Edward Conard

Top Ten New York Times Bestselling Author

  • “…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 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
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “…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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, April 16, 2026

AI Summary. US stocks look expensive by standard measures while the 10-year Treasury yield sits at 4.3%, higher than at any point in the 13-year rally after the global financial crisis. The excess cyclically adjusted earnings yield, a century-long guide to decade-ahead equity returns, currently signals an unappealing time to buy.

John Authers Bloomberg
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The S&P has rallied ~10.7% over the past two weeks, reaching an all-time high. Only in March 2000 was there a 10-day, 10% rally when stocks had higher earnings multiples than they do now. Such high multiples are historically predictive of subsequent low 10-year returns.

Are stocks expensive relative to bond yields?

Core argument: The 10-year Treasury yield at 4.3% stands higher than at any point during the 13-year equity rally that followed the Global Financial Crisis, while stocks look expensive by any sensible measure.

Stocks look expensive by any sensible measure, while the 10-year Treasury yield sits at 4.3% — higher than at any point during the 13-year rally that followed the Global Financial Crisis. Subtract the bond yield from the earnings yield (the inverse of the price/earnings ratio) of the S&P and you get what Shiller calls the excess CAPE yield. For over a century, this offered a great guide to how equities would fare over the ensuing decade — and it currently suggests that this is an unappealing time to buy into the market. Earnings season is getting underway amid great optimism. That limits potential damage from the war, but can’t explain this two-week rally. Bloomberg’s Earnings Estimates Graphs service shows that forecasts for S&P 500 first-quarter earnings have dropped over that time.

Takeaways by Macro Roundup® AI

  1. The 10-year Treasury yield at 4.3% stands higher than at any point during the 13-year equity rally that followed the Global Financial Crisis, while stocks look expensive by any sensible measure.
  2. Shiller's excess CAPE yield — the S&P earnings yield minus the bond yield — has offered a good guide to decade-ahead equity returns for over a century and currently suggests an unappealing time to buy into the market.
  3. Bloomberg's Earnings Estimates Graphs service shows forecasts for S&P 500 first-quarter earnings have dropped over the two weeks of the rally, which earnings optimism cannot explain.

Related Articles:

  • One Hundred Years in the U.S. Stock Markets — Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.
  • Everyone’s Looking For A Bubble. No One Sees The Stampede — A proprietary model estimates monthly artificial intelligence revenue grew roughly 18-fold in two years, from $772m to $13.8bn, with AI accounting for an estimated 23% of Google Cloud, 10% of Azure and 5% of Amazon Web Services. The model's ratio of investment to revenue fell from 6.1x to 4.7x, still historically high.
  • Bubbles, Booms and Crashes in the US Stock Market 1792-2024 — US industry booms averaging 300% gains over two years were on average followed by flat prices rather than crashes, according to an analysis of long-run stock market data. Booming and crashing industries are associated with subsequent high volatility, but post-boom performance is not significantly different from unconditional returns once market trends are controlled for.

AI Summary. Private companies account for 63% of US firms with $100m or more in annual revenue, with even higher shares in the EU and UK, and together generate nearly $12tn in annual revenue versus $33tn for public companies. Private equity, at $10.5tn in global assets, is 6x global private credit.

Amanda Lynam, Arun Manohar, Spencer Rogers, Sara Grut, et al. Goldman Sachs
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63% of American firms with $100mm or more of annual revenue are private; the share is even higher in the EU and UK. Private firms across the three generate $12T in annual revenue relative to their public peers’ $33T.

How large is the private company market relative to public markets?

Core argument: 63% of US firms with $100 million or more in annual revenue are private, and the private shares in the EU and UK are even larger, per S&P Capital IQ estimates.

63% of firms in the US with $100 million or more in annual revenue are private, and the shares of private firms in the EU and UK are even larger. This collection of private firms across all three regions represents nearly $12 trillion in aggregate annual revenue, per S&P Capital IQ estimates. For comparison, the annual revenue generated by the public company cohort totaled $33 trillion for the most recent 12-month period. [Exhibit 6 in gallery] frames the global private credit market (using Preqin’s universe, which does not capture BDCs) relative to other alternative asset markets such as private equity. The size differentials are meaningful: at $10.5 trillion in global AUM, private equity is 6x the size of the global private credit market.

