Will AI Worsen Affordability Woes?

And more from this week…

Happy International Workers’ Day! Oren has a couple of variations on a theme, that theme being affordability, to get us started:

American Compass’s “Cost of Thriving Index” emphasizes that even as particular products and services get cheaper, making ends meet can become harder if you need new or different products and services to participate fully in American life. A wireless plan has been a quintessential example. Yes, the inflation data shows a declining cost every year for having that amazing computer in your pocket. It keeps getting more advanced. It can transfer more data than ever. But that’s a chunk out of the family budget that simply didn’t exist in a prior generation. You can be “better off” in one sense, and find life unaffordable in another, simultaneously.

But… once something does become established in a baseline budget, it’s great to see the price come down. A report from the wireless industry (yes, it’s an industry report, but the data seem reasonable) highlights the real decline in the cost of a phone plan (even as data usage rises) and, most importantly, its declining share of household budgets.

As AI tools become integrated into everyday life—and their cost in at least the short- to medium-term may rise substantially—it’s worth thinking about the effect that will have on household economics. From the perspective of inflation, there will be no price increase relative to a pre-AI baseline. Your wages go further than ever! But if paying large sums for AI access becomes important to participating in everyday life, or succeeding in the competitive races that our schools and workplaces inevitably become, the result will be economists insisting that life has never been better while families feel more squeezed than before.

And because this apparently needs clarifying, “rising cost of flying to France for a wedding” is not what “squeezed” means. Much has rightly been made of the bizarre New York Times story, “These Couples Wanted to Have Children. Rising Costs Are Stopping Them.” One couple, living in a 2,000-square-foot house that probably cost about $500K “realized that even with one child, they would most likely need more space…”

For a second couple, “the decision not to have children came down to the life they’ve built and what it would take to change it. Married in 2023, they have shaped their relationship around exploring new places together, such as Japan, Bali and Morocco.” You see, “A flight to France for a wedding in September cost them $1,600 round trip. … With a child, they added, going to that wedding would have been more difficult and meant fewer trips this year.”

The third couple, two women, were confronted by the high cost of in vitro fertilization. Let’s put that one aside for a moment.

In none of these cases are “rising costs” the obstacle. The home our first couple seems to own has four bedrooms and three baths, which kind of, by definition, is enough space for one child, or two, or three. Likewise, “we’d rather go to Bali” is a lifestyle choice, not a constraint on achieving economic security in the American middle class. It’s good to tell these stories because everyone should be aware that attitudes like these exist, and perhaps even are prevalent. It’s bad that these couples are hiding behind the very real challenges faced by so many American families, as a way to justify their obvious preference for not having kids. (But galaxy brain, maybe it’s good that these couples feel the need to hide their preference because that means our culture still imposes some negative judgment on such prioritization, and what’s bad is that the Times wants to help them get away with it.)

Definitely bad, while we’re here: The GOP hiding behind the affordability crisis to justify its preference for… a capital gains tax cut: “Republicans Eye Capital Gains Tax Cut to Ease Voters’ Anxieties” (Bloomberg). I am speechless. — Oren

LET’S START WITH SOME GOOD NEWS FOR ONCE

As Commonplace’s Drew Holden reminded us in a recent essay, “Cities Really Can Just Enforce the Law.” The latest example: San Francisco’s BART. Since spending $90 million to install non-jumpable fare gates, crime has plummeted and the need for intensive maintenance to address rider-caused damage is down about 99%. As Aakash Gupta notes, the real return on investment isn’t from getting people to pay their fares. “The $10 million in recovered fares is the smallest line in the return. Fare revenue used to cover 70% of BART operations. After the pandemic it collapsed to 22%. The gates won’t fix that gap directly. They fix the precondition for fixing it: a system that office workers, families, and tourists are willing to use again. Ridership growth at stations with new gates outpaced ungated ones before the rollout finished.”

There is so much low-hanging fruit available to policymakers in simply enforcing the law and fixing the preconditions for fixing our communal problems. And voters will reward them for it.

For even more optimism, read Ivana Greco on, well, The Case for American Optimism. “I was recently talking about a friend about reasons to be optimistic about America, and Lisa came to mind. The fact that she’s been driving around with a carseat for decades is an incredible testament to the amount of love and care she’s poured into other people’s lives.”

