Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “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
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “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
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, October 29, 2025

AI Summary. The authors estimate that about 4–20% of tariff-induced cost increases passed into US retail prices within six months, so a 20% tariff raised affected goods' prices roughly 3–4% relative to untariffed goods in the same category. They estimate the tariffs added about 0.7 percentage points to consumer price inflation, with pass-through accumulating gradually.

Alberto Cavallo, Paola Llamas, and Franco Vazquez Harvard University
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Product-level data on prices and effective tariff rates show pass-through of tariffs to retail prices increasing gradually, reaching 20% after 6 months. As of August, CPI had risen 2.9%, compared to an estimated 2.2% in the absence of tariffs.

How much of tariff costs reached retail prices within six months?

Core argument: Product-level regressions estimate that ~4–20% of tariff-induced cost increases showed up in retail prices within 6 months, implying a 20% tariff raised affected goods' retail prices by about 3–4% relative to unaffected products in the same category.

Using product-level regressions that relate monthly price changes to changes in applied tariff rates, we find that ~4 to 20% of tariff-induced cost increases were reflected in retail prices within 6 months. This magnitude is consistent with incomplete but nontrivial transmission, implying that a 20% tariff raised the retail prices of affected goods by about 3 to 4% relative to unaffected products in the same category. Pass-through is higher for goods facing larger tariff hikes and in sectors with thinner distribution margins. Aggregating these product-level effects using official CPI expenditure weights, we estimate that the 2025 tariffs added roughly 0.7pp to the all-items Consumer Price Index within six months of implementation. This contribution is economically meaningful: without the tariffs, the annual inflation rate in the all-items Consumer Price Index (CPI-U, NSA)—which stood at 2.9% in August 2025—would have been close to 2.2%, a level broadly consistent with the Federal Reserve’s inflation target. After 6 months, about 20% of the tariff changes were reflected at the consumer level, [suggesting that] pass-through will continue to accumulate gradually over time, putting persistent upward pressure on inflation statistics.

Takeaways by Macro Roundup® AI

  1. Product-level regressions estimate that ~4–20% of tariff-induced cost increases showed up in retail prices within 6 months, implying a 20% tariff raised affected goods' retail prices by about 3–4% relative to unaffected products in the same category.
  2. Aggregating product-level effects with official CPI expenditure weights, the authors estimate the 2025 tariffs added roughly 0.7pp to the all-items CPI within six months, so August 2025 annual inflation would have been near 2.2% instead of 2.9% without them.
  3. Pass-through is higher for goods facing larger tariff hikes and in sectors with thinner distribution margins, and with about 20% of tariff changes reflected at the consumer level after 6 months, the authors suggest pass-through will continue to accumulate gradually.

Related Articles:

  • A Note On Tariffs From The Real World — A large retailer reports that pre-tariff inventory is still being sold, so tariff costs will show up as margin hits later, and that prices must eventually rise roughly 10–15% to cover them. The retailer says its sector's tariff rate went from about 12% to about 33%, and that retailers are holding prices through the holiday season before raising them.
  • The U.S. Is Not “Winning the Trade War” — The U.S. is the world's largest single source of demand for manufactured goods but remains far smaller than the rest of the world combined, implying foreign producers will mostly avoid bearing the direct cost of tariffs. Consistent with this, the dollar has fallen about 7% against trading partners' currencies while pre-tariff import prices rose about 1%.
  • The U.S. Is Tiptoeing Away From Many of Trump’s Signature Tariffs — The US has exempted dozens of products from its reciprocal tariffs and offered to carve out hundreds more, from farm products to airplane parts, for countries that strike trade deals. The administration is simultaneously expanding tariffs grounded in Section 232 of the Trade Expansion Act, covering metals, autos, heavy trucks, pharmaceuticals and furniture.

AI Summary. Inflation-adjusted median income growth for 25–54-year-old workers declined and has hovered near decade lows, with a more marked slowdown among those aged 25–29. The authors suggest this may reflect a reduced pace of job-to-job transitions, seen in lower hiring and quit rates.

Chris Wheat and George Eckerd JP Morgan
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A JPM analysis finds real income growth for prime-age (25–54) American workers fell to 2% y/y in September. Nominal growth is ~ at its pre-pandemic pace, “but real purchasing power gains are at a relatively low level” given inflation.