Takeaways by Macro Roundup® AI

  1. 63% of US firms with $100 million or more in annual revenue are private, and the private shares in the EU and UK are even larger, per S&P Capital IQ estimates.
  2. Private firms across the US, EU, and UK generate nearly $12 trillion in aggregate annual revenue, compared with $33 trillion for the public company cohort over the most recent 12-month period, per S&P Capital IQ estimates.
  3. Global private equity AUM of $10.5 trillion is 6x the size of the global private credit market, measured using Preqin's universe, which does not capture business development companies.

Related Articles:

  • Public Markets Are a Shrinking Part of the US Economy — S&P 500 companies account for 18% of total US employment, 21% of total US capital expenditure, roughly half of economy-wide corporate profits, and less than half of outstanding corporate debt. Privately owned firms account for almost 80% of job openings, and 81% of firms with revenues above $100m are private.
  • Competitive Advantage Period: The Neglected Value Driver — Data indicate persistence in returns on invested capital has increased since 2000, with large companies the main beneficiaries; the information technology sector's aggregate return was 19% versus a 10.8% median from 1970 to 2024. Of about 13,800 U.S. public firms listing from 1976 to 2019, 18% survived.
  • Echoes of Junk Bonds Past — Annual default rates of 10% for private credit direct lending are within the historical range, and with recovery assumptions implying roughly 50% losses given default, realized losses could run near 5% a year, or 10%+ for weaker credits. Many private credit funds are slow to mark down loans while allowing redemptions at 100 cents on the dollar.

AI Summary. Analysis of ancient DNA from 15,836 West Eurasians estimates selection coefficients at 9.7m genetic variants and finds pervasive directional selection, including increases in genetic scores for light skin pigmentation and negative selection against variants linked to type 2 diabetes risk and psychoses such as schizophrenia and bipolar disorder.

Ali Akbari, Annabel Perry, Alison Barton, Mohammadreza Kariminejad, et al. Nature
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Ancient DNA from 15,836 West Eurasians reveals that natural selection accelerated dramatically in the past 10,000 years, following the agricultural revolution. The strongest selection drove improved immune function and lighter skin pigmentation.

Has human genetic selection continued to shape traits across West Eurasia?

Core argument: Applying a new test for directional selection to ancient DNA from 15,836 West Eurasians, 10,016 with newly reported data, the authors estimate selection coefficients at 9.7 million variants to study how selection shapes the genetic architecture of complex traits.

We present a method for detecting directional selection in ancient DNA time-series data that tests for consistent trends in allele frequency change over time, and apply it to 15,836 West Eurasians (10,016 with new data). We estimate selection coefficients at 9.7 million variants, enabling study of how Darwinian forces couple to allelic effects and shape the genetic architecture of complex traits. We focused on 12 traits of particular interest with significant signals from all three tests (Figure 4). One of the strongest signals is an increase over time in the PGS for light skin pigmentation. Type 2 diabetes risk factors give compelling signals of negative selection. We detected negative polygenic selection against alleles associated today with psychoses such as bipolar disorder and schizophrenia. We finally observed signals of selection for combinations of alleles that today are associated with three correlated behavioural traits: scores on intelligence tests, household income and years of schooling. An important caveat is [that] these effects were measured in industrialized societies, and it remains unclear how these relate to phenotypes that were adaptive in the past.

Takeaways by Macro Roundup® AI

  1. Applying a new test for directional selection to ancient DNA from 15,836 West Eurasians, 10,016 with newly reported data, the authors estimate selection coefficients at 9.7 million variants to study how selection shapes the genetic architecture of complex traits.
  2. Among 12 traits with significant signals from all three tests, one of the strongest is an increase over time in the polygenic score for light skin pigmentation, alongside negative selection on type 2 diabetes risk factors and on alleles associated today with bipolar disorder and schizophrenia.
  3. The authors observed signals of selection on combinations of alleles associated today with intelligence test scores, household income, and years of schooling, while cautioning that these effects were measured in industrialized societies and their relation to past adaptive phenotypes remains unclear.

