Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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 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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a 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 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, March 24, 2025

AI Summary. The authors estimate that Treasury yields rise on days when official cost estimates reveal deficit-increasing legislation, with a one-time 1 percentage point increase in the deficit-to-GDP ratio raising the 10-year yield by 0.75 basis points, or 6.75 basis points for a persistent deficit shock. The response reflects higher expected inflation and term premia alongside lower convenience yields.

Roberto Gomez Cram, Howard Kung, and Hanno Lustig National Bureau of Economic Research
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Market reaction to CBO scoring of legislative proposals on “large negative proposal days” implies the 10-year rises by 0.75 bps for a one-time 1 ppt increase in deficits/GDP, cumulating to 6.75 bps for a persistent deficit shock. @HannoLustig

Do Treasury yields rise when new legislation raises projected deficits?

Core argument: High-frequency estimates imply that a one-time 1 percentage point increase in deficits/GDP raises the 10-year nominal Treasury yield by 0.75 bps, equivalent to 6.75 bps for a persistent deficit shock.

Treasury markets respond to the news in CBO cost estimates of individual bills about the future funding requirements from pending legislation. Treasury yields increase on days with major deficit increasing bills, driven by an increase in expected inflation and nominal term premia, along with a decrease in convenience yields. Our high frequency estimates imply that a 1 percentage point one-time increase in deficits/GDP increases the 10-year nominal yield by 0.75 bps. This effect is equivalent to a 6.75 bps increase in yields for a persistent shock to deficits. The Treasury response is related to an increase in expected inflation and nominal term premia, along with a decrease in convenience yields. The effects are three times larger for cost revisions for emergency spending proposals, which are unfunded and have a high ex-ante probability of passing, allowing us to better isolate the cash flow news component. The Treasury value responses are magnified by a factor of three for cost revisions relating to emergency spending proposals.

Takeaways by Macro Roundup® AI

  1. High-frequency estimates imply that a one-time 1 percentage point increase in deficits/GDP raises the 10-year nominal Treasury yield by 0.75 bps, equivalent to 6.75 bps for a persistent deficit shock.
  2. Treasury yields rise on days with major deficit-increasing bills, alongside higher expected inflation and nominal term premia and lower convenience yields.
  3. Treasury value responses are three times larger for cost revisions tied to emergency spending proposals, which are unfunded and carry a high ex-ante probability of passing, better isolating the cash flow news component.

Related Articles:

  • Can U.S. Treasury Markets Add and Subtract? — Congressional Budget Office cost estimates of spending and tax legislation with large projected deficits lowered the valuation of outstanding U.S. Treasury securities by more than 20% over the period studied, with effects concentrated at longer maturities. The authors estimate 57 cents of every dollar of fiscal expansion is unbacked and passed through to Treasury valuations.
  • Summers Says Slowing Balance-Sheet Runoff Pace Is ‘Alarming’ Signal on Debt Fragility — The Federal Reserve cut the monthly cap on Treasury securities allowed to roll off its balance sheet to $5bn from $25bn; because its purchases create interest-bearing bank reserves, slowing the runoff shortens the effective maturity of US public-sector debt. One argument holds this signals fragility in placing government debt amid worsening fiscal policy.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. The Congressional Budget Office estimates that in a scenario where the 2017 tax act's provisions are extended and the average interest rate on federal debt gradually rises, macroeconomic feedback would push that rate to 5.4% in the last year debt held by the public stays below 250% of GDP — 1.7 percentage points above its extended baseline.

Phillip Swagel Congressional Budget Office
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CBO finds that an unfunded permanent expansion of the TCJA would raise debt to 113% of GDP by 2029. Assuming an average interest rate on federal debt of 3.5% in 2025, rising to 3.6% by 2029, the deficit would be 7% of GDP in 2029, up from 6.4% in 2024.

How much would extending tax cuts raise federal borrowing rates?

Core argument: CBO estimates that under a scenario extending the 2017 tax act with higher borrowing costs, the average interest rate on federal debt reaches 5.4% in 2052, 1.7 percentage points above the extended baseline once macroeconomic feedback effects are included.

