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      US debt ceiling talks ‘productive’ as Biden and McCarthy to meet 10 days from deadline

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      US president Joe Biden and House Republican speaker Kevin McCarthy have held a “productive” phone call on the continued impasse over the debt ceiling and promised to meet on Monday after Biden returned to Washington.McCarthy, speaking to reporters after the call, said there were positive discussions on solving the crisis and that staff-level talks were set to resume later on Sunday.Asked if he was more hopeful after talking to the president, McCarthy said: “Our teams are talking today and we’re … meeting tomorrow. That’s better than it was earlier. So, yes.”Biden, who arrived back at the White House late on Sunday evening after his trip to Japan, said the call with McCarthy had gone well. “We’ll talk tomorrow,” he said.Speaking from the G7 summit in Japan on Sunday, Biden said he would be willing to cut spending together with tax adjustments to reach a deal, but the latest offer from Republicans on the ceiling was “unacceptable.”Less than two weeks remain until the 1 June deadline, upon which the Treasury department has said the federal government could be unable to pay all its debts.Without raising the debt limit, the US government will default on its bills, a historic first, with likely catastrophic consequences. Federal workers would be furloughed, global stock markets would crash and the US economy would probably drop into a recession.McCarthy’s comments on Sunday struck a more positive tone than the heated rhetoric of recent days which has seen talks stall.“Much of what they’ve already proposed is simply, quite frankly, unacceptable,” Biden told a news conference in Hiroshima. “It’s time for Republicans to accept that there is no bipartisan deal to be made solely, solely on their partisan terms. They have to move as well.”The president later tweeted that he would not agree to a deal that protected “Big Oil” subsidies and “wealthy tax cheats” while putting healthcare and food assistance at risk for millions of Americans.He also suggested some Republican lawmakers were willing to see the US default on its debt in the hope that the disastrous results would prevent Biden from winning re-election in 2024.After Sunday’s call, McCarthy said while there was still no final deal, there was an understanding to get negotiators on both sides back together before the two leaders met: “There’s no agreement. We’re still apart.”“What I’m looking at are where our differences are and how could we solve those, and I felt that part was productive,” he told reporters.McCarthy has said Republicans backed an increase in the defence budget while cutting overall spending, and that debt ceiling talks have not included discussions about tax cuts passed under former president Donald Trump.Ahead of the call with McCarthy, Biden stressed that he was open to making spending cuts and said he was not concerned they would lead to a recession, but he could not agree to Republicans’ current demands.Last month, the Republican-controlled House passed legislation that would cut a wide swath of government spending by 8% next year. Democrats say that would force average cuts of at least 22% on programs like education and law enforcement, a figure top Republicans have not disputed.Republicans hold a slim majority in the House and Biden’s fellow Democrats have narrow control of the Senate, so no deal can pass without bipartisan support. But time is running out, as Monday’s meeting will take place with just 10 days left to hammer out a deal before hitting Treasury’s deadline.McCarthy has said he will give House lawmakers 72 hours to review an agreement before bringing it up for a vote. More

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      A US debt default could crush small businesses. So what can we do? | Gene Marks

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      The US is careening towards a debt crisis the likes of which we haven’t seen since 2011 when Barack Obama faced off against the Tea Party. No one knows for sure if the federal government is going to default on its debt by the end of this month. But if Democrats and Republicans can’t agree on a compromise, it will have an enormous impact on small businesses around the country.Some 65% of small businesses believe they would be negatively affected by a default, according to a recent report from Goldman Sachs. This is very bad news. Small businesses accounted for 45% of all private-sector jobs in the first quarter of 2022.The first small businesses that will be affected will be those that contract directly with the federal government. Tens of thousands of small businesses received more than $154bn in federal contracts in the fiscal year 2021 – about 27% of all government contract spending that year. And this doesn’t include the small businesses that indirectly received funding from larger construction and other firms that get government money and sub-contract out work to them. If Janet Yellen is forced to prioritize interest and debt payments above all else, then these federal contracts would be suspended and the negative cash flow impact on these small firms would be substantial. Let’s remember: almost half of small businesses have less than three months of cash on hand.Then there are the small businesses that service government properties. A report from the Cato Institute estimates that the federal government owns or leases more than 350,000 buildings and properties around the country. These facilities are a critical revenue source for countless small firms that perform construction, maintenance, security, cleaning, electrical, landscaping and other kinds of services, all which would be potentially interrupted. The employees that go to these buildings every day rely on neighboring businesses for their lunches, dry cleaning, yoga, happy