Is slower job switching holding down real income growth for young workers?

Core argument: Median inflation-adjusted income growth among 25–54-year-olds declined in early 2025 and remained near decade-long lows through September.

Median income growth among 25–54-year-olds declined in early 2025 and remained low through September, hovering near decade-long lows after adjusting for inflation. Young people in our sample—workers aged 25–29—have experienced a more marked slowdown in income gains, potentially a function of the reduced pace of job-to-job transitions across the economy, reflected in lower hiring and quit rates. Persistently high increases in consumer prices have been a real headwind to purchasing power in recent years. Inflation hasn’t yet fallen to the Fed’s two percent objective, meaning that the solid recent rate of nominal income gains corresponds to nearly the weakest gains in real purchasing power seen over the past decade.

Takeaways by Macro Roundup® AI

  1. Median inflation-adjusted income growth among 25–54-year-olds declined in early 2025 and remained near decade-long lows through September.
  2. Workers aged 25–29 have experienced a more marked slowdown in income gains, potentially a function of a reduced pace of job-to-job transitions reflected in lower hiring and quit rates.
  3. With inflation still above the Federal Reserve's two percent objective, solid nominal income gains correspond to nearly the weakest real purchasing-power gains of the past decade.

Related Articles:

  • Jobless Growth — Labor demand growth may be too weak to keep pace with even modest labor supply growth: the labor market is somewhat weaker than before the pandemic, job growth has turned negative outside healthcare, and firms are focused on using AI to cut labor costs. Economists estimate most employment losses in routine manual occupations since the 1970s occurred during recessions.
  • Millions of Workers Are Left Out of the ‘Low-Hire, Low-Fire’ US Job Market — Economists expect anemic payroll growth with unemployment holding at 4.3%, a relatively low rate that masks workers stuck in unwanted jobs or underemployed. Goldman Sachs economists say labor market churn—the flow into and out of jobs—has fallen well below pre-Covid levels, and unemployment among 16-to-24-year-olds reached 10.5%.
  • A New Era of Higher Inflation Risks — The authors argue inflation's baseline is now higher than pre-pandemic, with 2% acting more as a floor than a ceiling, noting disinflation has largely stalled and core inflation has run above target on a six-month annualized basis for five years. They expect a structurally wider range of inflation outcomes, skewed to the upside and centered higher than in the 2010s.

AI Summary. US equities look expensive against sales, book value, earnings expectations and dividends, with the cyclically adjusted price-earnings ratio popularized by Yale University's Robert Shiller above 40 for the first time since the dot-com bubble burst. That measure never approached such a level over the preceding century, including before the 1929 crash.

John Authers Bloomberg
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John Authers notes that Shiller’s CAPE (cyclically adjusted price-earnings multiple) hit 40 for the first time since the dot-com bubble burst in 2000. “It never got close to that level over the preceding century, even on the eve of the 1929 Great Crash.”

Are US stocks expensive by every standard valuation measure?

Core argument: The S&P 500's cyclically adjusted price-earnings multiple (CAPE), popularized by Yale's Robert Shiller, exceeds 40 using Tuesday's close in Shiller's public spreadsheet, the first time above that level since the dot-com bubble burst in 2000.

US equities, whose results for the latest quarter have generally been coming in strong, look expensive. This is true whether we measure the S&P 500 with reference to sales, book value, earnings expectations or dividends The best-known long-term measure of stock market value is the cyclically adjusted price-earnings multiple (CAPE), popularized by Yale University’s Robert Shiller. Substituting Tuesday’s close into Shiller’s spreadsheet, which is public, delivers a CAPE above 40 for the first time since the dot-com bubble burst in 2000. It never got close to that level over the preceding century, even on the eve of the 1929 Great Crash. Even if we revise the CAPE ratio on the assumption that margins are permanently at their current level, they look way too expensive.

Takeaways by Macro Roundup® AI

  1. The S&P 500's cyclically adjusted price-earnings multiple (CAPE), popularized by Yale's Robert Shiller, exceeds 40 using Tuesday's close in Shiller's public spreadsheet, the first time above that level since the dot-com bubble burst in 2000.
  2. The CAPE never came close to 40 over the century preceding 2000, including on the eve of the 1929 Great Crash.
  3. US equities look expensive whether measured against sales, book value, earnings expectations or dividends, and remain expensive even when the CAPE is revised assuming margins stay permanently at current levels, despite generally strong latest-quarter results.