CBO [analyzed] the effects of a scenario in which provisions of the 2017 tax act were extended and the average interest rate on federal debt increased until it was 1 percentage point higher than in the extended baseline—before accounting for macroeconomic feedback effects that would further increase interest rates. Accounting for those macroeconomic effects, CBO estimates that the rate in 2052 (the last year federal debt held by the public is below 250% of GDP) would be 5.4%, 1.7 percentage points higher than in the extended baseline. To construct that estimate, CBO modeled a gradual increase in the average interest rate on federal debt, raising the rate in the baseline projections by 5 basis points in 2025 and by another 5 basis points in each year thereafter until it was 1 percentage point higher than in the extended baseline (in 2044).

Takeaways by Macro Roundup® AI

  1. CBO estimates that under a scenario extending the 2017 tax act with higher borrowing costs, the average interest rate on federal debt reaches 5.4% in 2052, 1.7 percentage points above the extended baseline once macroeconomic feedback effects are included.
  2. CBO identifies 2052 as the last year federal debt held by the public remains below 250% of GDP in the scenario combining extension of the 2017 tax act with higher interest rates.
  3. To construct the scenario, CBO raised the average interest rate on federal debt by 5 basis points in 2025 and by another 5 basis points each year thereafter until it stood 1 percentage point above the extended baseline in 2044.

Related Articles:

  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Summers Says Slowing Balance-Sheet Runoff Pace Is ‘Alarming’ Signal on Debt Fragility — The Federal Reserve cut the monthly cap on Treasury securities allowed to roll off its balance sheet to $5bn from $25bn; because its purchases create interest-bearing bank reserves, slowing the runoff shortens the effective maturity of US public-sector debt. One argument holds this signals fragility in placing government debt amid worsening fiscal policy.
  • The Inflationary Risks of Rising Federal Deficits and Debt — Simulations of the Federal Reserve's main macroeconomic model estimate that debt-financed deficits raise core prices about 0.2 percentage points over five years absent a central-bank response. With the central bank reacting, the cost shifts to interest rates: short rates roughly 0.25% higher, mortgage rates 23 basis points higher, and real household wealth 1.2% lower.

AI Summary. Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have lowered their year-end forecasts for 10-year US Treasury yields, citing the Treasury's campaign to push yields down. They point not only to public statements but to available tools such as limiting 10-year debt auction sizes, looser bank rules to boost bond demand, and deficit cuts.

Ye Xie and Liz Capo McCormick Bloomberg
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The US Treasury might reduce the size of 10-year auctions to boost demand for 10-year Treasuries as part of Treasury Secretary Besset’s yield control strategy.

Can the Treasury push down 10-year yields?

Core argument: Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end 10-year yield forecasts, citing in part Bessent's campaign to drive those yields lower.

Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end forecasts for 10-year yields in part, they said, because of Bessent’s campaign to drive them lower. It’s not just the jawboning, they added, but the fact that Bessent can follow it up with concrete action like limiting the size of 10-year debt auctions or advocating for looser bank regulations to boost bond demand or backing Elon Musk’s frantic campaign to cut the budget deficit. “The administration has almost kind of capped 10-year yields,” Blake Gwinn, head of US rates strategy at RBC Capital Markets said. “They’re kind of implicitly saying, if 10-year start to move higher or the economy starts to stumble and the Fed’s not playing ball, we’re just going to go out and slash 10-year issues.”

Takeaways by Macro Roundup® AI

  1. Chief rates strategists at Barclays, Royal Bank of Canada and Societe Generale have cut their year-end 10-year yield forecasts, citing in part Bessent's campaign to drive those yields lower.
  2. The strategists said Bessent's jawboning carries weight because he can follow it with concrete action, including limiting 10-year debt auction sizes, advocating looser bank regulations to boost bond demand, or backing Elon Musk's campaign to cut the budget deficit.
  3. Blake Gwinn, head of US rates strategy at RBC Capital Markets, said the administration has "almost kind of capped" 10-year yields, implicitly signaling it will slash 10-year issuance if yields move higher or the economy stumbles.

Related Articles:

  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.

Brad Setser Council on Foreign Relations
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.@Brad_Setser argues “the broad increase in U.S. imports actually precedes the rush to front-run tariffs. A global economy with this large a Chinese surplus can be sustained only with a large U.S. deficit.”

Does China's trillion-dollar surplus depend on a large U.S. deficit?

Core argument: China's trade surplus now exceeds $1 trillion a year, within a global economy that contains just one really big surplus and one really big deficit.

