Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard 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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…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 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 provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, June 5, 2025

AI Summary. The Congressional Budget Office estimates the House-passed tax and spending bill would add more than $2.4tn to primary deficits over 10 years, or nearly $3tn including interest costs, and about $5tn if temporary provisions are made permanent. It projects debt would rise from 100% of GDP to 124% by 2034, with the deficit reaching 7% of GDP by 2026.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:
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The CBO released an updated cost estimate for the OBBBA projecting that the bill would add over $2.4T to primary deficits over 10 years and increase debt from 100% of GDP to 124% by 2034, 133% if interest rates remain high.

How much debt would the House-passed tax and spending bill add?

Core argument: CBO estimates the House-passed OBBBA would add more than $2.4 trillion to primary deficits over 10 years and, including interest, nearly $3.0 trillion to debt through 2034, or roughly $5.0 trillion if temporary provisions are made permanent.

CBO released an updated cost estimate for the House-passed OBBBA, projecting the bill would add over $2.4T to primary deficits over 10 years. Review the bill's specific cost estimates here. After interest costs on the new debt, CBO estimates that by FY2034 the bill would: increase debt by nearly $3T, or roughly $5T if made permanent; increase the deficit to 7% of GDP by 2026; double interest costs between 2024 and 2034 to $1.8T (4.2% of GDP); increase debt from 100% of GDP today to 124% of GDP by 2034, 129% of GDP if made permanent, and 133% if interest rates remain high. With interest, the bill would add nearly $3.0T to the debt through 2034 – or $5.0 trillion if various temporary provisions are made permanent. If rates remain at current levels (10-year Treasuries at 4.5%) then interest costs would climb further to $2.1T (5.1% of GDP) in 2034. OBBBA would increase the deficit to 7.0% of GDP by 2026, compared to a current law projected level of 5.5%.

Takeaways by Macro Roundup® AI

  1. CBO estimates the House-passed OBBBA would add more than $2.4 trillion to primary deficits over 10 years and, including interest, nearly $3.0 trillion to debt through 2034, or roughly $5.0 trillion if temporary provisions are made permanent.
  2. CBO projects OBBBA would raise debt from 100% of GDP today to 124% of GDP by 2034, 129% if made permanent, and 133% if interest rates remain high.
  3. CBO estimates OBBBA would push the deficit to 7.0% of GDP by 2026, against a current-law projection of 5.5%, and double interest costs between 2024 and 2034 to $1.8 trillion (4.2% of GDP), or $2.1 trillion (5.1% of GDP) if 10-year Treasuries stay at 4.5%.

Related Articles:

  • Chicken Hawks — The House bill combines spending cuts concentrated in Medicaid, food stamps and student loans with an extension of all expiring tax cut provisions, revenue offsets including a scaled-back energy bill, new tax cuts on tips, overtime, seniors and state and local deductions, manufacturing incentives, and homeland security and defense funding.
  • This is What Normalization Looks Like (Mostly) — Estimates of the legislation's cost rest on a baseline assuming individual and business taxes would have been allowed to rise sharply as prior tax cuts expired. The Committee for a Responsible Federal Budget estimates the bill adds $3.1tn in incremental debt over 2026-2035, below its pre-election projections of $4tn and $7.8tn for the competing campaign agendas.
  • US Fiscal Sustainability Once More — US federal interest payments were projected to rise from 18% of tax revenues to about 22% by 2034 under the Congressional Budget Office's prior baseline. The author estimates that if the yield curve stays at current levels and policy is unchanged, that ratio would exceed 25% by 2032 and approach 30% by 2035.

AI Summary. An analysis of the House-passed reconciliation bill estimates that accounting for behavioral responses raises its costs relative to conventional scoring before 2033: some households reduce hours worked to retain Medicaid eligibility, and lower-wage workers increase hours while higher-income households work less, leaving total wage bills flat or lower.

Kent Smetters et al Penn-Wharton Budget Model
Date Posted:

Conventionally scored, the House-passed reconciliation bill raises the deficit by $2.8T over 2025–2035. Dynamic effects, incl. recipients’ re-acquiring Medicaid by working less and reduced hours of high income households, raise the delta to $3.2T.

Do behavioral responses raise the budget cost of the reconciliation bill?

Core argument: The analysis of the House-passed reconciliation bill finds that before 2033 dynamic costs exceed conventional costs partly because some households that would otherwise lose Medicaid re-acquire access by reducing their hours worked.

Before 2033, two primary factors increase the dynamic costs relative to the conventional: first, some households that would otherwise have lost Medicaid without dynamics re-acquire access with dynamics by reducing their hours worked. Second, despite increasing the number of hours worked in response to the legislation, firm-level total wage bills are often flat or negative due to compositional effects. Specifically, lower-wage workers increase their hours worked, especially due to a reduction in the social safety net spending programs. However, higher-income households reduce their hours worked, as income effects slightly dominate substitution effects after reductions in marginal tax rates. While total productivity-weighted hours increase, lower-income households pay taxes at a lower marginal tax rate than higher-income households.

