Taxes, Rents, Bonds and Medieval Coins · Morning Gist
Friday, October 95 stories · 11 min
Taxes, Rents, Bonds and Medieval Coins
Today's edition covers a deficit plan built only from existing taxes, small firms using AI, rents that may be bottoming, and 1,300-year-old evidence on trade.
Picked from 21 new articles across 16 sources · arrow keys for other days
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Clausing and Sarin propose five changes to existing US taxes that would raise about 3.3% of GDP, mostly from high earners and corporations. story 1 ↓
A NY Fed survey of 5,000+ small employers finds AI users' hiring expectations run 10 points higher, even after controls. These are expectations, not actual hiring. story 2 ↓
Apartment List's median asking rent is down 0.4% from a year earlier, but occupancy is turning as 2024's wave of new buildings slows. story 3 ↓
Stocks beat bonds in 83% of rolling 10-year periods, but bonds averaged +4.3% in stocks' 26 down years. Carlson's advice at 5% yields is to hold both. story 4 ↓
Early-medieval coin hoards show Arab conquests moved trade routes north. France and Germany got richer and more urban while Byzantium shrank. story 5 ↓
1/5Conversable Economist· conversableeconomist· Oct 8
Clausing and Sarin's Plan to Cut US Deficits Using Only Existing Taxes
Two tax economists propose five changes to existing taxes that together would raise about 3.3% of GDP. The burden falls mostly on high earners and corporations.
Why it matters · The US is borrowing a quarter of what it spends in a year with no war, pandemic or recession. This proposal puts actual numbers on what closing that gap through taxes would take.
Comparison across countries showing the US has relatively high government debt and low tax revenue.1 / 3
The federal government is on track to spend $7.4 trillion in 2026. About $1.9 trillion of that, roughly a quarter, will be borrowed. There's no recession or pandemic to explain it. Debt held by the public now equals 100% of GDP, about the same as the World War II peak, and it is still rising.
Kimberly Clausing and Natasha Sarin lay out a tax-side response in an essay titled "$15 Trillion on the Table in 2029." It will appear in an Aspen Institute volume edited by Melissa Kearney and Luke Pardue. They skip new instruments such as a wealth tax and instead change taxes that already exist. Their package totals about 3.3% of GDP, roughly $1 trillion a year at today's GDP.
The five buckets
1. Corporate tax. Firms with the largest profits would pay a 27% rate. That covers fewer than 2% of firms. A 2.7-point surtax would apply to fewer than 0.5%. The authors would keep full expensing, which lets firms deduct investment immediately and so taxes only pure profit. But they would pair it with a complete ban on deducting interest. Allowing both gives debt-financed projects a net subsidy, so some investments go ahead only because of the tax treatment. A higher rate would also need a stronger country-by-country minimum tax on foreign income. Otherwise more profit would be shifted abroad.
2/5Liberty Street Economics (NY Fed)· Oct 8
NY Fed survey: small firms using AI expect to hire more, not less
In 2025 Fed survey data, AI users kept a 10-point lead in hiring expectations after controls. The gap was widest among struggling firms.
Why it matters · Most worry about AI and jobs focuses on large companies and entry-level workers. This survey of more than 5,000 employer firms shows how the smallest employers expect AI to affect hiring and sales. It measures expectations, not actual outcomes.
Raw diffusion indexes: AI users at +33 on hiring and +48 on revenue, against +15 and +21 for non-users.1 / 3
Economists still disagree about how AI affects employment. Economy-wide pay and headcount have barely moved as adoption spread. Narrower measures, though, show weaker hiring of early-career workers and of people in AI-exposed jobs. NY Fed economists Will Aarons and Asani Sarkar look at small businesses, using the 2025 Small Business Credit Survey. It covered 5,248 employer firms and was fielded between September and November 2025.
How common AI already is
Among firms with at least one employee:
46% already use AI tools, and another 15% plan to start within a year.
Of the users, 63% call AI somewhat or very important to production, and 51% have partly or fully built it into their processes.