[The] pattern of trade imbalances implies a deeper and more persistent interdependence: a global economy with this large a Chinese surplus can be sustained only with a large U.S. deficit. At a global level, though, there is just one really big surplus and one really big deficit. The U.S. non-petrol deficit still drives the Asian surplus which, in fact, largely remains a Chinese surplus. The most salient feature about China is that its surplus now exceeds $1 trillion a year. Since the broader Asian surplus (apart from Japan, which generates its current account surplus through the returns on its overseas investment) remains, Asia collectively must run a massive surplus with the rest of the world.

Takeaways by Macro Roundup® AI

  1. China's trade surplus now exceeds $1 trillion a year, within a global economy that contains just one really big surplus and one really big deficit.
  2. The U.S. non-petroleum deficit drives the Asian surplus, which largely remains a Chinese surplus, implying that a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  3. Asia collectively runs a massive surplus with the rest of the world, with Japan generating its current account surplus through the returns on its overseas investment.

Related Articles:

  • What Is the Mar-a-Lago Accord? — The proposed Mar-a-Lago Accord would have the US offer allies security guarantees and market access in exchange for their intervening to weaken the dollar, expanding US manufacturing, and swapping existing US government debt for new 100-year Treasury bonds. Questions remain about the transition costs, inflation from higher US wage costs, and allies' incentives to participate.
  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.
  • 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.

AI Summary. The US Trade Representative has proposed port-call fees on Chinese-built and Chinese-operated vessels, reaching up to $3.5m per call under a formula based on a fleet's share of Chinese-built ships and new orders. The proposal also requires a share of US exports to move on US-flagged, US-built, US-crewed ships.

Laura Curtis, Weilun Soon, and James Attwood Bloomberg
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A new rule proposed by USTR would put levies of as much as $3.5mm per port call on Chinese-built ships that dock in the US to incentivize domestic shipbuilding. The fees could generate between $40-52B/year according to Clarksons Research Services.

Would port fees on Chinese-built ships disrupt US shipping and exports?

Core argument: The USTR proposal would charge up to $3.5 million per port call for Chinese-built vessels operated by a Chinese firm that also has a ship on order from a Chinese manufacturer.

The imposition of levies and additional export requirements are designed “to create leverage to obtain the elimination of China’s targeting of these sectors for dominance,” according to the initial proposals issued by the USTR [US Trade Representative.] Firms would be penalized using a formula based on their fleet’s existing share of Chinese-built ships, as well as others on order. Some vessels could attract fees of up to $3.5 million per port call if they are Chinese-built with a Chinese operator which also has a ship on order from a Chinese manufacturer. The proposal also requires a share of US products — including agricultural, chemical, energy and consumer goods — to move on US-flagged, crewed, and built ships in coming years.

Takeaways by Macro Roundup® AI

  1. The USTR proposal would charge up to $3.5 million per port call for Chinese-built vessels operated by a Chinese firm that also has a ship on order from a Chinese manufacturer.
  2. Penalties under the USTR proposals would be calculated by a formula based on a shipping firm's share of Chinese-built vessels in its existing fleet plus those on order.
  3. The USTR proposal would require a share of US products, including agricultural, chemical, energy and consumer goods, to move on US-flagged, US-crewed and US-built ships in coming years.

Related Articles:

  • Ship Wars — Shipyards tied to China's defense industrial base account for 15% of the country's active shipyards but 40% of commercial output by tonnage, with over 75% of their production built for firms outside China and Hong Kong. The authors argue these commercial revenues offset fixed costs and effectively subsidize China's naval expansion.
  • 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.
  • 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.

AI Summary. China's low household consumption share of GDP is not an oversight but is integral to its manufacturing competitiveness, so raising one requires lowering the other. Japan's experience shows consumption share fell for five years after it pledged to raise it, then took 17 years to rise 10 percentage points as manufacturing's share shrank.

Carol Yang South China Morning Post
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.@michaelxpettis argues that China’s low consumption isn’t a policy failure—it’s the flip side of its manufacturing edge. When Japan tried to raise the consumption share of GDP in the 1980s, it took 17 years and cost global manufacturing market share.

Does raising household consumption require giving up manufacturing competitiveness?

Core argument: Michael Pettis argues that China's low consumption share of GDP is not an accident but fundamental to its manufacturing competitiveness, so raising the consumption share requires changing that competitiveness.

