Edward Conard

Top Ten New York Times Bestselling Author

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

Macro Roundup


Monday, May 19, 2025

AI Summary. Manufacturing has fallen by 15 points of GDP while the trade balance deteriorated by only 4 points, so the trade deficit cannot be the main explanation of deindustrialization. Since a dollar spent on U.S. manufactures yields about 63 cents of manufacturing value added, eliminating the manufacturing trade deficit would add roughly 2.5 points of GDP.

Paul Krugman Paul Krugman
Date Posted:

Paul Krugman notes that “manufacturing has declined by 15pp of GDP but the trade balance has deteriorated by only 4pp. This tells us that the trade deficit can’t be the main explanation of deindustrialization.”

Is the trade deficit the main cause of manufacturing's decline?

Core argument: Manufacturing has fallen by 15 points of GDP while the trade balance deteriorated by only 4 points, which the author argues means the trade deficit cannot be the main explanation of deindustrialization.

Manufacturing has declined by 15 points of GDP, but the trade balance has deteriorated by only 4 points. This tells us that the trade deficit can’t be the main explanation of deindustrialization. And even 4 points is clearly an overstatement. When you spend a dollar on U.S. manufactured goods, not all the money stays in manufacturing. Some of it “leaks out” to other parts of the economy, mainly because industrial firms buy a lot of services. My read of the input-output tables (you don’t want to know) says that on average a dollar spent on U.S. manufactures translates into only 63 cents of manufacturing value added. So imagine that we could somehow eliminate our manufacturing trade deficit. Given what I’ve said, that would increase manufacturing value-added by 4*0.63 = ~2.5 points of GDP, that is, from around 10 to around 12.5 — not nothing, but a far cry from the 25 percent people remember as the good old days.

Takeaways by Macro Roundup® AI

  1. Manufacturing has fallen by 15 points of GDP while the trade balance deteriorated by only 4 points, which the author argues means the trade deficit cannot be the main explanation of deindustrialization.
  2. The author's read of the input-output tables indicates that a dollar spent on U.S. manufactures translates into only 63 cents of manufacturing value added, mainly because industrial firms buy a lot of services.
  3. Eliminating the U.S. manufacturing trade deficit would, by the author's estimate, raise manufacturing value added by about 2.5 points of GDP, from around 10 to around 12.5, far below the 25 percent share people remember.

Related Articles:

  • A Note on Trade Deficits and Manufacturing — The U.S. manufactures trade deficit of about 4% of GDP, if eliminated, is estimated to raise manufacturing value-added by roughly 2.5 percentage points of GDP — about a quarter larger than the current 10% share — because manufacturers also buy many services. That would reverse only about 2.5 of the roughly 17-point fall in manufacturing's employment share since 1970.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.
  • The R&D Puzzle in U.S. Manufacturing Productivity Growth — Research and development spending in U.S. manufacturing has been rising relative to output and hours worked while productivity has been flat, which suggests the ability of research and development to boost productivity growth has been declining.

AI Summary. Given a U.S. current account deficit, some domestic sector must be a net seller of financial assets, and the federal government is best suited to that role because its liabilities are easy to service and have served investors as hedges. The author argues borrowing and monetary policy should target adequate private-sector nominal income rather than the budget balance itself.

Matt Klein The Overshoot
Date Posted:

Excess foreign saving is a given, Klein asserts, and must be absorbed by “some combination of U.S. domestic entities…that are net sellers of financial assets.” Low private US debt issuance suggests limited room for federal deficit reduction, he argues.

Should federal borrowing target nominal income rather than the budget balance?

Core argument: U.S. private indebtedness sits at its lowest level since 2000, though still high, while total debt issuance remains remarkably low, which the author reads as a favorable outcome.

If the current account deficit is taken as a given, then there must be some combination of U.S. domestic entities on the other side that are net sellers of financial assets. None of those entities has a track record of consistently translating massive issuance into productive investments. But the federal government at least has the virtue of being able to issue liabilities that are reliably easy to service out of current income and that, historically, have been useful to investors as hedges for risk assets during downturns. Rather than targeting the budget balance for its own sake, federal borrowing and monetary policy together should be the output of a process aimed at supplying enough nominal income to the domestic private sector (but not too much). In particular, the goals should be ensuring that there is enough spending to keep businesses investing and hiring, while also minimizing the need for (or appeal of) excessive private borrowing. From this perspective, the past few years look pretty good. Private indebtedness is at its lowest since 2000, albeit still high, while total debt issuance remains remarkably low.

Takeaways by Macro Roundup® AI

  1. U.S. private indebtedness sits at its lowest level since 2000, though still high, while total debt issuance remains remarkably low, which the author reads as a favorable outcome.
  2. Taking the U.S. current account deficit as given requires some combination of domestic entities to be net sellers of financial assets, and the author argues none has consistently translated massive issuance into productive investments.
  3. The author argues federal borrowing and monetary policy should jointly aim at supplying enough nominal income to the domestic private sector to keep businesses investing and hiring while minimizing excessive private borrowing, rather than targeting the budget balance itself.

