Here are the higher frequency numbers for the recent period.
It's hard to ignore what we're seeing with our eyes with AI, hard to ignore all the business-level studies, so while we should always be cautious with noisy aggregate data I think we are seeing something.
Here is peak-to-peak productivity growth for every cycle since 1948 (this avoids cyclical distortions). The current cycle is currently the second best since 1973, although still short of the dotcom era (would see more clearly if I showed 1995-2005). Is average for postwar.
Are we finally seeing AI in the productivity data? A big upward revision to earlier data and strong Q4 bring us 2.2% above CBO's pre-pandemic forecast.
Annual rates:
1 year: 2.8%
2 years: 2.5%
6 years: 2.2%
The tariff refund issue is fun to follow. But it doesn't matter much for the macroeconomy. Business investment determined more by cost of capital than cash availability. Keynesian multiplier very low on one-time transfers to businesses. And debt impact large but only one-time.
Two articles today on AI. One by @jasonfurman.bsky.social linked below (where you will be greeted with a snarling picture of the author) and the other by @matteowong.bsky.social in The Atlantic, a link in the replies.
I'm somewhat of sceptic, but I admit I use the OpenAI API quite regularly.
"A.I. competition is delivering rapid innovation, falling prices and real choice at a pace few expected," Jason Furman writes. "Over time, policy will need to adapt to protect users, preserve competition and spread the gains."
We don't know how long it will last. At some point companies will have to figure out how to exercise monopoly power to raise prices or else go bankrupt. But for now the market is working better than I would have expected at delivering innovation and falling prices.
Some argue that because AI is so dominated by big biz that they are slow to innovate. That view is pretty hard to sustain with the explosion of innovation we've seen.
(Could argue coherently antitrust would slow innovation and that's good--but I rarely hear that argument made.)
That is not to say AI is 100% good. Competition gives you more of everything you want, including bad stuff. And AI itself may be dislocating.
But, on balance, we're benefiting a lot from the competition. And regardless antitrust would not solve the issues people worry about.
My latest @nytopinion.nytimes.com is about how AI has defied what many--including me--would have thought and has ushered in a new era of fierce competition in the digital space. The result is innovation, falling prices, consumer benefits, and more. www.nytimes.com/2026/02/25/o...
And yes, if you're focused on revenue maximization (and full respect if you are not--for the Saez/Zucman or Mankiw reasons), then you should definitely care about the peak of the Laffer curve.
It's not that relevant if debating top rate of 37 or 39.6%. But for, say, cap gains at 45% it is.
But I also do think that both the France and CA proposals are above the peak of the Laffer curve. A lot of wealth elasticity in small jurisdictions with substantial mobility.
At the U.S. level much, much more room for larger and more progressive taxes.
My argument was not intended to be primarily about any particular policy but why people are talking past each other when they have very different objectives for policy.
Here are my probabilities and the average of the 23 responses I tracked across social media channels.
Note my mean is about 2.3% (using a slightly finer and more approximate distribution within the cells).
No it's not. You don't engage with any of the argument I'm making.
The question is what your objective function is. Different people have different objective functions. Mine is something closer to revenue maximization. Some others argue for something different. Has important policy implications.
Checked who it was. Turns out I shouldn't have been surprised: It was the amazing @jasonfurman.bsky.social.
You can hear this episode of @galendruke.bsky.social podcast in the link below. They cover everything from Trump tariffs to taxes on the rich, housing, the new Fed Chairman, etc. #Recommend
I wrote down my probabilities and will share them later. What are yours?
BTW, there are other perspectives on this question than just the utilitarian and Pigouvian. Greg Mankiw, for example, argues people are entitled the benefits of their work, skill and luck.
It's possible that your ideal is to raise rates on billionaires above the revenue max but you would argue the current proposals fall short of that--so you don't have to confront this eventual tradeoff. Empirically, my view is France & CA proposals are past revenue maximizing.
But no one wants to say "billionaires are so bad that I'm willing to give up something else in order to tax them out of existence". Then again, in general most people don't love talking about issues with tradeoffs.
That motivation, however, sits uncomfortably with the arguments many in the political system are making which is about raising more revenue to do good stuff (e.g., spend more on poor children) or prevent bad stuff (e.g., spending cuts on them).
Much of the motivation of wealth taxes in recent debates in France & California really been about this. Gabriel Zucman & Emanuel Saez have explicitly endorsed this perspective in the past arguing revenue raising was less about revenue and more about other goals. E.g., in the NYT.
IF you think billionaires are a negative externality because of what, say, they do to our policy system then you should want something similar. If you tax them out of existence--and lose revenue in the process-that could be (from your perspective) a good outcome not a bad one.w
Carbon is a negative externality. The optimal carbon tax doesn't aim to maximize revenue but to discourage any carbon use whose social cost is in excess of its social benefit.
In fact, the optimal carbon tax path might ultimately yield no revenue--because no more emissions.
How much are you willing to reduce spending on poor children to tax billionaires more?
A utilitarian would raise taxes on billionaires basically to the revenue maximizing rate.
IF you think billionaires are a negative externality then you would go even higher.
A 🧵 .
And for context, the U.S. labor market is very fluid. There were also 64 million people hired in 2025.
In 2025 21 million people were laid off or discharged from their jobs. That is up from the last few years but less than any year from 2000-2020 (when the workforce was smaller).
Recent increase most likely a normalization from the abnormally low layoffs post-pandemic.
Overall this subtracted 1.15 pp from GDP growth in Q4, so it would have been 2.5% absent this but instead was 1.4%.
But it will artificially add about 1pp to growth in Q1 as the govt snaps back to something more normal in terms of real stuff per dollar.
In fact, the price differential between federal and overall GDP was the second biggest since 1948. The only bigger one was 1949-Q1 when there was an unusually large reset of compensation for federal military personnel.
Nominal down a little, real down a lot, how to square them? BEA puts it in the price index, estimating that it effectively "cost" the government 15.6% more to buy goods and services in Q4. That price increase is the 99th percentile of experience since 1948.
