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


Tuesday, July 1, 2025

AI Summary. The authors' model of automation predicts that occupations with rising expertise requirements see higher wages but falling employment, while those with declining requirements see lower wages alongside rising employment. Analyzing employment and earnings data by occupation across four decades, they find changes in occupational expertise strongly predict changes in occupational wages.

David Autor and Neil Thompson National Bureau of Economic Research
Date Posted:

Autor finds automation of a given routine task can “replace experts in some occupations and augment expertise in others.” Data from 1980–2014 show that occupations in which automation increased expertise requirements saw falling employment but rising wages.

How do changing expertise requirements shape occupational wages and employment?

Core argument: The authors' conceptual model shows that automation of a given task can simultaneously replace experts in some occupations and augment expertise in others, with countervailing effects on wages and employment.

Automation of any given task can simultaneously replace experts in some occupations and augment expertise in others. Our conceptual model shows how automation simultaneously replaces experts and augments expertise, and it predicts that changing expertise requirements have countervailing effects on wages and employment: automation that decreases expertise requirements reduces wages but permits the entry of less expert workers; automation that raises requirements raises wages but reduces the set of qualified workers. Analyzing data on employment and earnings by occupation over four decades, we show that changes in occupational expertise, stemming from both the removal and addition of occupational tasks, strongly predict changes in occupational wages. Our model makes the counterintuitive prediction that occupations with increasing expertise requirements see falling employment (alongside rising wages), while occupations with declining expertise requirements see rising employment alongside falling wages. The data robustly confirm this prediction.

Takeaways by Macro Roundup® AI

  1. The authors' conceptual model shows that automation of a given task can simultaneously replace experts in some occupations and augment expertise in others, with countervailing effects on wages and employment.
  2. Analyzing employment and earnings by occupation across four decades, the authors find that changes in occupational expertise, stemming from both the removal and addition of occupational tasks, strongly predict changes in occupational wages.
  3. The authors' model predicts, and their data confirm, that occupations with rising expertise requirements see falling employment alongside rising wages, while occupations with declining requirements see rising employment alongside falling wages.

Related Articles:

  • Applying AI To Rebuild Middle-Class Jobs — Computerization concentrated decision-making power and resources among elite experts with college and graduate degrees, while the 60% of U.S. adults without a bachelor's degree were relegated to low-paid service jobs. Because artificial intelligence can combine information and rules with acquired experience, it could enable more workers to perform higher-stakes decision-making tasks.
  • Technological Disruption in the Labor Market — The authors measure US labor market structure since 1880 and find 1990–2017 less disruptive than any earlier period, because past changes from general-purpose technologies like steam and electricity were so profound. They identify four recent signs of accelerating change, including a 50%+ rise in science and technology employment share since 2010.
  • Skills and Human Capital in the Labor Market — Labor market earnings are strongly associated with measures of personality traits and preferences, and over the last two decades returns to cognitive skills have been flat or declined in the US, Sweden, and Finland while returns to "soft" skills such as conscientiousness, extraversion, emotional stability, and social skills have grown rapidly.

AI Summary. Amazon employs about 1.56m people overall and is approaching having more robots than human workers in its warehouses, with robots supplanting some employees and helping slow hiring. A Wall Street Journal analysis estimates its average employees per facility fell to roughly 670, a 16-year low, while packages shipped per employee rose from about 175 in 2015 to about 3,870.

Sebastian Herrera Wall Street Journal
Date Posted:

Amazon has deployed more than one million robots in its facilities, which are at their lowest employee headcount since 2015. Since 2015, Amazon’s productivity has improved from 175 packages shipped per employee annually to 3,870.

Are warehouse robots replacing workers and raising productivity per employee?

Core argument: Amazon's average employees per facility fell to roughly 670 last year, the lowest in 16 years, according to a Wall Street Journal analysis comparing the company's reported workforce with estimates of its facility count.