Related Articles:

  • 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.
  • 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.
  • The Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.

AI Summary. Moody's downgraded the US credit rating to Aa1 from Aaa, becoming the last of the three main rating firms to strip the country of its top-tier grade, after S&P and Fitch moved earlier. Long-term Treasury yields rose, with the 30-year reaching 5.03%, and the dollar fell against all its Group-of-10 peers.

Alice Atkins and Naomi Tajitsu Bloomberg
Date Posted:

Prices of long-dated Treasuries are falling, with the 30-year yield rising 9bps to 5.03%, its highest level since November 2023. The 10-year rose 7bps to 4.56%, still under its January yield of 4.79%.

Does a credit downgrade lift Treasury yields and weaken the dollar?

Core argument: The 30-year Treasury yield rose as much as nine basis points to 5.03%, its highest since November 2023, while the 10-year climbed seven basis points to 4.56%, after Moody's downgraded the US to Aa1 from Aaa.

The 30-year yield rose as much as nine basis points to 5.03%, the highest since November 2023. The benchmark 10-year rate climbed seven basis points to 4.56%. The dollar fell against all of its Group-of-10 peers, with the euro surging over 1% to $1.1288. Moody’s announced Friday it was downgrading the US to Aa1 from Aaa, reinforcing Wall Street’s growing worries over the nation’s fiscal outlook as Capitol Hill debates even more unfunded tax cuts. Moody’s was the last of the three main rating firms to remove the US top-tier rating. S&P Global Ratings was the first to move in 2011, while Fitch Ratings followed in 2023 — both have the nation at AA+.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury yield rose as much as nine basis points to 5.03%, its highest since November 2023, while the 10-year climbed seven basis points to 4.56%, after Moody's downgraded the US to Aa1 from Aaa.
  2. The dollar fell against all of its Group-of-10 peers, with the euro surging over 1% to $1.1288.
  3. Moody's was the last of the three main rating firms to remove the US top-tier rating, following S&P Global Ratings in 2011 and Fitch Ratings in 2023, both of which have the nation at AA+.

Related Articles:

  • The Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.
  • 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.
  • 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.

AI Summary. The 5-year, 5-year forward real US interest rate stands at 2.5%, the highest since 2010 and above levels seen during past periods of Federal Reserve tightening. Long-term real rates rising while the Federal Reserve contemplates further cuts is unusual and raises concerns for US debt sustainability.

Robin Brooks Robin Brooks Substack
Date Posted:

“Worrying things are happening” @robin_j_brooks argues, citing the steep rise in real long-term yields. The “5y5y forward real interest rate now stands at 2.5%, which is the highest level going all the way back to 2010.”

Are rising long-term real interest rates a concern for US debt sustainability?

Core argument: The US 5y5y forward real interest rate stands at 2.5%, the highest level going back to 2010, and far exceeds levels reached during the 2013 "taper tantrum" or the 2022/23 hiking cycle.

You can break down nominal US interest rates into market expectations for inflation - what’s called breakeven inflation - and the real interest rate, a residual that’s left when you subtract breakeven inflation from the nominal yield. The chart shows these three things, with one added twist. It does this decomposition for 5y5y forward yield, which is the second half of the 10-year yield when you take out the “front-end” 5-year interest rate. This perspective shines a light on longer-term interest rates, which are so important for US debt sustainability. This is where recent trends are worrying. The 5y5y forward real interest rate (blue line) now stands at 2.5%, which is the highest level going all the way back to 2010. Most importantly, it far exceeds levels seen during hawkish Fed episodes, like the 2013 “taper tantrum” or the 2022/23 hiking cycle after the COVID inflation scare. If anything, the Fed is now contemplating further cuts as the economy weakens, weighed down by tariffs, so the fact that real long-term interest rates are rising at this juncture is highly unusual and worrying.

Takeaways by Macro Roundup® AI

  1. The US 5y5y forward real interest rate stands at 2.5%, the highest level going back to 2010, and far exceeds levels reached during the 2013 "taper tantrum" or the 2022/23 hiking cycle.
  2. Decomposing the 5y5y forward yield into breakeven inflation and a residual real rate isolates longer-term interest rates, which the author identifies as important for US debt sustainability.
  3. Long-term real interest rates are rising even as the Federal Reserve contemplates further cuts with the economy weakening under tariffs, a combination the author calls highly unusual and worrying.

Related Articles:

  • 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.
  • The Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.
  • 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. China's recorded US Treasury holdings fell to $765bn, below the UK's $779bn, making Britain the second-largest holder for the first time since the start of the century. China has gradually reduced official holdings from a peak above $1.3tn, diversifying into US agency bonds and gold, and analysts believe it increasingly uses third-party custodians that obscure its true holdings.