Takeaways by Macro Roundup® AI

  1. The analysis of the House-passed reconciliation bill finds that before 2033 dynamic costs exceed conventional costs partly because some households that would otherwise lose Medicaid re-acquire access by reducing their hours worked.
  2. Firm-level total wage bills are often flat or negative under the bill despite an increase in hours worked, as lower-wage workers raise hours in response to reduced social safety net spending while higher-income households cut hours.
  3. Total productivity-weighted hours increase under the legislation, though lower-income households pay taxes at lower marginal rates than higher-income households, whose reduced hours reflect income effects slightly dominating substitution effects after cuts in marginal tax rates.

Related Articles:

  • Taking a Closer Look at the House Budget’s Reconciliation Instructions — A House budget resolution allows $3.3tn of net deficit increases—$4.8tn of increases offset by $1.5tn of required savings—which with interest the authors estimate would permit nearly $4tn of additional debt. The authors estimate debt would reach 126% of GDP in the budget's final year versus 117% under current law.
  • Principles-Based Illustrative Reforms of Federal Tax and Spending Programs — The authors model 13 illustrative federal tax and spending reforms based on standard public economics design principles and project that, over 30 years relative to current law, they would cut budget deficits by 38%, raise the capital stock 31%, GDP 21%, and wages nearly 7%, while lowering health premiums 27%.

AI Summary. The authors estimate that faster-rising labor market returns to college for women account for about 50% of the increase in women's college graduation rate, with parental background explaining about a quarter and improved chances of marriage offers at older ages about a fifth. Women with college-educated mothers show greater tastes for or ability at college than sons do.

Zvi Eckstein, Michael Keane and Osnat Lifshitz National Bureau of Economic Research
Date Posted:

White women’s graduation rate rose 10pp more than white men’s btw the 1960 and 1980 cohorts. Returns to college, which rose twice as fast for women as men, account for 50%, and the “knock-on effect” of mothers’ rising education accounts for another 25%.

What drives women's rising college graduation rates relative to men's?

Core argument: Parental background accounts for about one quarter of the rise in women's college graduation rate, as children with college-educated mothers have greater tastes for or ability at college, with the effect stronger for daughters than sons.

In recent cohorts, women graduate at much higher rates than men. Our first main result is that changes in parental background are a key factor driving the growing gender education gap: children with college educated mothers have greater tastes for (or ability at) college, and this effect is stronger for daughters than sons. Thus, the increase in women’s education over time has the knock-on effect of increasing daughter’s education relative to sons in the next generation. The marriage market also contributed: women’s chance of getting marriage offers at older ages has improved, making it easier to defer marriage until after college. In contrast, we find that assortative mating did not increase much across the cohorts we study, so this is not an important factor driving the increase in women’s college graduation rate. Labor market returns to college increased in the ’60 to ’80 cohorts, but they increased twice as fast for women as for men. This factor accounts for about 50% of the increase in their graduation rate. Parental background accounts for about 1/4 and marriage offers 1/5.

Takeaways by Macro Roundup® AI

  1. Parental background accounts for about one quarter of the rise in women's college graduation rate, as children with college-educated mothers have greater tastes for or ability at college, with the effect stronger for daughters than sons.
  2. Improved chances of receiving marriage offers at older ages account for about one fifth of the increase in women's college graduation, while assortative mating changed little across the cohorts studied and is not an important factor.

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.
  • American Women Are Giving Up on Marriage — 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.

AI Summary. Survey measures of output prices show inflationary pressure in the US, at about two standard deviations above normal, while China's reading of -1.6 standard deviations indicates deflationary pressure, with Chinese consumer prices down 0.1% year-over-year. The author attributes China's persistent deflationary pressure to excess manufacturing capacity and argues letting the yuan depreciate against the dollar is the best remedy.

Robin Brooks Robin Brooks Substack
Date Posted:

Robin Brooks argues that US tariffs are stoking rising input and output prices and delivery lags at home while exacerbating existing deflationary pressures in China, to which the best response would be a depreciation of the yuan against the dollar.

Is excess manufacturing capacity driving China into deflation?

Core argument: China's output price Z-score stands at -1.6, indicating deflationary rather than inflationary pressure, and China's headline CPI inflation was -0.1 percent year-over-year in April 2025.

