Aurelia Butler

By Mark Miller(Reuters) -Social Security has never failed to make its benefit payments since the mailing of monthly checks began in 1940, but most Americans these days are worried about the future of the program.Who can blame them? Social Security’s two trust funds are projected to run dry in 2034, and the program would be able to pay only 80% of its obligations to retirees and disabled workers at that point. Politicians don’t exactly generate confidence when they make irresponsible – and wrong – comments claiming that Social Security is going bankrupt or running out of money.The result is public skepticism and concern. Forty-two percent of working Americans tell Pew Research Center pollsters https://pewrsr.ch/3FeMCBa that they doubt they will receive any benefits from Social Security. An equal share thinks they will receive a benefit, but at a reduced level. (https://pewrsr.ch/3FeMCBa).The Social Security trustees have been projecting this shortfall since the early 1990s, but the U.S. Congress has failed to act. What we need is a full, public debate on reform legislation – and an actual vote by lawmakers. The window is open for that to happen this year – the Democratic Party has developed an internal consensus on legislation that addresses the solvency problem, and also expands benefits modestly. It controls both legislative chambers – at least for now.The Social Security 2100 Act is supported by 202 House Democrats – in other words, nearly the entire party caucus. The bill probably cannot jump the hurdle of a Republican filibuster in the U.S. Senate, but it is imperative to get everyone in Congress on the record with a vote on this issue. “People have got to know where you stand,” said U.S. Representative John Larson, a Connecticut Democrat and chief sponsor of the legislation.EXPANDED BENEFITSThe Social Security 2100 legislation would close 52% of the long-term shortfall, according to an analysis by the Social Security actuaries. It would push the trust fund depletion date back to 2038 by adding new payroll taxes to wages over $400,000 – currently, taxation stops at $147,000. Earlier versions of the bill restored solvency for 75 years by also gradually increasing payroll tax rates, but that has been eliminated to reflect President Joe Biden’s campaign pledge not to raise taxes on people with incomes below $400,000 per year.The bill does recognize the need to expand benefits, which can help address rising income inequality, and racial and gender gaps in retirement security. The COVID-19 pandemic has widened those gaps. What’s more, Gen-Xers and Millennials are likely to fare even worse than boomers and today’s seniors when they reach retirement. This is the result of factors including escalating higher-education costs, staggering student debt burdens, wage stagnation, soaring housing costs and the decline of traditional defined benefit pensions.Social Security 2100 includes a modest 2% across-the-board boost in benefits, and it would shift the annual cost-of-living increase to a more generous formula. It also includes targeted benefit increases such as a new minimum benefit level for very low income seniors, and improved benefits for widows and widowers. It also would provide caregiver credits that increase benefits for people who take time out of the workforce to care for dependent family members. And it would repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which currently penalize many people who work in the public sector. What would Republicans do to solve the Social Security problem if they take control of Congress next year? Earlier versions of Republican reform plans have called for benefit cuts in the form of higher retirement ages and means testing. U.S. Senator Rick Scott, a Florida Republican, recently set off a small firestorm with a proposal to sunset all federal legislation every five years – an idea that at least in theory would require regular reauthorization of Social Security and Medicare. He also wants every American to pay income taxes – no matter their level of income.Republicans have also made clear that they prefer to handle Social Security reform behind closed doors. Senator Mitt Romney, a Utah Republican, has proposed the ironically named TRUST Act, which would create a closed process for legislators to propose changes to the Social Security and Medicare trust funds, culminating in an up or down vote process.This approach is a favorite play for lawmakers looking to keep their fingerprints off unpopular legislation – bills emerge from faceless, bipartisan committees. The last time it was attempted for Social Security was the unsuccessful Bowles-Simpson commission, which proposed a range of unpopular benefit cuts in 2011 that would have impacted middle-class seniors. Fighting to improve Social Security would fulfill a promise that Biden made as a presidential candidate, and it could energize voters. Public opinion polling has consistently shown strong public support for maintaining current benefit levels, even if new taxes are needed.New polling by Data for Progress shows that increasing benefits would make a large chunk of independent voters more likely to support Democratic candidates for Congress this fall. The idea of shoring up Social Security polls extremely well with middle-class Americans: 63% of those without a college degree tell Pew pollsters that Social Security finances should be a top priority for Congress and the president.This is a battle worth fighting in 2022.The opinions expressed here are those of the author, a columnist for Reuters. More