The key point is that a low consumption share of GDP is not an accident, or an oversight. It is fundamental to China’s manufacturing competitiveness. To change one means changing the other. That is why raising the consumption share is so challenging. Japan faced the same problem in the 1980s. It proposed in 1986, with the Maekawa Commission report, to solve the problem by raising the household share of Japanese GDP. But for the next five years the consumption share of Japan’s GDP declined, after which it took 17 years to raise the consumption share of GDP by 10 percentage points. Of course, it is not a coincidence that during this time, the manufacturing share of Japan’s GDP declined from 27% to around 20%, even as Japan’s share of global GDP declined from 17% to 7%. The point is that weak consumption and a globally competitive manufacturing sector are often different sides of the same coin.

Takeaways by Macro Roundup® AI

  1. Michael Pettis argues that China's low consumption share of GDP is not an accident but fundamental to its manufacturing competitiveness, so raising the consumption share requires changing that competitiveness.
  2. Japan's 1986 Maekawa Commission report proposed raising the household share of GDP, yet Japan's consumption share declined for the next five years and then took 17 years to rise by 10 percentage points.
  3. Japan's manufacturing share of GDP fell from 27% to around 20% while its share of global GDP fell from 17% to 7%, which Pettis presents as no coincidence.

Related Articles:

AI Summary. An analysis of census data by the Aspen Economic Strategy Group finds 51.4% of US women ages 18 to 40 were single—neither married nor cohabitating—up from 41.8% in 2000. Research estimates marriage rates by age 45 for women without a college degree fell from 79% to 52% across those born between 1930 and 1980.

Rachel Wolfe Wall Street Journal
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51.4% of US women aged 18-40 were single in 2023 up from 41.8% in 2000 according to the Aspen Economic Strategy Group. Ben Goldman notes “There simply aren’t enough [men] with steady jobs and earnings for non-college women to date.”

Are more American women staying single than in past decades?

Core argument: The share of U.S. women ages 18–40 who are single, neither married nor cohabitating, reached 51.4% in 2023, up from 41.8% in 2000, according to an Aspen Economic Strategy Group analysis of census data.

The share of women ages 18 to 40 who are single—that is, neither married nor cohabitating with a partner—was 51.4% in 2023, according to an analysis of census data by the Aspen Economic Strategy Group, up from 41.8% in 2000. Over half of single women said they believed they were happier than their married counterparts in a 2024 AEI survey of 5,837 adults. Just over a third of surveyed single men said the same. A 2022 Pew survey of single adults showed only 34% of single women were looking for romance, compared with 54% of single men, down from 38% and 61% in 2019. Men were also more likely than women to say they were worried that nobody would want to date them. Men’s economic struggles seem to be having the biggest effect on women without a college degree, whose marriage rates by age 45 have plummeted from 79% to 52% for those born between 1930 and 1980, according to research by Cornell University economist Benjamin Goldman. “Young men without a degree are struggling so much as a group that there simply aren’t enough with steady jobs and earnings for non-college women to date,” said Goldman.

Takeaways by Macro Roundup® AI

  1. The share of U.S. women ages 18–40 who are single, neither married nor cohabitating, reached 51.4% in 2023, up from 41.8% in 2000, according to an Aspen Economic Strategy Group analysis of census data.
  2. Research by Cornell University economist Benjamin Goldman finds marriage rates by age 45 among women without a college degree fell from 79% to 52% between those born in 1930 and 1980, which he attributes to too few non-college men with steady jobs and earnings.
  3. A 2022 Pew survey of single adults found 34% of single women were looking for romance versus 54% of single men, down from 38% and 61% in 2019.

Related Articles:

  • Bachelors Without Bachelor’s: Gender Gaps in Education and Declining Marriage Rates — Marriage rates for college-educated women have remained stable over the past fifty years even as the relative supply of college-educated men declined, with the overall decline in marriage driven almost entirely by fewer marriages between non-college women and non-college men. The education gap in women's marriage rates is larger in areas where non-college men face the highest joblessness and incarceration.
  • 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.
  • What’s Behind the Rapid Rise in LGBTQ Identity? — Young women use social media more than young men and are more likely to encounter accounts featuring LGBTQ topics, and research finds young women identifying as gay, lesbian, bisexual or queer are much more active on these platforms than straight women of the same age.

Tuesday, March 25, 2025

AI Summary. The authors argue that incumbent firms with wage-setting power over researchers engage in "defensive hiring" to deter potential entrants' innovation, which helps explain why US research and development spending has risen while total factor productivity growth has declined. They find research labor supply is inelastic and that incumbent R&D spending is negatively correlated with creative destruction and sectoral productivity growth.