GOOD NEWS IN AN UNLIKELY PLACE: FINANCIALIZATION

Maybe one reason we’re in a good mood this week is the remarkably wide range of positive stories coming from the overfinancialized economy this week in the Wall Street Journal. We’ve got:

• U.S. Senators Vote to Ban Themselves From Trading on Prediction Markets. “A representative for Sen. Bernie Moreno (R., Ohio), who introduced the resolution, said the rules apply to senators, officers and staff.”

• Saudi Arabia Pulls Funding From LIV Golf. Its Star Players Face a Painful Road Back. LIV “paid exorbitant fees to put on tournaments with lucrative purses featuring elite players such as Bryson DeChambeau and Jon Rahm. … And one thing has already become clear: The mainstream golf world isn’t ready to simply welcome them back.”

• Bill Ackman’s Stock-Picking Fund Drops 18% in Trading Debut. “Billionaire investor sought to harness his social-media following to attract everyday investors.”

Meanwhile, in the House of Representatives, Chairman Jason Smith had some tough talk for hospital CEOs in his opening statement at a Ways & Means Committee hearing: “Simply put, hospitals are charging an insane amount for care. Hospital prices have skyrocketed 300 percent in just over two decades—more than any other sector of our economy. Hospital consolidation and mergers, that lead to ever-growing market power, are fueling the borderline extortionary prices hospitals charge patients.”

And finally, the Roosevelt Institute published a nice paper on financialization, complementing many of the arguments Oren advanced recently in his New York Times essay: What Is “Financialization” and What Is It Doing to Our Country?

GOOD READS FOR YOUR WEEKEND

Self-recommending from Brian Potter at Construction Physics: How an Oil Refinery Works

Scott Bessent is the Wall Street Journal weekend interview: Donald Trump’s Economic Engineer

A wonderful essay from Brad Littlejohn at Commonplace: The Economics of Vice

In the New York Times, Craig Fuller writes: Truckers Kill More Than 5,000 People a Year. Regulators Are at Fault:

In the Financial Times: What is a city without children?

And for your listening pleasure, Congressman Riley Moore joins Teamsters President Sean O’Brien on his Better Bad Ideas podcast: Can a Republican Be Pro-Union?

And with that, on to the bad news.

WHERE BETTER TO START THAN TECHNOLOGY?

The Wall Street Journal has the best look yet at the unintended consequences of Chromebooks in schools, “How YouTube Took Over the American Classroom.” A few of the anecdotes:

“When [his mother] signed into his school Google account, she was aghast: Her son Ben had accessed more than 13,000 YouTube videos during school hours from December 2024 through February 2025, according to viewing data she provided the Journal.”

“YouTube during snack time, dismissal and indoor recess. YouTube to teach drawing to first-graders. YouTube to read a book to class.”

“A second-grader in New York watched more than 700 videos in two months during school hours, including one featuring pole dancing. A tenth-grader in Oregon scrolled through more than 200 between 9 and 11:40 a.m. on March 6.”

“In Ben Warren’s science class, nearly all educational content has been on the iPad: instead of live science experiments, the teacher showed a YouTube video. ‘Everything is a simulated experience,’ the now-eighth grader says. ‘I would rather use paper and pencil. It’s easier to focus.’”

“YouTube sought to close the 80 million-hours-per-day viewing gap between school days and weekends, according to a 2016 document entitled ‘YouTube edu opportunities’: ‘Increasing usage in schools M-F could decrease this gap!’”

Just read the whole thing. And then call your superintendent. Because…

New York Times: “In Backlash Against Tech in Schools, Parents Are Winning Rollbacks.” See, look at that, even in our bad news section we’ve got good news this week!

Of course, another area where we’re now seeing robust pushback is data-center construction. The idea that we’d slow development and deployment of this revolutionary technology is driving the accelerationists and efficiency hounds mad. But read Tonya Nickol, writing in Commonplace about why “Data Center Proposals Rock Trump Country.” Nickol and her neighbors live in a rural area going through one of these fights… look at things from their point of view and see which, if any, pro-data-center arguments you’d still find convincing.

JENSEN HUANG HAPPY HOUR

A rough week for our leather-jacketed friend, so sidle up to the bar.

SHOT: Jensen on the BG2 podcast last fall: “They also publicly say, and rightfully I believe they believe this, that they want China to be an open market. They want to attract foreign investment. They want companies to come to China and compete in the marketplace and believe that. I hope, I believe, and I hope that would return to that in our context. Answering your question, what do I see in the future? I do hope because they say it—their leaders say it. And I take it at face value. And I believe it because I think it makes sense for China that what’s in the best interest of China is for foreign companies to invest in China, compete in China, and for them to also have vibrant competition themselves.”