hours and other products and services. If ordered to stay home, these businesses – already reeling from the number of employees now working remotely – would suffer a significant blow.Then there are government functions. Individuals and small business owners rely on many areas of the government for services. They’re applying for passports, questioning the IRS, waiting on regulatory approval and loan guarantees from the Small Business Administration. These and many other critical government services could be suspended if funding is re-directed.These are all immediate effects of what would happen if the government must avoid a loan default. The longer-term effects are even more devastating. If the situation persists credit and financial markets will be volatile and banks will be forced to limit financing to only the most secure (and usually) largest of their customers, which means many small businesses seeking loans will either have to wait or be denied. The Goldman Sachs study found that 77% of small business owners they surveyed were already concerned about their ability to get loans.According to the White House, a default lasting more than three months would cause a significant recession with as many as 8 million people losing their jobs. The stock market – where small business owners park a significant amount of their retirement savings and collateral – could collapse.All of this could not come at a worse time for small businesses. Optimism among business owners – as determined monthly by the National Federation of Independent Businesses – is already at a 10-year low. Bankruptcies are ominously on the rise too, with one research firm reporting a 20% increase in filings from a year ago. An extended shutdown would make these numbers much worse.If you’re a small business owner, what can you do?It sounds obvious but it’s a fact that my very best clients are always thinking ahead. So the first thing you should be doing is preparing. A federal default or shutdown may not happen at all, but that doesn’t mean you shouldn’t be ready for such an event by the end of this month.That means hoarding cash, confirming your credit availability (including credit cards) and communicating with your customers, suppliers, employees and partners. No one should be surprised by your actions – like delaying payments – if a shutdown occurs. They should know that this is something you may be forced to do and they should know this well in advance. The more you tell them of your plans the better they can also plan and the more appreciative they will be.Also, and this is probably no consolation for businesses right now, is to take away an important lesson: diversity is important. If your business relies too much on any one customer (ie the federal government) then once this problem is behind us you should be making it a priority to diversify your customer base. Too much dependence on one source of revenue is too big a risk and even the federal government can’t be relied on to pay its bills on time – or at all.The silver lining in this dangerous, avoidable situation is that it would take time for things to get really, really bad. Although Yellen warns of a default by the end of May, she does have options for at least funding major parts of the government. And quarterly tax payments – expected by mid-June – could help stave off disaster for a while longer. But none of this should stop a business owner from thinking about the consequences now and preparing for this event. Even if we escape this time, given the acrimonious environment in Washington, we shouldn’t be surprised if something like this doesn’t occur again – and soon. More

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      The US debt ceiling crisis is more proof of Republicans’ cynicism and bad faith | Jill Filipovic

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      The shamelessness and recklessness of today’s Republican party seems to know no bounds. As the deadline for raising the debt ceiling or defaulting rapidly approaches, the party continues to hold the country hostage, telling Democrats: give us what we want – things we cannot get by going through normal democratic processes – or we will pitch the global economy off a cliff.Democrats in Congress are doing their best to get their Republican colleagues to behave rationally, but it’s notoriously difficult to negotiate with terrorists. The Republicans want major spending cuts, but they want to force those cuts through by threat instead of having to legislate normally. And the cuts they’re asking for are appalling: they include slashing funds to things like cancer research, rental assistance for the poor, support for schools with large numbers of low-income students, and pay for Americans in uniform. The Republican bill would end Biden’s attempt at student loan debt relief, repeal tax breaks for renewables and clean energy while increasing reliance on fossil fuels, raise already-onerous work requirements to receive food stamps and welfare benefits, and decrease the efficiency and abilities of the IRS.The Republican proposal would leave a great many Americans worse off – but it would be a boon for oil executives and wealthy tax avoiders.It’s also an unconscionable display of bad faith and manipulation. This is not the first time that Congress has needed to raise the debt ceiling, and the stakes are so high that, traditionally, it’s been a bipartisan effort, with Democrats and Republicans alike largely agreeing that it would be wildly irresponsible and disgustingly devious to use such a vulnerable moment to strong-arm the opposing party. The big exception came during the Tea Party takeover of the Republican party in 2011, when Republicans also used raising the debt ceiling to start a fight. Those Tea Party radicals seemed crazy then – but they had nothing on the absolutely unhinged lunatics of the Maga Republicans.In a sane Congress operating in a functional country, everyone in