Robots are also supplanting some employees, helping the company to slow hiring. Amazon employs about 1.56 million people overall, with the majority working in warehouses. The average number of employees Amazon had per facility last year, roughly 670, was the lowest recorded in the past 16 years, according to a Wall Street Journal analysis, which compared the company’s reported workforce with estimates of its facility count. The number of packages that Amazon ships itself per employee each year has also steadily increased since at least 2015 to about 3,870 from about 175, the analysis found, an indication of the company’s productivity gains.

Takeaways by Macro Roundup® AI

  1. Amazon's average employees per facility fell to roughly 670 last year, the lowest in 16 years, according to a Wall Street Journal analysis comparing the company's reported workforce with estimates of its facility count.
  2. The number of packages Amazon ships itself per employee each year rose to about 3,870 from about 175 since at least 2015, which the Wall Street Journal analysis calls an indication of productivity gains.
  3. Amazon is approaching the point of using more robots than humans in its warehouses, with robots supplanting some employees and helping the company slow hiring across a workforce of about 1.56 million.

Related Articles:

  • How AI & Robots are Smashing Economics, and Why It Matters — As artificial intelligence and robots make wages less responsive to employment conditions, the link between tight labor markets and inflation weakens, undermining central banks' inflation-targeting frameworks. The author argues central banks would then need far larger interest-rate moves to achieve the same effect, producing more volatile and less predictable outcomes.
  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • What Progress Has There Been In Industrial Robots? — Industrial robot repeatability improved little between 1972 and 1984, with a typical 1-meter reach, 10kg payload arm accurate to about 1 mm in both years, but a comparable 2023 robot achieves roughly 0.01–0.02 mm, 50 to 100x more precise. Such a robot cost 2 to 3x more in the 1980s than today, before accounting for cheap Chinese robot arms.

AI Summary. Movements in the trade-weighted US dollar against other major currencies map almost entirely onto changes in forward interest-rate differentials, with the same positive relationship holding across periods despite noisier data. The author argues this leaves no discernible evidence of a separate political risk premium in the dollar.

Robin Brooks Robin Brooks Substack
Date Posted:
Is Database:
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The dollar is down 11% since the start of the year. Robin Brooks argues that the decline is not a function of an increased risk premium but “maps almost entirely into interest differentials.”

Do interest-rate differentials explain dollar moves without a political risk premium?

Core argument: The fall in the trade-weighted Dollar against the G10 maps almost entirely into interest differentials, measured by the 2y2y forward trade-weighted rate differential of the US against the same set of countries.

The fall in the Dollar maps almost entirely into interest differentials. The left chart shows the trade-weighted Dollar against the G10 and the 2y2y forward trade-weighted rate differential of the US against the same set of countries. It’s tempting to think that a Trump risk premium is building, because the Dollar is down more than the rate differential. But looking at “levels” is misleading in this regard, because it compounds a bunch of moves that have nothing to do with the Dollar. The right chart uses the same data, but looks at daily changes in the rate differential (horizontal axis) and the Dollar (vertical axis). I differentiate between pre- (black dots) and post-inauguration (blue dots) data points and highlight the last observation (Jun. 30, 2025) just like I do in the left chart. As expected, there’s a positive link between the rate differential and the Dollar. There is no discernible difference between pre- and post-inauguration data. Things have gotten noisier - no question there - but the positive link is basically the same.

Takeaways by Macro Roundup® AI

  1. The fall in the trade-weighted Dollar against the G10 maps almost entirely into interest differentials, measured by the 2y2y forward trade-weighted rate differential of the US against the same set of countries.
  2. Daily changes in the rate differential and the Dollar show a positive link with no discernible difference between pre- and post-inauguration observations, though the relationship has gotten noisier.
  3. Comparing levels of the Dollar and the rate differential is misleading because it compounds moves that have nothing to do with the Dollar.

Related Articles:

  • With a Weakening Dollar, It’s America Second — 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.
  • The Dollar’s Global Role and the Financing of the US External Deficit — Balance-of-payments data from major creditor economies and the US indicate that recent inflows into dollar assets have come largely from private investors seeking yield rather than official reserve accumulation. In East Asia reserve flows tracked current account surpluses closely until 2014 and have since fallen well short, while Europe's outflows have long come from institutional investors and banks.
  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.