Arjun Neil Alim and Haohsiang Ko Financial Times
Date Posted:

Chinese official holdings of long-term Treasuries fell below those of the UK for the first time since 2000, although this does not adjust for Chinese custodial holdings in Luxembourg and Belgium.

Has China slipped behind the UK in recorded Treasury holdings?

Core argument: China's recorded Treasury holdings fell to $765bn at the end of March from $784bn the prior month, dropping below the UK's $779bn for the first time since the start of the century.

China’s recorded holdings of Treasuries have fallen below those of the UK for the first time since the start of the century, underlining an ongoing shift in Beijing’s management of its foreign reserves. The value of Treasuries held by Chinese investors, as recorded by US banks and custodians, fell to $765bn at the end of March, down from $784bn in the previous month. Those held by UK investors rose almost $30bn to $779bn. Beijing has been gradually reducing its official holdings of US treasuries from a peak of more than $1.3tn in 2011, diversifying into other assets including US agency bonds and gold. Some of the fall in the value of China’s holdings could also reflect market moves. Analysts believe China also holds a growing proportion of its US assets through third party custodians, including Euroclear in Belgium and Clearstream in Luxembourg, which obscures the true level of its holdings. Luxembourg’s Treasury holdings by value were flat in March while Belgium’s increased by $7.4bn from February.

Takeaways by Macro Roundup® AI

  1. China's recorded Treasury holdings fell to $765bn at the end of March from $784bn the prior month, dropping below the UK's $779bn for the first time since the start of the century.
  2. Beijing has been gradually reducing official Treasury holdings from a peak above $1.3tn in 2011, diversifying into other assets including US agency bonds and gold, though some of the decline in value could reflect market moves.
  3. Analysts believe China holds a growing share of its US assets through third-party custodians including Euroclear in Belgium and Clearstream in Luxembourg, obscuring its true holdings; Belgium's recorded Treasuries rose $7.4bn in March while Luxembourg's were flat.

Related Articles:

  • How China is Quietly Diversifying From US Treasuries — US Treasury data show China cut its official holdings of US Treasuries by more than 27% to $759bn, a faster decline than the preceding period, while raising holdings of higher-yielding agency bonds issued by government-sponsored entities such as Fannie Mae. Analysts argue China's true Treasury holdings may be higher, masked by intermediary custodians.
  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • China’s Holdings of US Treasuries Fall to Lowest Level Since 2009 — Chinese investors' holdings of US government debt fell by $57bn to $759bn, the lowest level since 2009 according to US Treasury data, which excludes Chinese-owned Treasuries held in accounts in other countries. The reported decline was likely exaggerated by assets shifting to securities depositaries in Belgium and Luxembourg.

AI Summary. Tax legislation is estimated to widen an anticipated $2tn annual US fiscal deficit by a few hundred billion in the near term, testing investor appetite for dollar assets. Dollar weakness alongside higher long-term yields would signal a regime in which fiscal stimulus is negative for risk assets.

Joseph Wang Fed Guy Blog
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Pending legislation will raise the “anticipated $2T annual fiscal deficit by a few $100bn in the near term” and “test the market’s appetite for dollar assets” in a period of fragile investor confidence, making fiscal stimulus risk negative for stocks.

Is investor appetite for dollar assets being tested by wider deficits?

Core argument: The tax legislation is estimated to widen the anticipated $2tn annual fiscal deficit by a few hundred billion dollars in the near term, and its front-loaded design tests the market's appetite for dollar assets.

The upcoming tax legislation is front-loaded and looks to test the market’s appetite for dollar assets at a time when investor confidence appears fragile. The current legislation is estimated to further expand the anticipated $2T annual fiscal deficit by a few hundred billion in the near term. While 10-year yields are comfortably below 5%, 30-year yields have steadily crept up towards multi-year highs. The large fiscal stimulus is coming at a time when there are clear signs of a regime change. The key price to watch would be the dollar, where dollar weakness amidst higher rates suggests we are now in a regime where fiscal stimulus is risk negative. The market helped pressure Trump to relent on his Liberation Day tariffs, and it may also compel him to moderate his big beautiful bill.

Takeaways by Macro Roundup® AI

  1. The tax legislation is estimated to widen the anticipated $2tn annual fiscal deficit by a few hundred billion dollars in the near term, and its front-loaded design tests the market's appetite for dollar assets.
  2. Ten-year yields remain comfortably below 5%, while 30-year yields have crept steadily toward multi-year highs.
  3. Dollar weakness alongside higher rates suggests a regime in which fiscal stimulus is risk negative, and the market pressure that pushed Trump to relent on his Liberation Day tariffs may also compel him to moderate his bill.