Related Articles:

  • Pervasive Findings of Directional Selection Realize the Promise of Ancient DNA to Elucidate Human Adaptation — Analyzing ancient DNA for consistent trends in gene-variant frequency over time, the authors report that many hundreds of gene variants were affected by strong directional selection over the last ten millennia. They identify selection for variant combinations today associated with lighter skin color, lower schizophrenia and bipolar risk, slower health decline, and higher intelligence-test scores, income, and schooling.
  • Animal Mutation Rates Reveal Traits That Speed Evolution — An analysis of 68 vertebrate species published in Nature found germline mutation rates varied about 40-fold per generation but roughly 120-fold per year, a wider range than earlier studies suggested. The authors found species with larger effective population sizes had lower mutation rates, evidence for the "drift-barrier hypothesis" that natural selection weakens against mutation in smaller populations.
  • Frontiers Evolutionary Trajectories of Complex Traits in European Populations of Modern Humans — Genome-wide polygenic scores indicate European populations after the Neolithic period show increases in height, educational attainment, and intelligence scores, alongside decreases in scores for unipolar depression. The authors associate this shift from relative stagnation to accelerated evolutionary change with the spread of agriculture and animal domestication.

AI Summary. Correcting for measurement error by using relative rather than absolute correlations among relatives, the authors estimate that educational intergenerational mobility in Denmark and Sweden is much lower than conventionally measured, with parent-child and sibling correlations much higher. They argue Nordic education spending and income compression have at best modestly reduced families' role in children's educational outcomes.

Gregory Clark and Martin Hørlyk Kristensen Historical Economics & Development Group
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After correction for measurement error, Denmark and Sweden show very limited mobility in educational attainment. Indeed, “19th-century England had intergenerational and sibling correlations that only modestly exceed those of modern Denmark and Sweden.”

Is Nordic social mobility much lower than conventionally measured?

Core argument: Correcting for measurement error by comparing relative rather than absolute correlations of relatives, the authors find that educational intergenerational mobility in modern Denmark and Sweden is much lower, and parent–child and sibling correlations much higher, than conventionally measured.

Attempts to compare societies in terms of their degree of social mobility across time and place have often failed to take any account of the problem of measurement error. In this paper we suggest a method of correcting for measurement errors that is based on looking not at the absolute correlation of relatives in outcomes, but at their relative correlation. Applying such methods to Denmark, Sweden and England now, as well as England in the nineteenth century [that] actual educational intergenerational mobility rates in modern Denmark and Sweden are much lower than conventionally measured, [and] the correlation of parents and siblings in educational attainment is much higher than conventionally measured. Denmark and Sweden’s more generous public support of education, and compression of household income inequalities, has at best modestly reduced the importance of families in determining child educational outcomes. Table 3 suggests that Denmark and Sweden have underlying social mobility rates that are similar, though not quite as high, as modern England, across all three dimensions of mobility. Marital assortment is as strong in the Nordic countries as in modern England, and intergenerational and sibling correlations are nearly as high. Even more remarkable in Table 3 is that nineteenth-century England had intergenerational and sibling correlations that only modestly exceed those of modern Denmark and Sweden.

Takeaways by Macro Roundup® AI

  1. Correcting for measurement error by comparing relative rather than absolute correlations of relatives, the authors find that educational intergenerational mobility in modern Denmark and Sweden is much lower, and parent–child and sibling correlations much higher, than conventionally measured.
  2. The authors report that Denmark and Sweden have underlying social mobility rates similar to, though not quite as high as, modern England across intergenerational, sibling, and marital dimensions, with marital assortment as strong in the Nordic countries.
  3. Denmark and Sweden's more generous public support of education and compression of household income inequalities have at best modestly reduced the importance of families in determining children's educational outcomes, and nineteenth-century England's intergenerational and sibling correlations only modestly exceed theirs.

