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      What is the US debt ceiling and what will happen if it is not raised?

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      The US is teetering on the edge of a fiscal cliff. Over three months ago the treasury warned that the US government had hit its borrowing limit, also known as the debt ceiling. Since then the US treasury has been taking “extraordinary measures” to ensure the government can continue to pay its bills. But time is quickly running out. Congress and the White House have until late summer to raise the debt limit, or else the US government will default on its bills, a historic first, with likely catastrophic consequences.Here is more on the debt ceiling and what it means for the US government:What is the debt ceiling?The debt ceiling is the limit on the amount of money the US government can borrow to pay for services, such as social security, Medicare and the military.Each year, the government takes in revenue from taxes and other streams, such as customs duties, but ultimately spends more than it takes in. This leaves the government with a deficit, which has ranged from $400bn to $3tn each year over the last decade. The deficit left at the end of the year ultimately gets tacked on to the country’s total debt.To borrow money, the US treasury issues securities, like US government bonds, that it will eventually pay back with interest. Once the US government hits its debt limit, the treasury cannot issue more securities, essentially stopping a key flow of money into the federal government.Congress is in charge of setting the debt limit, which currently stands at $31.4tn. The debt ceiling has been raised 78 times since 1960, under both Democrat and Republican presidents. At times, the ceiling was briefly suspended and then reinstated at a higher limit, essentially a retroactive raising of the debt ceiling.What happens if the US defaults?The US has never defaulted on its payments before, so exactly what will happen is unclear. It’s not likely to be good.“Failure to meet the government’s obligation would cause irreparable harm to the US economy, the livelihoods of all Americans and global financial stability,” the US treasury secretary, Janet Yellen, said in a letter to Congress earlier this year.Investors would lose faith in the US dollar, causing the economy to weaken quickly. Job cuts would be imminent, and the US federal government would not have the means to continue all its services.Why is the US debt so high?The US debt grows when the government is spending more money or when its revenue is lower.Throughout its history, the US has had at least some amount of debt. But the debt really started to grow in the 80s, after Ronald Reagan’s huge tax cuts. Without as much tax revenue, the government needed to borrow more money to spend.During the 90s, the end of the cold war allowed the government to cut back on defense spending, and a booming economy led to higher tax revenues. But then, in the early 2000s, the dotcom bubble burst, leading to a recession. George W Bush cut taxes twice, in 2001 and 2003, and then the US military campaigns in Iraq and Afghanistan increased spending by as much as nearly $6tn over the course of the war.When the 2008 Great Recession started, the government had to bulk up spending to bail out banks and increase social services as the unemployment rate hit 10%.When the unemployment rate returned to its pre-recession levels, in 2017, a major tax cut was passed under Donald Trump. The debt rose by $7.8tn while he was in office.And then the Covid-19 pandemic hit. The US government passed a series of stimulus bills to offset the worst of the pandemic’s impacts that ultimately totaled $5tn.What are the main contributors to federal government spending?The biggest chunk of US government spending goes to mandatory programs, such as social security, Medicaid and Medicare, which comprise nearly half of the overall annual budget. Military spending takes up the biggest chunk of discretionary spending, taking up 12% of the budget. Other big-ticket items include spending on education, employment training and services and benefits for US veterans.Why isn’t Congress raising the debt ceiling?On 26 April Republicans passed a bill in the House that would raise the debt ceiling by $1.5tn but mandated $4.8tn in spending cuts over a decade. Given the stakes, Democrats have refused to negotiate spending cuts over the debt ceiling. Lawmakers including Alexandria Ocasio-Cortez have argued that Republicans should bring forth spending cuts during budget negotiations, not over the debt ceiling.Still, Republicans seem adamant on using the high-stakes timeline toward default to pressure Democrats into agreeing to spending cuts. They did this successfully in 2011, when Democrats agreed to spending cuts 72 hours before the government defaulted. This time around, with neither side budging, a continued stalemate could bring the US economy closer to disaster. More

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      ‘Market rules should benefit the majority of the citizenry’: historians Naomi Oreskes and Erik M Conway

