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


Friday, June 27, 2025

AI Summary. The authors estimate that housing inventory below 5.0 months has only a weak relationship with year-over-year home price changes, while above that threshold the relationship turns clearly negative with a 9-month lag. By their rule of thumb, each additional month of inventory above 5 months implies home prices about 3% lower nine months later.

Aziz Sunderji Home Economics
Date Posted:

Historically, housing inventories above 5.81 months have been followed by y/y price declines 9m later. Given current inventories, Aziz Sunderji argues we will hit that tipping point in August, implying price declines would likely begin around May 2026.

What level of housing inventory signals home price declines ahead?

Core argument: The authors estimate an inventory threshold of 5.0 months, above which months of supply has a clearly negative relationship with year-over-year home price changes 9 months later, while below it the relationship is weak.

We answer two questions: Is there a specific level of inventory that reliably signals price declines? What’s the lag between rising supply and falling prices? We estimate the inventory threshold at 5.0 months. Below that level, inventory has only a weak relationship with year-over-year home price changes. But above it, the relationship becomes more clearly negative, signaling price declines 9 months in the future. Based on the model coefficients, we calculate that the predicted change in home prices turns negative at 5.81 months of inventory. The fit is unusually strong: our best-performing model—a 9-month lag with a 5.0-month threshold—yields an adjusted R² of 0.75, indicating that it explains a substantial share of the variation in home price growth. We can extract a simple rule of thumb from these results: once inventory is above 5 months, each additional month of inventory suggests home prices will be about 3% lower than they would otherwise be, 9 months down the road.

Takeaways by Macro Roundup® AI

  1. The authors estimate an inventory threshold of 5.0 months, above which months of supply has a clearly negative relationship with year-over-year home price changes 9 months later, while below it the relationship is weak.
  2. Based on the model coefficients, the authors calculate that predicted home price change turns negative at 5.81 months of inventory, with each additional month above 5 months implying home prices about 3% lower 9 months ahead.
  3. The best-performing specification, a 9-month lag with a 5.0-month threshold, yields an adjusted R² of 0.75, indicating it explains a substantial share of the variation in home price growth.

Related Articles:

  • Inflation Adjusted House Prices 1.0% Below 2022 Peak — Inflation-adjusted US house prices are 1.0% below their 2022 peak. An affordability index built from median income, a 15% down payment, and 30-year fixed mortgage rates shows the monthly payment on the same house up 102% over four years, with prices up 34% and mortgage rates at 6.65%.
  • America’s Housing Affordability Crisis and the Decline of Housing Supply — Housing production intensity has fallen substantially, especially in fast-growing Sunbelt markets once known for building, converging toward the low rates long seen on the coasts and in declining industrial centers. The authors argue incumbent-controlled regulation explains the weakening link between high prices, high demand areas, and new construction.
  • The Price of Housing in the United States — Real housing price appreciation in the United States has varied widely across regions, with West Coast cities rising earlier while prices in other regions remained comparable in real terms to decades earlier. The authors find essentially no relationship between real price growth and zoning restrictiveness in the earliest period studied, and progressively steeper gradients in later periods.

AI Summary. Nondisabled, childless Medicaid recipients who report no work spend an average 4.2 hours a day, or about 125 hours a month, watching television and playing video games — more than 50% above the 80 monthly hours of work or community engagement proposed as a requirement. They average 22 minutes a day looking for work.

Kevin Corinth American Enterprise Institute
Date Posted:

Kevin Corinth finds that childless, non-disabled, non-working adult Medicaid recipients aged 19–64 spend 14.4 hours a day sleeping and watching tv/video games, 3 hours more per day than their working peers.

How do nonworking Medicaid recipients without children spend their time?

Core argument: Medicaid recipients who do not report working spend 4.2 hours per day, or 125 hours per month, watching television and playing video games — more than 50% above the 80 hours of work or community engagement the reconciliation bill would require in at least some months.