Jesús Fernández-Villaverde, Yang Yu and Francesco Zanetti National Bureau of Economic Research
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Between 1975 and 2015, an increasingly inelastic supply of specialized talent encouraged incumbents to “overhire to deter entrant innovation.” A pro-innovation policy would tax incumbents and subsidize entrants. Jesús Fernández-Villaverde @AEIecon

Does hiring researchers to deter rivals explain rising R&D with slowing productivity?

Core argument: Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction, a mechanism the authors argue helps explain the simultaneous rise in US R&D spending and decline in total factor productivity growth over recent decades.

Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction [replacement of old firms and technologies by new ones]. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades, despite rising R&D spending and researcher employment in the US over the past two decades. Defensive hiring by incumbent firms internalizes the effect of hiring researchers on competitors’ innovation probabilities. In monopsonistic markets with an inelastic supply of researchers, incumbents overhire to deter entrant innovation and preserve market dominance. Ideas getting harder to find amplifies this mechanism. Empirical evidence supports this theory, showing that the elasticity of research labor supply is low and has declined since the mid-1990s. Incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents’ lifespans, effects that are stronger in industries with inelastic researcher supply. The government can subsidize new entrants and tax incumbents to promote technological growth and correct market distortions.

Takeaways by Macro Roundup® AI

  1. Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction, a mechanism the authors argue helps explain the simultaneous rise in US R&D spending and decline in total factor productivity growth over recent decades.
  2. In monopsonistic markets with inelastic researcher supply, incumbents overhire researchers to deter entrant innovation and preserve market dominance, internalizing the effect of their hiring on competitors' innovation probabilities, with ideas getting harder to find amplifying the mechanism.
  3. The elasticity of research labor supply is low and has declined since the mid-1990s, and incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents' lifespans, more strongly where researcher supply is inelastic.

Related Articles:

  • Are Ideas Getting Harder to Find? — The authors estimate U.S. research productivity has fallen by a factor of 41 since the 1930s, averaging declines above 5% per year across sectors. Sustaining constant growth in output per person requires doubling research effort every 13 years, challenging growth models that assume constant research productivity.
  • Something Is Getting Harder But It’s Not Finding Ideas — The number of researchers in the US economy has grown to 23x its 1930 level while the economy's growth rate has been constant or declining, contradicting the assumption that constant research input yields a constant growth rate. Bloom et al. explain this divergence by assuming ideas get harder to find as more are discovered.
  • Self-Selection and the Diminishing Returns of Research — The authors argue much of research's declining productivity is a transitional composition effect: the share of the labor force in research has tripled since the 1960s, and if researchers are positively selected on ability, that expansion lowered their average ability. Separating transitional from permanent diminishing returns nearly doubles predicted long-run per capita income growth.

AI Summary. The U.S. foreign-born population reached 53.3m, or 15.8% of the population, the highest level in American history, exceeding the shares recorded in 1890 (14.8%) and 1910 (14.7%) during the "Great Wave" of immigration. A four-year increase of 8.3m is larger than that of any four-year period in American history and exceeds the 7.9m increase over the prior 12 years.

Steven Camarota and Karen Zeigler Center for Immigration Studies
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The US foreign-born population rose by 8.3mm between 2021–2025 per Census Bureau data—the largest 4-year gain on record. The total reached 53.3mm, or 15.8% of the population, surpassing the prior peak of 14.8% set in 1890.

Has the foreign-born share of the US population reached a record high?

Core argument: The U.S. foreign-born population rose by 8.3 million from January 2021 to January 2025, a larger four-year increase than any other four-year period in American history and larger than the 7.9 million increase over the prior 12 years.

The numerical increase of 8.3 million in the last four years is larger than in any four-year period in American history. The 8.3 million increase in the four years from January 2021 to January 2025 is also larger than the 7.9 million increase in the 12 years prior. At 53.3 million and 15.8 percent of the population, the foreign-born population is higher now than at any time in American history. The number of immigrants has increased more than five-fold since 1970, and nearly three-fold since 1990, and by more than two-thirds since 2000. As a share of the population, even in 1890 (14.8%) and 1910 (14.7%) during what is often called the “Great Wave” of immigration, the foreign-born were a smaller share of the population than they are today.