This week financiers’ eyes have been firmly fixed on the Federal Reserve. No wonder. On Wednesday the US central bank raised rates at the most aggressive pace for 22 years, as Jay Powell, Fed chair, finally acknowledged the obvious: inflation is “much too high”. But as investors parse Powell’s words, they should spare a thought for a central bank on the other side of the world: the Reserve Bank of New Zealand.In recent years, this tiddler has often been an unlikely harbinger of bigger global trends. In the late 20th century, for instance, the RBNZ pioneered inflation targeting. More recently, it embraced climate reporting ahead of most peers.Last year, it started tightening policy before most counterparts. And this week it went further: its latest financial stability report warns of a “plausible” chance of a “disorderly” decline in house prices, as the era of free money ends.Unsurprisingly, the RBNZ also said it hopes to avoid a destabilising crash. But the key point is this: the Kiwi central bankers know they have an asset bubble on their hands, since property prices have jumped 45 per cent higher in the last two years and “are still estimated to be above sustainable levels”. This reflects both ultra-low rates and dismally bad domestic housing policies.And it is now telling the public and politicians that this bubble needs to deflate, hopefully smoothly. There is no longer a Kiwi “put” — or a central bank safety net to avoid price falls.If only the Fed would be as honest and direct. On Wednesday Powell tried to engage in some plain speaking, by telling the American people that inflation was creating “significant hardship” and that rates would need to rise “expeditiously” to crush this. He also declared “tremendous admiration” for his predecessor Paul Volcker, who hiked rates to tackle inflation five decades ago, even at the cost of a recession.However, what Powell did not do was discuss asset prices — let alone admit that these have recently been so inflated by cheap money that they are likely to fall as policy shifts. A central bank purist might argue that this omission simply reflects the nature of Powell’s mandate, which is to “promote maximum employment and stable prices for the American people”, as he said on Wednesday. In any case, evidence about the short-term risk of asset price falls is mixed.Yes, the S&P 500 has dipped into correction territory twice this year, with notable declines in tech stocks. However, the American stock indices actually rallied 3 per cent on Wednesday, after Powell struck a more dovish tone than expected by ruling out a 75 basis point rise at the next meeting.And there is no sign of any fall in American property prices right now. On the contrary, the Case-Shiller index of home prices is 34 per cent higher than it was two years ago, according to the most recent (February) data. However, it beggars belief that Powell could crush consumer price inflation while leaving asset prices intact. After all, one key factor that has raised these prices to elevated levels is that the Federal Reserve’s $9tn balance sheet almost doubled during the COVID-19 pandemic (and has expanded it nine-fold since 2008.) And, arguably, the most significant aspect of the Fed’s decision on Wednesday is not that 50bp rise in rates, but the fact that it pledged to start trimming its holdings of mortgages and treasuries by $47.5bn each month, starting in June — and accelerate this to a $90bn monthly reduction from September. According to calculations by Bank of America, this implies a $3tn balance sheet shrinkage (quantitative tightening, in other words) over the next three years. And it is highly unlikely that the impact of this is priced in. After all, QT on this scale has never occurred before, which means that neither Fed officials nor market analysts really know what to expect in advance. Or as Matt King, an analyst at Citibank, observes: “The reality is that tightening hasn’t really started yet.” Of course, some economists might argue that there is no point in the Fed spelling out this risk to asset prices now, given how this might hurt confidence. That would not make Powell popular with a White House that is facing a difficult election, Nor would it help him achieve his stated goal of a “soft” (or “softish”) economic landing, given that consumer sentiment has wobbled in recent months. But the reason why plain speaking is needed is that a dozen years of ultra-loose policy has left many investors (and households) addicted to free money, and acting as if this is permanent. Moreover, since the Fed has repeatedly rescued investors from a rapid asset price correction in recent years — most recently in 2020 — many investors have an innate assumption that there is a Fed “put”.So if Powell truly wants to emulate his hero Volcker, and take tough measures for long-term economic health, he should take a leaf from the Kiwi book, and tell the American public and politicians that many asset prices have been pumped unsustainably high by free money. That might not win him fans in Congress. But nobody ever thought it would be easy to deflate a multitrillion dollar asset price bubble. And the Fed has a better chance of doing this smoothly if it starts gently and early. Wednesday’s rally shows the consequences of staying [email protected] More

(Reuters) – Euro zone government bond yields extended their decline on Thursday after the Bank of England slashed its forecast for the British economy in 2023.The Bank of England raised interest rates to their highest since 2009 at 1% on Thursday to counter inflation now heading above 10%, even as it warned that Britain risks falling into recession.”It’s 100% Bank of England,” said Antoine Bouvet senior rates strategist at ING. “They downgraded their forecast for the UK economy, and it seems that the tightening cycle is about to end soon. That’s a dovish signal also for the euro zone,” he added.By 1201 GMT on Thursday, Germany’s 10-year yield, the benchmark for the bloc, was down 2.5 basis points (bps) to 0.96% after briefly rising back above 1% in earlier trade. Two-year yields, sensitive to interest rate expectations, were down 7 bps to 0.21%. Money markets slightly lowered their bets on ECB hikes, now pricing in around 82 bps of ECB rate hikes by year-end, compared to around 88 before the Bank of England decision. They also moved to price in less than 20 bps of ECB hikes by July. In Italy, a key beneficiary of ECB stimulus, the 10-year yield was down 9.5 bps to 2.87%, tightening the closely watched risk premium over German bonds to 191 bps, after hitting the highest since May 2020 at over 198 bps on Wednesday.With the focus on the Bank of England’s economic outlook, there was little reaction to remarks by ECB chief economist Philip Lane, who said the bank is preparing for a sequence of rate hikes that will put its benchmark in positive territory. The path it takes is more important than the exact date of the first move, Lane added. The Bank of England meeting followed the U.S. Federal Reserve, which on Wednesday raised its benchmark interest rate by half a percentage point, the biggest rise in 22 years, but chairman Jerome Powell explicitly ruled out raising rates by 75 basis points (bps) in a coming meeting, triggering a sharp rally in U.S. Treasuries and stocks.In earlier trade, euro zone bond yields had followed overnight moves in U.S. Treasuries, but yields had fallen less than across the Atlantic, where the two-year Treasury yield fell 13 bps on Wednesday. “I think euro rates still have a hawkish ECB to consider, there’s not a change on that front,” said Peter McCallum, rates strategist at Mizuho in London. Earlier on Thursday, ECB board member Fabio Panetta said the bank should not raise interest rates in July, a move an increasing number of policymakers are advocating, and should wait to see euro zone second quarter GDP data. In the primary market, Spain raised 5.61 billion euros from five to 50-year bonds and France raised 10.99 billion euros from 10 to 30-year bonds. More