77% report that AI has not changed their labor costs, and only 31% say it has raised sales.
The expectations gap
The authors measure optimism with a diffusion index: the share expecting an increase minus the share expecting a decrease.
3/5Calculated Risk· CalculatedRisk by Bill McBride· Oct 8
Apartment List data suggests asking rents may be near a bottom
National median asking rent is down 0.4% from a year earlier, but occupancy is turning as deliveries from the 2024 building boom slow.
Why it matters · Asking rents show up in official inflation measures with a lag, and they shape whether renting or buying makes sense. A floor in rents would mean the supply-driven drag on housing costs is ending.
Apartment List national rent trend. Shows the seasonal fall dip alongside the longer slide in rent growth.1 / 2
Bill McBride's monthly survey of rent and vacancy data opens with Apartment List's September 2026 National Rent Report. It shows the national median asking rent down 0.1% from August and 0.4% from a year earlier. The headline argues the signal is no longer only "rents are falling." It is that they may be close to a floor.
Why a monthly decline isn't the story
September brought the first month-over-month drop since January. That is normal for the season. Apartment List explains that fewer renters move in fall and winter, so landlords offer modest discounts to fill empty units. A small dip at this time of year says little about the trend. The year-over-year figure, which strips out seasonality, is the more useful number, and at -0.4% it is only slightly negative.
The supply glut is being absorbed
The bigger story is supply. Apartment List says a historic surge in multifamily construction has kept the rental market soft for nearly four years. Building peaked in 2024, when more than 600,000 new multifamily units were completed. That was the most new supply in a single year since 1986.
4/5A Wealth of Common Sense· Ben Carlson· Oct 8
Stocks or bonds at 5% yields? Carlson says the answer is both
Stocks beat bonds in 83% of rolling 10-year periods. Bonds gained 4.3% on average in the stock market's 26 down years. Each hedges the other.
Why it matters · Bonds pay meaningful yields again after nearly 20 years of low rates. Investors are now asking whether to skip them or go all in. Carlson's data shows the cost of each extreme.
Rolling 10-year returns, S&P 500 vs. 5-year Treasuries: stocks win 83% of the time, losing in the 1930s, '70s and 2000s.1 / 4
Ben Carlson answers two readers who want opposite things. One asks whether a 10-year investor should stay 100% in stocks, whatever bonds yield. The other plans to put all future 401(k) contributions into bonds, since fixed income may now match the 6.5% return his plan assumes. Carlson says time horizon matters a lot, but both extremes miss something.
The case for stocks, and its limits
Ibbotson data covering about 100 years shows stocks earning much more than bonds over the long run. Carlson compared rolling 10-year total returns for the S&P 500 and 5-year Treasuries going back to the late 1920s. Stocks won in more than 83% of those periods. Bonds won during the lost decades for stocks: the 1930s, 1970s and 2000s.
Bonds do most of their work over shorter stretches. The U.S. stock market has had 26 down years, with an average loss of 13.5%. In those same years, bonds gained an average of 4.3%, beating stocks by nearly 18 percentage points. The 2022 sell-off, when both fell sharply, was the exception. The hedge works best in crashes, when investors rush to safety. Carlson shows a Vanguard total bond index rising while the S&P 500 fell in 2000–2002 and again in 2007–2009.
5/5Klement on Investing· Joachim Klement· Oct 9
Coin hoards show Arab conquests rerouted trade and enriched France and Germany
Boehm and Chaney trace early-medieval coins to map trade routes. Wealth and cities grew where trade went, and shrank in Byzantium.
Why it matters · This is a natural experiment from about 1,300 years ago on what happens when trade routes move. It's useful background as protectionism rises today. Regions that lost trade access got poorer, and regions that gained it got richer and more urban.
Where late-antique mints and coin hoards were found, the raw data behind the reconstructed trade routes.1 / 3
Joachim Klement is a self-described free trader who worries about today's turn toward protectionism. In a light Friday post, he highlights a 2026 paper by economists Johannes Boehm and Thomas Chaney. They used coins from the end of antiquity to rebuild Europe's trade routes and track what those routes did to regional wealth.