Related Articles:

  • The Inheritance Of Social Status: England, 1600 to 2022 — Using a genealogical database of 422,374 English people with rarer surnames, the authors find social status persists strongly even among distant relatives, with status correlations declining by a constant factor of 0.79 per step in the lineage across all status measures and eras studied. The authors argue this constancy suggests social interventions have modest effects.
  • For Whom the Bell Curve Tolls: A Lineage of 400,000 English Individuals 1750-2020 Shows Genetics Determines Most Social Outcomes — A study of 402,000 English individuals across 1750–2020 estimates an intergenerational occupational status correlation of 0.88 and a genetic correlation between spouses of 0.76, which the authors interpret as a strong genetic basis for the persistence of social status. The authors argue that highly assortative mating around status genetics limits what policy can do to raise social mobility.
  • The Returns to Education: A Meta-Study — A meta-study of 79 causal estimates finds an average 8.2% earnings gain per year of education, matching earlier work, but also finds evidence of publication bias favoring statistically significant and positive estimates. Correcting for these biases implies an average causal return in the 0%–3% range.

AI Summary. High school varsity athletes are absent about 1.37 percentage points less often than non-athletes over the school year, nearly 20% lower, after controlling for factors linked to both sports participation and attendance. Athletes' absence rates fall further while their sport is in season, which the authors argue suggests participation itself improves attendance.

Nat Malkus and Sam Hollon American Enterprise Institute
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The absentee rate of Indiana high school students, ~23% of whom played a varsity sport, was ~20% lower for those who participated in varsity athletics than for non-athletes. The effect was stronger when an athlete’s particular sport was in season.

Does playing high school varsity sports reduce student absenteeism?

Core argument: High school varsity athletes' absence rate across the school year was 1.37 points lower than non-athletes', a reduction of almost 20%, after controlling for factors that matter for both sports participation and attendance.

We find that varsity sports participation is strongly associated with better student attendance, and we argue it is plausible that varsity sports participation causes better attendance. When we control for a number of factors that we know matter for both sports participation and attendance, we continue to find that varsity athletes are absent less often than their peers across the entire year. Across the school year, athletes’ absence rate was 1.37 points lower than non-athletes’. That’s a reduction of almost 20%. The broad pattern shown in Table 1 is that students from more advantaged groups were more likely to participate in varsity sports and less likely to be absent from school. It’s thus no surprise that, in the raw data, there is an association between playing varsity sports and having good attendance (Figure 3). But is that because students who attend school more reliably are more likely to play sports or because playing sports leads to better attendance? One way to tease out the answer is to compare varsity athletes' attendance during their sports seasons with their attendance the rest of the year. Not only do varsity athletes have lower annual absence rates—especially unexcused absences—than non-athletes, but [Figure 3 and Figure 4] show that their absence rates fall further when their sport is in season, [which suggests at least some causal effect].

Takeaways by Macro Roundup® AI

  1. High school varsity athletes' absence rate across the school year was 1.37 points lower than non-athletes', a reduction of almost 20%, after controlling for factors that matter for both sports participation and attendance.
  2. Varsity athletes' absence rates fall further when their sport is in season, which the authors argue suggests at least some causal effect of participation on attendance.
  3. Students from more advantaged groups were more likely to play varsity sports and less likely to be absent, producing an association in the raw data between varsity participation and good attendance.

Related Articles:

  • The Benefits of Scholastic Athletics — Using longitudinal data with extensive controls for family background, ability, and personality, the authors estimate that college varsity athletes from disadvantaged backgrounds—including women and men from low-income families and Black men—earn more after graduation than comparable non-athletes. The authors conclude that participation in college sports promotes social mobility, with no evidence of adverse outcomes.
  • Long COVID for Public Schools: Chronic Absenteeism Before and After the Pandemic — Nationwide chronic absenteeism — the share of students missing at least 10% of a school year — rose from 15% in 2018 to 28% in 2022, and although rates improved in 2023, they remained 75% above the pre-pandemic baseline. Chronic absenteeism is associated with lower standardized test scores, with the highest rates in lower-achieving, higher-poverty districts.
  • The Latest Chronic Absenteeism Numbers — Chronic absenteeism—students missing 10% or more of the school year—rose from 15% of K–12 students before the pandemic to 28%, then eased to 26% in the first full post-pandemic school year. Data from eight states show continued declines, including New Mexico's drop from 40% to 33%, but rates remain well above pre-pandemic levels.