The left chart shows supplier delivery times (black), input prices (red) and output prices (blue) for the US. Delivery times measure disruption to supply chains, input prices are what firms pay suppliers and output prices are what they charge customers. The Z-score transformation means you can think of a reading of 1.9, which is where US output prices now are, as two standard deviations above “normal,” a sign inflation pressure is building. The right chart shows the same three series for China. You can see the spikes in delivery times during various COVID lockdowns. The Z-score for output prices is currently -1.6, which means there’s deflationary, not inflationary, pressure. To be sure, deflationary pressure has existed for some time as China grapples with excess capacity in its manufacturing sector. But it’s notable that this deflationary pressure shows no sign of abating. China’s headline CPI inflation was -0.1 percent year-over-year in April 2025. The deflationary impulse from US tariffs is therefore pushing on an open door. The best way for China to combat deflation risk is to allow the Yuan to fall against the Dollar.

Takeaways by Macro Roundup® AI

  1. China's output price Z-score stands at -1.6, indicating deflationary rather than inflationary pressure, and China's headline CPI inflation was -0.1 percent year-over-year in April 2025.
  2. US output prices sit at a Z-score of 1.9, about two standard deviations above "normal," a sign inflation pressure is building, in contrast to China's deflationary reading.
  3. China's deflationary pressure, which has persisted as the country grapples with excess capacity in manufacturing, shows no sign of abating, and the author argues the best remedy is to let the Yuan fall against the Dollar.

Related Articles:

  • Global Economies, Converging on Equilibrium, Confront a Geopolitical Regime Shift — Global economies are converging on a reasonable equilibrium, with developed-world central banks gradually cutting rates toward what they view as neutral, China prioritizing domestic demand after a deflationary stretch, and artificial intelligence showing potential to enhance productivity. Markets are discounting that stability, with US equity indexes pricing an even more exceptional decade than the last.
  • Prices Won’t Stop Falling in China, and Beijing Is Grasping for Solutions — Prices for goods leaving Chinese factories have fallen year-over-year for 26 consecutive months, and China's gross domestic product deflator, a broad gauge of economy-wide prices, has been negative for six straight quarters, the longest stretch since the late 1990s. As falling prices sap profitability, companies could delay investment or cut jobs, and buyers could postpone purchases expecting further declines.
  • China FX Diversification and the Dollar — The dollar's share of China's cross-border transfers has fallen from 80-85% to 40-45% over roughly 15 years, with the decline driven mainly by higher renminbi flows, and the renminbi's share of global trade financing has risen from about 2% to over 7%. China's foreign exchange reserve composition and onshore trading remain dollar-dominated.

AI Summary. The article argues that China's decades of fertility-control policies left it with relatively few children, who are the biggest drivers of household spending, contributing to weak consumer demand. Household income has fallen from 62% of GDP to 44%, and household consumption from 53% to 39% of GDP, versus nearly 70% in the US.

Yi Fuxian Project Syndicate
Date Posted:
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China’s household consumption plummeted from 53% of GDP in 1983 to 39% today (compared to ~70% for the US), driven by a sharp decline in household sizes and incomes as “decades of fertility-control policies have left China with relatively few children.”

Do fewer children explain China's weak consumer demand?

Core argument: China's household consumption has fallen from 53% of GDP in 1983 to 39% today, compared with nearly 70% in the US, following decades of fertility-control policies that left the country with relatively few children.

Children are “super consumers”: the more children a household contains, the more it spends. But decades of fertility-control policies have left China with relatively few children. In 1982, three years after the one-child policy was introduced, the country’s total population-to-worker ratio stood at 2.2, reflecting a relatively large number of dependents for each worker (aged 20-59). By 2010, the ratio had plummeted to 1.6, well below the international average of 1.8. (While this ratio is now rising again in China, it is being driven primarily by an increase in the number of elderly, not children.) As households shrank, so did their incomes – from 62% of GDP in 1983 to 44% of GDP today. The result has been low and falling consumer demand: since 1983, household consumption has fallen from 53% of GDP to just 39% of GDP, compared to nearly 70% in the US.

Takeaways by Macro Roundup® AI

  1. China's household consumption has fallen from 53% of GDP in 1983 to 39% today, compared with nearly 70% in the US, following decades of fertility-control policies that left the country with relatively few children.
  2. China's total population-to-worker ratio fell from 2.2 in 1982, three years after the one-child policy began, to 1.6 by 2010, below the international average of 1.8, with the subsequent rise driven primarily by more elderly rather than more children.
  3. Chinese household income declined from 62% of GDP in 1983 to 44% today as households shrank, and children count as "super consumers," since the more children a household contains, the more it spends.