Related Articles:

  • The Worrying Fall in the Dollar — The dollar has risen on tariff reductions and fallen on tariff increases, a pattern the author calls unusual because tariffs on the rest of the world would be expected to strengthen the dollar. The author argues markets punished US policy volatility and that the dollar remains below the level implied by forward interest-rate differentials against other advanced economies.
  • 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.
  • Kenneth Rogoff on Monetary Moves, Fiscal Gambits, and Classical Chess — The author argues the US is likely to see another burst of inflation within roughly five to seven years, cumulatively 20–25% above the 2% target, which would erode the debt as an earlier episode did. He expects markets to respond by demanding higher interest rates, forcing difficult choices.

AI Summary. Owning a medium-size regional business — auto dealerships, beverage distributors, grocery stores, dental practices, law firms — is the largest source of income for the top 1% of US earners. Analysis of anonymized tax data finds such business ownership generated 34.9% of top 1% income in 2022, up from 30.3% in 2014, and 43.1% for the top 0.1%.

Juliet Chung Wall Street Journal
Date Posted:

The largest source of income for the 1% highest earners was business ownership, which generated 34.9%, in 2022 up from 30.3% in 2014. Top 0.1% earners saw 43.1% of their income coming from business ownership in 2022, compared with 37.3% in 2014.

What is the largest income source for top US earners?

Core argument: Ownership of medium-size regional businesses generated 34.9% of income for the top 1% of U.S. earners in 2022, up from 30.3% in 2014, according to Owen Zidar and Eric Zwick's analysis of anonymized tax data from 2000 through 2022.

The largest source of income for the 1% highest earners in the U.S. isn’t being a partner at an investment bank or launching a one-in-a-million tech startup. It is owning a medium-size regional business. Many of them are distinctly boring and extremely lucrative, like auto dealerships, beverage distributors, grocery stores, dental practices and law firms. [Owen Zidar and Eric Zwick] analysis of anonymized tax data from 2000 through 2022 suggests the importance of such business ownership to the U.S. economy has grown. The share of income that ownership generates has increased to 34.9% in 2022 from 30.3% in 2014 for the top 1% earners. It has increased even more at the topmost levels. The top 0.1% highest-earners saw 43.1% of their income come from such business ownership in 2022, compared with 37.3% in 2014. (The minimum income threshold in 2022 to qualify for the top 0.1% of earners was $2.3 million, according to Zidar.)

Takeaways by Macro Roundup® AI

  1. Ownership of medium-size regional businesses generated 34.9% of income for the top 1% of U.S. earners in 2022, up from 30.3% in 2014, according to Owen Zidar and Eric Zwick's analysis of anonymized tax data from 2000 through 2022.
  2. Among the top 0.1% of U.S. earners, 43.1% of income came from such business ownership in 2022 versus 37.3% in 2014, with the 2022 income threshold for that group at $2.3 million, according to Zidar.
  3. The largest source of income for the top 1% of U.S. earners is owning businesses such as auto dealerships, beverage distributors, grocery stores, dental practices and law firms, rather than investment banking partnerships or tech startups.

Related Articles:

  • Capitalists in the Twenty-First Century — Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.
  • Top Wealth in the United States: New Estimates and Implications for Taxing the Rich — New estimates of U.S. wealth distribution indicate the top 10% of households hold 68.7% of total wealth and the top 1% hold 31.2%, with the top 1% holding as much as the bottom 90% combined. Median wealth for white households is $171,000, about 10x the $17,100 median for Black households.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

Tuesday, May 20, 2025

AI Summary. Using linked Census and tax records for 37m low-income adults, the authors estimate that state Medicaid expansions raised enrollment by 12 percentage points and cut mortality among low-income adults by 2.5%, implying a 21% reduction in the mortality hazard of new enrollees. They estimate direct budgetary costs of $5.4m per life saved and $179,000 per life-year saved.

Angela Wyse and Bruce Meyer National Bureau of Economic Research
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Exploiting state-level variation in the timing and adoption of Medicaid expansions, Wyse and Meyer infer that the mortality hazard of new enrollees (the “treated”) fell by an average of 21%. Younger adults accounted for almost 1/2 of life-years saved.

Does expanding public health insurance reduce mortality among low-income adults?

Core argument: Medicaid expansions raised enrollment by 12 percentage points and reduced mortality of the low-income adult population by 2.5%, which the authors estimate implies a 21% reduction in the mortality hazard of new enrollees.