AI Summary. The Taiwan dollar surged more than 2% amid large foreign inflows and heavy US dollar selling by local exporters, testing the central bank's tolerance for currency strength. Further gains could produce paper losses for Taiwanese life insurers, which have scaled back hedges on foreign assets held largely in US dollars.

Betty Hou and Matthew Burgess Bloomberg
Date Posted:

Taiwan’s dollar surged more than 2% as its large life insurance and export sectors moved to hedge US dollar weakness. Taiwan’s currency has gained 12% this year, driven by foreign inflows and significant US dollar selling by local exporters.

Does a surging Taiwan dollar threaten local life insurers' unhedged holdings?

Core argument: The Taiwan dollar surged more than 2% as local exporters' selling of the US dollar, alongside large foreign inflows, tested the central bank's tolerance for local currency strength, according to two traders.

The Taiwan dollar surged more than 2% in another day of volatility for the currency, as exporters’ sales of the greenback tested the central bank’s tolerance for local currency strength. Large foreign inflows and significant US dollar selling by local exporters were seen in Tuesday’s morning session, according to two traders, who asked not to be identified as they weren’t authorized to speak publicly. Concerns over a stronger Taiwan dollar have been building since early May, when the currency posted its biggest one-day jump since the 1980s. If left unchecked, the gains could result in paper losses for life insurers after they scaled back hedges on their foreign asset holdings, the bulk of which are denominated in the greenback.

Takeaways by Macro Roundup® AI

  1. The Taiwan dollar surged more than 2% as local exporters' selling of the US dollar, alongside large foreign inflows, tested the central bank's tolerance for local currency strength, according to two traders.
  2. Concerns over a stronger Taiwan dollar have been building since early May, when the currency posted its biggest one-day jump since the 1980s.
  3. Unchecked Taiwan dollar gains could result in paper losses for life insurers, which scaled back hedges on foreign asset holdings that are mostly denominated in US dollars.

Related Articles:

  • The Coming Asian FX ‘Avalanche’ — Investment firm Eurizon SLJ argues that Asian exporters have hoarded much of their trade surpluses in dollar deposits rather than repatriating them, creating an overhang the firm roughly estimates at $2.5tn in China plus more from Taiwan, Malaysia, and Korea, growing about $500bn a year. It predicts this raises the risk of a non-linear dollar sell-off.
  • Taiwan’s Markets Jolted as Currency Surges Most Since 1980s — Taiwan's dollar surged as much as 5% in a day, its largest move since 1988, as traders speculated authorities might permit appreciation to help secure a trade deal with the US. Taiwan's central bank attributed the two-day appreciation partly to market chatter and urged against irresponsible speculation.
  • Too Many Dollars — Investors in South Korea and Japan may also exit dollar assets on fears that trade talks bring currency revaluation, as both resemble Taiwan in their U.S. trade and defense ties and have historically weak currencies. Japan allowed sharp appreciation under the 1985 Plaza Accord, which some scholars link to its subsequent decades of weakness.

AI Summary. Germany's budget raises defence spending to €152.8bn by 2029, more than doubling it to 3.5% of GDP. Using International Monetary Fund growth projections and today's yield curve, the author estimates German gross debt rises from 64% of GDP to 76% by 2029, with net debt supply for private investors approaching €250bn a year.

Chris Marsh Money: Inside and Out
Date Posted:

As Germany remilitarizes, @GeneralTheorist forecasts German gross debt will rise from 64% of GDP last year to 76% of GDP in 2029, increasing the available supply of Bunds by ~5% of German GDP over the next two years.

How much will higher defense spending raise German government debt?

Core argument: Germany's 2025 budget, delayed by government formation, more than doubles defence spending by 2029 to €152.8bn, equal to 3.5% of GDP.