Congress would agree that the US cannot default, and would behave accordingly. But this is not a sane Congress operating in a functional country, and that’s 100% because of the far-right takeover of the Republican party.Today’s Republicans are a party of destruction. As much as they claim to want to make America great again, they seem much more intent on sowing division, fomenting chaos and embracing an ethos of nihilism. There is no school shooting brutal enough to make them reconsider America’s extreme gun laws; no pregnant woman who suffers enough to make them take a step back on criminalizing abortion; and virtually nothing their unelected leader Donald Trump can to do make them reject him – allowing a deadly attack on the Capitol, being deemed a sexual abuser by a New York jury, and undermining America’s tradition of free and fair elections have not been enough to end the Republican party’s love affair with Trump. As the party has not only embraced Trump but molded itself in his image, it has become all the more dangerous to the nation.It was clear on 6 January 2021 that a dangerous number of Republicans had gone off the deep end, and were willing to take America down with them. Even after a rightwing mob attacked the Capitol complex in an attempt to overthrow the results of the presidential election, 147 congressional Republicans stood behind them, and voted to overturn the election results. These 147 elected officials voted against American democracy that day; they showed that they were willing to override the will of American voters in order to install their man in office. This is nothing short of fascistic, and it was a sign of dangers to come.Now, that same party is pushing an unpopular agenda, but is filled with elected officials who either don’t care or are totally delusional ideologues. Which is how we wound up watching the days tick down until a default. Democrats, and clear-thinking people, understand just how disastrous this would be: it would likely mean a global economic crash, a downgraded credit rating for the United States, and huge financial repercussions, including significant job losses, for Americans – and for lots of people outside of our borders.Too many Republicans, unfortunately, seem to be fine with that, perhaps because they also seem to enjoy burning things down – and they seem bizarrely confident that they’ll be able to blame the fallout on Biden.They shouldn’t be so sure. It’s obvious what is happening here: Republicans want to get their way, and are willing to use any means to do so. The blame won’t fall on Biden for failing to adequately negotiate with the extremists willing to threaten global financial stability to get their much-wanted cuts to cancer research and help for the poor. Blame will fall on the people who deserve blame: the Republicans acting like cartoon supervillains.Hopefully it doesn’t come to that. Hopefully, Republicans come to their senses, allow the US to raise the debt ceiling without major concessions, and avoid torpedoing the world economy. But even if this immediate crisis is averted – a big if – the fact that we’re here in the first place signals just how dangerous Republicans have become. Many members of the Republican party have already made clear that they have no respect for American democracy, and no desire to maintain it. Now, even more members of the party are making clear that they have no respect for America’s role as a stabilizing global economic force.This isn’t playing hardball. It’s hostage-taking. And unless Republicans manage to pull their party back from the brink, it’s only going to be one more sad example of Republicans’ attempt to make America into an untrustworthy, undemocratic shambles.
      Jill Filipovic is the author of the The H-Spot: The Feminist Pursuit of Happiness More

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      Democrats to urge Biden to use 14th amendment powers to avert ‘global economic catastrophe’

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      As concerns about the debt ceiling heat up, a group of Democratic senators is planning to send Joe Biden a letter requesting he use his authority under the 14th amendment of the constitution to continue paying the US government’s bills, even if the debt ceiling is not raised.Democratic senators including Tina Smith, Elizabeth Warren, Ed Markey and Bernie Sanders, an independent, argued that Republicans are not negotiating “in good faith”. They called into question the GOP’s attempt to apply work requirements to programs like Medicaid and SNAP, which provide healthcare and food vouchers for low income family.“It is unfortunate that Republicans in the House of Representatives and Senate are not acting in good faith. Instead, Republicans have made it clear that they are prepared to hold our entire economy hostage unless you accede to their demands to reduce the deficit on the backs of working families. That is simply unacceptable,” reads the letter obtained by the Guardian.The letter has been circulated amongst lawmakers at a time when Biden has reportedly signaled some support to compromise on work requirements and rules for federal programs. But Democrats are increasingly concerned about what those negotiations could look like and are looking to the 14th amendment, a US civil war-era addition to the constitution, which states that the validity of public debt “shall not be questioned’”. This could potentially allow Biden to override Congress on the grounds that their failure to raise the ceiling is unconstitutional.But Biden previously expressed some doubt on that strategy. “I have been considering the 14th amendment,” Biden said last week. “And a man I have enormous respect for, Larry Tribe, who advised me for a long time, thinks that it would be legitimate. But the problem is it would have to be litigated.”Even so, those behind the letter are up against the Republican party, which has refused to make concessions such as raising taxes on the very wealthy.“We write to urgently request that you prepare to exercise your authority under the 14th amendment of the constitution, which clearly states: ‘the validity of the public debt of the United States … shall not be questioned.’ Using this authority would allow the United States to continue to pay its bills on-time, without delay, preventing a global economic catastrophe.” More

