Data centers seem to be popping up everywhere. And based on the value of current construction, the US is indeed building a lot more data centers than we were in 2020 or 2021, about four times as much data center construction (inflation adjusted).
But… did you know that we build a lot more good-old manufacturing than data centers? Almost four times as much in recent months. And that’s even after a decline in manufacturing construction over the past year and a half.
The US also builds about the same amount of warehouses and chemical plants as we do data centers. Data centers may exceed those two categories in a few years, but for now they are pretty similar.
Keep in mind that manufacturing and chemical facilities also use a lot of electricity and water, and have plenty of local negative externalities! Warehouses probably have a lot less resource consumption and external effects, but it’s not zero either.
Are data centers popping up everywhere? Well, people are certainly noticing them. But so are lots of other types of buildings, which rarely register more than a peep from concerned citizens and local media, unless there is some clear and obvious external effect.
Two months ago I wrote about gasoline prices and tried to give the current prices some historical context. Gas prices have, of course, only continued to increase since then. Here’s a chart I created to give a bit more context, using an idea from Ryan Radia: how much does it cost to drive a car 250 miles? Since fuel efficiency has increased over time, we might be understating how much it costs to drive today relative to the past. And of course, to give the “cost” proper context I have stated in terms of hours worked at the average wage (note: the final data point is from April 2026, as we don’t have wage data for May yet):
In April 2026 it took about 1.4 hours of work at the average wage ($32.23) to purchase enough gasoline to drive 250 miles (10.7 gallons) at the average fuel efficiency (23.4 miles per gallon). That average fuel efficiency figure is from 2024, the latest available, so it could be a bit higher today. Maybe it’s a little easier than 1.4 hours of work to buy it, but even if fuel efficiency had crept up to 25 mpg (that would be a big increase in 2 years, historically speaking), it would still be 1.3 hours of work.
1.4 hours of work is certainly a big jump from earlier in 2026, but you’ll notice it is still on the low end in this chart, and well below the peak we saw in June 2022 of just over 2 hours of work to buy 250 miles worth of gasoline.
But 23.4 miles per gallon is pretty low, as this is includes lots of trucks and SUVs with pretty bad fuel efficiency. What if we looked at some more fuel efficient vehicles?
Here’s a few I checked on (all for 2026 models, with gas and electricity at current national averages):
Toyota Camry: 0.71 hours of work
Chrysler Pacifica Hybrid: 0.61 hours on electric, 1.18 hours on gasoline
Tesla Model Y: 0.37 hours of work
It will probably not surprise you that the all-electric Tesla Model Y is cheaper than the average car to operate at current prices, but you may not have realized that it is almost four times cheaper. But the Toyota Camry, with all models operating as hybrids now, also comes in pretty good at about half the cost of the average vehicle to operate (and the Camry is a very affordable car to purchase). The Chrysler Pacifica hybrid minivan does pretty well too, though even operating only on electricity (30 miles at a time), it’s only slightly more fuel efficient than the Camry.
This is a “guest” blog post that I asked Google Gemini Pro to write. Data centers are increasingly becoming a political issue in communities across America. People are asking questions like: “Why do we need these things? How much water will this use?” Because these are sometimes referred to as “AI Data Centers,” people might assume that data centers are primarily about creating cat memes and fake videos. And it’s true that’s a part of AI, and it’s true that much of the new data center construction is for AI.
But… data centers have been around for a while. People are only now taking notice of them, for the most part. To better understand this issue, I asked — what else? — AI to explain how much data centers are used in our daily lives. AI in this case means Google Gemini Pro.
I’ll paste the full guest post below, but I want to point something out first: this blog post makes no mention of AI. Instead, it talks about: GPS and mapping apps; almost everything you do if you work in an office; credit cards and digital banking; news and social media. All of these things rely on data centers and would cease to function without data centers. That’s not because I asked Gemini to leave out AI from the guest post — when I followed up on this omission, Gemini said “It was a calculated omission—partly to keep the focus on the immediate ‘analog’ shock to daily life.” Most people probably wouldn’t care of they lost the ability to create funny images with AI. They would care if they lost all of their photos, access to their Dropbox account, and the ability to send email.
You could interpret all of this as saying we are “too dependent” on data centers and the modern Internet. You could also say we are “too dependent” on electricity. Or modern plumbing. Or modern supply chains. Or agriculture. Modern life is based on modern technology. I don’t know if it really makes sense to say we are “dependent” on these things, other than that we use them and they are beneficial.