The German 2025 budget (only announced in the past this week due to the delays in forming a government) sees defence spending more than double by 2029, rising to €152.8 billion (to reach 3.5% of GDP).Plugging these numbers into a debt sustainability framework, using the IMF’s latest WEO projections for GDP, German gross debt increases from 64% of GDP in 2024 to 76% of GDP in 2029 given today’s yield curve - a 12ppts of GDP uplift in 5 years. State and local government borrowing could add more to this—as would a higher yield curve. While net issuance will be lower than during the pandemic and energy shock, allowing for the net Eurosystem purchases shows the increase in net free float will approach EUR250bn per year—about 5% of GDP—in the next two years.

Takeaways by Macro Roundup® AI

  1. Germany's 2025 budget, delayed by government formation, more than doubles defence spending by 2029 to €152.8bn, equal to 3.5% of GDP.
  2. Applying the budget to a debt sustainability framework with IMF World Economic Outlook GDP projections and today's yield curve, German gross debt rises from 64% of GDP in 2024 to 76% in 2029, a 12-point increase.
  3. Accounting for net Eurosystem purchases, the increase in German net free float approaches €250bn per year, about 5% of GDP, over the next two years, with net issuance below pandemic and energy-shock levels.

Related Articles:

  • Era of Bund Scarcity is Over, Says German Debt Chief — Germany's finance agency says the scarcity of German government bonds is over, with greater availability in the secondary market driven by the end of the European Central Bank's bond-buying programmes. German bond yields have moved above interest rate swaps of the same duration, a sign of market normalisation.
  • Global Market Views: Double Trouble for US Exceptionalism — Germany's post-election fiscal proposals mark a change in the country's likely fiscal impulse, prompting forecast upgrades of 0.2 percentage points to 0.2% German growth and 0.1 points to 0.8% Euro area growth. The shift reduces the risk of very weak Euro area growth and very low European Central Bank policy rates.
  • Germany Can Spend Almost €2tn Without Harming Growth, Economists Say — A poll of 28 eurozone economists estimated that Germany could raise its debt from 63% to 86% of GDP over a decade without repercussions for growth, implying about €1.9tn of fiscal space. The calculation assumes German nominal output grows 2% a year, from €4.3tn to €5.4tn.

AI Summary. Manufacturing accounted for about €2.5tn ($2.9tn) of EU value added, or roughly 16% of the total, down from about 20% in 1995. Consultancy EY estimates that raising European NATO equipment spending to about €137bn annually would add €35.7bn to Europe's defence sector and supply chain, creating perhaps 500,000 jobs.

Economist Staff The Economist
Date Posted:

Consultancy EY estimates that increased European equipment spending on Europe’s domestic defence sector and associated supply chain will increase the EU’s overall manufacturing sector by ~1.5% and create 500,000 jobs.

Can higher defense spending slow Europe's manufacturing decline?

Core argument: EY estimates European NATO members will need to spend roughly €137bn annually on equipment, about €65bn more than current levels, of which €35.7bn would flow to Europe's own defence sector and its supply chain.

Manufacturing made up around €2.5trn ($2.9trn) of value added in 2024, or around 16% of the EU total, down from about 20% in 1995. But what proportion of that is the defence industry and its complex supply chain is hard to determine, as official statistics generally keep such data confidential. Bottom-up modelling by EY, a consultancy, gives an idea, however. If, as it estimates, the European parts of NATO, which is most of the EU plus Britain and Norway, will need to spend around €137bn annually over the coming years in equipment, that would be about €65bn more than the current figure. The resulting increase in spending on Europe’s own defence sector and its associated supply chain would be €35.7bn, about 1.5% of the EU’s overall manufacturing-sector total and would, so EY reckons, add perhaps 500,000 jobs there. Less than a third of the additional €35.7bn would be in the defence sector itself; the rest would be spent elsewhere in the supply chain. That still translates into creating around 150,000 extra jobs in the actual defence sector.

Takeaways by Macro Roundup® AI

  1. EY estimates European NATO members will need to spend roughly €137bn annually on equipment, about €65bn more than current levels, of which €35.7bn would flow to Europe's own defence sector and its supply chain.
  2. EY reckons the €35.7bn increase equals about 1.5% of the EU's manufacturing total and would add perhaps 500,000 jobs, around 150,000 of them in the defence sector itself.
  3. EU manufacturing accounted for about €2.5trn ($2.9trn) of value added in 2024, or roughly 16% of the EU total, down from about 20% in 1995.