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      US workers deserve a break. It’s time for a 32-hour working week | Bernie Sanders

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      In 1938, as a result of a massive grassroots effort by the trade union movement, the Fair Labor Standards Act was enacted by Congress to reduce the work week to 40 hours. Back then, the American people were sick and tired of working 80, 90, 100 hours a week with very little time for rest, relaxation or quality time with their families. They demanded change and they won a huge victory. That’s the good news.The bad news is that despite an explosion in technology, major increases in worker productivity, and transformational changes in the workplace and American society, the Fair Labor Standards Act has not been reformed in 80 years. The result: millions of Americans are working longer hours for lower wages, with the average worker making nearly $50 a week less than he or she did 50 years ago, after adjusting for inflation. Further, family life is suffering, as parents don’t have adequate time for their kids, life expectancy for working people is in decline, and increased stress is a major factor in the mental health crisis we are now experiencing.Compared with other countries, our workplace record is not good. In 2021, American employees worked 184 more hours than Japanese workers, 294 more hours than British workers, and 442 more hours than German workers. Unbelievably, in 2023 there are millions of Americans who work at jobs with no vacation time.It’s time to reduce the work week to 32 hours with no loss in pay. It’s time to reduce the stress level in our country and allow Americans to enjoy a better quality of life. It’s time to make sure that working people benefit from rapidly increasing technology, not just large corporations that are already doing phenomenally well.Think about all of the extraordinary changes that have taken place in the workplace over the past several decades. When I was elected mayor of Burlington, Vermont, in 1981, there were no computers in city hall. There were no chatboxes, no printers, no emails, no calculators, no cellphones, no conference calling or Zoom.In factories and warehouses, robots and sophisticated machinery did not exist or were only used in primitive forms.In grocery stores and shops of all kinds, there were no checkout counters that utilized bar codes.As a result of the extraordinary technological transformation that we have seen in recent years, American workers are now 480% more productive than they were in the 1940s.In addition, there are far more workers today. In the 1940s, less than 65% of Americans between 25 and 54 were in the workforce. Today, with most families requiring two breadwinners to pay the bills, that number is over 83%.Yet despite all of these incredible gains in productivity, over 40% of US employees now work more than 45 hours per week; 12% work more than 60 hours a week; and the average worker now works 43 hours per week. Many are on their computers or answering emails seven days a week.Moving to a 32-hour work week with no loss of pay is not a radical idea. In fact, movement in that direction is already taking place in other developed countries. France, the seventh-largest economy in the world, has a 35-hour work week and is considering reducing it to 32. The work week in Norway and Denmark is about 37 hours.Recently, the United Kingdom conducted a four-day pilot program of 3,000 workers at over 60 companies. Not surprisingly, it showed that happy workers were more productive. The pilot was so successful that 92% of the companies that participated decided to maintain a four-day week, because of the benefits to both employers and employees.Another pilot of nearly 1,000 workers at 33 companies in seven countries found that revenue increased by more than 37% in the companies that participated and 97% of workers were happy with the four-day workweek.Studies have shown that despite working fewer hours, workers are either more, or just as, productive during a four-day work week. One study found that worker productivity increased 55% after companies implemented a four-day week. A trial of four-day work weeks for public-sector workers in Iceland found that productivity remained the same or improved across the majority of workplaces. In 2019, Microsoft tested a four-day work week in Japan and reported a 40% increase in productivity.In addition, 57% of workers in companies that have moved to a four-day work week have indicated that they are less likely to quit their jobs.Moreover, at a time when so many of our people are struggling with their mental health, 71% of workers in companies that have moved to a four-day work week report feeling less burnout, 39% reported feeling less stress and 46% reported feeling less fatigued.As much as technology and worker productivity has exploded in recent years, there is no debate that new breakthroughs in artificial intelligence and robotics will only accelerate the transformation of our economy. That transformation should benefit all, not just the few. It should create more time for friends and family, more time for rest and relaxation, more time for all of us to develop our human potential.Eighty-three years after President Franklin Delano Roosevelt signed a 40-hour work week into law, it’s time for us to move to a 32-hour work week at no loss of pay. More

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      Federal Reserve increases interest rates by a quarter point to 16-year high – as it happened