Takeaways by Macro Roundup® AI

  1. The U.S. foreign-born population rose by 8.3 million from January 2021 to January 2025, a larger four-year increase than any other four-year period in American history and larger than the 7.9 million increase over the prior 12 years.
  2. At 53.3 million people and 15.8 percent of the U.S. population, the foreign-born population stands higher in both number and share than at any time in American history.
  3. The foreign-born share of 15.8 percent exceeds the 14.8 percent of 1890 and 14.7 percent of 1910 during the "Great Wave" of immigration, with the number of immigrants up more than five-fold since 1970 and nearly three-fold since 1990.

Related Articles:

  • 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.
  • The Demographic Outlook: 2025 to 2055 — The Congressional Budget Office projects the U.S. population will grow from 350m to 372m over three decades, an average of 0.2% per year, less than a quarter of the 0.9% average annual rate from 1975 to 2024. Deaths are projected to exceed births beginning in 2033, with net immigration more than accounting for population growth thereafter.
  • The Cost of Illegal Immigration — The US foreign-born population rose by 6.6mm to 51.6mm over a roughly three-year span, lifting immigrants to 15.6% of the population, above the prior records of 14.8% in 1890 and 14.7% in 1910. The authors estimate about 13.7mm illegal immigrants now live in the US, a net increase of 3.7mm.

AI Summary. The authors of an Institute for New Economic Thinking paper estimate that wealth gains among the top 10% of US households were large enough to explain the rise in total consumer spending above its longer-term trend, sustaining their spending even as their inflation-adjusted incomes shrank.

Jonnelle Marte Bloomberg
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Americans earning over $250k/year now represent ~50% of US consumer spending, up from ~33% in the 1990s, supported in part by stock market gains. Recent equity market declines may have a disproportionate impact on spending relative to previous selloffs.

Does spending by the wealthiest households now drive the economy?

Core argument: Americans earning more than $250,000 a year account for half of all US consumer spending, up from about one-third in the 1990s, according to a Moody's Analytics analysis.

The increase in wealth experienced by the top 10% of households from 2020 to 2023 was almost without precedent, according to a paper published in May by the Institute for New Economic Thinking, enabling this cohort of “super rich” to keep spending even as their real incomes shrunk when adjusted for inflation. Gains among the wealthy were large enough to explain the rise in total consumer spending above its longer-term trend, according to the authors, economists Thomas Ferguson and Servaas Storm. A recent analysis by Moody’s Analytics found that Americans earning more than $250,000 a year now account for half of all US consumer spending, up from about one-third in the 1990s.

Takeaways by Macro Roundup® AI

  1. Americans earning more than $250,000 a year account for half of all US consumer spending, up from about one-third in the 1990s, according to a Moody's Analytics analysis.
  2. Economists Thomas Ferguson and Servaas Storm argue that wealth gains among the wealthy were large enough to explain the rise in total consumer spending above its longer-term trend.
  3. The wealth increase for the top 10% of households from 2020 to 2023 was almost without precedent, according to a May paper from the Institute for New Economic Thinking, letting them keep spending as their inflation-adjusted incomes shrank.

Related Articles:

  • The U.S. Economy Depends More Than Ever on Rich People — Moody's Analytics estimates the top 10% of earners account for 49.7% of all U.S. consumer spending, a record in data going back to 1989, up from about 36% three decades ago, with their spending alone equal to almost one-third of gross domestic product.
  • Consumer Sentiment Deteriorating Rapidly — University of Michigan survey data show consumer sentiment declining for households earning both above and below $100,000, with job-loss worries at levels typically seen in recessions and a record-high share of consumers saying business conditions are worsening. Income expectations are falling while inflation expectations are rising rapidly.
  • The American Dream Is Not a Coin Flip, and Wages Have Not Stagnated — 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.

AI Summary. Academic analysis of 12 labour-intensive Chinese manufacturing industries estimates average employment fell about 14%, or nearly 4mn jobs, between 2011 and 2019, with textile roles down 40%; a further analysis of the same sectors found 3.4mn more jobs lost through 2023. Researchers argue industrial upgrading and automation are cutting demand for lower-skilled workers and depressing their wages.

William Langley and Haohsiang Ko Financial Times
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China is facing its own “China Shock,” losing at least 7.4mm jobs in labor-intensive manufacturing industries between 2011 and 2023, due to automation and migration to lower-wage manufacturing hubs like Vietnam and Indonesia.