We examine the causal effect of health insurance on mortality using the universe of low-income adults, a dataset of 37 million individuals identified by linking the 2010 Census to administrative tax data. Our methodology leverages state-level variation in the timing and adoption of Medicaid expansions under the Affordable Care Act (ACA) and earlier waivers. We find that expansions increased Medicaid enrollment by 12 percentage points and reduced the mortality of the low-income adult population by 2.5%, suggesting a 21% reduction in the mortality hazard of new enrollees. Mortality reductions accrued not only to older age cohorts, but also to younger adults, who accounted for nearly half of life-years saved due to their longer remaining lifespans and large share of the low-income adult population. These expansions appear to be cost-effective, with direct budgetary costs of $5.4 million per life saved and $179,000 per life-year saved falling well below valuations commonly found in the literature. Our findings suggest that lack of health insurance explains about five to twenty percent of the mortality disparity between high- and low-income Americans.

Takeaways by Macro Roundup® AI

  1. Medicaid expansions raised enrollment by 12 percentage points and reduced mortality of the low-income adult population by 2.5%, which the authors estimate implies a 21% reduction in the mortality hazard of new enrollees.
  2. Mortality reductions accrued to younger adults as well as older cohorts, with younger adults accounting for nearly half of life-years saved given their longer remaining lifespans and large share of the low-income adult population.
  3. Direct budgetary costs of the expansions came to $5.4 million per life saved and $179,000 per life-year saved, below valuations commonly found in the literature, and the authors suggest lack of insurance explains about 5 to 20% of the mortality disparity between high- and low-income Americans.

Related Articles:

  • Here’s How Government Spending Has Grown—and Where the Money Is Going — US federal spending rose to nearly $6.8tn in fiscal year 2024 from about $3.7tn in 2015, with revenue rising far more slowly. Adjusting for inflation and population growth shows spending still climbed, but by less than the raw dollar figures suggest.
  • Medicaid May Face Big Cuts and Work Requirements — Medicaid enrollment reached 87m people, boosted by pandemic legislation requiring states to keep people enrolled longer than normal and by additional states adopting the Affordable Care Act expansion, under which the federal government covers 90% of costs for expansion enrollees. The Congressional Budget Office projected states would receive nearly $60bn less in federal Medicaid funds year over year.
  • The Great “Transfer”-mation — Government transfers rose from 8.2% of Americans' total personal income in 1970 to 17.6% in 2022, making them the third largest income source after work and investments. The share of U.S. counties drawing a quarter or more of personal income from transfers rose from under 1% in 1970 to 53% in 2022.

AI Summary. Only four of the world's top 50 technology companies are European, and venture capital technology investment in Europe is a fifth of U.S. levels. Over 50 years the U.S. created 241 companies from scratch worth more than $10bn versus 14 in Europe, by one researcher's count.

Tom Fairless and David Luhnow Wall Street Journal
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107 privately held European firms worth >$1B represent just 13% ($333.38B) of the American cohort of 90 such firms worth $2.53T, despite Europe having a larger population and similar education levels to the U.S.

How far does Europe lag the US in building tech giants?

Core argument: Over the past 50 years the U.S. created from scratch 241 companies worth more than $10 billion, versus 14 in Europe, according to calculations from Andrew McAfee.

Only four of the world’s top 50 tech companies are European, despite Europe having a larger population and similar education levels to the U.S. and accounting for 21% of global economic output. None of the top 10 companies investing in quantum computing are in Europe. In Europe, venture capital tech investment is a fifth of U.S. levels. Over the past 50 years, the U.S. has created, from scratch, 241 companies with a market capitalization of more than $10 billion, while Europe has created just 14, according to calculations from Andrew McAfee. The typical company in the top 10 publicly traded U.S. firms was founded in 1985, while in Europe, it was in 1911, according to the International Monetary Fund. By the late 1990s, when the digital revolution got under way, the average EU worker produced 95% of what their American counterparts made per hour. Now, the Europeans produce less than 80%.

Takeaways by Macro Roundup® AI

  1. Over the past 50 years the U.S. created from scratch 241 companies worth more than $10 billion, versus 14 in Europe, according to calculations from Andrew McAfee.
  2. Only four of the world's top 50 tech companies are European, and none of the top 10 firms investing in quantum computing are in Europe, though Europe accounts for 21% of global economic output.
  3. The average EU worker produced 95% of U.S. output per hour by the late 1990s but now produces less than 80%, while European venture capital tech investment is a fifth of U.S. levels.

Related Articles:

  • A Visualization of Europe’s Non-Bubbly Economy — The Draghi report notes that no European Union company with a market capitalization above €100bn was founded from scratch in the past fifty years, while all six US companies valued above €1tn were. The 13 EU companies founded in that period and worth at least $10bn total about $400bn, versus nearly $30tn for their US counterparts.
  • 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.
  • Why the U.S. Economy Is Trouncing Europe’s — Only about 12% of Americans score at the highest levels on international academic tests versus 34% at the lowest, yet the U.S. has created nearly 250 companies worth over $10bn ($30tn in value) against Europe's 14, and median U.S. disposable household income is 25% above Germany's. The author argues expanding high-skilled immigration is the fastest way to accelerate growth.

