Roundup® AI

  1. Glaciers in the Alps and Pyrenees lost about 40% of their volume in less than a quarter of a century, according to a study published in Nature and carried out by 35 teams.
  2. Glaciers in the rest of the world, excluding the continental ice sheets of Antarctica and Greenland, lost 5% of their volume between 2000 and 2023, the study found.
  3. The Nature study excluded the Antarctic and Greenland ice sheets, the world's biggest ice masses, from its assessment of glacier volume loss.

Related Articles:

  • 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.
  • Abrupt Reduction In Shipping Emission As An Inadvertent Geoengineering Termination Shock Produces Substantial Radiative Warming — Fuel regulations that abruptly cut sulfur dioxide emissions from international shipping by about 80% created an inadvertent geoengineering termination shock, and the authors estimate the resulting radiative forcing over the global ocean could double or more the rate of warming in the 2020s relative to the rate since 1980.
  • Accelerating Glacier Volume Loss On Juneau Icefield Driven By Hypsometry and Melt-Accelerating Feedbacks — Ice loss from Alaska's Juneau Icefield accelerated, with glacier volume loss of 0.65–1.01 km³ per year from 1770–1979 rising to 3.08–3.72 km³ from 1979–2010 and 5.91 ± 0.80 km³ from 2010–2020. The authors attribute the acceleration to rising snowline elevations and pervasive plateau thinning that trigger melt-accelerating feedbacks likely to inhibit future regrowth.

Friday, February 21, 2025

AI Summary. A regression discontinuity study of a large urban school district, where disadvantaged students qualify for gifted status at a lower IQ threshold, estimates that being identified as gifted raises the college entry rate of marginally eligible boys by 28 percentage points, from 46% to 74%. That matches the 74% rate of marginally ineligible girls, closing the gender gap.

David Card, Eric Chyn, and Laura Giuliano National Bureau of Economic Research
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Card et al, find that the 25-30 percentage point college enrollment gap between disadvantaged boys and girls with IQs of ~116 closed among students who qualified for a “gifted” program. @EricChyn

Does gifted identification raise college entry for disadvantaged boys?

Core argument: Gifted identification raises the estimated college entry rate of marginally eligible disadvantaged boys by 28 percentage points, from 46% for those narrowly missing the threshold to 74%, in a large urban school district.

We study the effects of being identified as gifted in elementary school on subsequent test scores, courses and grades, and on the probability of entering college, for disadvantaged children in a large urban school district (“the District”). The law specifies a threshold of 130 [IQ] points for non-disadvantaged students, but allows districts to select a lower “Plan B” threshold [116 pts] for FRL and ELL students. The strict IQ threshold for gifted status provides the basis for a regression discontinuity (RD) evaluation of the impacts of being identified as gifted. Figure 6 illustrates how these impacts affect gender gaps by presenting the estimated mean potential outcomes for the complying boys (left side) and complying girls (right side) using an 8-point bandwidth. The estimated college entry rate for male compliers who narrowly miss the gifted threshold is 46%; the 28 ppt treatment effect of passing the threshold raises this to 74%, which equals the rate for female compliers who narrowly miss the threshold - being identified as gifted raises the college entry rate of marginally eligible boys to the same rate as girls.

Takeaways by Macro Roundup® AI

  1. Gifted identification raises the estimated college entry rate of marginally eligible disadvantaged boys by 28 percentage points, from 46% for those narrowly missing the threshold to 74%, in a large urban school district.
  2. The estimated 74% college entry rate for marginally eligible boys identified as gifted equals the rate for female compliers who narrowly miss the threshold.
  3. The study uses a regression discontinuity design around the IQ threshold for gifted status, 130 points for non-disadvantaged students and a "Plan B" threshold of 116 points for free-lunch and English-learner students.

Related Articles:

  • Do Adults Have the Skills They Need to Thrive in a Changing World? — An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
  • Skills and Human Capital in the Labor Market — Labor market earnings are strongly associated with measures of personality traits and preferences, and over the last two decades returns to cognitive skills have been flat or declined in the US, Sweden, and Finland while returns to "soft" skills such as conscientiousness, extraversion, emotional stability, and social skills have grown rapidly.
  • Multidimensional Human Capital and the Wage Structure — The wage return to cognitive skills has declined, from about 10% higher hourly wages per standard deviation of test score in the 1980s and early 1990s to 4.5% in the 2000s and early 2010s, while returns to a bachelor's degree rose. Social skill-intensive occupations grew as a share of US jobs, with faster real wage growth.