Are industrial upgrading and automation eliminating China's low-skilled manufacturing jobs?

Core argument: Academics at Changzhou University, Yancheng Teachers University and Henan University found average employment across 12 labour-intensive Chinese manufacturing industries shrank roughly 14%, nearly 4mn roles, between 2011 and 2019, with textile jobs down 40%.

Analysis of 12 labour-intensive manufacturing industries between 2011 and 2019 by academics at Changzhou University, Yancheng Teachers University and Henan University found that average employment shrank by roughly 14%, or nearly 4mn roles, between 2011 and 2019. Roles in the textile industry shrank 40% over the period. An FT analysis of the same 12 sectors between 2019 and 2023 found a further decline of 3.4mn jobs. Dorien Emmers and Scott Rozelle argued in last year that the rapid upgrading of Chinese industry, as well as its “massive push to automate” was further reducing demand for [lower skilled] labourers, to the point that their wages had started to decline. “When too many unskilled workers are squeezed out of upgraded industries, their wages tend to stagnate or fall, curtailing demand and hampering growth. This eventually leads to serious social problems, such as higher rates of unemployment and increased crime and social unrest. Nations with socially polarised work forces also suffer from political instability.”

Takeaways by Macro Roundup® AI

  1. Academics at Changzhou University, Yancheng Teachers University and Henan University found average employment across 12 labour-intensive Chinese manufacturing industries shrank roughly 14%, nearly 4mn roles, between 2011 and 2019, with textile jobs down 40%.
  2. An FT analysis of the same 12 labour-intensive sectors found a further decline of 3.4mn jobs between 2019 and 2023.
  3. Dorien Emmers and Scott Rozelle argued that China's rapid industrial upgrading and "massive push to automate" is reducing demand for lower-skilled labourers to the point that their wages have started to decline, which they said curtails demand and hampers growth.

Related Articles:

  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • The Evolution of Global Trade in 2024 — Global trade imbalances consist of one very large surplus and one very large deficit: China's goods surplus exceeds $1tn a year, while the U.S. non-petroleum deficit drives the Asian surplus. The author argues a Chinese surplus this large can be sustained only alongside a large U.S. deficit.
  • Xi Jinping Calls for Quality Jobs for Youth Instead of ‘Bitterness’ — China's leadership has ordered that providing "high-quality full employment" be an economic priority, with youth unemployment running at nearly three times the overall rate. Unemployment among 16-24 year-olds, excluding students, stood at 14.7% against an urban unemployment rate of 5%.

AI Summary. The proposed "Mar-a-Lago Accord," which would have foreign central banks swap US Treasury bills for 100-year bonds paying no interest, is unworkable because repeated tariff threats across many objectives have drained their credibility as leverage. Overusing tariffs and financial sanctions would push foreign countries out of dollars and accelerate the loss of dollar dominance.

Jeffrey Frankel Econbrowser
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Citing the coercive nature of the theorized “Mar-a-Lago Accord” @JFrankelEcon argues “If the US persists in over-using tariffs and financial sanctions, it will incentivize foreign countries to move out of dollars altogether.”

Can tariff threats force foreign central banks into century bonds?

Core argument: The proposed Mar-a-Lago Accord, which would swap foreign central banks' Treasury bills for 100-year bonds paying no interest for 100 years, stands no chance of acceptance by those central banks and other investors.

The Mar-a-Lago Accord about which people are talking, regarding the dollar, doesn’t stand a chance. Why would the world’s central banks and other investors accept 100-year bonds — which would pay no interest for 100 years — in place of good old Treasury bills? Presumably, Trump would threaten tariffs against their countries. But he has waved this weapon in the air so often, in the names of so many objectives, with so many postponements and reversals, that it would not retain much credibility if used to force purchases of US treasury securities. If the US persists in over-using tariffs and financial sanctions, it will incentivize foreign countries to move out of dollars altogether, accelerating the loss of dollar dominance. The rest of the proposal is to force foreign countries to accept the inferior treasury bonds by brandishing US military and geopolitical power. The situation is perhaps reminiscent of the 1960s when Germany, wanting to preserve the Bretton Woods system, willingly paid the foreign exchange costs of stationing American soldiers in Germany.