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      For the last decade, historians Naomi Oreskes and Erik M Conway have been digging into the history of the idea that freedom only thrives if businesses are left unbothered by governments. It’s a philosophy that has touched every corner of American life, they argue, even though it has long been proven deeply flawed.In their new book – The Big Myth – How American Business Taught Us to Loathe Government and Love the Free Market – Oreskes and Conway document the rise of what’s more politely called “market fundamentalism” over the last century, from corporate propaganda and fringe academic theory to mainstream ideology.The book is both a sequel and a prequel to their groundbreaking book Merchants of Doubt, which is about a handful of prominent scientists who obfuscated clear scientific findings to oppose climate regulation. At the heart of their beliefs, Oreskes and Conway argue, was the big myth.The Guardian spoke to Oreskes and Conway about The Big Myth and how it came to dominate how Americans think about government regulation. This interview has been edited for length and clarity.The Guardian: How do you define “the big myth”?Oreskes: In a way, the myth isn’t just one thing; it’s a set of interconnected concepts that together support this larger ideology of market fundamentalism.The first part of the myth is the notion of the free market, the idea that you could even meaningfully talk about “the free market” as a thing that exists. In reality, people make markets. Markets are human institutions.So that leads to the second part of the myth, which is the idea that markets have wisdom, that the invisible hand guides us and that if we all do our own thing, our own self-interest will somehow lead to this productive, efficient and happy outcome. And therefore, we should just trust markets, that the government distorts markets and interferes with the wisdom of the marketplace.Then the third part of the myth is, in a way, the most damaging – it’s the piece that really informed Merchants of Doubt. It’s this idea of the inextricable link between capitalism and economic freedom as a bulwark against totalitarianism.What are the origins of the big myth?Conway: We pick up the story with business leaders fighting against the regulation of child labor and workplace safety. We’ve all forgotten that there was a crisis of workplace accidents in the United States in the late-19th and early-20th century that killed and maimed hundreds of thousands of peopleBusiness leaders in the United States were absolutely dead-set against doing anything about these twin crises.Oreskes: It’s pretty hard to come up with a good argument to defend the employment of children as young as two in textile mills, which we know happened. How do you defend something that’s clearly, on the surface, really quite appalling? Come up with some kind of argument that appeals to something that we do care about, that we value: freedom.We saw this in Merchants of Doubt, when we talked about the tobacco industry and how it mobilized this whole argument about the freedom to smoke, that you don’t want the government telling you what to do. We actually thought the tobacco industry invented that strategy. But they didn’t. What we show in this new book is that it goes back much further.In the 20th century, one of the things the market fundamentalists did was rewrite US history to invent a story about how free enterprise was embedded into the very foundations of American society, economy and culture.They do this in the 1930s through a metaphor they came up with called the “Tripod of Freedom.” This was pushed by the National Association of Manufacturers (NAM), which at the time was the largest trade organization in the United States. They claimed that the United States was founded on three essential principles that were like a tripod – if any were to be compromised, the whole structure would fall. The three pillars were representative democracy, the Bill of Rights and free enterprise. The third part was a complete invention because, actually, free enterprise appears nowhere in the Constitution or in the Bill of Rights. Nowhere in the Declaration of Independence.The book covers the extensive propaganda campaign from NAM and companies like General Electric to sway the American public against government regulation of businesses. Why were these campaigns so effective?Conway: They disguised propaganda as entertainment, it was not obviously partisan or political. That was the whole idea. Propagandists need a kernel of truth in order to be successful. The best lies are ones that are built on something people already believe.They basically doubled down after the second world war when corporations could control their own advertising again. They keep doing it for decades. If you’re hammered through every outlet with the same message over and over again, eventually you start to believe it. Even if, once upon a time, you realized it was garbage.You have a whole chapter on Little House on the Prairie, Laura Ingalls Wilder’s best-selling books that became a hit TV show. I imagine many people didn’t know it was largely written with the help of her daughter, Rose Lane Wilder, a staunch libertarian. Though the books are supposed to be about Ingalls Wilder’s true childhood, Lane Wilder fictionalized much of it to expound on the ideals of individualism.Oreskes: There are people out there who are mad at us for bursting that bubble. My defense? Actually, we didn’t burst the bubble. Other historians, Caroline Fraser and Christine Woodside burst that bubble, and we’re drawing from their work.In the first chunk of the book, market fundamentalism is fighting an uphill battle. At what point did market fundamentalism start taking hold and becoming mainstream?Oreskes: A key figure in this story, obviously, is Ronald Reagan. Most Americans know that Reagan was an actor before he became a politician, but what they don’t know is how he affected that transition.Reagan’s career was not doing all that well, but he was still a Democrat. He was the president of the Screen Actor’s Guild. But then he gets this job with GE, and the job has two parts: hosting General Electric Theater and promoting General Electric ideology through speeches. It’s pretty clear that during this period, his political outlook shifts to be very, very aligned with GE. So he comes out of GE with this new political ideology, quite different than what he had before he went in. Also critically, he comes out with a set of wealthy corporate backers who then finance his run for governor of California.But you make the point that it wasn’t just Reagan.Conway: When Jimmy Carter becomes president, he brings into office a new generation of economists, many of whom have now been educated with the ideas of free markets that have been pushed into academia by the Chicago School of Economics. They begin shifting the way the government manages the economy. They are the regulators Carter brings into office, the first people we now associate with Reagan and ending with Bill Clinton, who finishes the job of deregulating banks in the late 1990s.Orenskes: We see how this language, rhetoric and ideology gets taken across the board politically so that when Bill Cinton gives his State of the Union address in 1995, he says: “The era of big government is over.” And that’s a Democrat, right?So how does that happen? Milton Friedman said one of the jobs of intellectuals is to be standing ready with ideas. And you just work on your ideas and you get laughed at for a long time. But one day, the world is ready and then you’re there. So when the crisis, the postwar 1970s stagflation develops, nobody really has an explanation for why this has happened. There are probably multiple factors – but the right wing is now standing ready saying: “Oh, the problem is too much government. The problem is big government. The problem is overregulation.” That gains traction, in part because it’s a simpler explanation to a complex problem.Does it seem like market fundamentalism’s grasp is loosening? Are the tides changing?Oreskes: After the Silicon Valley Bank failure, there’s this big conversation taking place right now about how much of that was allowed to happen by weakened regulation, particularly because there were specific regulations that were weakened during the Trump administration.I think most people still see regulation as a necessary evil – even liberals and progressives. So they’re sort of apologetic about it. “Yeah, I know it’s bad. But you know, we have to do it.” I would like to try to change that conversation, to make people think much more in terms of regulations as the rules of how markets operate.At the end of the book, we make a point about biological regulation. Without biological regulation, all life would cease to exist because an organism cannot operate unless it can regulate its internal chemistry. Biological regulation makes life possible. I think that’s true of society as a whole. The right set of rules and regulations supports a vibrant economy where people can “live well and prosper” (you know, Star Trek).Conway: The question is, who are the rules set up to benefit the most? Business leaders want the rules of the road to benefit them, and we’re arguing that no, the rules of the market should benefit the majority of the citizenry, not just the business leaders. More

