My leader in this week's Economist, arguing that America's moment of bipartisan tax-cutting mania is an error:
— Economically, it worsens the looming fiscal crunch
— Politically, pulling voters out of the tax base kills incentives to care about good government
www.economist.com/leaders/2026...
Reminds me of when, in December 2022, we polled on what the Government had done well since being elected.
At the time it was spending c. £10 billion a month subsidising everyone's energy bills, and yet:
Have been waiting almost two years for the right article to smuggle this fact into.
(From my leader on America's misguided war on taxes: economist.com/leaders/2026...)
Trump's "Big, Beautiful Bill" tax refunds are now arriving. Democrats are putting forward proposals to zero out income tax liability for vast swathes of Americans. And zany proposals are floating around at the state level.
AMERICA'S TAX REVOLT
Republicans and Democrats alike seem to be ditching the idea that most Americans ought to be paying very much in taxes at all.
Increasingly, voters seem to agree. For Tax Day, I wrote about this troubling development for @economist.com.
www.economist.com/united-stat...
THE CRUELLEST YEAR
Twelve months after "Liberation Day", I wrote for @economist.com on American manufacturers—supposedly the trade war's winners. Even they are sceptical: chaos, instability and paperwork have swamped the tariffs' competitiveness boost.
www.economist.com/united-stat...
4/ Lots more in the piece itself, which you can read here www.economist.com/finance-and...
3/ And, more spectulatively, if angst over electricity prices dials up another level, the already-shaky politics of America's data centre buildout could fray further.
2/ But the shock collides with an economy that ordinary Americans seem to hate, no matter how good thre growth numbers.
One saving grace, until now, had been that gas prices were fairly low. No more. The political impacts of that shift ahead of the midterms will be sharp.
1/ The sheer scale of the boom in shale and LNG exports over the past few decades has been staggering, and is probably still under-appreciated.
In aggregate, that means American growth won't be as battered as energy importers in Europe and Asia.
Parts of the country will boom.
UNITED PETROSTATES
I look at how the oil shock will hit the US economy in @economist.com today—one that now exports 2/3 as much energy as Saudi Arabia.
Growth will still sag, and the poorest get squeezed. But America is well-positioned to weather the hit
www.economist.com/finance-and...
10/ And here's the link again to that "K-shaped" economy piece:
www.economist.com/finance-and...
9/ The wider theme of why Americans are so keen on talking down an astonishingly successful (and broad-based) economic boom is one I've still not quite got to the bottom of.
See also the "affordability crisis" talk, which I wrote about a few months ago:
www.economist.com/briefing/20...
8/
— The jobs market has slowed down (and growth, unusually, hasn't: in part because of AI capex and stockmarket wealth effect), which is unusual and has a similar "feel" to the "K-shaped thesis"
— People are still mad about inflation, and the market for doomsterism is robust
7/ Still, ideas like the "K-shaped economy" tend not to propagate so furiously without speaking to something. So, what's the steelman?
My best effort is:
— America is longstandingly unequal, and that can be unpopular even if it's not getting worse
(more in next post...)
6/ The strongest reason to be nervous is that stockmarket gains have been pretty remarkable over the past few years, and the rich hold more stocks.
But: since 2019, the top 1% and the bottom 20% have actually had about-equal % increases in net worth, according to the NY Fed.
5/ Cumulatively, the poorest have seen their wages grow the most since the pandemic, though that advantage seems to have tapered off in the past year or so as the labour market has cooled.
4/ More tellingly, little else in the economy is behaving as if America has become substantially more top-heavy recently.
If anything, consumer sentiment is more equal than usual. (Meaning mostly that everyone is equally glum.)
3/ Other estimates of spending differentials (here's one based on credit and debit card data from Consumer Edge) don't show big gaps.
2/ I talk through some of the issues with that approach in the piece, but this thread is also worth reading on the issue:
x.com/LevyAntoine...
1/ To start: does the top 10% do nearly half of spending in America, as the "K-shaped" narrative claims?
That stat comes from an imputed spending estimate from Moody's, based on Fed financial flows data. A more straightforward approach—asking people—yields a much duller story.
NOT SO "K"
America's "K-shaped" economy has become conventional wisdom—the idea that spending is booming for the rich and slumping for the rest, leaving growth top-heavy and precarious.
Only one problem: as I write in @economist.com, it is probably wrong.
🔗: www.economist.com/finance-and...
8/
— The jobs market has slowed down (and growth, unusually, hasn't: in part because of AI capex and stockmarket wealth effect), which is unusual and has a similar "feel" to the "K-shaped thesis"
— People are still mad about inflation, and the market for doomsterism is robust
7/ Still, ideas like the "K-shaped economy" tend not to propagate so furiously without speaking to something. So, what's the steelman?
My best effort is:
— America is longstandingly unequal, and that can be unpopular even if it's not getting worse
(more in next post...)
6/ The strongest reason to be nervous is that stockmarket gains have been pretty remarkable over the past few years, and the rich hold more stocks.
But: since 2019, the top 1% and the bottom 20% have actually had about-equal % increases in net worth, according to the NY Fed.
5/ Cumulatively, the poorest have seen their wages grow the most since the pandemic, though that advantage seems to have tapered off in the past year or so as the labour market has cooled.
4/ More tellingly, little else in the economy is behaving as if America has become substantially more top-heavy recently.
If anything, consumer sentiment is more equal than usual. (Meaning mostly that everyone is equally glum.)
3/ Other estimates of spending differentials (here's one based on credit and debit card data from Consumer Edge) don't show big gaps.
2/ I talk through some of the issues with that approach in the piece, but this thread is also worth reading on the issue:
x.com/LevyAntoine...
1/ To start: does the top 10% do nearly half of spending in America, as the "K-shaped" narrative claims.
That stat comes from an imputed spending estimate from Moody's, based on Fed financial flows data. A more straightforward approach—asking people—yields a much duller story.