AI Summary. The authors project US deficits reaching about 14% of GDP by 2053 and 25% by 2073, a gloomier path than earlier estimates largely because of a changed assumption about how deficits affect private saving. They estimate a sustainable US debt limit of 155%–210% of GDP.

Mark Warshawsky and Giorgi Bokhua American Enterprise Institute
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Mark Warshawsky and Giorgi Bokhua @AEIecon project the deficit will be 6.9% of GDP in 2033, up from 6.1% in their 2022 baseline model. Debt is forecasted to reach 256% of GDP in 2052, “likely resulting in a crisis even before 2053.”

How high will US deficits and debt rise relative to sustainable limits?

Core argument: Warshawsky, Mantus, and Pang project US federal deficits reaching roughly 14% of GDP by 2053 and 25% by 2073, with the 2023 projections gloomier for later years largely due to a changed assumption about how increased deficits affect the private savings rate.

The fiscal outlook remained highly unsustainable as of 2023, with deficits projected to reach approximately 14% of GDP by 2053 and 25% by 2073. The 2023 projections present gloomier forecasts, particularly for the later years, largely due to a changed assumption about how increased deficits affect the private savings rate. The trajectory of debt reaches unsustainable levels, likely resulting in a crisis even before 2053. We published a working paper in 2024, where we estimated sustainable debt limits for 27 OECD countries, estimating a range between 155% and 210% of GDP for the United States. Notably, the International Monetary Fund model, which we adjusted in our paper, aligns closely with our estimates Even after implementing reforms described in Table 1 and cutting all government spending and increasing income taxes, the government debt-to-GDP ratio (excluding Social Security trust fund holdings) would still rise to 203% by 2073, within the unsustainable range.

Takeaways by Macro Roundup® AI

  1. Warshawsky, Mantus, and Pang project US federal deficits reaching roughly 14% of GDP by 2053 and 25% by 2073, with the 2023 projections gloomier for later years largely due to a changed assumption about how increased deficits affect the private savings rate.
  2. The authors estimate sustainable debt limits of 155% to 210% of GDP for the United States in a 2024 working paper covering 27 OECD countries, with their adjusted International Monetary Fund model aligning closely with those estimates.
  3. Even after the reforms described in Table 1, cutting all government spending, and increasing income taxes, the authors project government debt excluding Social Security trust fund holdings would still rise to 203% of GDP by 2073, within the unsustainable range.

Related Articles:

  • Current Estimates of Sustainable Government Debt Limits for the US and 26 Other OECD Countries — The authors estimate sustainable sovereign debt limits for 27 advanced economies at 136%–234% of GDP on a gross basis and 181%–268% net of central bank holdings, finding evidence of "fiscal fatigue" once gross debt exceeds roughly 140%–145% of GDP. One estimate puts the US sustainable gross debt limit at 154% of GDP, about 30 percentage points above its current level.
  • 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%.
  • 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. Historical experience suggests that when a great power spends more on debt interest than on military capability for a sustained period, rivals are likely to challenge its position and domestic stability may suffer as governments fail to satisfy competing claims from the military, bondholders, taxpayers and welfare recipients. U.S. federal interest payments of $1.124tn exceeded defense spending of $1.107tn.

Niall Ferguson Wall Street Journal
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In 2024, the US spent 3.1% of GDP on interest and 2.9% on defense. @nfergus argues, “History suggests that any sustained period when a great power spends more on interest …than on military is likely to see its strategic rivals challenge its position.”

Does spending more on debt interest than defense threaten a great power?

Core argument: U.S. federal interest payments topped out at $1.124 trillion in 2024, exceeding national defense consumption expenditures and gross investment of $1.107 trillion, according to the BEA.