Related Articles:

  • Why We Are Not In A Bubble….Yet — The 5 largest US technology companies are worth about 16% of the global public equity market, and the top 10 US stocks nearly 25%, almost $25tn. The author argues valuations are high but not bubble-level, with the "Magnificent 7" median forward price-to-earnings ratio at 27x, roughly half that of the late-1990s leaders.
  • Which U.S. Stocks Generated the Highest Long-Term Returns? — Of the 29,078 U.S. common stocks in a database spanning nearly a century, 51.6% had negative cumulative returns, while 17 stocks returned more than 5m% — led by Altria at 265m%. Those top performers averaged annualized returns of just 13.47%, underscoring the value of time invested.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. Currencies of countries with low government debt burdens, including Sweden, Norway, and Switzerland, have outperformed the dollar, while the Japanese yen has fallen more than 2% against it and the euro has been flat. Japan's gross government debt stands at 240% of GDP, and the euro area is dominated by high-debt countries.

Robin Brooks Robin Brooks Substack
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Since Powell’s Jackson Hole speech, currencies issued by countries with low debt burdens are outperforming the currencies of high-debt countries. Brooks projects that Sweden’s “undervalued” Krona will emerge as a key safe-haven currency going forward.

Are currencies of low-debt countries outperforming the dollar?

Core argument: Since Jackson Hole, the Swedish krona has been the best-performing currency against the dollar, followed by the Norwegian krone and Swiss franc, a pattern attributed to countries with low debt burdens outperforming high-debt ones.

Countries with low debt burdens are outperforming ones with lots of debt. The right chart above shows this dynamic. Since Jackson Hole, the Swedish Krona (red line) is the best performing currency against the Dollar, followed by the Norwegian Krone (orange line) and Swiss Franc (black line). The Euro (pink line) is flat against the Dollar, no surprise since it consists mostly of high-debt countries, with Germany’s recent move to soften up its debt brake and pursue big fiscal stimulus a major destabilizer for the region. The Japanese Yen (blue line) is down over two percent against the Dollar, no surprise given that gross government debt is 240 percent of GDP. The fact that Sweden is at the top of the pack makes sense. The Krona is massively undervalued (it’s at the same level against the Euro as during the global financial crisis), while Sweden has also managed to steer clear of endlessly rising debt levels that so bedevil the Euro periphery.

Takeaways by Macro Roundup® AI

  1. Since Jackson Hole, the Swedish krona has been the best-performing currency against the dollar, followed by the Norwegian krone and Swiss franc, a pattern attributed to countries with low debt burdens outperforming high-debt ones.
  2. The Japanese yen is down over 2% against the dollar, a move tied to Japan's gross government debt of 240% of GDP.
  3. The euro is flat against the dollar, attributed to the bloc consisting mostly of high-debt countries, with Germany's move to soften its debt brake and pursue big fiscal stimulus a major destabilizer for the region.

Related Articles:

  • Dollar Dominance and Dollar Depreciation — Moving On Different Tracks — The dollar is projected to depreciate as less exceptional US economic and market performance makes it harder to attract unhedged capital flows to fund a large current account and fiscal deficit, leaving a high currency valuation to correct further. A softening US labor market supports that view.
  • Across The Rich World, Fiscal Crises Loom — An analysis estimates most rich countries could keep debt stable as a share of their economies with only small primary surpluses—Britain's required surplus is 0.3% of GDP—even if all debt were refinanced immediately at current rates, but the tightening needed to stabilize debt ratios exceeds 2% of GDP in Britain and America and 3% in France.
  • De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves — Central banks' gold accumulation is generally not associated with reducing the dollar's share of international reserves at the country level, apart from a few prominent cases, and is more consistent with modest overall diversification. Gold's role as an official-sector store of value has grown, but its use as a unit of account and medium of exchange remains limited.

AI Summary. Bank of America expects the US Treasury to lean more heavily on short-term bill issuance, lifting bills to about 25% of outstanding debt from about 20%. Its strategists estimate the resulting reduction in longer-dated note and bond supply is equivalent to roughly $1tn of 10-year notes, worth at least 31 basis points of lower yields.