Related Articles:

  • ‘No Marriage, No Children’ Is China’s Ticking Timebomb — China registered about 6.1m marriages in its most recent year, the lowest since public records began in 1986 and less than half the 2013 peak, with roughly 30% of 30-year-olds unmarried versus 15% a decade earlier. Births of 9.54m were the second-lowest since the People's Republic of China was founded in 1949.
  • The Power of Demography and the Fate of East Asia — East Asia's total population has peaked and is projected to decline for at least a generation, with the pace of decline likely accelerating each decade, while US population is projected to keep growing for decades. The author argues such sustained divergence can shift the global balance of power.
  • China Steps Up Campaign For Single People to Date, Marry and Give Birth — Local officials in China are calling married women in their 20s and early 30s to ask about family plans, urge prenatal check-ups, and offer subsidies for additional children, with one resident reporting an Rmb100,000 ($14,000) offer for a second child. State-run outlets have promoted claims that childbirth benefits maternal health.

AI Summary. Italy is debating whether to give long-term legal migrant workers and their children a faster path to citizenship, a question with implications for an ageing society where nearly a quarter of the population is over 65 and 12% is under 14. Easing the rules could let up to 2.5mn long-term legal residents apply immediately.

Amy Kazmin Financial Times
Date Posted:

An upcoming vote might provide an easier path to Italian citizenship for 5.4mm legal foreign residents, addressing the demographic challenge of a population where 25% is over 65. 13.5% of new births in Italy last year were to foreign parents.

Should an ageing country give long-term migrant workers faster citizenship?

Core argument: Italy's referendum could allow up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply immediately for citizenship, though the process would still take years.

Italian voters are wrestling with the contentious issue of whether the country should ease its restrictive immigration rules and give its long-term, legal migrant workers — and their children — a faster path to citizenship. It is a question with profound implications for a rapidly ageing society, where nearly a quarter of the population is over 65 and just 12% below the age of 14. Italy’s official statistical agency does not make public any details of the country’s 5.4mn legal foreign residents, their origins, birthplaces, or ages. But more than 914,000 of Italy’s 8.1mn school children — 11% of the total — are foreigners, while 13.5% of last year’s new births were to foreign parents. In total, Italy has had 1.4mn foreign births since 2002. People from within the EU can seek naturalisation in Italy after just four years, the referendum could permit up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply for citizenship immediately, though the process would still take years to complete.

Takeaways by Macro Roundup® AI

  1. Italy's referendum could allow up to 2.5mn long-term legal residents — many from eastern Europe, Asia, Africa and the Middle East — to apply immediately for citizenship, though the process would still take years.
  2. Nearly a quarter of Italy's population is over 65 and just 12% is under 14, while foreigners account for more than 914,000 of 8.1mn school children (11%) and 13.5% of last year's births.
  3. Italy's official statistical agency publishes no details on the origins, birthplaces or ages of the country's 5.4mn legal foreign residents, while EU citizens can seek naturalisation in Italy after four years.

Related Articles:

  • Italy’s Exodus of Young Talent Worsens Population Squeeze — Italy's official statistics agency reports that nearly 191,000 people left the country in a year, the highest in 25 years, with the share of emigrants holding at least a college degree rising from one in three a decade earlier to half. Italy's working-age population is forecast to fall another 5mn by 2040.
  • Changing Sub-Saharan Africa’s Growth Trajectory — Sub-Saharan Africa's working-age population is growing nearly 3% a year, versus close to zero in much of the world, and is projected to exceed China's within about a decade and reach a quarter of the global total. With modest productivity growth near 2%, the region is likely among the world's fastest-growing.
  • Germany Joins EU’s ‘Ultra-Low’ Fertility Club — Germany's fertility rate fell to 1.35 children per woman, below the United Nations' "ultra-low" threshold of 1.4, a level at which falling birth rates become difficult to reverse. Estonia and Austria also dropped below 1.4, joining nine European Union countries including Spain, Greece, and Italy, while France's rate fell to a record-low 1.67 and Finland's to 1.26.

AI Summary. The US cannot fill about a third of the more than 400,000 new engineering roles created each year, and the UK faces a shortfall of 1 million engineering jobs as 20% of its engineers retire. Shortages of skilled workers raise costs and lengthen timelines for building electricity grids and data centers.

Akshat Rathi, Olivia Rudgard and Josh Saul Bloomberg
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Aging populations and anti-immigration rhetoric in rich countries are forcing companies building electricity infrastructure to find creative solutions to meet surging demand. The US is unable to fill a third of its 400k+ new annual engineering roles.

Are engineer shortages raising costs and delaying grid and data center construction?

Core argument: The US cannot fill about a third of the more than 400,000 new engineering roles created each year, while 20% of the UK's engineers will retire by 2030, leaving a shortfall of 1 million jobs.