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      From 6h agoThe Federal Reserve is set to raise interest rates this afternoon, with an announcement coming at 2pm ET from the central bank after its most recent board meeting. Analysts expect the Fed will raise rates by a quarter point, which will bring rates up to 5% to 5.25%. This would be the central bank’s 10th interest rate increase since March 2022, when rates were at zero.The interest rate increase will come at what in hindsight may seem like an inflection point for the economy. Inflation is down, consumer spending has flattened and growth in the job market is starting to slow down, but Fed officials, especially Fed chair Jerome Powell, have been stringent on getting inflation down to their target of 2%. Inflation in March was 5%, the lowest it’s been since 2021, but still quite far from 2%.Analysts and economists will be closely watching Powell’s press conference at 2.30pm, where he will discuss the direction Fed staff see the economy going, giving hints as to whether even more interest rate hikes are to come or whether the Fed will end its rate-hike campaign.Here’s a quick summary of everything that’s happened today:
      The Federal Reserve increased interest rates by a quarter point, bringing rates up to 5% to 5.25%. Fed chair Jerome Powell said that Fed officials no longer anticipate more hikes, but will monitor economic data to see if they are necessary in coming months. The stock market dipped slightly after the Fed’s announcement.
      The debate over the debt ceiling continued today, with news that Senate majority leader Mitch McConnell will keep himself out of the specific of negotiating talks and hints that senators Joe Manchin and Kyrsten Sinema are breaking from Dems and looking to take Senate negotiations seriously.
      2024 is already gearing up: Joe Biden released his second TV ad since launching his campaign last week, while US rep. Colin Allred of Texas announced his bid to unseat Texas senator Ted Cruz. In Nevada, Jim Marchant, an election denier and staunch supporter of Donald Trump, also announced a Senate big.
      We’ll be closing this blog for today. Thanks for reading.Democratic senator Raphael Warnock from Georgia said that his two young kids were on lockdown at school because of the shooting in midtown Atlanta.“They’re there. I’m here, hoping and praying they’re safe,” he said on the Senate floor. “Thoughts and prayers are not enough.”One person has been confirmed dead and at least four injured after a gunman opened fire in a building in midtown around 12.30pm ET. Police said they are still searching for a suspect.The Washington Post just published a cheery report that the White House and lawmakers on Capitol Hill technically have just six working days together before the US government potentially defaults on its debt on 1 June.With the House and Senate in session on different days, and Biden making international trips for the G7 summit in Japan and another “Quad” meeting with Australia, Japan and India in Australia, the legislative and executive branches are scheduled to have just six more days together to figure out the debt ceiling.Of course, negotiations can take place even when a chamber is not in session, but the precariousness of negotiations and the closeness of default makes the timing a tad inconvenient.Talking about the fallout of the collapse of Silicon Valley Bank in March, Federal Reserve chair Jerome Powell said that it seems the worst of the crisis is over.“The severe period of stress, those have now all been resolved and all the depositors have been protected,” he said, adding that JPMorgan’s acquisition of First Republic bank marked the end of the worst of it all.Asked about lessons that he learned from the crisis, he noted that there needs to be stronger regulation and supervision, but declined to offer any specifics as he has tasked Fed vice chair Michael Barr with drafting specific policy proposals.“I am not aware of anybody thinking [the collapse] could happen so quickly,” Powell said. “Now that we know that was possible… it will be up to vice chair Barr to design ways to address that.”Today’s Federal Reserve interest rate hike is its second quarter-point hike in a row, after a series of half- and three-quarter point hikes over the last year. Fed chair Jerome Powell said at his press conference this afternoon that “slowing down was the right move”.“I think it’s enabled us to see more data and it will continue to do so. We have to always balance the risk of not doing enough and not getting inflation under control against the risk of maybe slowing down economic activity too much,” he said. “We thought that this rate hike, along with the meaningful change in our policy statement, was the right way to balance that.Asked about the possibility of a recession, Powell seemed optimistic that the Fed could achieve a “soft landing” – keeping interest rates high without seeing huge impacts on unemployment. He noted that even as rates have hit 5% over the last 14 months, the unemployment rate stands at 3.5%.“It’s possible that we can continue to have a cooling in the labor market without having the big increases in unemployment that have gone with many prior episodes,” he said.Of course, Powell noted earlier in the press conference that the full impacts of the interest rate increases have yet to be seen, acknowledging uncertainty about the full economic impact of rate hikes.Federal Reserve chair Jerome Powell emphasized the importance of raising the debt ceiling, though noted that the debt limit is “fiscal policy matters”.