Related Articles:

  • Behind NATO’s 2 Percent: Measuring the True Scope of Alliance Defense Investments and the NATO Defense — NATO's collective defense spending averaged 1.72% of GDP over roughly two and a half decades, below the alliance's agreed 2% threshold, leaving a cumulative shortfall the authors estimate at over $2tn that was not invested in force structure, modernization, and readiness. The authors argue closing the gap requires years of sustained investment beyond current commitments.
  • From Trains to Tanks: Germany’s Rearmament Marks Industrial Shift — Germany's defense spending has risen almost 80% since 2020 to over €90bn, according to NATO estimates, offering hiring growth in a country where nearly 250,000 manufacturing jobs have disappeared since the pandemic began. Four major defense contractors added more than 16,500 employees over three years, a gain exceeding 40%, and plan roughly 12,000 more hires.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.

Wednesday, July 2, 2025

AI Summary. The Senate reconciliation bill is estimated to add more than $4tn to the national debt through 2034, about $1tn more than the House-passed version, with deficits averaging roughly 7% of GDP annually. Making its temporary tax cuts and spending increases permanent would raise the total to more than $5.3tn.

Marc Goldwein Committee for a Responsible Federal Budget
Date Posted:

The CRFB team estimates that the Senate’s reconciliation bill will result in a deficit of 7% of GDP next year. This estimate doesn’t account for tariff revenue.

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

Core argument: The Senate reconciliation bill would add $4.1 trillion to the national debt through FY2034, about $1 trillion more than the House-passed One Big Beautiful Bill Act, rising to more than $5.3 trillion if its temporary tax cuts and spending increases were made permanent.

The Senate passed a reconciliation bill that would add over $4 trillion to the national debt through Fiscal Year (FY) 2034, $1 trillion more than the House-passed One Big Beautiful Bill Act (OBBBA). Annual deficits would average about 7% of GDP per year under the Senate bill, including 7.1% in 2027. That’s more than double Secretary Bessent’s proposed fiscal target of 3% of GDP, almost 2% of GDP above current law, and nearly 1% of GDP higher than a simple extension of the Tax Cut and Jobs Act’s (TJCA) individual provisions. If made permanent, deficits would rise to roughly 8% of GDP by the end of the budget window.The Senate bill as written would increase debt by $4.1 trillion through 2034, with more than $3.5 trillion of borrowing from the Finance title (taxes and Medicaid), nearly $300 billion of borrowing from other deficit-increasing titles, about $500 billion of savings from deficit-reducing titles, and nearly $700 billion from interest. If various temporary tax cuts and spending increases were made permanent, the bill would add more than $5.3 trillion to the debt.

Takeaways by Macro Roundup® AI

  1. The Senate reconciliation bill would add $4.1 trillion to the national debt through FY2034, about $1 trillion more than the House-passed One Big Beautiful Bill Act, rising to more than $5.3 trillion if its temporary tax cuts and spending increases were made permanent.
  2. Annual deficits under the Senate bill would average about 7% of GDP, including 7.1% in 2027, more than double Secretary Bessent's proposed 3% of GDP fiscal target and nearly 1% of GDP above a simple extension of the Tax Cuts and Jobs Act's individual provisions.
  3. The Senate bill's $4.1 trillion debt increase comprises more than $3.5 trillion of borrowing from the Finance title covering taxes and Medicaid, nearly $300 billion from other deficit-increasing titles, about $500 billion of savings from deficit-reducing titles, and nearly $700 billion of interest.

Related Articles:

  • CBO Score Shows Senate OBBBA Adds Over $3.9 Trillion to Debt — 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.
  • 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.
  • Treasury Issuance Growing — 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.

AI Summary. The authors estimate Senate tax and spending provisions extending and expanding the 2017 tax law would raise primary deficits by about $3.1tn over 10 years and lift federal debt from 100% of GDP to 127% by 2034, versus 117% under current law. They project GDP falls 0.3% and average wages 0.3% over 10 years.

