Evelyn Reynolds

More stories

  • 138 Shares99 Views

    in Economy

    Yellen Warns of Missed Payments if Debt Limit Is Not Lifted

    The Treasury secretary said the Biden administration would face “very tough choices” if Congress did not act.Treasury Secretary Janet L. Yellen said on Wednesday that it was “almost certain” that the United States would not have enough cash to continue to pay all of its bills on time beyond early June and that she would soon provide Congress with a more precise update about when the nation could default if the debt limit was not raised.The comments, made at a WSJ CEO Council event, came as negotiators for the White House and House Republicans raced to reach a deal to raise the debt limit and reduce government spending that Congress can pass before June 1. The Treasury secretary reiterated her warning that a default would inflict severe damage on the U.S. economy and made the case that she would be left with no good options to contain the fallout.“Treasury and President Biden will face very tough choices if Congress doesn’t act to raise the debt ceiling and if we hit the so-called X-date without that occurring,” Ms. Yellen said. “There will be some obligations that we will be unable to pay.”Ms. Yellen declined to elaborate on how exactly she would proceed if the debt limit was not lifted, but she dismissed the idea that “prioritizing” certain payments that the government was required to make would be an easy solution. She noted that government payment systems were devised to pay bills on time, not to decide which ones to pay.“Prioritization is not really something that is operationally feasible,” she said.This week, Ms. Yellen notified Congress that the federal government could run out of cash as soon as June 1. Her projections have been met with skepticism by some House Republicans, who have been calling on her to produce an analysis that details the Treasury Department’s cash reserves to prove that the deadline is real.Ms. Yellen said on Wednesday that there was considerable uncertainty associated with tracking government payments and receipts but that she planned to provide as much clarity as possible in her next update.The Treasury secretary said she was already seeing “the beginnings” of stress in financial markets due to the brinkmanship. However, she said she had not been engaging with investors about what would happen if the debt limit was not lifted.“We are committed to not having missed payments and raising the debt ceiling,” Ms. Yellen said. “We are not involved in planning for what happens if there is a default.”Despite her concerns, she said that she was hopeful the negotiations would be successful and that the Biden administration had been committed to policies that would reduce deficits.“I think a deal is possible,” Ms. Yellen said. “They’re working toward an agreement that could command bipartisan support.” More