(Reuters) – U.S. stocks were set for a lower open on Thursday, a day after the Federal Reserve’s less aggressive tone sparked a rally on Wall Street, with investors keeping an eye out for jobs data this week for more clues on future rate hikes. Citigroup (NYSE:C) slipped 0.7% in premarket trading to lead losses among big banks. Megacap companies slid, with Meta Platforms and Amazon.com (NASDAQ:AMZN) down 1% each.The benchmark S&P 500 index recorded its biggest one-day percentage gain in nearly two years on Wednesday, after the Fed raised its benchmark overnight interest rate by half a percentage point as expected and said it would begin shrinking its $9 trillion asset portfolio next month in an effort to further lower inflation.Fed Chair Jerome Powell explicitly ruled out raising rates by 75 basis points in a coming meeting, calming nerves over fears of aggressive policy tightening.”I don’t think it’s surprising that short-term traders are looking to lock in some profits,” Sam Stovall, chief investment strategist at CFRA, said.”The real question is, was yesterday’s rally simply a reflex rally because stocks had been oversold and are we now just headed back in the same direction as we were prior to the Fed meeting.”The focus now shifts to the U.S. Labor Department’s closely watched monthly employment report on Friday for clues on labor market strength and its impact on monetary policy.Worries about Fed policy moves, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, overshadowing a better-than-expected quarterly reporting season.The tech-heavy Nasdaq has declined 17.1% year-to-date, compared with a 9.8% drop in the S&P 500 and a 6.3% fall in the blue-chip Dow.Of the 368 S&P 500 companies that have reported earnings as of Wednesday, 79.9% have topped analyst expectations, according to Refinitiv data.At 08:40 a.m. ET, Dow e-minis were down 161 points, or 0.47%, S&P 500 e-minis were down 26.5 points, or 0.62%, and Nasdaq 100 e-minis were down 105.75 points, or 0.78%. Twitter Inc (NYSE:TWTR) rose 2.2% as Elon Musk secured $7.14 billion in funding from a group of investors that includes Oracle Corp (NYSE:ORCL) co-founder Larry Ellison to fund his $44 billion takeover of the social-media company.EBay Inc and Etsy (NASDAQ:ETSY) Inc slid 7.0% and 12.3%, respectively, after the online retailers projected downbeat second-quarter revenue. Albemarle (NYSE:ALB) Corp jumped 13.7% as the lithium producer raised its full-year forecasts on robust demand and higher prices for the metal used in electric vehicle batteries.Booking Holdings (NASDAQ:BKNG) climbed 10.3% after the online travel agency posted upbeat first-quarter earnings and said global travel trends pointed to a busy summer season, especially in Europe. More

By 1205 GMT, sterling was down 2% against the U.S. dollar at $1.2381, its lowest level since July 2020. . It was set for its biggest one-day fall since March 2020, when the outbreak of COVID-19 wreaked havoc on world markets.It also slumped 1.3% against the euro to its lowest level since December 2021 at 85.04 pence .The BoE kept its forecast for economic growth this year at 3.75%, but slashed its forecast for 2023 to show a contraction of 0.25% from a previous estimate of 1.25% growth. It cut its growth projection for 2024 to 0.25% from a previous 1.0%.BoE Governor Andrew Bailey said the forecasts do not meet the technical definition of recession but of a very sharp slowdown.”The weakness of the growth outlook means that the inflation outlook is pretty weak too,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. “Markets are right to take a step back and we had thought that scale of tightening priced in was excessive.” UK gilt futures dropped and two-year gilt yields fell more than 14 basis points, the sharpest drop since March 1.A split also emerged in the Monetary Policy Committee with two members saying the guidance was too strong, given the risks to growth.”Two members’ suggestion that further hikes are not appropriate is resonating,” said Neil Jones, head of hedge fund sales at Mizuho in London.London’s FTSE stock index, however, took comfort from a weakening currency. It was last up 1.6% , while UK bank stocks index fell almost 1%. More