“It’s essential that the debt ceiling be raised in a timely way so that the US government can pay all of its bills when they’re due. Failure to do that would be unprecedented,” he said. “We’d be in uncharted territory.Powell noted that the Fed doesn’t “give advice to either side” and also noted that “no one should assume that the Fed can protect the economy from the potential short- and long-term effects” upon default.He also noted that debt limit standoff did not play a role in the Fed’s decision today to increase interest rates.Federal Reserve chair Jerome Powell is holding a press conference after the central bank announced a quarter-point interest rate increase. Powell’s tone in the press conference has changed since he last addressed the press in March. The Fed is no longer anticipating needing more rate increases, but will monitor the economy in determining future interest rate changes.While Powell is still reiterating the Fed’s inflation target of 2%, he acknowledged that the economy is “seeing the effects of our policy tightening on demand and the most interest-rate-sensitive sectors of the economy, particularly housing and investment”. In other words, the Fed sees its interest rate hikes taking effect in the slowing of the economy.“There are some signs that supply and demand in the labor market are coming back into balance,” Powell said. He added that the “economy is likely to face further headwinds from tighter credit conditions”, meaning the full effects of the interest-rate hikes have yet to be seen.Taking a question from a reporter on whether the Fed’s statement today should be taken as a hint that officials will pause rate hikes, Powell said the officials did not make a decision on a pause, but noted that they intentionally updated their stance in today’s press statement that removed a line suggesting more increases would be appropriate.“Instead, we’re saying that in determining the extent to which [more hikes are needed], the Committee will take into account certain factors,” he said. “That’s a meaningful change that we are no longer saying we anticipate [changes] and we will be driven by incoming data meeting by meeting.”The press statement that came with the Federal Reserve’s announcement of another interest rate hike is nearly identical to the one that was released at its last meeting on 22 March, with one key exception.In its 22 March release, Fed officials in the Federal Open Market Committee (FOMC) hinted that more interest rates are to come, saying: “The Committee anticipates that some additional policy firming may be appropriate” in order to bring inflation down to the target of 2%.In today’s statement, that line was cut.The rest of the statement was in line with FOMC’s March meeting statement. They reiterated their stance that “inflation remains elevated” and the jobs market has been strong, with the unemployment rate low. They emphasized that “the US banking system is sound and resilient” and that they are “highly attentive to inflation risks”.Analysts have been wondering whether this interest rate increase will be the Fed’s last, with pauses to come after as the interest rate is held steady at future meetings.Any more hints about what is next for interest rates after this most recent hike will likely be made at Fed chair Jerome Powell’s press conference at 2.30pm ET.The Federal Reserve just announced a quarter-point interest rate increase. This brings the interest rate to a 16-year high at 5% to 5.25%. The central bank has been on a year-long campaign to temper inflation, though it has had to delicately balance the potential of shaking the economy too much with stringent rate increases.Fed chair Jerome Powell will lead a closely watched press conference, where he will discuss the Fed’s view on the state of the economy.The United Auto Workers (UAW) union said in an internal memo that it is holding off on a Joe Biden endorsement due to the president’s electric vehicle policies.UAW president Shawn Fain said in the memo that union leaders met with Biden last week and discussed “our concerns with the electric vehicle transition”, according to the New York Times. The union is concerned that auto workers will suffer during the transition to EV as less workers are needed to assemble EVs.“The EV transition is at serious risk of becoming a race to the bottom,” the memo reads, referring to electric vehicles. “We want to see national leadership have our back on this before we make any commitments.”The union has 400,000 members across the country, though members are primarily in auto-industry heavyweight Michigan, a key election battleground state.The FBI arrested a man in Florida on Tuesday for his involvement in the January 6th Capitol riots, specifically for setting off an “explosive device” in the US Capitol tunnel that leads into the building. Daniel Ball, 38, was first arrested last week by the Citrus County Sheriff’s Office for assaulting seven people, including law enforcement officers, in Florida. Ball’s probation officer, upon being shown photos and videos of the Capitol riot, identified Ball as the person throwing an explosive device in the tunnel, where law enforcement was blocking rioters.Ball faces multiple charges related to the riot, including assaulting police officers and entering a restricted area with a deadly weapon.The justice department said in March that at least 1,000 people have been arrested on charges related to the riots, with 518 pleading guilty to federal crimes so far.Election denier Jim Marchant announced that he will be running for US Senate, challenging Democrat incumbent senator Jacky Rosen for the seat she won last year.During his announcement speech on Tuesday, Marchant said that he is running to “protect Nevadans from the overbearing government, from Silicon Valley, from big media, from labor unions, from the radical gender-change advocates,” the Washington Post reported.His election campaign was acknowledged by Rosen on Twitter, who replied to Marchant’s announcement:
      Nevadans deserve a Senator who will fight for them, not a MAGA election denier who opposes abortion rights even in cases of rape and incest…
      While far-right politicians like Jim Marchant spread baseless conspiracy theories, I’ve always focused on solving problems for Nevadans.