Elizabeth Stanton Bloomberg
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A Bank of America analysis suggests Treasury’s anticipated decision to issue more short-term bills may drive the 10-year yield lower by more than 25bps. That decision would likely result in bills accounting for 25% of outstanding debt, up from 20% today.

Does heavier short-term bill issuance lower long-term Treasury yields?

Core argument: Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.

Treasury officials are slated to unveil their financing strategy for November to January on Nov. 5, and Bank of America expects them “to lean more heavily on bill supply.” That would lead to bills accounting for about 25% of the outstanding debt, up from about 20%. The upshot is relatively less supply of notes and bonds maturing in two to 30 years, which should support their value and allow them to trade at lower yields, strategists led by Meghan Swiber said in a report. Over the 2026 and 2027 fiscal years, the anticipated increase in the relative bill supply is equivalent to about $1 trillion of 10-year notes, a supply cut they estimate is worth at least 31 basis points and as much as 34 basis points.

Takeaways by Macro Roundup® AI

  1. Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.
  2. Bank of America expects Treasury officials to lean more heavily on bill supply, lifting bills to about 25% of outstanding debt from about 20%.
  3. Treasury officials are slated to unveil their November-to-January financing strategy on Nov. 5, and Bank of America says relatively less supply of notes and bonds maturing in two to 30 years should support their value and allow them to trade at lower yields.

Related Articles:

  • Monthly Budget Review: September 2025 — The Congressional Budget Office estimates the federal budget deficit was $1.8tn in fiscal year 2025, $8bn below the prior year, as revenues rose an estimated $308bn (6%) and outlays rose $301bn (4%). Customs duties including tariffs rose $118bn (153%), and net interest on the public debt surpassed $1tn for the first time.
  • Passive Shortening — The US Treasury issues longer-term securities on a regular schedule and absorbs swings in financing needs through short-term bills, putting it on track to modestly shorten its debt maturity structure. As short-term debt grows, government interest expense becomes more closely tied to the Federal Reserve's policy rate.
  • Why Microsoft Has Lower Borrowing Costs Than the U.S. — Two AAA-rated Microsoft bonds trade at yields slightly below equivalent U.S. Treasurys, an unusual negative spread given that companies are more likely to default than a government able to tax and that corporate bonds are harder to sell. Demand for high-quality corporate debt has compressed the AAA corporate spread to 0.3 percentage point over Treasurys.

Thursday, October 30, 2025

AI Summary. New York state's share of US taxpayers reporting over $1m in income fell from 12.7% in 2010 to 8.7% in 2022, and the Citizens Budget Commission estimates state and city income tax receipts from that group would have been $13bn higher had the share held. Job growth has concentrated in lower-paid health care and social assistance.

The Economist Economist Staff
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Since January 2020, private sector real hourly earnings have fallen 9% in New York City, while increasing 3% nationally, as large firms based in NYC move jobs to lower-cost states. JP Morgan now has more workers in Texas than in New York.

Is a shrinking share of high earners weakening New York's tax base?

Core argument: New York state's share of U.S. taxpayers reporting more than $1m in income fell from 12.7% in 2010 to 8.7% in 2022, according to the Citizens Budget Commission.

According to the Citizens Budget Commission New York state’s share of American taxpayers reporting more than $1m in income declined from 12.7% in 2010 to 8.7% in 2022. Such people paid $34bn in income tax to the state and city in 2022, a figure that would have been $13bn higher if New York’s share of millionaires had held up. Estimates from Goldman Sachs suggest that fully 10% of households in New York City with incomes of more than $10m established residency elsewhere between 2018 and 2023. As the ultra-rich have headed for the exit, the city’s employment growth has become concentrated in much worse-paid industries than finance. Since the end of 2019, New York has added more than 268,000 jobs in health care and social assistance, particularly home health care. Employment as a whole rose by just 220,000 over the same period, meaning that, if it was not for that industry, overall employment would have shrunk.

Takeaways by Macro Roundup® AI

  1. New York state's share of U.S. taxpayers reporting more than $1m in income fell from 12.7% in 2010 to 8.7% in 2022, according to the Citizens Budget Commission.
  2. Taxpayers reporting more than $1m in income paid $34bn in New York state and city income tax in 2022, a figure that would have been $13bn higher had the state's share of millionaires held up.
  3. New York added more than 268,000 health care and social assistance jobs since the end of 2019, against total employment growth of 220,000, meaning overall employment would have shrunk without that industry.