Anyway, on to the guest post from Google Gemini Pro:
The Day the Cloud Evaporated: Life After the Data Center Collapse
Imagine waking up tomorrow morning in your suburban home in Ohio, or your apartment in Seattle. You reach for your smartphone to silence the alarm, but the screen is a stubborn, glowing rectangle of error messages. You try to check the weather, but the app’s spinning wheel never stops. You try to text your partner, but the message stays “Sending…” until it eventually fails.
This isn’t just a bad Wi-Fi connection. Every data center on Earth—those massive, humming warehouses filled with silicon and cooling fans—has vanished. In an instant, the “brain” of the modern world has been lobotomized. For the average person in the United States, life wouldn’t just slow down; it would fundamentally reset to 1950, but without the physical infrastructure of 1950 to catch the fall.
Congressional districts must be redrawn after each US Census. In fact, that is one of the main functions the Census: to determine how many seats of the US House of Representatives that each state is allotted. A related function is to give states information about the distribution of the population in their state. Even if a state doesn’t gain or lose seats after a Census, the population in their state may have grown, shrank, or simply moved around within the state. If each Congressional district is to represent roughly the same number of people, district boundaries will still need to be redrawn even absent a change in the state’s total share of the US House seats.
That much is clear. However, given that historically and still largely today Congressional districts are drawn by state legislatures, there is a temptation and a real possibility that the party in power of a state legislature will draw boundaries in a way that benefits that party. There is nothing illegal about doing this as far as the federal Constitution is concerned (that I am aware of), but it does seem a bit unsporting. But I guess much of politics might be deemed “unsporting.”
Nonetheless, sometimes the shape of districts is so obviously weird and not representing an cohesive group of citizens or communities that it gets the derisive term “Gerrymander,” which derives from a historical example of a very odd looking district. But even if a district doesn’t look weird, it may still give one party an advantage that some deem unfair, such as by diluting one party’s supporters into multiple districts so they get no seats, or alternatively cramming all the supporters into one district so they have a very lopsided victory in just one district, rather than controlling multiple districts. This practice is known as “partisan Gerrymandering,” and it will be my focus in this post today (there are other forms, such as racial Gerrymandering, which are also important but are beyond the scope of this post).
Surely this practice occurs. Some states have tried to avoid it the problem of Gerrymandering by using non-partisan commissions, though this is a minority of states (less than a dozen), and when push-comes-to-shove they don’t actually seem that committed to the idea (both California and Virginia have essentially abandoned these commissions in 2025-26 to attempt to, once again, gain a partisan advantage). But lately a particular question has come up: does partisan Gerrymandering benefit one major party more?
In total for the US House, whatever Gerrymandering at the state level that is happening seems to roughly wash out in national representation: in the 2024 election, Republicans received about 51.7% of the two-party share of votes totaled over all House elections, and Republicans have about 50.6% of the seats in the House. Perhaps you could say that the GOP effectively loses 5 seats to what they “should” have in a truly proportional sense, but this ignores many factors, some of which I will discuss below. But even so, the GOP has a slim majority in the House and they won a slim total of national House votes. It’s about right.
But that “washing out” at the national level ignores some very large disparities at the state level. In some states, one party has all the House seats, even though they got nowhere near 100% of the House vote. Many of these are states with 1 or 2 House seats, which are less interesting because either there is no possibility of Gerrymandering (1 seat) or there is no obviously “fair” division, but it is not only those small states. For examples, Massachusetts gives all 9 seats to the Democrats, even though Republicans received 31.5% of the two-party vote share. Do Republicans deserve 3 of the seats? Is the fact that they don’t have 1/3 of the seats evidence of Gerrymandering? Conversely, in Oklahoma Republicans hold all 5 seats, even though Democrats got 30% of the vote. Should Democrats get a seat or two in Oklahoma?
(Note: for all vote data, I have queried Google Gemini Pro. I found multiple errors along the way, but I am fairly confident the numbers are all correct now. Please let me know if you spot any errors).
Neither Massachusetts nor Oklahoma’s Congressional representation is an obvious case of Gerrymandering on its face. It’s possible that 1/3 opposition party support in both states is perfectly even distributed across the state, such that it would not be possible to draw any “fair” districts that give the opposition roughly 1/3 of the seats. But it could be the result of Gerrymandering, or at least an indication we should look deeper. We can tally up all of the differences across states in the following chart:
Forecast models, betting markets, and surveys of experts all drastically overstated the actual growth of GDP in the last quarter of 2025. They were off in the initial release, which was just 1.4 percent, but this was even further revised down to 0.5 percent. All four of the sources I track were forecasting over well over 2 percent, with some over 3 percent.