For Medicaid recipients who do not report working, the most common activity after sleeping is watching television and playing video games. They spend 4.2 hours per day watching television and playing video games, or 125 hours during a 30-day month. That is more than 50% higher than the 80 hours they would be required to work or otherwise engage with the community during at least some months under the reconciliation bill. They spend on average 6.1 hours per day, or 184 hours per month on all socializing, relaxing and leisure activities (including television and video games). On the average day they spend about 0.36 hours (i.e., 22 minutes) looking for work, 4.0 hours doing housework and errands, and 0.47 hours (i.e., 28 minutes) caring for others. For Medicaid recipients who report working, the most common activity after sleeping is work. They work an average of 4.2 hours per day, or 126 hours per month, enough for the average working Medicaid recipient to comply with the community engagement requirement. Working Medicaid recipients spend a lower 2.7 hours per day watching television and playing video games, and a total of 4.5 hours on all socializing, relaxing and leisure activities.

Takeaways by Macro Roundup® AI

  1. Medicaid recipients who do not report working spend 4.2 hours per day, or 125 hours per month, watching television and playing video games — more than 50% above the 80 hours of work or community engagement the reconciliation bill would require in at least some months.
  2. Medicaid recipients who do not report working spend 6.1 hours per day, or 184 hours per month, on all socializing, relaxing and leisure activities, against 22 minutes per day looking for work, 4.0 hours on housework and errands, and 28 minutes caring for others.
  3. Medicaid recipients who report working average 4.2 hours of work per day, or 126 hours per month, enough for the average working recipient to comply with the community engagement requirement, and spend 2.7 hours per day on television and video games.

Related Articles:

  • 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.
  • Government Benefit Programs Already Do A Lot To Help Low Income Families — For a two-adult, three-child family, existing taxes and government benefits bring take-home resources to about $58,000 with no earnings, $79,000 with $20,000 of earnings, and $90,000 with $80,000 of earnings plus $15,000 in employer health premiums. A $75,000 gap in earnings and work-related benefits narrows to $11,000 in take-home pay.
  • The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States — In a randomized experiment, 1,000 low-income individuals received $1,000/month unconditionally for three years while a control group of 2,000 received $50/month, and the transfers reduced individual income excluding transfers by about $1,500/year. The authors find no significant effects on human capital investment and conclude the transfers produced a moderate labor supply reduction not offset by other productive activities.

AI Summary. The Congressional Budget Office estimates that a Medicaid work-requirement policy would apply to about 18.5m people annually once fully implemented, reducing federal Medicaid coverage by roughly 5.2m adults in 2034. It projects the provision would increase the number of people without health insurance by 4.8m that year, as few of those disenrolled would obtain employment-based coverage.

Phillip Swagel Congressional Budget Office
Date Posted:

CBO estimates that of the 7.8mm Medicaid recipients who will lose coverage under the reconciliation bill, 60% (4.8mm) would lose coverage due to non-compliance with part-time work requirements.

How many people would Medicaid work requirements leave uninsured?

Core argument: CBO estimates that enacting section 44141 of H.R. 1, the One Big Beautiful Bill Act, would increase the number of people without health insurance by 4.8 million in 2034.

CBO expects that about 18.5 million people would be subject to the requirement each year, once implemented fully in all states, although some would qualify for an exemption. In 2034, federal Medicaid coverage would decrease by about 5.2 million adults. Few of those disenrolled from Medicaid because of the policy would have access to and enroll in employment-based coverage and none would be eligible for the premium tax credit. CBO estimates that enacting section 44141 would increase the number of people without health insurance by 4.8 million in 2034.

Takeaways by Macro Roundup® AI

  1. CBO estimates that enacting section 44141 of H.R. 1, the One Big Beautiful Bill Act, would increase the number of people without health insurance by 4.8 million in 2034.
  2. CBO projects that federal Medicaid coverage would decline by about 5.2 million adults in 2034, with about 18.5 million people subject to the requirement each year once it is fully implemented in all states.
  3. CBO expects that few people disenrolled from Medicaid because of the policy would have access to and enroll in employment-based coverage, and none would be eligible for the premium tax credit.

Related Articles:

AI Summary. The US Treasury Department announced an agreement with G-7 allies to exempt US companies from certain international minimum taxes under the OECD global tax framework. In exchange, the Treasury asked Congress to drop the proposed Section 899 retaliatory tax measure from the pending tax bill.

Daniel Flatley and Lauren Vella Bloomberg
Date Posted:

The Treasury Department announced a deal with G-7 allies that will exclude US companies from OECD Pillar 2 taxes in exchange for removing the Section 899 “revenge tax” proposal from President Donald Trump’s tax bill.