AI Summary. Saudi Arabia has become a net consumer of foreign capital rather than a provider, accumulating $142bn in foreign debt as heavy spending on economic transformation outpaces oil revenue, with its sovereign wealth fund scaling back some projects. Estimates put the oil price needed to balance its budget near $96 a barrel.

Erik Schatzker Bloomberg
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Saudi Arabia will likely be running sustained current account deficits to help finance almost $2T of domestic investment. Spending at this level means the kingdom has not been a net provider of overseas capital since 2024.

Has Saudi Arabia shifted from exporting capital to importing it?

Core argument: Saudi Arabia needed an average oil price of $96 a barrel to balance its budget in the first quarter of 2025, rising to $113 if Public Investment Fund spending commitments are included, according to Bloomberg chief emerging-markets economist Ziad Daoud.

Saudi Arabia is no longer a net provider of overseas capital. Its own sovereign wealth fund, the Public Investment Fund, or PIF, is even scaling back on some projects. Until 2024, the kingdom ran current-account deficits only in years when crude prices collapsed – like in 2015 and 2016, after its ill-fated attempt to crush US shale-oil production, and the early Covid shock. But after a decade of unprecedented spending on the social, economic and geopolitical transformation championed by Crown Prince Mohammed bin Salman, Saudi Arabia simply doesn’t have enough revenue to fund everything. At least, not with Brent crude sliding to around $65 a barrel. It’s become a net consumer of capital and amassed $142 billion in foreign debt. According to Ziad Daoud, Bloomberg’s chief emerging-markets economist, Saudi Arabia needed an average oil price of $96 a barrel just to balance its budget in the first quarter of 2025 (and $113 if spending commitments by the PIF are included). Closing the current-account gap requires an $82 price.

Takeaways by Macro Roundup® AI

  1. Saudi Arabia needed an average oil price of $96 a barrel to balance its budget in the first quarter of 2025, rising to $113 if Public Investment Fund spending commitments are included, according to Bloomberg chief emerging-markets economist Ziad Daoud.
  2. Saudi Arabia has become a net consumer of capital rather than a net provider of overseas capital, amassing $142 billion in foreign debt, with Brent crude sliding to around $65 a barrel.
  3. Until 2024, Saudi Arabia ran current-account deficits only when crude prices collapsed, as in 2015 and 2016 after its attempt to crush US shale-oil production and during the early Covid shock; closing the current-account gap requires an $82 price.

Related Articles:

  • The Petrodollar Is Dead, Long Live the Petrodollar — Saudi Arabia has no surplus left to recycle and is instead borrowing heavily in sovereign debt markets and selling assets, including stakes in its national oil company, to fund its economic plans. The International Monetary Fund projects the Saudi current account surplus narrowing to 0.5% of GDP before shifting into deficit through the end of the decade.
  • Oil Was Written Off. Now It’s the Most Productive US Industry — US oil and gas extraction productivity nearly tripled in a decade, and crude output reached a record 13.3m barrels a day — 48% above Saudi Arabia — with under a third of the rigs. BloombergNEF projects production growth of 600,000 barrels a day on higher well productivity.
  • Saudi Arabia’s PIF and the New Petrodollar Recycling — Saudi Arabia's Public Investment Fund appears to have taken over a significant portion of the foreign asset allocation previously handled by the Saudi Central Bank, making its balance sheet a window into a new form of petrodollar recycling. Of roughly $777bn in total assets, $305bn were current and $472bn non-current, with $225bn of the latter held as investment securities.

AI Summary. US long-term real interest rates, measured as the five-year forward five-year real rate, have not declined alongside weakening US economic activity and remain far above the equivalent Euro zone rate derived from interest rate swaps. The author argues this divergence indicates a potentially large fiscal risk premium forming in US yields.

Robin Brooks Robin Brooks Substack
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A growing divergence between real Treasury yields and EuroZone yields in the face of weakening American economic activity suggests investors may be pricing in a “fiscal risk premium” for American debt. @robin_j_brooks

Are high US long-term real rates signaling a fiscal risk premium?

Core argument: US 5y5y forward real interest rates have not fallen much since "Liberation Day" on April 2 even as US economic activity has clearly weakened, which the author cites as one indication that a fiscal risk premium may be forming.

One way to gauge just how massive the rise in real long-term rates is for the US is to compare them to the equivalent interest rate for the Euro zone. The Euro zone doesn’t have a comparable government bond (it’s a monetary union without a fiscal union), but you can use interest rate swaps to back out an equivalent 5y5y forward real rate. The chart compares the 5y5y forward real interest in the Euro zone (black) with that in the US (blue). The US “exceptionalism” narrative likely drove up the US real rate in the years following COVID, but it’s notable that this real yield has NOT fallen much since “Liberation Day” on April 2, since when economic activity for the US has clearly weakened. The fact that US real rates have not followed weaker data down is one indication that a fiscal risk premium may be forming. The large divergence between US and Euro zone real rates suggests that this risk premium may be big.