Takeaways by Macro Roundup® AI

  1. The proposed Mar-a-Lago Accord, which would swap foreign central banks' Treasury bills for 100-year bonds paying no interest for 100 years, stands no chance of acceptance by those central banks and other investors.
  2. Trump's tariff threat has been brandished so often, for so many objectives, and with so many postponements and reversals that it would carry little credibility as a tool to force purchases of US Treasury securities.
  3. Continued over-use of tariffs and financial sanctions by the US would incentivize foreign countries to move out of dollars altogether, accelerating the loss of dollar dominance.

Related Articles:

  • What Is the Mar-a-Lago Accord? — The proposed Mar-a-Lago Accord would have the US offer allies security guarantees and market access in exchange for their intervening to weaken the dollar, expanding US manufacturing, and swapping existing US government debt for new 100-year Treasury bonds. Questions remain about the transition costs, inflation from higher US wage costs, and allies' incentives to participate.
  • A User’s Guide to Restructuring the Global Trading System — During the 2018–2019 U.S.–China trade war, the effective tariff rate on Chinese imports rose 17.9 percentage points while the renminbi depreciated 13.7% against the dollar, leaving after-tariff import prices in dollars up just 4.1%. The author argues this currency offset of more than three-fourths of the tariff explains why inflation pressure was negligible.
  • Mar-a-Lago Accord, Schmar-a-Lago Accord — Sustainably weakening the dollar would require the Federal Reserve to cut interest rates while foreign central banks raise theirs, which is unlikely given US inflation above the Federal Reserve's 2% target and weak foreign economies. Tariff threats and security-umbrella pressure might sway Japan and Europe, but China would be less willing to comply.

AI Summary. NATO's collective defense spending averaged 1.72% of GDP over roughly two and a half decades, below the alliance's agreed 2% threshold, leaving a cumulative shortfall the authors estimate at over $2tn that was not invested in force structure, modernization, and readiness. The authors argue closing the gap requires years of sustained investment beyond current commitments.

Mackenzie Eaglen and Cole Spiller American Enterprise Institute
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Between 2000 and 2024, NATO’s defense spending averaged 1.72% of GDP, a cumulative $2T short of the 2% target, “funds that should have been invested…in force structure, modernization, and readiness but were instead deferred or cut.” @MEaglen

How large is NATO's cumulative defense spending shortfall?

Core argument: NATO's collective defense spending averaged 1.72% of GDP from 2000 to 2024, below the agreed 2% threshold, producing a cumulative alliance-wide defense spending deficit of more than $2 trillion.

From 2000 to 2024, NATO’s collective defense spending averaged just 1.72% of GDP, well below the agreed-upon 2% threshold. The result is a defense spending deficit totaling over $2 trillion across the alliance—funds that should have been invested under the 2% of GDP framework in force structure, modernization, and readiness but were instead deferred or cut. This deficit peaked in 2014, coinciding with Russia’s illegal annexation of Crimea, which prompted a renewed focus on defense investment. Closing this gap will take years of sustained investment beyond current commitments. As illustrated on the battlefield in Ukraine, modern warfare demands consistent investment in large-scale force generation, munitions stockpiles, and industrial capacity—all of which require a funding framework beyond a static percentage of GDP.

Takeaways by Macro Roundup® AI

  1. NATO's collective defense spending averaged 1.72% of GDP from 2000 to 2024, below the agreed 2% threshold, producing a cumulative alliance-wide defense spending deficit of more than $2 trillion.
  2. The NATO defense spending deficit peaked in 2014, coinciding with Russia's illegal annexation of Crimea, which prompted renewed focus on defense investment.
  3. Closing NATO's spending gap will require years of sustained investment beyond current commitments, and the war in Ukraine illustrates that large-scale force generation, munitions stockpiles, and industrial capacity need a funding framework beyond a static share of GDP.

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  • Germany’s Parliament Approves Friedrich Merz’s €1tn Spending Plan — Germany's parliament approved constitutional changes allowing up to €1tn for military and infrastructure spending, including unlimited borrowing for defense and a €500bn, 12-year fund to modernize hospitals, schools, roads and energy networks. The plan could revive Europe's largest economy and boost EU rearmament efforts.
  • German Army Struggles to Get Gen Z Recruits ‘Ready for War’ — Germany's armed forces commissioner warned the country is not moving closer to its target of 203,000 active troops by 2031, as the military slightly shrank amid high dropout rates, with a quarter of new recruits leaving within six months. Conscientious objector applications reached 2,998, up from 200 in 2021.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.