Can exempting US companies from global minimum taxes replace a retaliatory tax?

Core argument: The Treasury Department announced a deal with G-7 allies excluding US companies from some taxes imposed by other countries in exchange for dropping the Section 899 "revenge tax" from President Donald Trump's tax bill.

The Treasury Department announced a deal with G-7 allies that will exclude US companies from some taxes imposed by other countries in exchange for removing the Section 899 “revenge tax” proposal from President Donald Trump’s tax bill. “OECD Pillar 2 taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months,” Treasury Secretary Scott Bessent said on social media Thursday. “Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill,” he added. The congressional tax committee chairs, Representative Jason Smith and Senator Mike Crapo, quickly responded that “at the request of Secretary Bessent and in light of this joint understanding to preserve U.S. tax sovereignty” they will remove “proposed tax code Section 899 from the One, Big, Beautiful Bill Act.”

Takeaways by Macro Roundup® AI

  1. The Treasury Department announced a deal with G-7 allies excluding US companies from some taxes imposed by other countries in exchange for dropping the Section 899 "revenge tax" from President Donald Trump's tax bill.
  2. Treasury Secretary Scott Bessent said OECD Pillar 2 taxes will not apply to US companies and that Treasury will work cooperatively to implement the agreement across the OECD-G20 Inclusive Framework.
  3. Representative Jason Smith and Senator Mike Crapo said they will remove proposed tax code Section 899 from the One, Big, Beautiful Bill Act at Bessent's request and in light of the joint understanding to preserve US tax sovereignty.

Related Articles:

  • Related: 899 — The Three Numbers Alarming the Bond Market — A provision in US legislation would let the Treasury impose a 5% tax surcharge, rising in stages to 20%, on the US investments of countries it identifies as levying "extraterritorial and discriminatory" taxes on American companies, such as the European Union's digital services tax. The chief financial effects would be a weaker dollar and foreign markets outperforming the US.
  • Obscure Tax Item in Trump’s Big Bill Alarms Wall Street and Are Foreigners Selling US Assets? — A proposed US tax provision, Section 899, would raise tax rates on individuals and companies from countries whose tax policies the US deems discriminatory, including those imposing digital services taxes on large technology firms. Analysts say the measure, which could raise rates on passive income such as interest and dividends, would further drive away foreign investors.
  • 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.

AI Summary. Republican support in the 2024 presidential election rose among Hispanic voters (48%, up from 36% in 2020), Black voters (15% from 8%), Asian voters (40% from 30%), and naturalized citizens (47% from 38%). Men backed Trump by 12 points (55%-43%) after splitting closely in 2020, with gains concentrated among men under 50.

Hannah Hartig, Scott Keeter, Andrew Daniller and Ted Van Green Pew Research Center
Date Posted:

Immigrants, 9% of 2024 voters, slightly favored Harris over Trump (51% to 47%). In 2020, those voters favored Biden by 21pp. In 2020, Trump’s narrowly losing coalition was 86% white; 4 years later, Trump’s winning coalition was only 78% white.

Did Republican support rise among minority voters and men in 2024?

Core argument: Hispanic voters split 51% Harris to 48% Trump in 2024, a narrowing from 2020, when Biden beat Trump 61%-36% among that group.

Among Hispanic voters, Trump battled to near parity in 2024 (51% Harris, 48% Trump) after losing to Joe Biden 61%-36% in 2020. Trump won 15% of Black voters – up from 8% four years earlier. Trump also did better among Asian voters. While a majority of Asian voters (57%) backed Harris, 40% supported Trump. This was a narrower margin than Biden’s in 2020 (70% to 30%). Naturalized citizens – immigrants who hold U.S. citizenship – who voted in the election split their votes about evenly, with 51% voting for Harris and 47% for Trump. In 2020, naturalized citizens favored Biden by 21 percentage points: 59% to 38%. In 2024, naturalized citizens made up 9% of voters. Trump made gains among men – especially men under 50. Men favored Trump by 12 points (55%-43%) after being closely divided in 2020. In particular, men under 50 split their votes fairly evenly this year (49% Trump, 48% Harris). In 2020, this group backed Biden by 10 points (53% Biden, 43% Trump).