Takeaways by Macro Roundup® AI

  1. US 5y5y forward real interest rates have not fallen much since "Liberation Day" on April 2 even as US economic activity has clearly weakened, which the author cites as one indication that a fiscal risk premium may be forming.
  2. Because the Euro zone is a monetary union without a fiscal union and lacks a comparable government bond, interest rate swaps can be used to back out an equivalent 5y5y forward real rate for comparison with the US.
  3. The large divergence between US and Euro zone 5y5y forward real rates suggests that a US fiscal risk premium may be big, with the US "exceptionalism" narrative likely having driven up the US real rate in the years following COVID.

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.
  • 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.
  • The Long-Term Budget Outlook: 2025 to 2055 — The Congressional Budget Office projects the 10-year Treasury note interest rate will average 3.8% over 2025–2055, close to its 3.7% average over the prior three decades, with the inflation-adjusted rate averaging 1.5%. It assesses that long-run rates are largely set by structural factors including demographics, saving and investment behavior, and federal debt.

AI Summary. The share of US adults saying "most people can be trusted" fell from 46% in 1972 to 34% in 2018 and stood at 34% in a later survey. Trust is associated with neighborhood characteristics beyond individual demographics, and people who see their neighbors as similar to them racially, politically, and educationally report trusting them more.

Laura Silver, Scott Keeter, Stephanie Kramer, Jordan Lippert, et al. Pew Research Center
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Trust rises with educational attainment and income. Only 34% of Americans overall agree that “most people can be trusted,” down from 46% in 1972. 24% of adults with a high school education or less agree, relative to 44% with a college education.

Has Americans' trust in one another declined, and does neighborhood similarity matter?

Core argument: The share of U.S. adults saying "most people can be trusted" fell from 46% in 1972 to 34% in 2018, according to the General Social Survey, with an identical 34% in a 2023–24 Pew Research Center poll.

Americans trust each other less than they did a few decades ago. The share of adults who said “most people can be trusted” declined from 46% in 1972 to 34% in 2018, according to the General Social Survey. In a 2023-24 Pew Research Center poll, an identical 34% said most people can be trusted. While the level of trust within a community may be predicted largely by the wealth, education and other characteristics of the people who live there, that’s not the entire story. Even after controlling for demographic differences, neighborhoods seem to matter. For example, people who live in an area where more people are college educated tend to have higher levels of trust, regardless of their own level of education. Demographic and social diversity also can present barriers to trust. A March 2025 survey found that more than two-thirds of people who say their neighbors are similar to them racially, politically and educationally also say they trust most or all of their neighbors. By contrast, most people who see their neighbors as very different say they trust only some or none of them.

Takeaways by Macro Roundup® AI

  1. The share of U.S. adults saying "most people can be trusted" fell from 46% in 1972 to 34% in 2018, according to the General Social Survey, with an identical 34% in a 2023–24 Pew Research Center poll.
  2. Neighborhoods appear to matter for trust even after controlling for demographic differences, as people living in areas where more residents are college educated tend to report higher trust regardless of their own education level.
  3. A March 2025 survey found that more than two-thirds of people who say their neighbors are similar to them racially, politically and educationally trust most or all of their neighbors, while most who see neighbors as very different trust only some or none.

Related Articles:

AI Summary. Democratic two-way presidential support fell 3 points from 52% to 49% between the two most recent elections, with larger declines among overlapping demographic groups: 12 points among young Latinos, 16 among young Latino men, and 17 among young Latino men who vote irregularly.

Yair Ghitza, Haris Aqeel and Josh Yazman Catalist
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“Two-way” (i.e. after netting our minor candidates and undervotes) support for Democrats among voters under the age of 30 dropped 6pp btw 2020 (61%) and 2024 (55%) nationally. Harris lost 16pp of support from 18–29 year old Latino men.

How concentrated was the Democratic vote decline among overlapping groups?

Core argument: Harris's two-way support fell 3 points nationally versus Biden in 2020, dropping from 52% to 49%.

Figure 4, shows how much support Harris lost compared to Biden in 2020 among a key set of groups. Across the country, she lost 3 points, going from 52% to 49% [two-way support] overall. Importantly, it would be a mistake to consider these demographic attributes one at a time. For instance, Latinos are more likely to be irregular voters than white voters, young people are less likely to vote in midterm elections, and Latinos are more likely to be young. In other words, these groups overlap considerably. Further, groups that had a combination of these traits were more likely to move away from Harris. Among young Latinos, Harris lost 12 points; among young Latino men, 16 points; among young Latino men who are irregular voters, 17 points. Similar trends are evident across other combinations of these groups and sub-groups, including along racial, gender, age and vote history lines.