      Marchant has described himself as a “MAGA conservative”, the Post reports, and is an avid supporter of Donald Trump. More

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      Danger and deja vu: what 2011 can tell us about the US debt ceiling crisis

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      Angry at the size of the government debt, House Republicans have passed a bill that ties spending cuts to any lifting of the US’s debt limit. A tense fight is escalating, with Democrats refusing to budge and hard-line Republicans digging in. Without a solution, economists and others warn, the US could be plunged into an “economic catastrophe”.You can be forgiven a sense of déja vu. This has all happened before. Only this time, it could be worse.The federal government has a legal maximum on how much debt it can accumulate –often called the debt ceiling or the debt limit. Congress has to vote to raise that limit and has done 78 times since 1960 – often without fuss. But in recent years, the debt negotiations have become Washington’s most heated – and potentially dangerous – debate.This year’s fight looks like the most high-risk one since 2011, when Republicans used the debt limit debate as a bargaining chip for spending cuts. It was a fight to the bitter end. One former congressman told the New York Times that the battle drew “parallels and distinctions with other tumultuous times such as the civil war”.With stock markets reeling and 72 hours left before the US would have defaulted on its debts, a disaster that threatened to wreak havoc on the economy, Republicans and Democrats finally agreed on a bill that raised the debt ceiling by $900bn and cut spending by nearly the same amount.For Republicans, particularly the new rightwing Tea Party members who refused to budge even as default loomed, it was a political win.Politics are once again deeply embedded in this year’s debt ceiling debate and many see a mirroring of the debt ceiling crisis of 2011.The House speaker, Kevin McCarthy, is caught between his party’s moderate and far-right factions. Though McCarthy rallied his party behind a House bill, Democrats are so far refusing to negotiate.The US treasury is already running on fumes. In January, the treasury started using “extraordinary measures” to avoid defaulting on US debts while the debate over raising the limit started. Some estimate that the US government’s default date – the so-called “X date” when the government officially runs out of funds to pay its bills — will arrive in late July, giving the GOP and Democrats less than three months to find a solution.The US has never defaulted on its debt. Failure to find a solution would send stock markets reeling, recipients of federal benefits might not get their monthly checks, parts of government would grind to a halt and “long-term damage” would be inflicted on the US economy, according to the Federal Reserve chair, Jerome Powell.Fights over the US debt ceiling are common and usually resolved after a session of bloviating. Wall Street has so far ignored this scrap, betting on a repeat. But, as in 2011, all that could change as the X date approaches. This time the Tea Party Republicans have been replaced by even more hardline politicians – the Freedom Caucus – who begrudgingly signed on to McCarthy’s plan but have sworn to hold out for cost cuts no matter the price.“What will damage the economy is what we’ve seen the last two years: record spending, record inflation, record debt. We already know that’s damaging the economy,” Representative Jim Jordan, a founding member of the Freedom Caucus, told Reuters.David Kamin, a New York University law professor who served as an economic adviser to the Obama and Biden administrations, including during the 2011 crisis, said: “Congress has negotiated [the debt ceiling] over the many decades that it’s been in its current form. But what is different about this episode, and the episode in 2011, is the very credible threat from the Republican side to not raise the debt limit, to demand a large set of policy in exchange for a vote.” He added: “That then sets up a dangerous negotiation where what’s at stake is severe repercussions for the economy.”A default would be catastrophic for the US and global economy, creating instability in financial markets and interrupting government services. But, as the 2011 crisis showed, even getting close to default comes with a price. Markets plummeted and the ratings agency S&P downgraded the US’s credit rating for the first time in history, making it more expensive for the country to borrow money. The cost to borrow went up $1.3bn the next year and continued to be more expensive years later, essentially offsetting some of the negotiation’s cost-cutting measures.To some economists, that was just the short-term impact. The spending cuts ushered in years of budget tightening whose impacts were felt for years.