Takeaways by Macro Roundup® AI

  1. Hispanic voters split 51% Harris to 48% Trump in 2024, a narrowing from 2020, when Biden beat Trump 61%-36% among that group.
  2. Trump won 15% of Black voters in 2024, up from 8% in 2020, and 40% of Asian voters against Harris's 57%, a narrower margin than Biden's 70%-30% in 2020.
  3. Men favored Trump by 12 points (55%-43%) in 2024 after being closely divided in 2020, with men under 50 splitting 49% Trump to 48% Harris, compared with Biden's 53%-43% edge in 2020.

Related Articles:

  • What Happened In 2024 — 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.
  • 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 Donald Trump Has Remade America’s Political Landscape — An analysis of US county-level presidential voting found that Republicans increased their vote share in each of three consecutive elections in 1,433 counties, home to about 42.7m voting-age Americans, versus 57 counties for Democrats, home to roughly 8.1m. Overall, 2,678 counties shifted Republican by an average of 13.3 percentage points, against 435 shifting Democratic by 8.8 points.

AI Summary. The U.S. imprisonment rate stayed below 120 per 100,000 people from the end of World War II until the mid-1970s, then doubled by 1985 and grew about 8% a year, passing 1m prisoners in 1994 and peaking in 2009 — 18 years after violent crime peaked.

Keith Humphreys The Atlantic
Date Posted:

The US prison population was 1.6mm in 2009 and fell to 1.2mm at the end of 2023 as criminals who were arrested during the crime wave that peaked in 1991 die or are released. Because younger generations are not as violent, the stock of prisoners is declining.

Why did imprisonment keep rising long after violent crime peaked?

Core argument: From the end of World War II until the mid-1970s, the U.S. imprisonment rate never exceeded 120 per 100,000, but by 1985 it had doubled, with more than 200 in 100,000 Americans in a state or federal prison.

From the end of World War II until the mid-1970s, the proportion of Americans in prison each year never exceeded 120 per 100,000. But starting in the late 1960s, a multi-decade crime wave swelled in America. By 1985, the imprisonment rate had doubled from its historical norm, such that more than 200 in 100,000 Americans were in a state or federal prison. The number of people in prison increased an average of 8% a year for the next decade, breaching the 1 million mark in 1994 and continuing to grow until 2009. This had ramifications that were felt for years: Because most people who are released from prison return, the system has been stocked and restocked with the legacy of that American crime-and-punishment wave for a quarter century. The 2009 peak of U.S. imprisonment came 18 years after the 1991 peak in the violent-crime rate.

Takeaways by Macro Roundup® AI

  1. From the end of World War II until the mid-1970s, the U.S. imprisonment rate never exceeded 120 per 100,000, but by 1985 it had doubled, with more than 200 in 100,000 Americans in a state or federal prison.
  2. The U.S. prison population grew an average of 8% a year for the decade after 1985, passing 1 million in 1994 and continuing to rise until its 2009 peak, 18 years after violent crime peaked in 1991.
  3. Because most people released from U.S. prisons return, the system has been stocked and restocked for a quarter century with the legacy of the American crime-and-punishment wave.

Related Articles:

  • Number of Young People Accused of Serious Crimes Surges in New York City — New York City Police Department figures show 4,858 major crimes with a minor accused or arrested in the most recent year, up 37% from 3,543 seven years earlier, with robberies and felony assaults continuing to rise. Police officials attribute the increase to a state law diverting most 16- and 17-year-old defendants from adult courts.
  • It’s Time to Talk About America’s Disorder Problem — A meta-analysis of 56 studies found that disorder policing consistently reduces crime, but that indiscriminate "aggressive order maintenance" arrests did not significantly reduce crime while problem-oriented strategies targeting specific sources of disorder often had sizable effects without spillovers. The authors note that a large share of disorder comes from a small number of people and places.
  • The Collapse of Broken-Windows Policing in New York City, Los Angeles, and Washington, DC, 2013–22 — Arrests for minor "broken-windows" offenses—counted as misdemeanors, violations, and infractions per 100,000 residents—fell 74% in New York, 77% in Washington, DC, and 81% in Los Angeles over the period studied, declining steadily in New York and Los Angeles.