AI Summary. The Pentagon has approached U.S. automakers and other manufacturers about using their workers and factory capacity to boost production of munitions and other equipment as wars deplete stocks, asking whether they could rapidly shift to defense work. Most large non-defense manufacturers already hold Pentagon contracts, but these are typically limited in scope and value.

Sharon Terlep and Marcus Weisgerber Wall Street Journal
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The Pentagon is in talks with several firms, including GE Aerospace, GM, and Ford, about repurposing existing manufacturing capacity to increase production of munitions.

Can civilian manufacturers rapidly shift capacity to weapons production?

Core argument: The Pentagon has approached U.S. automakers and other manufacturers about using their personnel and factory capacity to boost production of munitions and other equipment as the wars in Ukraine and Iran deplete stocks.

The Pentagon is interested in enlisting the companies to use their personnel and factory capacity to increase production of munitions and other equipment as the wars in Ukraine and Iran deplete stocks. Defense officials said American manufacturers might be needed to backstop traditional defense companies and asked whether the companies could rapidly shift to defense work. Repurposing domestic manufacturing for military use has a precedent. Detroit’s automakers halted car production during World War II to churn out bombers, aircraft engines and trucks, as America’s “Arsenal of Democracy.” Today, much of military production is done by a limited number of contractors. While many of the largest U.S. manufacturers outside the traditional defense sector already hold Pentagon contracts, most are limited in scope and dollar value, often confined to niche research or specific products.

Takeaways by Macro Roundup® AI

  1. The Pentagon has approached U.S. automakers and other manufacturers about using their personnel and factory capacity to boost production of munitions and other equipment as the wars in Ukraine and Iran deplete stocks.
  2. Defense officials said American manufacturers might be needed to backstop traditional defense companies and asked whether those firms could rapidly shift to defense work, with much of military production done by a limited number of contractors.
  3. Many of the largest U.S. manufacturers outside the traditional defense sector already hold Pentagon contracts, but most are limited in scope and dollar value, often confined to niche research or specific products.

Related Articles:

  • The Cold War and the U.S. Labor Market — The authors estimate that declining U.S. military procurement spending from the 1950s to the 1990s explains roughly 18–30% of the decline in manufacturing employment and just under 10% of the rise in top-decile income inequality. They argue Cold War procurement raised demand for manufacturing workers and helped sustain tight labor markets for low-skill workers.
  • U.S. Shipyard Key to Trump’s American Revival Is Already Too Busy — South Korea's Hanwha Ocean, which bought the Philadelphia Shipyard, has pledged $5bn in upgrades and aims to produce up to 20 ships a year there, up from one or two recently, using automation and robotics from its South Korean operations. It is in talks with the Pentagon over potential vessel deals.
  • The Old Economy Begins To Take Its Revenge — The author argues that capital rotates between the financial economy's asset-light booms and the physical economy, with commodity capacity constraints and the use of critical materials as geopolitical leverage now making returns on physical investment more attractive. In this view, higher interest rates reflect the better returns and capital spending needed to expand production capacity.

Friday, April 17, 2026

AI Summary. The gap between growth-oriented and value-oriented new business applications is widening, a divergence likely driven by a proliferation of startups built around artificial intelligence. Large language models are lowering the barriers to starting a business.

Torsten Sløk Apollo
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New business applications are ~ back at their pandemic-era level. Sløk argues the increase is “likely driven by the proliferation of AI-enabled startups, as large language models dramatically lower the barriers to entrepreneurship.”

Are AI tools driving a widening surge in high-growth business formation?

Core argument: U.S. business applications continue to rise, and breaking them into value and growth companies reveals a widening divergence between the two categories.

Breaking down business applications into value and growth companies reveals a widening divergence, likely driven by the proliferation of AI-enabled startups, as large language models dramatically lower the barriers to entrepreneurship.

Takeaways by Macro Roundup® AI

  1. U.S. business applications continue to rise, and breaking them into value and growth companies reveals a widening divergence between the two categories.
  2. The widening divergence in business applications is likely driven by the proliferation of AI-enabled startups.
  3. Large language models dramatically lower the barriers to entrepreneurship.