Does that mean we shouldn’t trust the forecasts? Perhaps, but last quarter was largely pulled down by government spending cuts, which the models completed missed. You can see this very clearly in the Atlanta Fed GDPNow model. Perhaps they shouldn’t have been surprised by this drop in government spending, but that is where the major error was.
So what do these forecasts think about the first quarter data for 2026, which comes out tomorrow? The two best predictors historically, GDPNow (Atlanta Fed) and Kalshi, are pretty far apart on this one, over a percentage point difference, with GDPNow being the only forecast under 2 percent:
The Cost of Thriving Index from Oren Cass’s American Compass is an attempt to calculate how well US families are doing financially, but without using traditional inflation adjustments to income. Instead, Cass and crew have chosen 5 categories of goods and services, and tracked those over time relative to median earnings for men ages 25 and older (in the baseline model — it can also be applied to different categories of workers).
Scott Winship and I wrote a detailed critique of the COTI, which I summarized in a previous blog post. Our critique comes from several angles, including correcting several major errors in COTI, as well as arguing that standard inflation adjustments to median income are superior to this new approach.
Based on our critique, I don’t think COTI is a very good measure of how well US families are doing financially. But the COT Index still has many fans. And Cass seems to think Trump is in large part pursuing many policies that should help out US workers and families, such as Trump’s tariff policies. Thus, it will be useful to see if Trump’s policies are leading to American workers “thriving” in the first year of Trump’s presidency.
Unfortunately, even using Cass’s preferred approach, Americans don’t appear to be thriving under Trump.
For Tax Day 2026, here are some estimates of how progressive the US tax system is, drawing primarily from published academic work. While there is disagreement about exactly how progressive the tax system is (and should be), these papers all agree that as income rises, average tax rates rise. These estimates attempt to include, as best as possible, all federal, state, and local taxes, and to take account of tax incidence.
And here is a chart that I created, which comes from the appendix data for PSZ (2018), which is roughly comparable to the Auten-Splinter chart above. Note that it isn’t perfectly comparable: the income groups on the x-axis aren’t exactly the same, and the latest year in PSZ is 2014 rather than 2019 (they do have estimates for later years in updates to the work, but I am trying to stick with the published academic work). But they are roughly comparable:
Auerbach, Kotlikoff, and Koehler in the Journal of Political Economy take the additional step of computing lifetime average tax rates, rather than for a single year, showing the US tax system is even more progressive when considered this way. Note: they also include the value of transfers, which makes these results not directly comparable to the papers above:
Finally, here are two estimates from think tanks that work on tax policy. Even though the Tax Foundation is considered more right-leaning and ITEP is considered more left-leaning, both agree that the overall US tax code is progressive.
Vice President Vance’s recent trip to Hungary to stump for Viktor Orban was interesting for a number of reasons, but is not totally surprising. In many ways Orban’s “illiberal democracy” (his self-applied term) has many overlaps with MAGA Republican policy. Johan Norberg recently wrote a very good critique of Orban’s policies, and why the US should not follow further down the path or Orbanism.
I agree completely with Norberg’s analysis completely, though his focus is mostly on the decline in democracy, the rule of law, and personal freedoms in Hungary under Orban. Norberg does have several criticisms of Orban’s economic policies, but on the whole economic policy under Orban has been relatively unchanged: in the Human Freedom Index report Norberg cites, the “personal freedom” portion of the index declined 1.5 points on a 10-point scale under Orban, while the “economic freedom” portion only declined by 0.3 points.
What’s really interesting is that within the Economic Freedom of the World Index, Hungary’s highest scoring area of the five areas is “freedom to trade internationally,” where they ranked the 25th best country in the world in 2023. While MAGA Republicans might like the US to copy many of Hungary’s policies, they clearly do not in this case, as trade restrictions one of the signature economic policies of Trump (possibly his most important economic policy).
To be clear, the high ranking on free trade in Hungary is not due to any conscious policy choice of Orban’s administration. Instead, it is because Hungary is a member of the European Union, and therefore is part of the single market (meaning they have free trade with most of their trading partners) and part of the customs union (meaning they can’t set their own external trade policy). Indeed, it appears if Orban had his way, they would have much less free trade, as he is trying to hold up the EU-Mercosur trade agreement. Nonetheless, Orban’s hands are largely tied on trade policy.
Not only was Hungary ranked quite high on free trade in 2023, they were ranked higher than the US, as they have been for most of the past decade:
While the EFW data is generally only available with a significant lag, and therefore only through 2023 in the chart above, they did provide a special update for the US in mid-2025, given the radical changes in trade policies by the second Trump administration. That’s the blue dot you see floating down below with a score of 7.4. While that isn’t the final ranking for 2025 (they still don’t have the scores for 2024!), it gives an indication of roughly where the US will land in 2025, making it much less free trading than Hungary.