Monday, June 30, 2025

AI Summary. The S&P 500's record level holds in dollars but not in other major currencies, reflecting dollar depreciation, with non-US stocks outperforming US stocks by about 10 percentage points. The rebound is not driven by the largest tech platforms, whose performance now matches the index's other 493 stocks.

John Authers Bloomberg
Date Posted:

While the S&P hit a new all-time high Friday in dollar terms, it remains 10% under its February 19th peak in Euro terms. The MSCI All-World Index net US has outperformed the S&P by ~10pp since February.

Does a weaker dollar explain the US stock market's record high?

Core argument: Non-US stocks have beaten US stocks by about 10 percentage points since Feb. 19, and the S&P 500 sits above its Feb. 19 level in dollars but not when valued in any other major currency.

The [S&P 500] is above its Feb. 19 level when denominated in dollars, but not when valued in any other major currency. This high owes much to the dollar’s depreciation. The rest of the world’s stocks have beaten the US by about 10 percentage points since then. In dollars, that means a nice gain. The new all-time high doesn’t, then, challenge the prevailing narrative that it’s best to take money out of the US and reallocate elsewhere. This rebound has little to do with the giant tech platform groups that dominate the S&P. Since the previous high, Bloomberg’s Magnificent Seven index dipped much further during the alarm over the Liberation Day tariffs, but its performance is now bang in line with an index of the other 493 largest stocks. The S&P 500 is back trading at more than three times sales, close to a record.

Takeaways by Macro Roundup® AI

  1. Non-US stocks have beaten US stocks by about 10 percentage points since Feb. 19, and the S&P 500 sits above its Feb. 19 level in dollars but not when valued in any other major currency.
  2. The S&P 500's new all-time high owes much to the dollar's depreciation, leaving intact the narrative favoring taking money out of the US and reallocating elsewhere.
  3. Bloomberg's Magnificent Seven index dipped much further during the alarm over the Liberation Day tariffs but now performs in line with an index of the other 493 largest stocks, while the S&P 500 trades at more than three times sales, close to a record.

Related Articles:

  • 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.
  • Trump Is Driving Off Investors and Threatening the Dollar’s Reign — The dollar has lost more than 10% of its value against the euro, pound and Swiss franc and is down against every major currency, a decline comparable in speed to 2010. It nonetheless remains stronger against most major currencies than it was in 2021.
  • The Dollar has Further to Fall — The author argues the dollar has considerably further to fall, noting Federal Reserve data show its real value nearly two standard deviations above its average since 1973, a level matched only twice before, each followed by depreciations of 25-30%. Financing the $1.1tn US current account deficit requires matching net capital inflows.

AI Summary. US Treasury auction metrics show no current weakness in demand, with stable bid-to-cover ratios and no systematic tailing, even as debt-to-GDP rises, the term premium increases, and the government must refinance $9tn over the next year. The author argues Treasury issuance will keep outgrowing the economy, likely pushing long-term interest rates higher.

Torsten Sløk, Rajvi Shah, and Shruti Galwankar Apollo
Date Posted:

Stable bid-to-cover rates and the absence of auctions “systematically tailing” indicate strong demand for Treasuries, but rising debt servicing costs and term premia suggest “gradually higher long-term rates and steepening of the yield curve.”

Will growing Treasury issuance push long-term interest rates higher?

Core argument: The US government pays a record-high $3.3 billion in interest every day, and about 20 cents of every dollar of tax revenue goes to servicing debt.

Examining Treasury auction metrics across the curve reveals no signs of weakness in demand for US Treasuries at present. Bid-to-cover ratios are stable, and there is no evidence of auctions systematically tailing. However, [this] offers little comfort when considering the rising trend in debt-to-GDP, the increasing term premium, the falling dollar, and the $9 trillion that the US government needs to refinance over the next 12 months. In particular, debt-servicing costs are rising rapidly, and the US government currently pays a record-high $3.3 billion in interest payments every day, and for every dollar the US government collects in tax revenue, about 20 cents go to paying interest on debt. With debt levels growing much faster than GDP, the bottom line is that Treasury issuance will continue to grow faster than the economy, and the most likely outcome is that investors will demand compensation in the form of higher long-term interest rates.