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      Pacific trade deal is more useful to Joe Biden than it is to the UK’s economy

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      Tory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”.Trade secretary Kemi Badenoch also used the word “dynamic” to describe the 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). She pushed back against criticism that signing a trade deal with a loose collection of countries on the other side of the world would only add 0.08% to the UK’s gross national product, and then only after 10 years of membership. That figure was an estimate by civil servants 10 years ago, she said in an interview with the Daily Mail. The CPTPP is more important these days.And it might be, but not for the trade it facilitates. The significance lies in the geopolitical realignment it promotes and how such pacts could harm future Labour governments.The CPTPP was signed on 8 March 2018. Australia, Brunei, Canada, Japan, Mexico, New Zealand and Singapore were the first to form a bloc before being joined in the five years that followed by Vietnam, Peru, Malaysia and Chile.Former president Barack Obama hoped the US would also be a founder member before coming up against a Republican Congress that disagreed. Later, Donald Trump abandoned the deal altogether.Obama wanted to throw a friendly arm around Pacific countries threatened by China’s increasingly aggressive attitude to its neighbours – or, looked at another way, maintain open markets for US goods and services across south-east Asia in opposition to Xi Jinping’s Belt and Road investment initiative. Joe Biden, despite having control of Congress, refused to consider reopening talks about US membership, paving the way for China to apply in 2021.Thankfully for Biden, Britain’s application preceeded Beijing’s by six months, putting the UK ahead in the queue; quickly it became apparent that Britain’s role could be to help block China’s entry to the CPTPP without the US ever needing to join. For the Americans, the potential loss of trade was a side issue.Brexit was never considered by Washington to be a positive development, but there was a silver lining once it became clear the UK could be deployed more flexibly in a fight with China – a confrontation that Brussels has so far backed away from.The Aukus defence pact between Australia, the UK and US is another example of this anti-China coalition – and of Sunak’s efforts to win back Washington’s approval.The move also plays to a domestic agenda. In the same way that Margaret Thatcher’s sale of state assets – from council housing to essential utilities – denied Labour the means to directly influence the economy without spending hundreds of billions of pounds renationalising those assets, so global trade deals undermine Labour’s promise to use the state to uphold workers’ rights and environmental protections.Secret courts form the foundation stone of most trade deals and allow big corporations to sue governments when laws and regulations change and deny them profits.Badenoch’s civil servants say they are comfortable with the investor-state dispute settlement (ISDS) tribunal system because the UK government has never lost a case.However, a government that wanted to push ahead at a faster pace with environmental protections, carbon taxes, or enhanced worker’s rights might find themselves on the wrong end of a court judgment.The TUC’s general secretary, Paul Nowak, was quickly out of the blocks to voice these fears when the deal was announced on Friday. That is why the EU parliament has forced Brussels to ban ISDS clauses from future trade deals.Sunak, on the other hand, appears comfortable with the prospect of CPTPP countries beginning to dictate how the UK considers basic rights – and how this could become the price of easier trade, and more importantly, foreign policy. More