History suggests that any sustained period when a great power spends more on interest payments than on military capabilities is likely to see its strategic rivals challenge its position. The tension between “guns and coupons” (as the interest-bearing parts of bonds used to be known) may also undermine its domestic stability, as governments try and fail to meet the competing demands of generals, bondholders, taxpayers and welfare recipients. Annual defense spending—to be precise, national defense consumption expenditures and gross investment—was $1.107 trillion in 2024, according to the BEA, while federal expenditure on interest payments (the government long ago gave up on paying down principal) topped out at $1.124 trillion. These outlays can also be expressed as percentages of gross domestic product. The CBO, which uses a narrower definition of defense spending than the BEA, places it at 2.9% of GDP for last year. Net interest payments (adjusting for the interest received by bonds held by government agencies) amounted to 3.1%.

Takeaways by Macro Roundup® AI

  1. U.S. federal interest payments topped out at $1.124 trillion in 2024, exceeding national defense consumption expenditures and gross investment of $1.107 trillion, according to the BEA.
  2. Net interest payments amounted to 3.1% of GDP, against defense spending of 2.9% under the CBO's narrower definition of defense.
  3. History suggests that a great power sustaining higher interest payments than military spending is likely to see strategic rivals challenge its position, and the tension between "guns and coupons" may also undermine its domestic stability.

Related Articles:

  • The Crumbling Foundation of America’s Military — A U.S. Army Science Board report warned that the American industrial base may be incapable of meeting the munitions demand created by a potential future conflict with a peer adversary. Much of the reduction in U.S. arms-manufacturing capacity was deliberate, following the collapse of the Soviet Union and the end of the Cold War.
  • Keeping Up with the Pacing Threat: Unveiling the True Size of Beijing’s Military Spending — China's publicly released military budget understates its spending; adjusting for purchasing power and adding uncounted expenditures, the authors estimate the buying power of China's military budget at $711bn, roughly triple Beijing's stated figure and nearly equal to the United States'. Such parity favors China, whose spending concentrates on Asia while US resources are spread across multiple theaters.
  • China’s Shipyards Are Ready for a Protracted War. America’s Aren’t — China produced more than half of the world's commercial shipbuilding output, while Europe accounts for about 5% and the US next to nothing, with most of the remainder built in South Korea and Japan. Analysts argue that in a protracted conflict China's wartime-scale yards could quickly accelerate production, replace lost ships, and repair damaged ones.

AI Summary. Germany's economy has contracted for two consecutive years, with manufacturing output down about 10% and companies shedding thousands of jobs a month amid rising costs and falling exports. German households paid the highest electricity prices in the European Union, and Germany's patent applications were less than half those of South Korea and Japan.

Bertrand Benoit Wall Street Journal
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German manufacturing fell ~ 10% over the past 2 years, and “its companies, squeezed between rising costs and falling exports, are shedding thousands of jobs a month.” Patents are ½ of Japan’s and Korea’s, and CO2 emissions/capita are just below China’s.

Why is Germany's economy shrinking and shedding manufacturing jobs?

Core argument: Germany's economy has shrunk for two consecutive years, erasing any recovery made since the Covid-19 pandemic, with manufacturing output down about 10% over the same period and companies shedding thousands of jobs a month as costs rise and exports fall.

[Germany] Europe’s former growth engine has shrunk for two years in a row, erasing any recovery made since the Covid-19 pandemic. Its manufacturing output is down about 10% over the same period and its companies, squeezed between rising costs and falling exports, are shedding thousands of jobs a month. Germany’s CO2 emissions per capita are above the global and the European Union average, higher than the U.K.'s and France’s and just below China’s, according to Our World in Data. Meanwhile, German households paid the highest electricity prices in the EU in the first half of 2024, according to official EU statistics. In 2023, Germany recorded 133,000 patent applications, less than half the numbers in South Korea and Japan, according to the World Intellectual Property Organization.

Takeaways by Macro Roundup® AI

  1. Germany's economy has shrunk for two consecutive years, erasing any recovery made since the Covid-19 pandemic, with manufacturing output down about 10% over the same period and companies shedding thousands of jobs a month as costs rise and exports fall.
  2. German households paid the highest electricity prices in the EU in the first half of 2024, according to official EU statistics, while Germany's CO2 emissions per capita exceed the global, EU, U.K. and French levels and sit just below China's, according to Our World in Data.
  3. Germany recorded 133,000 patent applications in 2023, less than half the totals in South Korea and Japan, according to the World Intellectual Property Organization.