Related Articles:

  • Attention (And Money) Is All You Need: Why Universities Are Struggling to Keep AI Talent — The annual compensation gap between top industry and academic artificial intelligence researchers widened from roughly $294,000 to $1.5m, coinciding with accelerating academic out-migration toward large incumbent technology firms. Researchers who move to industry cut paper production by about 63% while increasing patent filings nearly sixfold, consistent with a shift from open science toward proprietary innovation.
  • Which Entrepreneurs Boost Productivity? — The authors find that a minority of entrepreneurs are "transformative" — generating disproportionate productivity gains, scoring high on IQ tests, being well-educated, and hiring research and development workers. They argue that economies with more such entrepreneurs and R&D workers sustain higher long-run productivity growth.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. The authors forecast that the drag on US growth from higher oil prices will roughly offset the boost from recent tax cuts, and have lowered their GDP growth projection by 0.5 percentage points to 2.0%. Their baseline now runs about half a percentage point below estimated potential growth, with adverse scenarios three-quarters to a full point below.

Jessica Rindels and David Mericle Goldman Sachs
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In response to the war, GS no longer forecasts that the “transition from tariff drag in 2025 to a tax cut boost in 2026” will raise growth above potential as the drag from higher oil prices offsets the stimulative effect of tax cuts.

Do higher oil prices offset the growth boost from tax cuts?

Core argument: The authors lowered their 2026 Q4/Q4 U.S. GDP growth forecast by 0.5pp to 2.0% since the war with Iran began, reflecting higher oil prices and incoming Q1 GDP tracking data.

Coming into the year, we expected the transition from tariff drag in 2025 to a tax cut boost in 2026 to generate above-potential GDP growth this year. But as Exhibit 8 shows, we now expect the drag on growth from higher oil prices to roughly offset the boost to growth from the 2025 fiscal bill. Reflecting both the impact of higher oil prices and incoming Q1 GDP tracking data, we have lowered our 2026 Q4/Q4 GDP growth forecast by 0.5pp to 2.0% since the war began. For upcoming quarters, our baseline forecast is about ½pp below our estimate of potential growth, and in our adverse or severely adverse scenarios, GDP growth would be ¾-1pp below potential.

Takeaways by Macro Roundup® AI

  1. The authors lowered their 2026 Q4/Q4 U.S. GDP growth forecast by 0.5pp to 2.0% since the war with Iran began, reflecting higher oil prices and incoming Q1 GDP tracking data.
  2. The drag on growth from higher oil prices is now expected to roughly offset the boost from the 2025 fiscal bill, displacing an earlier expectation of above-potential GDP growth as tariff drag gave way to tax cuts.
  3. The baseline forecast puts GDP growth about ½pp below estimated potential in upcoming quarters, with adverse and severely adverse scenarios running ¾–1pp below potential.

Related Articles:

  • Electric Fury — Rising US electricity costs are burdening consumers and stirring voter anger, with the rapid build-out of artificial intelligence data centers, tariffs, and upgrades to an aging grid pushing power prices higher at rates unseen in decades. Utility bills have moved to the center of US politics alongside grocery prices.
  • Salem’s Lot: Gulf War Update; The Purge Of Senior US Military Officers; A US Fossil Fuel Reliance Fever Dream — The US is not insulated from market effects of a Strait of Hormuz closure: while US natural gas prices have declined this year, most other hydrocarbon and refined product prices have risen materially, with US crude oil, wholesale gasoline, naphtha, shipping fuel and some petrochemical increases exceeding those in Europe and Asia.
  • Are We Running Out Of Oil — An analysis of country- and product-specific oil markets identifies pockets of potential extreme tightness if the Strait of Hormuz remains effectively closed, with critically low supplies of the petrochemical feedstocks naphtha and liquefied petroleum gas in Asia and cross-product scarcity in multiple Asian countries.

AI Summary. U.S. core goods inflation has been running at its fastest pace outside the post-pandemic reopening, and the author argues tariffs are not the main explanation: prices rose 8% for computer software and accessories, which are tariff-exempt, while tariff-hit motor vehicles and parts were flat. Services inflation, including restaurants, dental visits and haircuts, also remains faster than before the pandemic.