Related Articles:

  • The Stationary Bandits of New York City — New York City's construction costs exceed international benchmarks: Paris installs metro platform edge doors for about €3.7m per station while the Metropolitan Transportation Authority says it needs $55m per station. The author argues stringent crane operator licensing and sidewalk shed regulations protect a small number of unionized contractors from competition.
  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.

AI Summary. New York City's top 1%, those earning at least $900,000, receive roughly 40% of city income — about twice the inequality of the US overall — and contribute about two-fifths of the city's $18bn in annual income tax revenue. Their homes and offices also cover a large share of roughly $34bn in yearly property levies.

Ben Steverman and Emily Flitter Bloomberg
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“Even a few billionaires or marquee employers packing up their bags” could put a significant hole in NYC’s budget, given that the city’s top 1% earners pay 40% of the city’s income tax and a significant portion of property taxes.

How dependent is New York City's budget on its wealthiest residents?

Core argument: New York City's wealthiest 1% earn roughly 40% of the city's income, about twice the income inequality of the US as a whole and higher than any other country, according to the World Inequality Database.

The city’s wealthiest 1% earn roughly 40% of its dollars, a share that fluctuates based on financial and market conditions. That’s about twice the income inequality in the US as a whole and also higher than any other country in the world, according to the World Inequality Database. Almost 35,000 year-round city residents earned at least $1 million in 2023, the latest tax data show. Of the world’s 500 wealthiest people, 23 call New York City home, with a combined net worth of nearly $450 billion, and many more come through town as often as time and their tax situations allow. Depleting this resource could devastate the city. Each year, NYC’s top 1%—those with incomes of at least $900,000—contribute about two-fifths of the city’s $18 billion in annual income tax revenue. Their lavish homes and sleek offices cover a large share of the city’s roughly $34 billion in annual property levies as well. Even a few billionaires or marquee employers packing up their bags could put a noticeable dent in the municipal budget.

Takeaways by Macro Roundup® AI

  1. New York City's wealthiest 1% earn roughly 40% of the city's income, about twice the income inequality of the US as a whole and higher than any other country, according to the World Inequality Database.
  2. New York City's top 1%, those with incomes of at least $900,000, contribute about two-fifths of the city's $18 billion in annual income tax revenue, and their homes and offices cover a large share of roughly $34 billion in annual property levies.
  3. Almost 35,000 year-round New York City residents earned at least $1 million in 2023, and 23 of the world's 500 wealthiest people call the city home, with a combined net worth of nearly $450 billion.

Related Articles:

  • Behavioral Responses to State Income Taxation of High Earners: Evidence from California — A California ballot measure raising top marginal income tax rates by up to 3 percentage points prompted an additional 0.8% of the affected tax base to leave the state, with an estimated income elasticity of 2.5–3.2 for high earners who stayed. The authors estimate these responses eroded 45.2% of windfall revenues within one year and 60.9% within two.
  • Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy — The authors estimate that US billionaires move to states without estate taxes as they age, with $80.7bn of Forbes 400 wealth escaping estate taxation as a result. They find that for the average state the added estate tax revenue exceeds forgone income tax revenue by 31%, with California a notable exception.
  • Ed Conard Debates Furman On “The Expected Value of Risk Taking” — A debate on U.S. fiscal policy argues that spending increases, rather than the tax increases needed to fund them, slow growth, and that higher taxes would reduce the expected value of America's innovative risk-taking. The argument holds that cutting debt below 100% of GDP is critical.

AI Summary. Higher-income American households have raised their cash relative to liabilities far more than lower-income households, with the top 1% up 37 percentage points and the bottom 60% up 8 percentage points since late 2019. Lower-income households instead increased holdings of housing and durable goods, and the ratio of nonfinancial assets to liabilities reached 299%, its highest since 1985.

Matt Klein The Overshoot
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At ~3:1, the ratio of nonfinancial assets to liabilities is at its highest level since 1985. Since Covid, Americans in the bottom 60% have seen an ~43% rise in the value of durable goods owned relative to consumer credit owed, the highest across cohorts.

How do household balance sheet gains differ across income groups?