How do you get more labor? “You either birth them or you import them,” says Zeke Hernandez, professor at the Wharton School of the University of Pennsylvania. “But in an environment of declining birth rates, increasing retirements and now a restrictive immigration regime, shortages become quite severe.” The US is already unable to fill about a third of its more than 400,000 new engineer roles created each year. The UK will see 20% of its engineers retire by 2030 — leaving a shortfall of 1 million jobs. Skilled worker shortages lead to higher costs and longer timelines to build much-needed infrastructure, such as electricity grids. This is a problem for the US and Europe, which are seeing a surge in demand for power thanks to electric cars, heat pumps and massive data centers. The severe shortage of skilled workers is slowing progress towards electrifying everything. Some data center builders in the US are delaying new work, while others are having to plan projects two years in advance instead of six months.

Takeaways by Macro Roundup® AI

  1. The US cannot fill about a third of the more than 400,000 new engineering roles created each year, while 20% of the UK's engineers will retire by 2030, leaving a shortfall of 1 million jobs.
  2. Wharton professor Zeke Hernandez argues labor comes only from births or immigration, and that declining birth rates, rising retirements and a restrictive immigration regime make shortages quite severe.
  3. Skilled worker shortages raise costs and lengthen timelines for infrastructure such as electricity grids, with some US data center builders delaying new work and others planning projects two years ahead instead of six months.

Related Articles:

  • Chip Industry Sees Labor Shortages Threatening US Expansion Plan — The Semiconductor Industry Association projects US chipmakers will add roughly 115,000 jobs by 2030, but estimates about 58% could go unfilled based on current degree completion rates. The group says too few Americans study science, engineering, math and technology, while many foreign-born engineering graduates leave the US.
  • Skilled Workers Are Scarce, Posing a Challenge for Bidens Infrastructure Plan — A shortage of skilled construction labor poses a challenge to large-scale U.S. infrastructure spending, with only 10% of infrastructure workers under 25 versus 13% of all U.S. workers and a median age of 53 for construction and building inspectors. The construction industry faces a projected shortfall of 2m workers, and 88% of contractors report difficulty finding skilled labor.

Friday, June 6, 2025

AI Summary. Four independent budget models produce broadly consistent projections for the House-passed reconciliation bill: roughly $4.0tn in tax cuts over ten years, partially offset by about $1.5tn in spending cuts. The models disagree on growth effects but agree the legislation would substantially widen future deficits even after accounting for growth.

James Capretta American Enterprise Institute
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Concurring with the CBO and JCT, four leading fiscal models “all show a tax cut of around $4.0T over ten years, partially offset by spending cuts of about $1.5T over the same time span.”

Do budget models agree the reconciliation bill would widen deficits?

Core argument: The Penn-Wharton Budget Model, Yale's Budget Lab, the Tax Foundation, and the Tax Policy Center all estimate the House-passed reconciliation bill delivers roughly $4.0tn in tax cuts over ten years, partially offset by about $1.5tn in spending cuts.

The Penn-Wharton Budget Model (PWBM), The Budget Lab (TBL) at Yale,The Tax Foundation (TF) and the Tax Policy Center (TPC) [produce projections that] are largely consistent with each other.They all show a tax cut of around $4.0 trillion over ten years, partially offset by spending cuts of about $1.5 trillion over the same time span. PWBM’s dynamic estimates are more pessimistic in the near term than those produced by the Tax Foundation. PWBM projects that the economic effects of the bill will widen the 10-year deficit effect from $2.8 trillion in its conventional forecast to $3.2 trillion, while the Tax Foundation expects higher growth from the bill’s tax provisions to narrow projected deficits by about $0.9 trillion compared to its conventional forecast. The models are in agreement that the overall effect of the legislation will be to widen future deficits rather substantially, even when growth is taken into account. Moreover, if those tax provisions in the bill which are now scheduled to expire in three to eight years were made permanent, the cost of the tax title would increase further.

Takeaways by Macro Roundup® AI

  1. The Penn-Wharton Budget Model, Yale's Budget Lab, the Tax Foundation, and the Tax Policy Center all estimate the House-passed reconciliation bill delivers roughly $4.0tn in tax cuts over ten years, partially offset by about $1.5tn in spending cuts.
  2. Penn-Wharton projects the bill's economic effects widen the 10-year deficit impact from $2.8tn conventionally to $3.2tn, while the Tax Foundation expects higher growth from the tax provisions to narrow deficits by about $0.9tn versus its conventional estimate.
  3. The models agree the legislation will widen future deficits substantially even when growth is taken into account, and making permanent the tax provisions scheduled to expire in three to eight years would raise the cost of the tax title further.

Related Articles:

AI Summary. Apple's overseas manufacturing model gave it more control over production, not less, and its investment in Chinese manufacturing reached $55bn a year. The author argues Apple's investment and freely shared knowledge were a major factor enabling Chinese technology companies to close the gap with Western rivals, and that this expertise cannot be taken back.