CHASER: “China Bans Meta’s Acquisition of Manus on National Security Grounds” (Wall Street Journal). As Friend of the ‘Stack Chris McGuire explains:

Ultimately, this is a much larger defeat for the Chinese AI ecosystem than for the United States. Meta will be fine without Manus. But Chinese nationals looking to found AI companies will increasingly just start them overseas. The message from the Chinese government here is that every AI company founded in China will forever remain subject to Chinese government regulatory pressure and manipulation, regardless of its legal status or location.

Lastly, given the Chinese government clearly believes that the US and Chinese AI ecosystems should be completely separate, we should stop helping their ecosystem succeed!

SHOT: Also last fall, Jensen told Bloomberg, “Of course, over the years people have speculated about diversion. We chase down every single concern and we’ve repeatedly tested and sampled data centers around the world and found no diversion.”

As Senators Jim Banks and Elizabeth Warren noted in a March letter to Commerce Secretary Howard Lutnick, Jensen has also said previously that “there’s no evidence of any AI chip diversion” and “the important thing is that the countries and the companies that we sell to recognize that diversion is not allowed and everybody would like to continue to buy Nvidia technology. And so they monitor themselves very carefully.” In his proud tradition of condescending non-sequiturs, he has also argued that smuggling Nvidia chips is impossible, because “these are massive systems. The Grace Blackwell system is nearly two tons, and so you’re not going to be putting that in your pocket or your backpack anytime soon.”

CHASER: Epoch AI has a new paper: “How much AI compute has been smuggled to China? We estimate between 290k and 1.6M H100-equivalents by the end of 2025 — representing ~20% to ~60% of China’s total compute.”

The line between vigorously pursuing profit for your company and lying on behalf of the Chinese Communist Party is not a thin one. We should reasonably expect American executives to remain on the right side of it.

SPEAKING OF CHINA, LET’S TALK ABOUT CHINA

With the planned Beijing summit between Presidents Trump and Xi less than two weeks away, it was very encouraging to see “Senators Introduce Bipartisan Bill to Ban Chinese Vehicles and Auto Parts” (NBC). The press release from Senators Bernie Moreno and Elissa Slotkin announcing the bill is notable for the supporters quoted: a Democrat, a Republican, the United Auto Workers, General Motors, and American Compass.

In the House, meanwhile, “Lawmakers Urge Trump to Prohibit China’s Automakers From Building Cars in the U.S.” (Wall Street Journal). This letter was signed by more than 70 Democrats. Speak up, House Republicans!

And good for the FCC: “US Telecom Agency Votes to Expand Tech Crackdown on China” (Reuters). Did you know that electronics made in China could be tested in Chinese labs to win U.S. approval? In fact, the majority of all U.S. electronics are tested in China? No longer!

And the global realignment proceeds apace... on critical minerals, where “Trump Admin Touts 27 Mineral Deals in Bid to Counter China” (Politico). A particularly good case study of the ongoing efforts comes from Malaysia, where the Wall Street Journal reports:

The Pentagon’s push to get its hands on the rarest of the rare-earth elements leads all the way to this small port city in Malaysia. Here, Lynas Rare Earths, an Australian company, has begun pumping out heavy rare earths, the elusive kind that China dominates. “No one had made a separated heavy rare earth outside of China in 20 years,” said Amanda Lacaze, Lynas’s chief executive. The company’s chief operating officer, Pol Le Roux, said it had actually been 30 years. When China cut off exports of heavy rare-earth elements during trade tensions last year, automobile factories in the U.S. and Europe were forced to stop production. Now, Lynas is at the vanguard of an effort by the U.S. and allies to prevent Beijing from using its monopoly power to squeeze the rest of the world. The Pentagon is opening its wallet in unusual ways to ensure supplies. In March 2026, Lynas announced a preliminary $96 million deal in which the Pentagon would purchase Lynas’s rare earths.”

Back on this side of the globe, “The US Geological Survey (USGS) has identified an estimated 2.3 million metric tons of undiscovered, economically recoverable lithium in the Appalachian region. This volume is equivalent to 328 years of US lithium imports based on 2025 levels.”

…and in Europe, China is unhappy with the EU’s rising barriers, according to the Financial Times: “China has warned the EU that it will take ‘countermeasures’ if its companies are hurt by a proposed new European law aimed at bolstering the bloc’s industry against cheaper imports. The law is one of the EU’s most serious attempts yet to push back against Chinese high-tech imports and their perceived threat to important local industries, such as automotives.”

Enjoy the weekend!