Kent Smetters et al University of Pennsylvania
Date Posted:

The Penn-Wharton model finds that, dynamically scored, the Senate-passed reconciliation bill would increase the sum of primary deficits, which do not include interest, by $3.5T over the next 10 years.

How would extending the 2017 tax cuts affect debt, GDP, and wages?

Core argument: The Senate Finance Committee's tax provisions extending and expanding the 2017 Tax Cuts and Jobs Act are estimated to raise primary deficits by $4,274 billion over 10 years, with other committees adding $290 billion and spending cuts offsetting $1,460 billion, for a conventional cost of $3,104 billion.

Tax provisions approved by the Senate Finance Committee would extend and expand major components of the 2017 Tax Cuts and Jobs Act, which we estimate will increase primary deficits by $4,274 billion ($4.3 trillion) over 10 years. Other Committees increase primary deficits by another $290 billion. These changes would be partly offset by spending cuts of $1,460 billion, for a total conventional cost of $3,104 billion. The bill would increase debt by 7.6% in 10 years, and decrease GDP by 0.3% in 10 years. The average wage falls by 0.3% in 10 years. Primary deficits increase by more (to $3,507 billion $3.5T?) in the budget window when accounting for these economic dynamics. Debt would rise from 100% of Gross Domestic Product (GDP) today to 127% by 2034 – compared to 117 percent under current law and 124% under the House bill. After 30 years, GDP falls by 4.6% and wages fall by 3.4% relative to current law due to capital shallowing.

Takeaways by Macro Roundup® AI

  1. The Senate Finance Committee's tax provisions extending and expanding the 2017 Tax Cuts and Jobs Act are estimated to raise primary deficits by $4,274 billion over 10 years, with other committees adding $290 billion and spending cuts offsetting $1,460 billion, for a conventional cost of $3,104 billion.
  2. Federal debt would rise from 100% of GDP to 127% by 2034 under the Senate bill, compared with 117% under current law and 124% under the House bill.
  3. The Senate bill is estimated to reduce GDP by 0.3% and average wages by 0.3% within 10 years, and by 4.6% and 3.4% respectively after 30 years relative to current law, reflecting capital shallowing.

Related Articles:

  • CBO Score Shows Senate OBBBA Adds Over $3.9 Trillion to Debt — 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.
  • Treasury Issuance Growing — 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.
  • 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. The Senate-passed budget bill is estimated to cost $3.0tn over 2025-2034 (0.84% of GDP) and $12.1tn over 2025-2055 (0.71% of GDP), assuming temporary provisions expire. This conventional score excludes distributional effects, macroeconomic feedback, and any impact of added debt on interest rates.

Ernie Tedeschi Yale University
Date Posted:

Ernie Tedeschi estimates that the Senate’s version of the reconciliation bill (conventionally scored) will cost $3T over the 2025–2034 window. Interest payments rise to 3.8% of GDP in 2030 relative to 3.6% under CBO’s current law baseline.

How much does the Senate-passed budget bill add to deficits?

Core argument: The Senate-passed budget bill carries a baseline cost of $3.0 trillion over 2025–2034, equal to 0.84% of GDP over that period, assuming temporary provisions actually expire.

The baseline cost of the bill as passed, assuming temporary provisions actually expire, over the 2025-2034 window is $3.0 trillion (0.84% of GDP over this time period) and over the 2025-2055 window is $12.1 trillion (0.71% of GDP over this time period). This analysis provides a conventional score for these proposals. In this analysis we do not look at the distributional implications of this proposal or its macroeconomic implications. We thus do not account for any additional growth (or slowing of growth) that may emerge in the short or long run from passing this bill, nor do we analyze the impact of the increased debt burden on interest rates.

Takeaways by Macro Roundup® AI

  1. The Senate-passed budget bill carries a baseline cost of $3.0 trillion over 2025–2034, equal to 0.84% of GDP over that period, assuming temporary provisions actually expire.
  2. The bill's baseline cost reaches $12.1 trillion over the 2025–2055 window, or 0.71% of GDP over that period.
  3. The analysis is a conventional score that excludes distributional and macroeconomic implications, accounting for neither added or slowed growth from the bill nor the effect of increased debt on interest rates.