Takeaways by Macro Roundup® AI

  1. The US government pays a record-high $3.3 billion in interest every day, and about 20 cents of every dollar of tax revenue goes to servicing debt.
  2. Treasury auction metrics across the curve show no current weakness in demand, with stable bid-to-cover ratios and no evidence of auctions systematically tailing.
  3. With debt growing much faster than GDP and $9 trillion to refinance over the next 12 months, Treasury issuance is set to outpace the economy, with investors most likely demanding higher long-term interest rates.

Related Articles:

  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — Roughly half of all fixed income issuance coming to market over the past year has been US Treasuries, meaning investors must allocate a growing share of dollars to financing the government. The argument is that lower government debt would free up more funds for consumer borrowing and business 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.
  • Larry Summers and Bob Rubin Join Our CIOs to Discuss the Surprising Economic Cycle — Adopting the Simpson-Bowles fiscal consolidation when interest rates were at zero would have risked excessive disinflation, since long rates had no room to fall to provide an offsetting expansionary impulse. After the large run-up in debt and rise in real interest rates, the developing fiscal situation risks inflationary pressure, Treasury market disruption, or crowding out of private investment.

AI Summary. The Congressional Budget Office's score of the Senate reconciliation bill implies it would add over $3.9tn to the national debt against a current-law baseline including interest, with roughly $4.45tn of net tax cuts and nearly $300bn of gross spending increases partially offset by nearly $1.5tn of spending cuts.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:

Using CBO scoring, the Committee for a Responsible Federal Budget calculates the Senate’s version of the reconciliation bill would add over $3.9 trillion to the national debt by 2034 including ~ $690B in cumulative interest costs.

How much would the Senate reconciliation bill add to the debt?

Core argument: Measured against a current law baseline and including interest, the Senate reconciliation bill would add over $3.9 trillion to the national debt, based on CBO's "current policy" score.

The Congressional Budget Office (CBO) published their "current policy" score of the Senate reconciliation bill, showing the bill would add about $500 billion less to the deficit than extending all the expiring 2017 tax cuts. Against a more appropriate current law baseline, and including interest, these numbers suggest the bill would add over $3.9 trillion to the national debt. Specifically, the bill includes roughly $4.45 trillion of net tax cuts and nearly $300 billion of gross spending increase, partially offset by nearly $1.5 trillion of gross spending cuts. We estimate the bill would increase interest costs by nearly $700 billion.

Takeaways by Macro Roundup® AI

  1. Measured against a current law baseline and including interest, the Senate reconciliation bill would add over $3.9 trillion to the national debt, based on CBO's "current policy" score.
  2. The Senate bill contains roughly $4.45 trillion of net tax cuts and nearly $300 billion of gross spending increases, partially offset by nearly $1.5 trillion of gross spending cuts.
  3. CBO's "current policy" score shows the Senate bill adding about $500 billion less to the deficit than extending all the expiring 2017 tax cuts, and the bill is estimated to raise interest costs by nearly $700 billion.

Related Articles:

AI Summary. A Federal Reserve chair could not persuade the rate-setting committee to cut to 1%, but could emphasize the employment mandate over the inflation mandate, while the Treasury lowers longer-dated yields by shifting issuance toward short-term bills. The next crisis is likely to stem from a large dollar depreciation triggering foreign investor flight.

Joseph Wang Fed Guy Blog
Date Posted:

Joseph Wang @FedGuy12 warns a dovish chair and shortened maturity profile of Treasuries risks dollar depreciation and capital flight that could more than offset the boon to risk assets from lower interest rates.

How can a Fed chair and Treasury lower long-term interest rates?

Core argument: Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early to influence policy expectations, though that Chair will not persuade the committee to cut to 1% and could instead emphasize the employment mandate over the inflation mandate.

Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early in order to influence policy expectations. Trump’s Chair will not be able to persuade the committee to drop rates to 1%, but he could emphasize the employment mandate over the inflation mandate. The Treasury can significantly lower longer dated rates by adjusting coupon supply in conjunction with a dovish Fed. Trump’s proclamation of ending issuance of debt maturing more than 9 months is an exaggeration, but increasing the bill share of Treasuries can easily be done. The next crisis is likely to emerge from the impacts of a significant dollar depreciation, which could lead to a foreign investor exodus that is commonly seen in emerging markets. Easier domestic financial conditions make risk assets more attractive to domestic investors, but that has to be balanced with the potential for capital flight.