“We were still in a pretty depressed economy and in recovery from the great recession when those cuts were instituted. They just made the recovery last far longer than it should have,” said Josh Bivens, chief economist for the Economic Policy Institute, a leftwing thinktank. “Over the next six or seven years, really valuable public goods and services were not delivered because they were cut so sharply.”Government spending tends to rise after recessions but per-capita federal spending fell after the debt crisis. Bivens argues that if government spending had continued at its normal levels, the unemployment rate would have returned to its pre-recession level five or six years before 2017, when the job market finally recovered its losses.This time around the Republican bill, called the “Limit, Save and Grow Act”, would increase the debt ceiling by $1.5tn in exchange for $1.47tn in cuts during the next fiscal year and a 1% spending increase cap thereafter. The Congressional Budget Office estimates that the bill would cut federal spending by $4.8tn over the next 10 years.The bill would mean cuts to things like defense, education and social services over time, though Republicans have outlined few specific cuts in the bill. House Republicans are proposing scrapping Joe Biden’s student relief program, making more stringent work requirements for government benefits, namely Medicaid, and rolling back several Inflation Reduction Act investments, particularly clean energy tax credits.The IRS would lose $71bn in funding under the new bill, a move that would lead to more lenient tax collection and ultimately cost the federal government $120bn over the next decade. Republicans have been targeting the IRS for budget cuts for over a decade, weakening the agency’s tax enforcement over corporations and the wealthy and allowing $18bn in lost government revenue, ProPublica estimated in 2018.While Republicans are using old tricks from 2011, Democrats appear to have learned some lessons from the Obama-era spat. After 2011, the Obama administration refused to negotiate over the debt ceiling. Biden and other Democratic leaders have continued the practice: the Senate majority leader, Chuck Schumer, called the Republican bill “dead on arrival” when it got to the Senate.“President Biden will never force middle class and working families to bear the burden of tax cuts for the wealthiest, as this bill does,” the White House press secretary, Karine Jean-Pierre, said in a statement Wednesday. “Congressional Republicans must act immediately and without conditions to avoid default and ensure that the full faith and credit of the United States is not put at risk.”The question now is: what are the political costs for the Democrats and Republicans? As the crisis deepens, how long will they hold and who will fold?Despite Republicans preaching fiscal discipline, US debt actually rose by $7.8tn under the Trump administration. Spending cuts would also likely target GOP-friendly expenditures. The party has already had to make a tough compromise over ethanol tax credits, which were ultimately left untouched at the behest of “Corn Belt” Republican lawmakers. And McCarthy still lost four Republican votes, the most he can afford to lose with the Republicans’ slim House majority. He has little room to compromise even if he can get Biden to negotiate.Matt Gaetz, a Republican representative from Florida and another Freedom Caucus member, voted against McCarthy’s bill and said in a statement that it would “increase America’s debt by $16tn over the next ten years”.“Gaslighting nearly $50tn in debt to America is something my conscious [sic] cannot abide at this time,” Gaetz said.Kamin pointed out that Republicans only focus on the debt ceiling as a leverage point when there is a Democratic president – the debt ceiling was raised three times during Trump’s presidency – showing that their objective is less about actually reducing the deficit than it is about playing politics.“The Republican party – at least elements of the Republican party – have organized themselves using this as a litmus test for adherence to their beliefs and are really focused on it as a central element of their agenda,” Kamin said. But the fight is “not fundamentally about deficits and debt”, he said. It is a fight about politics.As in 2011, the two sides are locked in a game of chicken and waiting for the opposition to cave. If neither side blinks, the impact on the economy will be felt for years to come. More

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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