  • 125 Shares189 Views

    in Economy

    Potential Debt Ceiling Deal Would Barely Change Federal Spending Path

    Negotiators have focused on a relatively small corner of the budget, shunning new revenues or cuts to the fastest-growing programsAs their debt limit negotiations with President Biden push the nation perilously close to a devastating default, House Republicans have stuck to a clear message: They must force a change in what they call the nation’s “unsustainable” spending path.Yet in talks with Mr. Biden, Speaker Kevin McCarthy and his lieutenants have focused almost entirely on cutting a small corner of the budget — known as nondefense discretionary spending — that includes funding for education, environmental protection, national parks, domestic law enforcement and other areas. That budget line accounts for less than 15 percent of the $6.3 trillion the government is expected to spend this year. It is not outsized, by historical standards. It is already projected to shrink, as a share of the economy, over the next decade.And it has nothing to do with the big drivers of projected spending growth in the coming years: the safety-net programs Social Security and Medicare, which are facing increasingly large payouts as the American population ages.Those politically popular programs have been deemed off limits in the current talks by Republicans, who came under heavy criticism from Mr. Biden for even entertaining changes that could raise the retirement age for those programs or make other changes to slow their future spending.Republicans have also refused to entertain cuts to military spending, which is nearly as large as nondefense discretionary spending. As a result, the negotiations are almost certain not to produce any agreement with Mr. Biden that would dramatically alter the course of federal spending in the next decade.Instead, they would concentrate budget cuts on education, environmental protection and a host of other government services that fiscal experts say are nowhere close to being primary sources of spending growth in the years to come.For instance, if Republicans could somehow persuade Mr. Biden to accept the full round of discretionary spending cuts contained in the fiscal bill the House passed last month, it would do little to alter the nation’s overall spending trajectory over the next decade. Those cuts would reduce federal spending by about $470 billion in 2033 and likely save about $100 billion that year in borrowing costs, according to the Congressional Budget Office.Total government spending would then be just under 24 percent of the economy — or nearly exactly what it is today.While those cuts might not make much of a dent in the overall budget, they would still be felt by many Americans. Because the cuts would be so contained to one segment, many popular government programs would shrink by as much as 30 percent under that scenario, White House officials and independent analysts have calculated.“The cuts Republicans propose would have severe impacts on education, public safety, child care, veterans’ health care and more,” the White House budget director, Shalanda Young, wrote in a memo last week.Republicans have for months cited growing federal spending and debt as the reason they have refused to raise the nation’s borrowing limit — risking default — unless Mr. Biden agrees to spending cuts.Representative Garret Graves of Louisiana, one of Mr. McCarthy’s top negotiators, said this week that the biggest gap with Biden administration officials was on spending numbers. “My interpretation of their position is that they fail to recognize or fail to see to the fact that we are on a spending trajectory right now that is absolutely unsustainable,” he said.Federal spending spiked during the Covid-19 pandemic, first under President Donald J. Trump and continuing under Mr. Biden, as lawmakers delivered trillions of dollars in assistance to businesses, people and state and local governments. It remains higher than historical norms, when measured as a share of the economy, which is the easiest way to track spending patterns as prices have increased over time.The Congressional Budget Office estimates that total spending averaged just under 21 percent of gross domestic product from 1980 through 2019, just before the pandemic hit. It surged above 30 percent in 2020 and 2021. This fiscal year, it is expected to be just over 24 percent, falling slightly over the next several years and then beginning to grow again in the waning years of this decade, climbing past 25 percent in 2033.Discretionary spending, though, is expected to decline over the decade as a share of the economy. Military spending — which Republicans have thus far refused to reduce as part of talks with Mr. Biden’s team — should tick down slightly from 3 percent of the economy. Discretionary spending outside the military is now 3.6 percent but is expected to fall to 3.2 percent by 2033.Social Security and Medicare, conversely, are expected to grow rapidly over the next 10 years, as retiring baby boomers qualify to receive health and retirement benefits. Social Security spending will rise from 4.8 percent to 6 percent of the economy in that time, the budget office projects, and Medicare will rise from 3.9 percent to 5.3 percent.Analysts say those programs are the primary reason budget forecasts have long shown federal spending increasing in the coming decades — even before Mr. Biden took office.“The entirety of the overall federal spending increase relative to G.D.P. over the long term can be accounted for by the growth in the major federal health programs (Medicare, Medicaid, and the A.C.A.) and Social Security,” Charles P. Blahous, who studies federal spending and debt at the Mercatus Center at George Mason University, told the Senate Budget Committee this month in written testimony.Conservative groups have criticized Republicans for not including the safety-net programs in debt demands. “While current debt ceiling negotiations largely concern ways to restrain the discretionary parts of the budget, any serious proposal to tackle the emerging debt and deficit crisis must also address our largest mandatory spending programs: Social Security and Medicare,” Alex Durante, an economist at the Tax Foundation, which promotes lower taxes, wrote on Wednesday.Liberal groups and the White House have criticized Mr. McCarthy and his team for neglecting the other side of the fiscal ledger: the nation’s tax system. Tax receipts briefly surged last year but are expected to fall back toward historical norms this year, stabilizing around 18 percent of the economy, the budget office projects. Mr. McCarthy has cited last year’s numbers to incorrectly claim current tax revenues are near record highs. More