Takeaways by Macro Roundup® AI

  1. Trump has expressed a preference for 1% interest rates and looks to nominate a Fed Chair early to influence policy expectations, though that Chair will not persuade the committee to cut to 1% and could instead emphasize the employment mandate over the inflation mandate.
  2. The Treasury can significantly lower longer-dated rates by adjusting coupon supply alongside a dovish Fed, and while Trump's proclamation of ending issuance of debt maturing beyond 9 months is an exaggeration, increasing the bill share of Treasuries can easily be done.
  3. The next crisis is likely to emerge from the impacts of a significant dollar depreciation, which could prompt a foreign investor exodus of the kind commonly seen in emerging markets, while easier domestic financial conditions make risk assets more attractive to domestic investors.

Related Articles:

  • Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! — Interest rates are ultimately driven by macroeconomic fundamentals, with an "intrinsic risk-free rate" defined as the sum of the inflation rate and real GDP growth tracking the observed 10-year Treasury bond yield closely. On this view, central banks' influence comes from preferential access to data on those fundamentals, their capacity to alter them, and their credibility.
  • Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4% — Bond traders have paid at least $38m in premiums for options positions that pay off if the 10-year US Treasury yield falls to 4% from roughly 4.3%. Interest-rate swaps price about 60 basis points of Federal Reserve easing across the year's remaining meetings, up from 45 basis points a week earlier.
  • Rapidly Growing Treasury Supply Crowding Out Other Types of Credit Growth — Roughly half of all fixed income issuance coming to market over the past year has been US Treasuries, meaning investors must allocate a growing share of dollars to financing the government. The argument is that lower government debt would free up more funds for consumer borrowing and business investment.

AI Summary. Canada scrapped its digital services tax, a 3% levy on revenue of the largest technology companies including Meta, Netflix and Amazon, to smooth trade negotiations with the US. Canadian and US leaders agreed to resume trade talks.

Ilya Gridneff Financial Times
Date Posted:

Canada scrapped a digital services tax hours before it was to go into effect. After scrapping the tax, “Carney and Trump have agreed that they will resume negotiations.”

Will scrapping a digital services tax restart stalled trade negotiations?

Core argument: Canada scrapped its 3% digital services tax on the revenue of the largest technology companies hours before it was due to take effect on June 30, in an effort to smooth trade negotiations with the United States.

Canada has scrapped a digital services tax that targeted US technology companies, in an effort to smooth trade negotiations with its neighbour after President Donald Trump described the levy as a “direct and blatant” attack. The tax, first announced in 2020, targeted companies such as Meta, Netflix and Amazon as well as local businesses. Those affected had to file a return by the end of June or face a fine. The decision to abandon the tax, a 3% levy on revenue for the biggest technology companies, came hours before it was due to come into effect on June 30. Carney and Trump have agreed that they will resume negotiations.

Takeaways by Macro Roundup® AI

  1. Canada scrapped its 3% digital services tax on the revenue of the largest technology companies hours before it was due to take effect on June 30, in an effort to smooth trade negotiations with the United States.
  2. The Canadian levy, first announced in 2020, targeted US firms including Meta, Netflix and Amazon as well as local businesses, with affected companies required to file a return by the end of June or face a fine.
  3. President Donald Trump described Canada's digital services tax as a "direct and blatant" attack, and Carney and Trump have agreed to resume trade negotiations.

Related Articles:

  • Treasury Deal Kills ‘Revenge Tax’ That Spooked Wall Street — The US Treasury Department announced an agreement with G-7 allies to exempt US companies from certain international minimum taxes under the OECD global tax framework. In exchange, the Treasury asked Congress to drop the proposed Section 899 retaliatory tax measure from the pending tax bill.

AI Summary. China's headline consumer price inflation has fallen below zero and core inflation is little better, and the author argues US tariffs will hasten this deflationary dynamic. Because easing monetary policy would weaken the Yuan against the Dollar, China is accepting deflation instead, which the author argues means rising real interest rates.

Robin Brooks Robin Brooks Substack
Date Posted:

CPI readings suggest that deflation is taking hold in China. Reduced demand for Chinese goods due to US tariffs, Brooks argues, requires looser Chinese monetary policy and devaluation of the yuan; China’s refusal is an implicit acceptance of deflation.