Core argument: U.S. households in the 80th–99th income percentiles have raised their cash-to-liability ratio by about 60 percentage points since the 2006 trough, versus about 20 percentage points for the bottom 60% of earners.

Americans in the 80th-99th percentiles of the household income distribution have increased their holdings of cash relative to liabilities by about 60 percentage points since the trough in 2006, while Americans in the bottom 60% increased their debt coverage by about 20 percentage points. Similarly, Americans in the top 1% of the income distribution increased their cash/liability ratio by 37 percentage points since 2019Q4, those in the 80-99% income cohort increased their debt coverage by 16 percentage points, and those in the bottom 60% did so by 8 percentage points. Lower-income Americans have instead focused on increasing their holdings of housing and durable goods—and limiting the growth in debt relative to income while spending more. The ratio of nonfinancial assets to liabilities has increased by 58 percentage points (to 299%) since 2019Q4, and is now at its highest since 1985. The increase in the ratio of real assets to liabilities is broadly similar across income cohorts, although the number for the top 1% is skewed by the relatively low levels of debt carried by the highest-earners. Americans in the bottom 60% have experienced the biggest increase in the value of durable goods owned vs. consumer credit owed.

Takeaways by Macro Roundup® AI

  1. U.S. households in the 80th–99th income percentiles have raised their cash-to-liability ratio by about 60 percentage points since the 2006 trough, versus about 20 percentage points for the bottom 60% of earners.
  2. Since 2019Q4, the top 1% of U.S. earners increased their cash/liability ratio by 37 percentage points, the 80–99% cohort by 16 percentage points, and the bottom 60% by 8 percentage points.
  3. The U.S. ratio of nonfinancial assets to liabilities rose 58 percentage points to 299% since 2019Q4, its highest since 1985, with the bottom 60% seeing the largest increase in durable goods owned versus consumer credit owed.

Related Articles:

  • Top 10% of Earners Drive a Growing Share of US Consumer Spending — An analysis of Federal Reserve data found the top 10% of US earners accounted for 49.2% of total consumer spending, up from 48.5% the prior quarter and the highest share in data going back to 1989. Spending by the bottom 80%, those making under roughly $175,000, has merely kept pace with inflation.
  • US Households and Firms Are in Great Shape — Household and banking sector leverage in the US have declined significantly since 2008, while corporate leverage has moved sideways and federal government leverage has risen significantly. On this measure, the US private sector is in strong financial shape.
  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.

AI Summary. A proposal would replace the 7.65% employer-side payroll tax with a flat Employer Compensation Tax levied on each firm's total annual compensation costs, leaving worker-side taxes and benefit formulas unchanged. The Urban Institute estimates such a tax could close two-thirds of Social Security's funding gap and half of Medicare's, but would not restore full solvency on its own.

Marc Goldwein Committee for a Responsible Federal Budget
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Both the Social Security retirement and Medicare HI trust funds face insolvency in 7 years. Goldwein proposes an Employer Compensation Tax that would “generate enough revenue to close two-thirds of Social Security’s funding gap and half of Medicare’s.”

Can taxing employers' total compensation costs close Social Security's funding gap?

Core argument: The proposed Employer Compensation Tax would replace the 7.65% employer-side payroll tax with a flat tax on each firm's total annual compensation costs, leaving the worker-side payroll tax and benefit calculations unchanged from current law.

This Trust Fund Solution would replace the 7.65% employer-side payroll tax with a new flat Employer Compensation Tax (ECT) imposed on the full cost of all compensation firms pay each year. The worker-side payroll tax and benefit calculations would remain the same as under current law. The ECT would be imposed on each employer’s total compensation costs rather than each worker’s pay. The Urban Institute modelled two ECT options to improve trust fund solvency. A Full ECT that maintains the current combined tax rate of 15.3% and uses the revenue for solvency, and a Rate-Cut ECT that uses about half the revenue to reduce the combined tax rate by 1 percentage point to 14.3% and the remaining revenue to improve solvency. The ECT could generate enough revenue to close two-thirds of Social Security’s funding gap and half of Medicare’s. Alternatively, it could close one-third of Social Security’s shortfall and one-eighth of Medicare’s while also cutting taxes for the bottom 60% of American workers. The ECT alone would not be sufficient to restore solvency to Social Security and Medicare at the current payroll tax rate.