Drake Bennett Bloomberg
Date Posted:

Apple’s investment in PRC mfg reached $55B/yr by 2015, and shared knowledge enabled the rise of Chinese tech companies. Quoting FT’s McGee, “The technology transfer that Apple facilitated made it the biggest corporate supporter of ‘Made in China 2025′.”

Did Apple's investment help Chinese tech firms close the gap?

Core argument: Apple's investment in Chinese manufacturing reached $55 billion per year by 2015, and FT's McGee argues in *Apple in China* that Apple's unique approach to overseas manufacturing evolved into a formidable competitive advantage.

In his new book, Apple in China, FT’s McGee argues Apple’s unique approach to overseas manufacturing…has evolved into a formidable competitive advantage. Apple’s billions in investment and freely shared knowledge have been a major factor enabling the rise of China’s own technology companies, allowing them to close the gap with Western competitors — Apple included —with surprising speed. Outsourcing was - at first in South Korea and Taiwan, then, increasingly, in China - actually gave the company more control, not less, over the production process. As Apple grew, it began making massive investments in manufacturing technology. Apple’s investment in Chinese manufacturing reached $55 billion per year by 2015. But even if Apple were itself interested in decoupling from China, it’s not possible to unbolt and take back the valuable expertise that Apple’s Chinese partners have already gained from their collaboration. “The technology transfer that Apple facilitated,” McGee writes, “made it the biggest corporate supporter of Made in China 2025, Beijing’s ambitious, anti-Western plan to sever its reliance on foreign technology.”

Takeaways by Macro Roundup® AI

  1. Apple's investment in Chinese manufacturing reached $55 billion per year by 2015, and FT's McGee argues in *Apple in China* that Apple's unique approach to overseas manufacturing evolved into a formidable competitive advantage.
  2. McGee writes that the technology transfer Apple facilitated made it the biggest corporate supporter of Made in China 2025, Beijing's plan to sever its reliance on foreign technology.
  3. McGee argues Apple's outsourcing — first in South Korea and Taiwan, then increasingly in China — gave the company more control over production, not less, while its billions in investment and freely shared knowledge helped Chinese technology firms close the gap with Western competitors, Apple included.

Related Articles:

  • What it Would Take for Apple to Disentangle itself from China — Some supply chain experts argue India's phone manufacturing growth is overstated, noting the 200M phones made there last year are mostly models selling for $250 or less, while iPhones average near $1,000 and require more sophisticated automation and labor. One analyst projects Apple shifts just 10% of iPhone production outside China by 2030, or at most 20%.
  • Apple’s iPhone Supply Chain Splinters Under US-China Tensions — Data on more than 370 Apple suppliers and their factory locations show the company's manufacturing network spreading across the developing world, with Vietnam and India the biggest gainers. US and Japanese producers have reduced their China footprint as Chinese firms join the supplier list, though China still houses most Apple device factories.
  • Apple Aims to Source all US iPhones From India in Pivot Away From China — Apple plans to shift assembly of all US-sold iPhones to India, aiming to source the more than 60mn units sold annually in the US from Indian plants, which would require doubling its iPhone output there. The US accounted for about 28% of Apple's 232.1mn global iPhone shipments in 2024.

AI Summary. About three-quarters of manufacturing and service firms facing tariff-driven cost increases reported passing at least some of those costs to customers through higher prices, while roughly a quarter of each said they absorbed the full increase without raising prices. Nearly a third of manufacturers and about 45% of service firms reported full pass-through.

Jaison Abel, Richard Deitz, Sebastian Heise et al Federal Reserve Bank of New York
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About ¾ of firms facing tariff-induced cost increases reported passing on costs to consumers: ~⅓ of mfg and ~45% of service firms fully passed on all cost increases, while 45% of mfrs and ⅓ of service firms passed on a portion of the cost increase.

Are businesses passing tariff costs on to customers or absorbing them?

Core argument: About three-quarters of businesses facing tariff-induced cost increases in both manufacturing and services passed at least some of those higher costs to customers through higher prices.

As shown in the chart, about three-quarters of businesses facing tariff-induced cost increases in both the manufacturing and service sectors passed along at least some of these higher costs to their customers by raising prices. Almost a third of manufacturers and about 45 percent of service firms reported fully passing along all tariff-related cost increases, while 45 percent of manufacturers and a third of service firms said they passed along some but not all of the cost increase. At the other end of the spectrum, roughly a quarter of both types of firms said they absorbed all tariff-related cost increases and were not raising their prices. This pattern is consistent with other research using business surveys showing that in response to a hypothetical 5 percent cost increase, about a quarter of firms would fully pass through this cost increase into higher prices, while another quarter of firms would not change prices at all.