Is China accepting deflation to keep its currency stable?

Core argument: China's headline CPI inflation fell below zero toward the end of 2024, before US tariffs hit, and core inflation looks little better.

China was on the verge of deflation before US tariffs hit. The left chart above shows headline CPI inflation in the US (blue) and China (black). Headline inflation in China fell below zero towards the end of 2024. The right chart shows that core inflation looks little better. US tariffs will only hasten this deflationary dynamic. The way to counter this deflationary dynamic would be to ease monetary policy, but an inevitable byproduct of such easing is a fall in the Yuan against the Dollar. China doesn’t want that, so it’s - instead - making a choice to accept deflation, which in turn means that real interest rates in China will rise. The de facto peg of the Yuan against the Dollar means China is bumping up against the “impossible trinity,” whereby it’s impossible to have independent monetary policy amid an exchange rate peg and capital mobility (China of course has capital controls, but capital flight periodically rears its head). The decision not to devalue against the Dollar therefore has very real, adverse consequences: it makes a fall into deflation much more likely.

Takeaways by Macro Roundup® AI

  1. China's headline CPI inflation fell below zero toward the end of 2024, before US tariffs hit, and core inflation looks little better.
  2. Easing monetary policy to counter China's deflationary dynamic would bring a fall in the Yuan against the Dollar, which China does not want, so it is accepting deflation and rising real interest rates instead.
  3. The de facto peg of the Yuan against the Dollar puts China against the "impossible trinity" of independent monetary policy, an exchange rate peg, and capital mobility, and the decision not to devalue makes a fall into deflation much more likely.

Related Articles:

  • China is Falling into Deflation — 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.
  • Trade With China Is Becoming a One-Way Street — China's import volumes have shown no growth since the end of 2022 while its export volumes rose 33%, according to data from the Netherlands Bureau of Economic Policy Analysis. In dollar terms, Chinese imports fell 11% from the US, 17% from Japan, and 18% from Germany, as Chinese companies replace overseas suppliers with domestic ones.
  • 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.

AI Summary. About 37,000 people registered to vote in the 14 days before the registration deadline for a New York City Democratic mayoral primary, compared with about 3,000 in the same period in the prior cycle, according to an analysis of the electoral map.

Emma Fitzsimmons, Alex Lemonides and Irineo Cabreros New York Times
Date Posted:

A New York Times analysis of the NYC democratic primary electorate found a significant shift in voters’ age profile. While < 50,000 people 18–24 voted in 2021, the participation of that cohort tripled this year.

Can a mayoral campaign sharply increase new voter registrations?

Core argument: About 37,000 people registered to vote in the 14 days before the Democratic primary registration deadline, compared with roughly 3,000 in the same period in 2021, according to a New York Times analysis.

Mr. Mamdani changed the electoral map. In the 14 days leading up to the registration deadline for the Democratic primary, about 37,000 people registered to vote, compared with about 3,000 people in the same period in 2021, according to an analysis by The New York Times.

Takeaways by Macro Roundup® AI

  1. About 37,000 people registered to vote in the 14 days before the Democratic primary registration deadline, compared with roughly 3,000 in the same period in 2021, according to a New York Times analysis.

Related Articles:

  • The Anatomy of Mamdani’s Political Earthquake — An analysis of New York City's mayoral vote finds that Mamdani's coalition centered on working-, middle-, and upper-middle-class renters across white, Hispanic and Asian neighborhoods and on the youngest voters, while Cuomo's support came from both the wealthy and the poor and from middle-class Black voters in an older Black electorate.
  • Behind Trump’s 2024 Victory, a More Racially and Ethnically Diverse Voter Coalition — Republican support in the 2024 presidential election rose among Hispanic voters (48%, up from 36% in 2020), Black voters (15% from 8%), Asian voters (40% from 30%), and naturalized citizens (47% from 38%). Men backed Trump by 12 points (55%-43%) after splitting closely in 2020, with gains concentrated among men under 50.
  • New Yorkers Make Their Housing Shortage Worse — Housing units rose 17% in the Austin metropolitan area between 2020 and 2024 versus 3% in New York City, and New York housing prices and rents have risen more than Austin's despite far weaker job growth. Rent regulation covering roughly half of New York's units discourages tenants from moving and landlords from upgrading.