Related Articles:

  • Germany’s Economic Model Is Broken, and No One Has a Plan B — German industrial output has fallen 15% since 2018, manufacturing employment is down 3%, and over €300bn of investment capital has flowed out of the country since 2021. Exports support roughly one in four German jobs and equal 43% of GDP, four times the US share and twice China's.
  • How German Industry Can Survive the Second China Shock — The European Union has 30mm manufacturing jobs, and China has grown from a $4tn economy producing under 15% of global manufacturing output to an $18tn economy producing over a third, with well over 50% of global capacity in many sectors. European tariffs on Chinese electric vehicles limit import competition but do not offset lost export markets.
  • The Future of European Competitiveness – A Competitiveness Strategy for Europe — A European Union competitiveness report attributes the EU's labour productivity growth gap with the US largely to weaker activity in information and communications technology and large-scale digital services; excluding main ICT sectors, EU productivity was broadly at par with the US from 2000-2019. It estimates Europe's investment share must rise about 5 percentage points of GDP.

AI Summary. An analysis of UN population projections and China's 2020 census projects the ratio of men to women at prime marriage ages will peak at 119 men per 100 women by 2027, implying 22.5m more men than women in those cohorts, and remain high for decades. The share of unmarried men aged 25-39 rose from 13% to 30%.

Economist Staff The Economist
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Analysis by @TheEconomist finds that by 2027, there will be 22.5mm more men, ages 23-37, than women, ages 22-36, due to decades of policies leading to sex-selective abortions. One in six young Chinese men won’t find a marriage partner.

How large will China's surplus of marriage-age men become?

Core argument: The Economist's analysis of UN World Population Prospects data and China's 2020 census finds the sex ratio among men aged 23-37 and women aged 22-36 peaking at 119 men per 100 women by 2027, up from 105 in 2012.

The Economist has analysed data from the UN’s World Population Prospects, a biennial report, and from China’s 2020 census. The data reveal that the sex ratio—the number of men for every 100 women—among men aged 23-37 and women aged 22-36 will hit a peak of 119 by 2027. (Those are the ages between which 80% of each sex gets married—see chart 1.) It is then predicted to remain high for decades. In 2012 the ratio was just 105. That means that in 2027 there will be 22.5m more men than women in those cohorts, by far the largest number of “surplus” young males ever recorded anywhere. What is more, the share of unmarried men aged 25-39 shot up from 13% to 30% from 2006 to 2022. The 2020 census showed the sex ratio for young adults was 106 in urban areas and 120 in rural ones. Young rural women who move to the city often marry richer urban men. But changing social mores around marriage mean many better-educated urban women do not want to get married at all, let alone to rural men, shrinking the dating pool yet further.

Takeaways by Macro Roundup® AI

  1. The Economist's analysis of UN World Population Prospects data and China's 2020 census finds the sex ratio among men aged 23-37 and women aged 22-36 peaking at 119 men per 100 women by 2027, up from 105 in 2012.
  2. China is projected to have 22.5m more men than women in those marriage-age cohorts in 2027, by far the largest number of "surplus" young males ever recorded anywhere, with the ratio predicted to remain high for decades.
  3. The share of unmarried Chinese men aged 25-39 rose from 13% to 30% between 2006 and 2022, and the 2020 census showed a young-adult sex ratio of 120 in rural areas versus 106 in urban ones.

Related Articles:

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  • Thoughts and Comments on Demographic Aging and Shrinking — As an arithmetic matter, the greying of societies is driven much more by smaller families than by longer lives, which the author attributes to a withering away of the family. Demographic simulations project that by 2040 couples in their 60s in China will likely have at least one living parent to care for, and many will have two or three.
  • East Asia’s Coming Population Collapse — United Nations projections show China's population falling 8%, Japan's 18%, South Korea's 12%, and Taiwan's 8% between 2020 and 2050, while the US population rises 12%. Working-age people per person over 65 are projected to drop to about 1.8 in China and 1.2 in Japan and South Korea.