Takeaways by Macro Roundup® AI

  1. About three-quarters of businesses facing tariff-induced cost increases in both manufacturing and services passed at least some of those higher costs to customers through higher prices.
  2. Almost a third of manufacturers and about 45 percent of service firms reported fully passing along all tariff-related cost increases, while 45 percent of manufacturers and a third of service firms passed along some but not all.
  3. Roughly a quarter of both manufacturers and service firms said they absorbed all tariff-related cost increases without raising prices, consistent with survey research in which about a quarter of firms would not change prices after a hypothetical 5 percent cost increase.

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AI Summary. A quarterly U.S. GDP decline driven by a surge in goods imports — with businesses stocking up on gold, electronics, and pharmaceuticals — implied an implausible drop in domestic production, and the author argues consumer spending, business investment, and especially inventory accumulation were undercounted. Even so, the author concludes growth did meaningfully slow.

Matthew Klein The Overshoot
Date Posted:

Though he continues to regard the advance estimate for 2025Q1 GDP as suspiciously low, Klein concedes that U.S. goods imports surged by an apparent $100B to $948B in 2025Q1, which must be subtracted from measured expenditure and exports to infer GDP.

Does an import surge distort measured GDP declines?

Core argument: Under the expenditure approach (consumption + fixed investment + inventory change + exports − imports), the 2025Q1 import surge was large enough relative to domestic demand and exports to imply a negative change in domestic production.

When the advance estimate for 2025Q1 growth was first published at the end of April, I ignored it because the headline number was obviously off. Supposedly, there was a surge in imports that was so large relative to the sum of domestic demand (including inventories) and exports that the implied change in domestic production was negative. My conclusion is that some combination of consumer spending, business investment, and (especially) inventory accumulation must have been undercounted. Even so, however, there really does seem to have been a meaningful slowdown in GDP. The goal is to track production of new goods and services within a given jurisdiction. One way to do this is to measure the value generated by each industry sector and add them all up to get GDP. BEA does so, [but] with a lag. The short cut is the “expenditure approach”: GDP = Consumption + Fixed investment + Changes in inventories + Exports - Imports. As it happens, U.S. goods imports surged in the first three months of 2025 as businesses and investors stocked up on gold, electronics, and pharmaceuticals. The value of goods imports in January-March was $948 billion, compared to $848 billion in October-December 2024.

Takeaways by Macro Roundup® AI

  1. Under the expenditure approach (consumption + fixed investment + inventory change + exports − imports), the 2025Q1 import surge was large enough relative to domestic demand and exports to imply a negative change in domestic production.
  2. Some combination of consumer spending, business investment, and especially inventory accumulation was likely undercounted in the 2025Q1 advance estimate, though a meaningful GDP slowdown still appears to have occurred.

Related Articles:

  • Jason Furman On GDP — Headline GDP growth slowed, but the drag came from volatile inventories, with underlying growth strong. US output sits slightly below the Congressional Budget Office's pre-pandemic forecast, within its rounding error, with most GDP components close to where they were expected to be, though these figures will be revised repeatedly.
  • Jason Furman On US GDP Report — US gross domestic product is roughly in line with the Congressional Budget Office's pre-pandemic forecast, with consumer spending — more than two-thirds of the economy — running well ahead of that forecast, which likely reflects continued effects of large fiscal support. Offsetting this, residential investment has fallen for seven straight quarters, down 19.3% over four quarters.

AI Summary. The author argues dollar bearishness rests on two flawed pillars: US inflation may pick up while tariffs slow inflation in the Euro zone and China, forcing the Federal Reserve to stay more hawkish, and the EU's tolerance of goods transshipped to Russia undermines its claim as a reserve-currency alternative.

Robin Brooks Robin Brooks Substack
Date Posted:
Is Database:
Database

“The EU is styling itself as the big alternative to the US,” Brooks writes, but “the mess EU has made on Russia sanctions [via Kyrgyzstan]” belies its fitness. “You can do that, but you can’t then also pretend to be an alternative to Dollar hegemony.”

Is dollar bearishness built on two flawed pillars?

Core argument: Inflation shows early signs of picking up in the US while slowing in the Euro zone and China under the weight of tariffs, a divergence that is bullish for the Dollar because it forces the Fed to stay more hawkish than other central banks.

The current wave of Dollar bearishness has two pillars. The first is a short-term, cyclical pillar, whereby tariffs damage the US more than the rest of the world. [However],there are early signs that inflation in the US is about to pick up, while - under the weight of tariffs - inflation is slowing in the Euro zone and China. This kind of divergence in inflation is [actually] bullish for the Dollar because it forces the Fed to stay more hawkish than other central banks. The second pillar of Dollar bearishness revolves around a loss of reserve currency status. The EU is styling itself as the big alternative to the US, but - given the mess the EU has made on Russia sanctions - that just isn’t credible. The chart shows exports from various countries to Kyrgyzstan, one of the main transshipment hubs for Western goods to Russia. The US (orange) and the UK (green) kept a tight lid on this stuff, while countries like Germany (black) and Italy (purple) have seen a transshipment boom that is ongoing. In Brussels, this stuff is an open secret and - more than three years after the invasion of Ukraine - key policy makers continue to turn a blind eye. You can do that, but you can’t then also pretend to be an alternative to Dollar hegemony.