Takeaways by Macro Roundup® AI

  1. The proposed Employer Compensation Tax would replace the 7.65% employer-side payroll tax with a flat tax on each firm's total annual compensation costs, leaving the worker-side payroll tax and benefit calculations unchanged from current law.
  2. The Urban Institute modelled a Full ECT that maintains the combined 15.3% tax rate and directs the revenue to solvency, which could close two-thirds of Social Security's funding gap and half of Medicare's.
  3. The Urban Institute's Rate-Cut ECT option would use about half the revenue to lower the combined rate by 1 percentage point to 14.3%, closing one-third of Social Security's shortfall and one-eighth of Medicare's while cutting taxes for the bottom 60% of American workers.

Related Articles:

  • What Progressives Should Be Thinking About Social Security Reform — Other English-speaking countries such as the UK, Canada, Australia, Ireland and New Zealand direct more pension spending toward preventing old-age poverty and far less toward middle- and upper-income retirees, with maximum US Social Security benefits running two to four times higher in dollar terms. One proposed reform would base benefits on years worked rather than contributions.
  • Social Security and Trends in Wealth Inequality — The authors estimate that including Social Security in household wealth leaves top wealth shares little changed over three decades, with the top 10% and top 1% shares rising 1.1 and 1.6 percentage points versus roughly 9 and 6 points for marketable wealth alone. Social Security wealth grew from $7tn to $39tn.
  • Trends in the Distribution of Family Wealth, 1989 to 2022 — The Congressional Budget Office estimates that the top 10% of U.S. families held 60% of all wealth in 2022, up from 56% in 1989, with the top 1% holding 27%, up from 23%. The rest of the top half saw its share fall from 37% to 33%, while the bottom half held 6% in both years.

AI Summary. Inflation-adjusted US house prices are 2.8% below their 2022 peak, based on the Case-Shiller National Index. An affordability estimate using median income, a 15% down payment and 30-year fixed mortgage rates finds that the monthly principal-and-interest payment on the same $500,000 house rose 90% over four years, as prices climbed 23% and mortgage rates went from 2.84% to 6.59%.

Bill McBride Calculated Risk
Date Posted:

Nationally, real house prices are now 2.8% below the 2022 peak and 9.6% above the 2006 peak. “Affordability” remains at levels last seen in the early 1980s, when 30-year mortgage rates were over 14%.

How much have house prices and mortgage rates raised monthly payments?

Core argument: Inflation-adjusted U.S. house prices stand 2.8% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.

I’ve put together my own affordability index [using] median income from the Census Bureau (estimated 2025), assumed a 15% down payment, and used a 2% estimate for property taxes, insurance and maintenance. This is probably low for high property tax states like New Jersey and Texas, and too high for lower property tax states. For house prices, I used the Case-Shiller National Index, Seasonally Adjusted (SA). Also, for the down payment - there wasn’t a significant difference between 15% and 20%. For mortgage rates, I used the Freddie Mac PMMS (30-year fixed rates). Here is what the index looks like (lower is more affordable). In August 2021, the payment on a $500,000 house, with a 20% down payment and 2.84% 30-year mortgage rates, would be around $1,652 for principal and interest. The monthly payment for the same house, with house prices up 23% over four years and mortgage rates at 6.59% in August 2025, would be $3,131 - an increase of 90% for the same house!

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted U.S. house prices stand 2.8% below their 2022 peak, based on the Case-Shiller National Index, seasonally adjusted.
  2. The monthly principal-and-interest payment on a $500,000 house rose 90%, from about $1,652 in August 2021 to about $3,131 in August 2025, as house prices climbed 23% and 30-year mortgage rates went from 2.84% to 6.59%.
  3. The affordability index uses Census Bureau median income (estimated for 2025), a 15% down payment, a 2% estimate for property taxes, insurance and maintenance, and Freddie Mac PMMS 30-year fixed rates, with little difference between 15% and 20% down.

Related Articles:

  • The State of Housing (Un)Affordability in the US — A slowdown in housing supply growth has weighed on affordability, with the share of housing stock available for sale or rent below its historical average, implying a gap between supply and demand. The analysis estimates that restoring affordability would require roughly 3–4mn additional units, or 2–2.6% of current stock, with California and Florida facing the largest shortages.
  • 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.