Related Articles:

  • CBO Score Shows Senate OBBBA Adds Over $3.9 Trillion to Debt — 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.
  • Debt Has Always Been the Ruin of Great Powers. Is the U.S. Next? — Historical experience suggests that when a great power spends more on debt interest than on military capability for a sustained period, rivals are likely to challenge its position and domestic stability may suffer as governments fail to satisfy competing claims from the military, bondholders, taxpayers and welfare recipients. U.S. federal interest payments of $1.124tn exceeded defense spending of $1.107tn.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.

AI Summary. Many Asian economies show deeply undervalued real exchange rates and large current account surpluses, alongside accumulated foreign bond holdings that are often unhedged and worth less than their purchase price in dollar terms. The currency appreciation warranted by balance of payments fundamentals could therefore put financial stability at risk.

Brad Setser Council on Foreign Relations
Date Posted:

Taiwan’s bond portfolio, heavy in low-interest, long-duration bonds, has lost ~12% of its value in dollar terms since 2022 as rates rose. “Appreciation warranted by balance of payments fundamentals,” Setser notes, “may put financial stability at risk.”

Do unhedged foreign bond losses block needed currency appreciation in Asia?

Core argument: Many Asian countries are deeply undervalued on fundamental metrics, with very weak real exchange rates and generally high current account surpluses, particularly with the fall in oil prices.

On a host of fundamental metrics, many Asian countries are deeply undervalued. Real exchange rates are very weak and current account surpluses are generally quite high, particularly with the fall in oil prices. These economies have accumulated a lot of foreign bonds (as ongoing surpluses implied foreign asset accumulation) and those bonds are often both underwater in dollar terms and unhedged. Thus, the currency appreciation that is warranted by balance of payments fundamentals would potentially put financial stability at risk.

Takeaways by Macro Roundup® AI

  1. Many Asian countries are deeply undervalued on fundamental metrics, with very weak real exchange rates and generally high current account surpluses, particularly with the fall in oil prices.
  2. Asian economies' ongoing current account surpluses have implied accumulation of large foreign bond holdings that are often both underwater in dollar terms and unhedged.
  3. The currency appreciation warranted by balance of payments fundamentals in Asian economies would potentially put financial stability at risk.

Related Articles:

  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.
  • Taiwan Dollar Surges More Than 2% as Traders Test Central Bank — The Taiwan dollar surged more than 2% amid large foreign inflows and heavy US dollar selling by local exporters, testing the central bank's tolerance for currency strength. Further gains could produce paper losses for Taiwanese life insurers, which have scaled back hedges on foreign assets held largely in US dollars.
  • The Coming Asian FX ‘Avalanche’ — Investment firm Eurizon SLJ argues that Asian exporters have hoarded much of their trade surpluses in dollar deposits rather than repatriating them, creating an overhang the firm roughly estimates at $2.5tn in China plus more from Taiwan, Malaysia, and Korea, growing about $500bn a year. It predicts this raises the risk of a non-linear dollar sell-off.

AI Summary. The euro is up about 14% against the dollar this year, helping curb price gains that now match the European Central Bank's inflation goal. The risk is that further appreciation pushes inflation below the target and damages European competitiveness, with the central bank warning that a move past $1.20 would be problematic.

Jana Randow, Alexander Weber, and Mark Schroers Bloomberg
Date Posted:

The euro’s 14% appreciation against the dollar since the start of the year may start to weigh on exports if the euro moves above $1.20, and may also cause inflation to fall below the 2% target.

Will further currency appreciation push inflation below target and hurt competitiveness?

Core argument: The euro is up about 14% against the dollar this year as confidence in the US dwindles, helping curb price gains that now match the ECB's target.

The [Euro] is up about 14% against the dollar this year as confidence in the US dwindles — helping curb price gains that now precisely match the ECB’s goal. The currency has averaged at $1.1829 since it was introduced in 1999, and traded just below that level on Tuesday. The danger, however, is that the rally propels the euro to levels that cause inflation to undershoot the target, damaging competitiveness in the process. The shift was initially welcomed not just for its inflation-fighting properties but as an opportunity to swell the role of Europe’s common currency on the world stage. [ECB] Vice President Luis de Guindos warned that an advance past $1.20 would be problematic.