Takeaways by Macro Roundup® AI

  1. Inflation shows early signs of picking up in the US while slowing in the Euro zone and China under the weight of tariffs, a divergence that is bullish for the Dollar because it forces the Fed to stay more hawkish than other central banks.
  2. The EU's claim to be the big alternative to the US as a reserve currency is not credible given its handling of Russia sanctions, with key policy makers continuing to turn a blind eye more than three years after the invasion of Ukraine.
  3. Exports to Kyrgyzstan, a main transshipment hub for Western goods to Russia, show an ongoing boom from Germany and Italy, while the US and the UK kept a tight lid on such flows.

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  • Markets Are Discovering the Real Trump Trade Is ‘Sell America’ — Despite shaken confidence in US assets, no alternative matches the depth and liquidity of the nearly $29tn Treasury market, with the dollar involved in about 90% of foreign-exchange trades and almost 60% of central bank reserves. The euro lacks the depth of debt instruments required of a reserve asset, and China's yuan is government-managed.
  • Top Dollar — Foreign holdings of U.S. financial assets exceed American holdings abroad, making the United States a net debtor whose liabilities are denominated in dollars while its foreign assets are largely in other currencies. U.S. foreign liabilities grew from $30tn to over $51tn while U.S. foreign assets grew from $24tn to $33tn, tripling the net debtor position from $6tn.
  • Tariffs, the Dollar, and Equities: High-Frequency Evidence from the Liberation Day Announcement

AI Summary. Saudi Arabia is running a deep budget deficit and has become the largest sovereign bond issuer in emerging markets, with more than $14bn of deals, as it funds an economic transformation plan expected to cost $2tn. The United Arab Emirates and Qatar have pledged larger US investment commitments relative to their economies and have more fiscal headroom.

Matthew Martin, Dinesh Nair, and Adveith Nair Bloomberg
Date Posted:

Qatar agreed to a $1.2T economic commitment with the US and UAE promised $1.4T, compared with $1T from Saudi Arabia whose oil-price driven deficit drove $14B in recent sovereign issuances. Qatar & UAE hope to establish markets for AI, finance, and more.

Are budget deficits limiting Saudi Arabia's investment reach abroad?

Core argument: Saudi Arabia is the biggest sovereign bond issuer in emerging markets with more than $14 billion of deals this year, a figure that would be about $10 billion higher including sales from the PIF and Saudi Aramco.

The kingdom’s budget is in deep deficit, it has raised billions of dollars through bond sales to help fund an economic transformation plan expected to cost $2 trillion, and officials are rationalizing spending. The country is now the biggest issuer of sovereign bonds in emerging markets, with more than $14 billion of deals this year. That number would be about $10 billion higher if sales from the PIF [Private Investment Fund] and state oil company Saudi Aramco are included. The PIF’s strategy calls for it to ramp up investing both globally and domestically in dollar terms, but local commitments will increasingly be a greater portion of the total. Qatar, with less than one-tenth of the Saudi population, agreed to a $1.2 trillion economic commitment with the US, and the UAE has promised $1.4 trillion. While those pledges are larger than Saudi Arabia’s promise [$1T] relative to the sizes of their economies, Riyadh’s neighbors have more fiscal headroom. The UAE and Qatar are earning billions of dollars more than they can spend at home and need to find investments abroad. Along the way, they’re hoping these bets help establish them as leading markets for artificial intelligence, finance and more.

Takeaways by Macro Roundup® AI

  1. Saudi Arabia is the biggest sovereign bond issuer in emerging markets with more than $14 billion of deals this year, a figure that would be about $10 billion higher including sales from the PIF and Saudi Aramco.
  2. Saudi Arabia is running a deep budget deficit and rationalizing spending while funding an economic transformation plan expected to cost $2 trillion, having raised billions of dollars through bond sales.
  3. Qatar, with less than one-tenth of Saudi Arabia's population, agreed to a $1.2 trillion economic commitment with the US and the UAE promised $1.4 trillion, pledges larger than Riyadh's $1 trillion relative to the sizes of their economies.

Related Articles:

  • Megaprojects in the Desert Sap Saudi Arabia’s Cash — Saudi Arabia's spending on megaprojects has risen while oil revenues have leveled off, and the International Monetary Fund estimated oil prices near $80–$86 a barrel would be needed to balance its budget. The kingdom is expected to run a deficit of about $21bn, roughly 2% of gross domestic product.
  • 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.