The method: follow the money, literally
Mints across Europe and the Middle East kept producing coins through late antiquity and the early Middle Ages, and traders carried them across the continent. Boehm and Chaney mapped where coins were minted and where they ended up in hoards. That let them reconstruct trade flows in two periods: late antiquity (450–630 CE) and the time after the Arab conquests (713–900 CE).
Some background helps. The Roman Empire's economic centre had moved toward Byzantium from the third century CE, and the move sped up after the Visigoths sacked Rome in 410. Northern and Western Europe declined under various Germanic rulers. From the seventh century, Arab armies fought the Byzantine Empire, and by the early 700s they had taken North Africa and much of Spain.
2. IRS funding. Audit rates for high-income taxpayers fell from 16.5% to 2% between 2010 and 2021. The tax gap, meaning taxes owed but not paid, is estimated at $870 billion a year (2.7% of GDP). The authors say the real figure is probably larger because cheating at the top is hard to measure.
3. New "sin" taxes. These are taxes meant both to raise money and to discourage a behavior. The plan includes a 5% tax on the value of sports bets, paired with a tax on prediction-market winnings. Together they would raise more than $130 billion over 2030–2039. The biggest revenue raiser among these excise taxes is a carbon fee. It would start at $40 per metric ton, rise 5% a year after inflation over the budget window, and then track inflation. That is lower than many congressional proposals and below the levels used in the EU and Canada.
4. Income tax brackets. Brackets would return to their 1997 levels, a period of fast growth just before the budget briefly ran surpluses.
5. Capital income. A set of changes to how investment income is taxed, each with its own 2030 revenue estimate.
Why taxes, not cuts?
The blog's author gives three reasons for focusing on taxes. The authors are tax specialists. US tax revenue is low by international standards while its debt is high. And finding $1 trillion in spending cuts is hard when Medicare, Social Security, defense and interest dominate the budget. He acknowledges that even part of this tax package would be politically hard to pass.
Remember
Borrowing covers $1.9 trillion of $7.4 trillion in 2026 federal spending. Public debt has reached 100% of GDP, the WWII peak.
The package raises about 3.3% of GDP, mainly from large corporations, high earners, carbon and gambling.
Full expensing paired with no interest deductions is meant to tax only pure profit and remove the subsidy for debt.
Employment: AI users came in at +33 points, against +15 for non-users.
Revenue: AI users came in at +48, against +21 for non-users.
The authors then test whether something other than AI explains the gap. Younger firms, more profitable firms and firms with more than ten employees do expect more hiring. Even after controlling for owner and firm characteristics and location, AI users' net hiring expectation stays 13 points higher. Adding each firm's actual hiring over the past year cuts the gap to 10 points, but it stays positive. For revenue, the gap is 14 points after controls and past revenue changes.
Their main test for spurious correlation is to split firms by self-reported financial health, which they use as a proxy for owner optimism. If naturally optimistic owners were driving the result, the gap should be largest among firms in good condition. It is the reverse. Among firms in fair or poor condition, AI users lead non-users by 21 points on hiring and 24 on revenue. Among firms in good or better condition, the leads are 10 and 15. The authors conclude that the link is unlikely to be spurious.
A proposed mechanism
AI users that report trouble with technology, such as websites, e-commerce or cybersecurity, have a 16-point higher net revenue expectation than users without those problems. The authors argue that AI may help small firms get past specific operational limits on growth, rather than reflecting general optimism. How deeply a firm has integrated AI made no difference to its hiring expectations compared with firms still experimenting.
The authors note the main limitation themselves: these are expectations. Whether AI adopters actually hire more or earn more is left for future research.
Remember
46% of small employer firms use AI, and 77% report it has not changed their labor costs.
After controls, AI users' net hiring expectations stay 10–13 points higher and revenue expectations 14 points higher.
The gap is widest among financially weaker firms, which argues against simple owner optimism.