Matt Klein The Overshoot
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Underlying inflation has been ~2pp higher than it was pre-pandemic and began rising in mid-2025. Klein argues that this primarily reflects strong demand in both manufacturing and services rather than supply disturbances, including tariffs.

Are tariffs the main driver of faster U.S. inflation?

Core argument: Core goods inflation ran about 1 percentage point faster than pre-pandemic rates in both 2023 and 2024, with goods price declines starting to slow from mid-2024.

Prices for physical goods were rising faster than at any point outside of the post-pandemic reopening before the Iran War. While some of that can reasonably be attributed to tariffs, tariffs are not the only, or even the main explanation. First, core goods inflation was running about 1pp faster than pre-pandemic in both 2023 and 2024, with price declines starting to slow beginning in mid-2024. Second, much of the recent pick-up in core goods inflation is attributable to items that are explicitly exempted from tariffs, such as computer parts that are used in data centers. By contrast, important categories that have been subjected to large tariffs, such as motor vehicles and parts—both directly and via punitive tariffs on steel and aluminum—have experienced relatively little inflation. The PCE price index for “computer software and accessories” rose by 8% between February 2025 and February- 2026, whereas prices for “motor vehicles and parts” have been flat. The boom in demand for goods needed for AI development has dwarfed the impact of tariffs. [Further], inflation [for restaurants] and other services, such as dental visits, haircut and dry cleaning have all either remained persistently faster than before the pandemic or have accelerated in the past year. Tariffs cannot plausibly explain any of these moves.

Takeaways by Macro Roundup® AI

  1. Core goods inflation ran about 1 percentage point faster than pre-pandemic rates in both 2023 and 2024, with goods price declines starting to slow from mid-2024.
  2. Inflation for restaurants and services such as dental visits, haircuts and dry cleaning has either remained persistently faster than before the pandemic or accelerated over the past year, moves tariffs cannot plausibly explain.

Related Articles:

  • The Fed is Misreading the Inflation Risks — The author argues the Federal Reserve is wrong to attribute excess inflation mostly to goods prices driven by tariffs, since services make up the bulk of economic activity. Prices of services businesses buy as production inputs have been accelerating, as has consumer services inflation excluding imputed prices, housing, and utilities.
  • Testing Resilience — Inflation across the G20 is projected to run 1.2 percentage points higher than previously expected at 4% before easing to 2.7% the following year, while core inflation in G20 advanced economies is anticipated to weaken from 2.6% to 2.3%. These projections assume energy market disruption moderates, with oil, gas and fertiliser prices declining gradually.
  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.

AI Summary. Statistical models of University of Michigan consumer sentiment—trained on 1990–2019 data using inflation, unemployment, real consumer spending, and the S&P 500—fit the series well back to the 1950s but predict higher sentiment than observed after the pandemic price shock. Adding a variable measuring how far the consumer price level exceeded its pre-pandemic trend tracks the actual decline in sentiment.

Jared Bernstein Jared’s Substack
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The Michigan Consumer Sentiment Index is at an all-time low. Bernstein argues the ongoing drop in sentiment is due to the continued rise in the price level relative to its pre-pandemic trend, leaving “folks as fed up with Trump as they were with Biden.”

Does the price level gap explain weak consumer sentiment?

Core argument: Two statistical models of University of Michigan consumer sentiment, trained on 1990–2019 data using inflation, unemployment, real consumer spending, and the S&P 500, fit the series back to the 1950s but diverge after COVID's price shock.

[The chart in gallery] shows the full UMich series, along with two predictions from two statistical models, based on inflation, unemployment, real consumer spending, and the S&P 500. We trained the model on data from 1990-2019 and then forecast and backcast. As you see, both models fit the data well, even back to the 1950s. At least, they do until COVID and the shock to prices. Then the first model says we should be a lot happier, damnit! To explain the gap, [Daniel Posthumus and I added this variable] which we think of as a trend-break to the price level. We run a smooth trend through the CPI price level through 2019, and extend the trend’s 2014-19 growth rate. Think of that shaded area at the end as a quantifying of the extent to which people were shocked/surprised/angered by the jump in the price level. We plug the log difference between trend and actual into the model, which, as you see in the pullout above, tracks the actual decline in sentiment.