  • 163 Shares169 Views

    in Economy

    U.S. Faces ‘Elevated Risk’ of Default in Early June, a New Report Warns

    The Bipartisan Policy Center said the government would be operating on “dangerously low” cash reserves after Memorial Day in its estimate of the so-called X-date.The United States faces an “elevated risk” of running out of cash to pay its bills between June 2 and 13 if Congress does not raise or suspend the nation’s debt limit, according to an analysis released on Tuesday by the Bipartisan Policy Center, an influential think tank that carefully tracks federal spending.The analysis underscores the growing possibility that the United States will default on its debt as soon as next week. It comes amid negotiations between the White House and Republicans in Congress to reach an agreement that would also lift the $31.4 trillion borrowing cap.“Come early June, Treasury will be skating on very thin ice that will only get thinner with each passing day,” said Shai Akabas, the center’s director of economic policy. “Of course, the problem with skating on thin ice is that sometimes you fall through.”The center said that the Treasury Department would be operating on “dangerously low” cash reserves after Memorial Day and that each day in June would come with increasing risk. The department has been using accounting maneuvers known as extraordinary measures to delay a default since the United States technically hit the debt limit in January, but those are expected to be exhausted soon.The center noted that the federal government could get a reprieve if it mustered sufficient revenue to make it to June 15, when quarterly tax payments are due. That could push a default, the so-called X-date, into July.However, Treasury Secretary Janet L. Yellen said this week that she thought it was unlikely that the federal government would have enough cash on hand to make it to mid-June.In a letter to Congress on Monday, Ms. Yellen reiterated her estimate that the X-date could arrive as soon as June 1. Her warning did not come with the caveats included in her previous updates, which had suggested that the government’s cash reserves could potentially last for a few additional weeks. Instead, she emphasized the urgency of the situation.“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position and raise questions about our ability to defend our national security interests,” Ms. Yellen said.As the X-date approaches, the Treasury Department has been checking with federal agencies about the timing of upcoming expenditures. Treasury recently sent a memo to agencies to inquire if any scheduled payments could be delayed. The Washington Post reported earlier on the memo.The communication is similar to what the Treasury Department conveyed during the 2021 debt limit standoff and is part of how it manages its cash reserves.“To produce an accurate forecast around the debt limit, it’s critical that Treasury have updated information on the magnitude and timing of agency payments,” Lily Adams, a Treasury spokeswoman, said. “As in prior debt limit episodes, Treasury will continue to regularly communicate with all aspects of the federal government on their planned expenditures.” More

  • 163 Shares109 Views

    in Economy

    Former Fed Chair Ben Bernanke says there’s more work ahead to control inflation

    Former Federal Reserve Chair Ben Bernanke thinks central bankers still have work to do to tame inflation.
    A paper from Bernanke and economist Olivier Blanchard notes that inflation has evolved since ballooning to a 40-year high in the summer of 2022.
    In a discussion about the paper, economist Jason Furman noted that fiscal policy played a large role in boosting inflation but “the less forgivable sin, though, was monetary policy.”

    Former Federal Reserve Board Chair Ben Bernanke speaks during a discussion on “Perspectives on Monetary Policy” during the Thomas Laubach Research Conference at the Federal Reserve Board building in Washington, DC, May 19, 2023.
    Saul Loeb | AFP | Getty Images

    WASHINGTON — Former Federal Reserve Chair Ben Bernanke, who guided the central bank and the U.S. economy through the Great Recession, thinks central bankers still have work to do to bring down inflation.
    That work, he and economist Olivier Blanchard argue in an academic paper released Tuesday, will entail slowing down what has been a phenomenally resilient labor market.

    The duo does not present specific prescriptions for how much unemployment needs to rise, but they do suggest it’s possible for the current Fed to orchestrate its way out of this predicament without severely tanking the U.S. economy.
    “Looking forward, with labor market slack still below sustainable levels and inflation expectations modestly higher, we conclude that the Fed is unlikely to be able to avoid slowing the economy to return inflation to target,” Bernanke and Blanchard wrote in the paper.
    Since leaving the Fed in 2014, Bernanke has been a distinguished senior fellow at the Brookings Institution. Blanchard is a senior fellow at the Peterson Institute for International Economics.