Completions have slowed a lot since then, though they remain fairly high by historical standards. Even as the boom wound down, the market struggled to fill all the new units. Vacancies stayed high, and landlords competing for tenants held rents flat or lower.
Apartment List says that is now changing. Multifamily occupancy is reaching an inflection point at the same time as rent growth. The logic is simple. Once fewer new units arrive and existing vacancies get filled, landlords have less reason to cut prices. When occupancy and rent growth turn together, it suggests the market has worked through most of the excess supply, not just hit a temporary low.
What's behind the paywall
The post goes on to Realtor.com data, which McBride notes shows a 37th straight month of year-over-year rent declines. The rest of the survey, including any vacancy figures beyond Apartment List's, is for paid subscribers only. So the "near a bottom" claim rests mainly on Apartment List's evidence above. The free portion doesn't report occupancy levels or a forecast for when rent growth turns positive.
Remember
Apartment List's national median asking rent fell 0.1% in September and 0.4% year over year. The monthly dip is seasonal.
The 2024 peak delivered over 600,000 multifamily units, the most since 1986, keeping rents soft for nearly four years.
Multifamily occupancy is turning along with rent growth, a sign the excess supply is mostly absorbed.
His conclusion is that a 10-year investor doesn't need bonds. Many still benefit from them as an emotional hedge, a source of regular income, or cash to buy stocks after they fall.
The case against going all in on bonds
Carlson says this is the first time a reader has asked him about holding 100% bonds. Yields were too low for that to make sense for most of the past 20 years. He argues that stocks also hedge bonds:
Inflation risk: Bonds pay back fixed dollar amounts, so high inflation can shrink your standard of living. Stock dividends and earnings tend to grow faster than inflation.
Reinvestment risk: If rates fall, maturing bonds can't be reinvested at the yield you need to hit your target.
Interest-rate risk: Even with individual bonds held to maturity, selling early to pay for a big expense can mean selling at a loss.
His historical table shows that a 20/80 stock/bond portfolio earns noticeably more than all bonds, with little extra volatility. Carlson argues that holding only bonds is probably riskier than holding a small stake in stocks. He adds that concentrated bets, mainly on U.S. large-cap stocks, have won for 10–15 years because bonds paid so little. At today's yields, he expects diversification to pay off again, though he doesn't say when.
Remember
Since the late 1920s, the S&P 500 beat 5-year Treasuries in over 83% of rolling 10-year periods.
In the stock market's 26 down years (average -13.5%), bonds averaged +4.3%. 2022 was the main exception.
Even with 5% yields, an all-bond portfolio carries inflation and reinvestment risk. A 20% stock stake adds return without much volatility.
The new border between the Christian and Muslim worlds cut trade flowing through the Byzantine Empire in present-day Turkey and southeast Europe. Meanwhile, more trade reached present-day France and Germany along Muslim routes running through North Africa and into Spain.
The paper's consumption maps follow the trade. Between the two periods, Italy, the Balkans and Turkey got poorer, while France and Germany saw consumption rise quickly. Urban populations also grew between 700 and 900 CE in the regions that gained trade.
Klement explains the mechanism this way. Cities act as trade hubs, and their network effects spread new technologies faster, some of them brought in or learned through trade. Those technologies raise labour productivity, which raises wealth and then consumption. He argues this is the same process that keeps cities richer and more productive than rural areas today.
He takes the story one step further. Richer Frankish lands, he says, funded the military power of Pippin and Charlemagne, the rise of the Carolingian Empire, and more than a millennium of Northern European dominance. His half-serious conclusion is that people in Germany, France, the Benelux countries and the UK owe some thanks to the Arab conquest of North Africa and Spain.
Klement admits that free trade is not a cure-all and can widen inequality. The post presents the paper's maps without going into its statistical details.
Remember
Boehm and Chaney used where coins were minted and where hoards turned up to rebuild trade routes for 450–630 and 713–900 CE.
After the Arab conquests, trade bypassed Byzantium, and consumption fell in Italy, the Balkans and Turkey.
France and Germany gained trade through North Africa and Spain, and their consumption and urbanisation rose.