Takeaways by Macro Roundup® AI

  1. The euro is up about 14% against the dollar this year as confidence in the US dwindles, helping curb price gains that now match the ECB's target.
  2. ECB Vice President Luis de Guindos warned that a euro advance past $1.20 would be problematic, given the risk that the rally drives inflation below target and damages competitiveness.
  3. The euro has averaged $1.1829 since its introduction in 1999, and its rise was initially welcomed both for fighting inflation and as an opportunity to expand the common currency's global role.

Related Articles:

  • A Trump Risk Premium in the Dollar — Movements in the trade-weighted US dollar against other major currencies map almost entirely onto changes in forward interest-rate differentials, with the same positive relationship holding across periods despite noisier data. The author argues this leaves no discernible evidence of a separate political risk premium in the dollar.
  • Asia’s $7.5 Trillion Bet on US Assets Is Suddenly Unravelling — Asia's 11 largest economies have accumulated $7.5tn in US stocks and bonds, but their annual capital flows into the US fell to $68bn, equal to just 11% of their trade surpluses with the US. Their major currencies, including the yen and yuan, trade on average 57% below exchange rates adjusted for living-cost differences.
  • German Fiscal Policy On The Move — Germany's budget raises defence spending to €152.8bn by 2029, more than doubling it to 3.5% of GDP. Using International Monetary Fund growth projections and today's yield curve, the author estimates German gross debt rises from 64% of GDP to 76% by 2029, with net debt supply for private investors approaching €250bn a year.

AI Summary. California lawmakers rolled back the California Environmental Quality Act, a law long used by opponents to block development projects, as part of legislation targeting the state's housing shortage. California needs 3.5m housing units but builds only about 100,000 annually, and housing experts identify regulatory barriers to construction as the heart of the problem.

Jim Carlton Wall Street Journal
Date Posted:

As part of an effort to increase housing construction and lower housing costs, California rolled back the longstanding California Environmental Quality Act, which had been used to block new housing construction.

Will rolling back environmental review rules ease housing shortages?

Core argument: California needs 3.5 million housing units but builds only about 100,000 annually, a shortage housing experts attribute chiefly to regulatory barriers to construction.

California lawmakers rolled back one of the most stringent environmental laws in the country, after Gov. Gavin Newsom muscled through the effort in a dramatic move to combat the state’s affordability crisis. The Democratic governor—widely viewed as a 2028 presidential contender—made passage of two bills addressing an acute housing shortage a condition of his signing the 2025-26 budget. A cornerstone of the legislation reins in the California Environmental Quality Act, which for more than a half-century has been used by opponents to block almost any kind of development project. California sits at the epicenter of America’s home shortage. The state has faced a homelessness crisis. Nine of the 10 least affordable cities in the country are located there, according to a May 20 report by WalletHub, a personal-finance company. And the heart of the problem, say housing experts, are the regulatory barriers to construction. The state needs 3.5 million units, but only about 100,000 are built annually.

Takeaways by Macro Roundup® AI

  1. California needs 3.5 million housing units but builds only about 100,000 annually, a shortage housing experts attribute chiefly to regulatory barriers to construction.
  2. California lawmakers reined in the California Environmental Quality Act, which for more than a half-century has been used by opponents to block almost any kind of development project.
  3. Gov. Gavin Newsom made passage of two housing bills a condition of signing California's 2025-26 budget, in a state holding nine of the 10 least affordable U.S. cities, according to a May 20 WalletHub report.

Related Articles:

  • 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.
  • Why Has Construction Productivity Stagnated? The Role of Land-Use Regulation — Homes built per construction worker boomed after World War II and fell after 1970, a decline the authors link to local land-use regulation that limits project size and keeps construction firms small and less productive. They estimate US residential builders would be roughly 60% more productive if their size distribution matched manufacturing.
  • 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.