The EFW Area 4 score includes not just tariff rates, but also non-tariff barriers to trade, as well as capital controls and labor movement. What if we only focus on the tariff sub-score, since this is the part of trade policy Trump has altered the most?
On tariff policy alone, there wasn’t much difference between the US and Hungary in 2023 (indeed, if we look solely at tariff rates, the US was slightly better, with an average rate of 3.3% compared with 5.0% in Hungary). But with the radical change in rates in 2025, Fraser estimates that the US will drop significantly, giving it one of the highest average tariff rates in the world. This would be a massive difference between Hungary and the US on trade policy. We’ll have to wait for the complete data before making a final judgement, and indeed given that average tariff rates have changed more than 50 times under the second Trump administration already, it’s not even clear what our score will be for 2025. But it will almost certainly be worse than Hungary.
A recent viral Tweet shares a political cartoon from 1894, which shows a worker being squeezed by high rents and low wages. The Tweet claims “the problem has only gotten worse.”
134 years ago this cartoon was drawn, and in 134 years the problem has only gotten worse. pic.twitter.com/vvyLXXEe6s
Can this be true? Are workers today actually worse off than they were in 1894? At first blush, this seems obviously wrong. Here is a chart I created showing real (inflation-adjusted) wages since 1894. They are eight times higher today (I have combined two wage series and two price indices, so don’t take this as being perfect, but roughly accurate).
Figure 1
Whatever concerns we might have about high rents today, there must have been some other major improvements in the cost of living relative to wage increases since 1894, given that one hour of work can purchase about 8 times as many real goods and services today.
But is there a narrower case for the cartoon? What if we only focus on wages? We can do this by using a great new resource from the Philadelphia Fed, which provides some long-run data on housing prices in the US, for both purchasing a home and renters. The data series conveniently goes all the way back to 1890, so we can make the comparison with 1894 using the nominal rent index (it ends in 2006, but we can merge it with the modern CPI for rental housing). What if we compare this rental price series to the same wage series I used in the chart above?
Figure 2
The trend in this second chart is very troubling. Rents have increased much faster than nominal wages. While other goods and services may be more affordable, rents — which consume around 24 percent of household income for renters — are rising relative to wages. Sure, we can talk all day about how the quality has improved — larger apartments, indoor plumbing, modern safety features that didn’t exist in 1894 — yet still, renters can only rent what is available. And today rental housing is much more expensive than on April 1, 1894.
APRIL FOOLS!
The data was all correct, other than the fact that I tricked you by swapping the wage and rent lines. Wages have actually increased much faster than rents since 1894 (though they have increased roughly equal rates in recent decades). Sorry for that little trick, I’m a little surprised no one noticed. Perhaps I am just too well-known for being a straight shooter with data. Here is the real chart:
Today I am posting an update to the generational wealth chart that I have posted many times in the past. This update brings the data through the 3rd quarter of 2025 for the youngest cohort, which includes both Millennials and a growing part of Gen Z in the data from the Federal Reserve. I am somehow hesitant to post this chart, as it is starting to be data that is less useful as the younger generations age, for two reasons.
The first problem with the data is that the Fed is lumping everyone from ages 18-43 together as one generation. Given that the youngest Millennials were 29 in 2025, we are now including a significant part of Gen Z, which is OK in itself, but it becomes harder to compare with generations that encompass only 16 or 17 years of birth cohorts. Secondly, the data from the Fed’s Distributional Financial Accounts is only benchmarked every three years with the Fed’s more detailed Survey of Consumer Finances. Currently only the 2022 version of the survey is available, which is now probably a bit out of date. Based on past updates, it is entirely possible that it is underestimating wealth for the youngest cohort. But I think we will have much more certainty about this data once the 2025 SCF is available and used as a benchmark for the DFA data.
With all of those caveats aside, here is the updated chart:
As I am currently working on a book manuscript using the Survey of Consumer Finances, I will be very excited to finally have the 2025 data available. Until then, this is probably the best intergenerational comparison we can do, and it continues to look very positive for the youngest cohorts. With an average of almost $146,000 of wealth for the combined Millennial/Gen Z cohort, they are well ahead of where Gen X was even in their late 30s, and ahead of Boomers at around age 37 as well. All of this bodes well for young people, despite frequent expressions of pessimism, but we should hold off judgement until the 2025 data is fully updated.
Economist Writing Every Day 