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      Disney v DeSantis dispute hinges on clause referencing King Charles III

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      A dispute between the Florida governor, Ron DeSantis, and Disney over control of the company’s Florida theme park district hinges on a clause referencing King Charles III and his descendants.The row began after DeSantis in March 2022 passed a “don’t say gay” law banning classroom teaching on sexual orientation and gender identity. The law was highly controversial, with LGBTQ+ activists saying it was discriminatory. Joe Biden denounced it as “hateful”.Under former chief executive Bob Chapek, Disney was initially hesitant to state public opposition to the bill, but did so after pressure. That prompted DeSantis and Florida Republicans to try to revoke privileges Disney has had for decades at its theme park, which employs 75,000 people.However, a new governing board appointed by DeSantis on Wednesday reportedly said it will need to overturn last-minute agreements which would prevent it from taking control.The document states that its provisions will stand until “21 years after the death of the last survivor of the descendants of King Charles III, king of England living as of the date of this declaration”.“Royal clauses” of this kind are used to avoid rules in some places against contracts which last in perpetuity. The British royal family was chosen for the clauses because information about the family tree was readily available, but also because of the “better healthcare available to, and longer life expectancy of, a royal family member compared to a non-royal”, according to the law firm Birketts.In February, the Florida state house passed a bill to end the unusual status that allowed Disney World to govern itself. Under the status, Disney World had its own police and fire departments, planning powers and some other public functions.The bill gave DeSantis the power to appoint the five members of the board that controls government services for the Reedy Creek district.“We’re going to have to deal with it and correct it,” board member Brian Aungst said of the last-minute agreements on Wednesday, according to the Associated Press. “It’s a subversion of the will of the voters and the legislature and the governor. It completely circumvents the authority of this board to govern.”skip past newsletter promotionafter newsletter promotionIn a statement, Disney said: “All agreements signed between Disney and the District were appropriate, and were discussed and approved in open, noticed public forums in compliance with Florida’s ‘Government in the Sunshine’ law.”Buckingham Palace declined to comment. More

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      Angry Fox News chief said fact-checks of Trump’s election lies ‘bad for business’