Takeaways by Macro Roundup® AI

  1. Harris's two-way support fell 3 points nationally versus Biden in 2020, dropping from 52% to 49%.
  2. Harris's losses were larger among overlapping groups: 12 points among young Latinos, 16 points among young Latino men, and 17 points among young Latino men who are irregular voters.
  3. Treating demographic attributes one at a time is a mistake, since these groups overlap considerably, with Latinos more likely to be irregular voters and young, and similar trends appear across racial, gender, age, and vote-history combinations.

Related Articles:

  • Democrats Need to Face Why Trump Won — Among American voters over 30, the gender gap in presidential support has held at roughly 10%, but among those under 30 it has widened dramatically, with 18-year-old men 23 percentage points more likely than 18-year-old women to support Donald Trump. Similar divides are appearing in other countries.
  • How To Get Rich in 2025 — Academic estimates compiled by The Economist indicate inheritances, after falling over the 20th century, were worth about 10% of GDP on average by the end of the 2010s, with roughly $6tn inherited across the rich world in a year. Falling family sizes mean each inheritance is spread across fewer heirs.
  • Zero-Sum Thinking and the Roots of U.S. Political Divides — Zero-sum thinking — viewing gains for one group as losses for another — is associated with greater support for liberal economic policies, stronger alignment with the Democratic Party, and weaker alignment with the Republican Party. The authors also find it linked to believing the QAnon conspiracy theory holds some truth and to sympathy for the attack on the U.S. Capitol.

AI Summary. A biotechnology company reported that a gene-editing treatment designed to correct the mutation behind chronic granulomatous disease, an immune disorder, restored a crucial enzyme's function in two-thirds of one patient's neutrophils with no serious side effects a month later. The results have not been peer-reviewed, and researchers say it is too soon to judge success.

Heidi Ledford Nature
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A CRISPR-based gene-editing technique known as prime editing was used to treat a teenager with a rare immune disorder. It will take somewhere btw six months and a year “to be certain that the edited stem cells are thriving.”

Can gene editing correct the mutation behind an inherited immune disorder?

Core argument: Prime Medicine reported on 19 May that a teenager treated with its CRISPR therapy for chronic granulomatous disease had restored function of a crucial enzyme in two-thirds of his neutrophils, with no serious side effects after one month.

Researchers designed the treatment to correct a mutation that causes chronic granulomatous disease, a dangerous condition that disables a variety of immune cells, including those called neutrophils. A month after the teenager received the treatment, he had experienced no serious side effects. And the therapy seemed to have restored the function of a crucial enzyme in two-thirds of his neutrophils — more than enough to provide a significant boost to his immune system. Prime Medicine, a biotechnology company in Cambridge, Massachusetts, unveiled the results on 19 May. It has not yet published them in a peer-reviewed journal. It is too soon to know whether the treatment was a success: it will take between six months and a year to be certain that the edited stem cells are thriving, says Annarita Miccio, who studies gene therapy at the Imagine Institute at the Necker Hospital for Sick Children in Paris and is not involved in the research.

Takeaways by Macro Roundup® AI

  1. Prime Medicine reported on 19 May that a teenager treated with its CRISPR therapy for chronic granulomatous disease had restored function of a crucial enzyme in two-thirds of his neutrophils, with no serious side effects after one month.
  2. The treatment was designed to correct a mutation that causes chronic granulomatous disease, a condition that disables a variety of immune cells including neutrophils, and the results have not been published in a peer-reviewed journal.
  3. Annarita Miccio, a gene-therapy researcher at the Imagine Institute in Paris who is not involved in the research, says it will take six months to a year to be certain that the edited stem cells are thriving.

Related Articles:

  • Bridge RNAs Direct Programmable Recombination Of Target And Donor DNA — The IS110 bridge system uses a single compact RNA-guided recombinase that is sufficient on its own for direct DNA recombination, unlike other programmable genome-editing tools that require added effector proteins. Its bispecific bridge RNA can be reprogrammed to direct DNA insertion, excision, and inversion for large-scale sequence and genome rearrangement.
  • Accurate Structure Prediction of Biomolecular Interactions With AlphaFold 3 — AlphaFold 3, a single deep learning model with a diffusion-based architecture, jointly predicts the structures of complexes containing proteins, nucleic acids, small molecules, ions, and modified residues. The authors report accuracy exceeding specialised tools for protein-ligand docking, protein-nucleic acid interactions, and antibody-antigen prediction.
  • AI Protein-Prediction Tool AlphaFold3 Is Now More Open — DeepMind's AlphaFold3, which can model proteins together with other molecules, was initially released only through a web server that limited predictions, drawing criticism from scientists that withholding the code and model weights undermined reproducibility. The code is now downloadable for non-commercial use, with training weights available to academics on request.