Advice to Musk, Trump's baby bills, zero parties: highlights from economists' blogs

Ilon Musk has announced the formation of a political party, can he succeed where dozens of politicians before him have failed? What U.S. President Donald Trump's Big Beautiful Law initiative could be a step toward unconditional basic income? Why are tech giants building data centers on borrowed time? And finally, why have the number of parties and celebrations declined over the past 20 years? The most interesting things in economists' blogs - in our review.

Back in May, billionaire Ilon Musk, ending his career in the White House, announced that he planned to reduce spending on politics and focus on his business. But on July 5, the entrepreneur suddenly announced on his X network the creation of a third political party in the United States. It was named "America." On the first trading day after the announcement, Tesla's stock plummeted 6.8%;

Whether Musk will succeed in turning his party into a meaningful political force, discusses in his Silver Bulletin blog, Nate Silver, a well-known American expert on electoral statistics.

He immediately makes the caveat that it is unlikely that political observers (and himself) can really predict macro-political trends nowadays, most "simply ...extrapolate the latest trend into infinity." The rise of Trump, for example, was not predicted by everyone, he writes.

But the third party is precisely the area where the expert community has "an impeccable record," he writes - after all, third parties have failed time after time in U.S. history.

There are two major political forces in the United States, the Republican and Democratic parties. And while Americans regularly express dissatisfaction with both, the majority still remain loyal to either the Republicans or the Democrats. About 65% of Americans in 2023 explicitly state their party affiliation, Silver notes. It turns out that independent candidates initially only have to deal with the remaining one-third of the vote. Third parties in the U.S. have never won a presidential election. The last senator elected from a third - conservative - party was James L. Buckley in 1970. The last third-party candidate to receive electoral votes in individual states in a presidential election was George Wallace in 1968, Silver notes.

There's a problem with Musk himself: his political instincts are weak, and his already small popularity has diminished since leaving the White House. His net approval rating (the difference between favorable and unfavorable ratings) is minus 18.4 according to the latest data.

There's a possibility that Musk is creating the party solely for revenge against Trump. And it could hurt Republicans. "Even 2 percent of the vote in competitive districts is enough to deny Republicans a victory in a midterm election that already promises to be tough for them," Silver explains.

Despite the justified skepticism, even a small likelihood of meaningful consequences justifies attention to Musk's new initiative, Silver says. He also gives the businessman some advice: target young voters who are disillusioned with the major parties and want new political approaches. Another tip is to take the Silicon Valley business approach to politics and think 10 to 15 years ahead, especially when it comes to issues at the intersection of technology and culture. These are the areas where the U.S. two-party system is most vulnerable and open to change, Silver notes.

"Think of the party America as a bet on a breakthrough, not a whim. It will likely collapse at the start anyway - but at least you've swung for the impossible," Silver wrote. 

On July 4, the US Independence Day, Donald Trump finally signed the "Big Beautiful" law, the controversy around which has not subsided for several weeks. The law has been hotly debated because of the extension of tax breaks and cuts to social programs, but some important points have received almost no attention.

One such is the so-called "Trump accounts," writes George Mason University professor Alex Tabarrok on his Marginal Revolution blog. It's about a special investment account for newborn babies. Under the terms, every U.S. citizen born between January 1, 2025, and December 31, 2028, will receive $1,000 in such an account, which the government will invest in a diversified index fund of U.S. stocks;

These accounts could fundamentally change the Social Security system in the U.S. and be an important step toward an unconditional basic income, Tabarrok says. Parents and employers can fund the account. What's more, employers could contribute up to $2,500 per year per employee's child. This money would be tax-free, making such investments attractive. 

Even with moderate contributions (e.g., $1,000 annually) and an average return of 7%, the child will have accumulated about $36,000 by adulthood, $58,000 by age 25, and $875,000 by retirement at age 65. In fact, Trump accounts act as an individual retirement account available to any child under 18.

The program could be quite expensive, Tabarrok notes. Approximately 3.5 million citizens are born in the U.S. each year, so it would require $3.5 billion a year in direct spending alone, not including the indirect costs of the tax credit, he writes. On the other hand, the economist says, such bills could significantly reduce reliance on Social Security for long-term savings. The initial $1,000 contribution from the government is limited to four years, but when 14 million children receive the money, there will likely be public demand to make it permanent.

Tech giants Meta, Google, Microsoft and Amazon are planning to invest hundreds of billions of dollars in data center construction in the coming years. Already, they are collectively investing more than $70 billion in AI development every quarter. However, this boom in data center investment is happening on borrowed time,  writes MIT Digital Economy Institute columnist and fellow Paul Kedrosky on his blog. 

As an example, he cites Meta, which, according to data from the Financial Times, plans to raise $29 billion to build data centers. Of that amount, the company is willing to invest only $3 billion of its own money and borrow the rest. Why would Meta, which has no money problems, raise debt, Kedroski wondered.

Private equity groups are offering companies with high investment ratings an alternative to a traditional bond issue or bank loan, according to the same FT article. They create a project company (SPV) or joint venture, which assumes the debt and owns the data center. In this case, the debt is actually repaid by the notional Meta, which also controls all the assets;

This allows companies not to spoil their balance sheets, because raising such a large amount of capital would look bad in the financial statements. Lenders also benefit from this, because they receive a tangible premium to rates - 200-300 basis points, or 2-3%. This is a very attractive yield on debt instruments of companies with investment ratings. They can charge higher interest rates but still be sure that they will get their money back, Kedroski writes.

But when demand for AI slows or margins shrink, equity will not be enough. As a result, the market will have excess capacity, masked risks and a fragile financial structure that can easily collapse in the event of a failure, he warns;

"We've already seen how such a story ends. AI-backed bonds? (Collateralized AI Obligations)? I'm kidding...I hope so," the author writes, referring to mortgage bonds, whose boom eventually led to the 2008 global financial crisis. 

There are similar signs to the events of 17 years ago: hidden leverage, mispriced risk and capital chasing returns through increasingly convoluted schemes. But such schemes are unlikely to cause a 2008-level crisis. The situation with data centers has not yet reached the scale it was with mortgage-backed securities, Kedroski notes. 

How much time have you spent partying, celebrating, or any other social event in the last month? 20 years ago, that number would likely have been double - at least in the U.S., writes former The Atlantic columnist Derek Thompson on his blog. For younger people, the decline has been even more dramatic: in 2024, Americans aged 15 to 24 spend 70 percent less time partying than their peers did in 2003. This phenomenon could have negative consequences, he warns: the decline in face-to-face socializing coincides with a rise in anxiety and mental health problems among Americans.

Why are there fewer parties? Many of the reasons behind this trend in the United States are seen in other countries as well. Thompson cites American political scientist and sociologist Robert Putnam, who earlier talked about the changing social role of women. They were the ones in families who were responsible for organizing a game of bridge or sharing a meal with neighbors. But from the second half of the 20th century, more women began to work. In the U.S., their share of 25- to 54-year-olds in the labor force has risen from 50 percent in 1970 to nearly 80 percent now. And men didn't take over leisure tasks. As a result, families with two working adults simply have less time and energy to get together.Other factors include declining alcohol consumption among young people, televisions and smartphones that take up more and more of their free time, and the changing role of children in parents' lives. Although fewer children are being born, parents are giving them much more attention. "It's impossible to throw a cocktail party when your second job is being a private driver for your son and daughter, driving them to 13 extracurricular activities on the weekend (which you essentially signed them up for yourself)," Thompson writes.

This article was AI-translated and verified by a human editor