Takeaways by Macro Roundup® AI

  1. Two statistical models of University of Michigan consumer sentiment, trained on 1990–2019 data using inflation, unemployment, real consumer spending, and the S&P 500, fit the series back to the 1950s but diverge after COVID's price shock.
  2. After COVID, the first model implies consumer sentiment should be considerably higher than what households actually reported, leaving a gap the model's base variables do not explain.
  3. Adding a price-level trend-break variable — the log difference between actual CPI and a smooth pre-2019 trend extended at its 2014–19 growth rate — tracks the actual decline in consumer sentiment, according to Daniel Posthumus and the author.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • If You Hate Trump’s Economy, I Have News for You — Consumer sentiment about the economy has worsened even as the economy and affordability continued improving at roughly the same pace, falling below levels seen during the financial crisis and the pandemic. Measures of economic conditions increasingly track how people feel about the party in power, with Democratic and Republican views of the economy flipping after the change in administration.
  • Vibecessions, Part II — Consumer prices rose about 20% during both the Biden and Reagan presidencies, yet voters punished Biden's party while Reagan won in a landslide. The author argues the difference is that Americans had grown accustomed to high inflation before Reagan, whereas the surge after decades of low inflation came as a shock.

AI Summary. Polling by YouGov finds about 60% of Americans at every income level believe they are taxed too much, despite facing very different tax rates. Many states have cut taxes citing strong economic growth, localities are enacting property-tax exemptions for retirees, and the Tax Foundation warns states risk cuts they cannot afford.

Economist Staff The Economist
Date Posted:
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Database

According to Gallup polling, the share of Americans who think the income taxes they pay are “fair” is near a record low. Politicians are responding; btw 2020 and 2026, the vast majority of US states cut personal income taxes.

Do Americans at every income level feel overtaxed?

Core argument: YouGov polling finds around 60% of Americans at every income level believe they are taxed too much, despite being taxed at very different rates, with Democrats and Republicans and rich and poor alike sharing the view.

Democrats and Republicans alike think they are overtaxed, as do both rich and poor. YouGov’s polling finds that around 60% of Americans at every income level think they are taxed too much—despite being taxed at very different rates. Statehouses are hearing this, too. Many, citing strong economic growth, have cut taxes in recent years. Enthusiasm is building to go further and faster, leaving some observers wary. “Most have done so responsibly thus far,” says Jared Walczak of the Tax Foundation, a think-tank. “But they now risk overreaching and making reductions they cannot afford.” A wave of localities is pushing through property-tax exemptions for retirees. Florida is flirting with abolishing non-school property taxes altogether. Ohio has a possible ballot initiative to scrap them in all forms.

Takeaways by Macro Roundup® AI

  1. YouGov polling finds around 60% of Americans at every income level believe they are taxed too much, despite being taxed at very different rates, with Democrats and Republicans and rich and poor alike sharing the view.
  2. Many American statehouses have cut taxes in recent years, citing strong economic growth, and Jared Walczak of the Tax Foundation says most have done so responsibly but now risk overreaching and making reductions they cannot afford.
  3. A wave of American localities is pushing through property-tax exemptions for retirees, Florida is flirting with abolishing non-school property taxes, and Ohio has a possible ballot initiative to scrap property taxes in all forms.

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.
  • Massachusetts Town Rejects 50% Property Tax Hike — Massachusetts caps annual property tax revenue growth at 2.5% unless voters approve an override, and South Hadley voters rejected ballot measures meant to close a $3m deficit driven partly by a 42% jump in healthcare costs and reduced state aid. Municipalities nationwide face the end of federal pandemic aid, higher costs, and state-imposed revenue limits.
  • The Limits of New York’s “Tax the Rich” Policy — Between 2010 and 2022, taxpayers earning $1m or more in California, New York, Texas, and Florida accounted for about 50% of US capital gains realizations on average. Over that period Florida rose from 8% to 16.7% of millionaire capital gains income while New York fell from 14% to 8.9%.