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      The top executive at Fox News was furious one of the network’s reporters was fact-checking Donald Trump’s false claims about the 2020 election, writing in a December 2020 email that it was “bad for business”.Suzanne Scott, the chief executive of Fox News, was responding in early December 2020 to an on-air fact-check by Eric Shawn, one of the network’s anchors. “This has to stop now,” she wrote to Meade Cooper, another Fox executive. “This is bad business and there clearly is a lack of understanding [sic] what is happening in these shows. The audience is furious and we are just feeding them material. Bad for business.”Scott also asked other Fox employees to alert her if the network booked Mike Pompeo, the former secretary of state, or Mike Lindell, a serial promoter of election misinformation. “They would both get ratings,” she said.The message is part of a tranche of internal communications obtained by the voting equipment company Dominion in its $1.6bn defamation lawsuit against Fox. Dominion displayed a copy of the message a court hearing last week as its lawyers argued that Fox knowingly aired false statements about Dominion because it was concerned about losing viewers to rival networks such as Newsmax and One America News (OAN). The Guardian obtained a copy of the message and the slideshow that was presented in court.Weeks earlier, on 19 November, Scott also complained about a different fact-check on air. “I can’t keep defending these reporters who don’t understand our viewers and how to handle stories,” she wrote.“The audience feels like we crapped on [sic] and we have damaged their trust and belief in us,” she wrote, adding that Fox nation had lost 25,000 subscribers. “We can fix this but we cannot smirk at our viewers any longer.”The reporter who did the fact-check, Kristin Fisher, later said she felt she was punished for telling the truth, NPR reported.Fox says it was reporting on newsworthy allegations by the former president and his lawyers, and that its viewers would not have understood its broadcasts about Dominion to be statements of fact. It also says top executives at the company and others who expressed concern about the accuracy of its statements about Dominion were not directly involved in determining what went into each show.Dominion’s slideshow also included messages from Fox News host Maria Bartiromo, whose show was a hotbed for false claims about the election. In one message, Bartiromo appeared to be aware that Sidney Powell, one of Donald Trump’s lawyers, would come on her show the next day to make specious claims about Dominion software switching votes, saying: “OK, Sidney will say it tomorrow.” In notes to herself, Bartiromo noted that Powell was being shut out from meetings with Jared Kushner at the White House because he did not want to hear about “conspiracy theories”.Dominion also revealed a key 13 November 2020 internal fact-check from Fox from a team known as the “brain room” that debunked false claims about Dominion. Even though executives testified that claims debunked by the brain room should not have been aired, Fox continued to make false claims about Dominion after the fact-check.The documents also show internal concern about statements being made by Jeanine Pirro, another host who aired false Dominion claims. In one message, fact-checkers went over a script for one of her shows and highlighted inaccurate statements about Dominion. “The brain room is going through this now. Jeanine dictated it to Tim. It’s rife with conspiracies and BS and yet another example of why this woman should never be on live television,” Jerry Andrews, a Fox executive, wrote in an email.Jury selection in the trial is scheduled to begin on 13 April in Wilmington, Delaware. The trial is scheduled to begin 17 April and last six weeks. More

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      Bernie Sanders accuses ex-Starbucks chief of unprecedented union-busting

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      Starbucks’ former chief executive Howard Schultz was accused at a Senate hearing on Wednesday of running “the most aggressive and illegal union-busting campaign in the modern history of our country”.The hearing, “No Company Is Above the Law: The Need to End Illegal Union Busting at Starbucks”, was chaired by Senator Bernie Sanders, a longtime critic of Starbucks’ anti-union activities.Starbucks had initially resisted calls for Schultz to appear. He agreed after the committee threatened to subpoena him.Nearly 300 Starbucks stores around the US have won union elections since the first Starbucks stores unionized in December 2021, though the rate of election filings slowed after an initial surge. Since that time, Starbucks has fought hard to stop the unionization drive and faces more unfair labor practice allegations than any other private employer in the US.Sanders said: “Over the last 18 months Starbucks has waged the most aggressive and illegal union-busting campaign in the modern history of our country.”Schultz responded by saying to Sanders: “These are allegations, and Starbucks has not broken the law.”He defended the company’s record and said the company gave workers better wages and benefits than its competitors.The Starbucks boss was defended by Republicans on the committee. Senator Rand Paul called the hearing a “witch-hunt” and Senator Bill Cassidy said it was a “smear campaign”.Cassidy said no one is above the law, “but let’s not kid ourselves: this is not a fair and impartial hearing.”Before the hearing, Sanders released a report by the committee’s majority staff outlining Starbucks’ record of unfair labor practice charges.The report found Starbucks broke the law 130 times in six states and is facing an additional 70 cases. Misconduct ranged from firing workers in retaliation for union organizing to shutting down stores, withholding pay and benefits, and comments made by Schultz himself.skip past newsletter promotionafter newsletter promotion“There is mounting evidence that the $113bn company’s anti-union efforts include a pattern of flagrant violations of federal labor law,” the report claims. “Starbucks has engaged in the most significant union-busting campaign in modern history. It has been led by Howard Schultz.”Naomi Martinez, a shift supervisor at a unionized Starbucks in Phoenix, Arizona, said she wanted to hear Schultz publicly explain Starbucks’ response to the union campaign and the numerous labor law violations that the National Labor Relations Board and judges have affirmed in complaints and rulings.“I always see the company state that they are continuing to respect the law, respect legal processes, respect the rights to organize, and we see a different story on the worker side of things,” said Martinez.“I just want to hear from Howard’s mouth himself whether or not he thinks that Starbucks has continuously, really respected rights to organize, fully adhering to the law at every turn. Every time that they have their spokespeople say something like that it really is just, to me at least, a slap in the face, because they are abusing these legal processes at every turn.”Starbucks has denied all allegations of labor law violations and appealed all National Labor Relations Board and court rulings against the company. More