    Their paper notes that inflation has evolved since ballooning to a 40-year high in the summer of 2022. Initially, prices jumped as consumers used stimulus from Congress and the central bank to shift spending from services to goods, creating logjams in supplies and juicing inflation.
    However, they note the new phase is now being pushed by a rise in wages trying to catch up to the surge in prices. The good news is that such shocks are generally controllable, but they said the Fed needs to keep trying to address the labor situation in which the unemployment rate is at 3.4% and there are still about 1.6 open jobs for every available worker.

    “The portion of inflation which traces its origin to overheating of labor markets can only be reversed by policy actions that bring labor demand and supply into better balance,” Bernanke and Blanchard say.

    A look forward and back

    The paper, though, is as much about what caused a surge that took headline inflation as gauged by the consumer price index above 9% last year as it is what happens from here.
    Most economists agree that a combination of trillions in government spending combined with zero interest rates and nearly $5 trillion in bond purchases from the Fed flooded the economy with money and created distortions that led to soaring prices.
    In a forum Tuesday presented by the Brookings Institution, Bernanke, Blanchard and other high-profile economists and academics discussed the root causes and what policymakers should do as they review policies for the future.
    Among the considerations were the factors of supply and demand, how much Covid itself influenced consumer decisions, and whether a new policy framework the Fed adopted in September 2020 that sought not only employment that was full but also “broad-based and inclusive” played a role in the economic dynamics.
    “The quantitatively larger sin was fiscal policy, especially for the year 2021. The less forgivable sin, though, was monetary policy,” said Jason Furman, former chair of the Council of Economic Advisers and now an economics professor at Harvard.
    “I have lower expectations for fiscal policy. When they get the sign right, I’m pleasantly surprised,” he added. “Monetary policy made the error again and again and meeting after meeting. … I do have higher expectations for the Fed than just getting the sign right.”
    As inflation rose past the Fed’s 2% target, policymakers persisted in calling the trend “transitory” and did little other than to begin discussing when it would reduce its bond purchases. The Fed only began raising interest rates in March 2022, a full year after its preferred inflation gauge eclipsed the target.
    Since then, policymakers have raised benchmark interest rate 10 times for a total of 5 percentage points, taking the fed funds rate to its highest level in nearly 16 years.

    ‘An error of tactics’

    Former Fed Vice Chair Richard Clarida, who was on the Federal Open Market Committee during the inflationary surge, said the missteps on policy were not attributable to an over-adherence to the policy framework adopted in 2020, which came amid racial unrest across the country. He called the Fed’s hesitance to tighten policy “an error of tactics and not of strategy” and attributed it to the “fog of war.”
    He also noted the Fed was hardly alone: Many other global central banks chose not to raise rates amid the inflation spike.
    “No advanced economy central bank began to hike rates until inflation exceeded target,” Clarida said. “Why this happened, obviously, is a very important and interesting question that says more about the practice of inflation-targeting central banking in the sphere than it does about any particular implementation of a framework.”
    The Bernanke-Blanchard paper notes the danger inherent in central banks letting inflation go on for too long and the impact that has on expectations for prices.
    “The longer the overheating episode, the stronger the catch-up effect, and the weaker the anchoring of expectations, the larger is the effect of labor market tightness on inflation, and, implicitly, the stronger the eventual monetary contraction needed to return inflation to target, all else equal,” they wrote. More

  • 163 Shares169 Views

    in Economy

    Biden and McCarthy Describe ‘Productive’ Debt Limit Talks, but No Deal Is Reached

    President Biden and Speaker Kevin McCarthy expressed optimism on Monday that they could break the partisan stalemate that has prevented action to avert a default on the nation’s debt, but remained far apart on a deal to raise the debt limit as Democrats resisted Republicans’ demands for spending cuts in exchange.The two met face to face at the White House for the second time in two weeks in a show of good will after a weekend of behind-the-scenes clashes among negotiators, punctuated by a move by Republicans on Friday to halt the talks and accusations by both sides that the other was being unreasonable.With Mr. Biden back from a summit meeting in Japan, the tenor appeared to have changed considerably. “We don’t have an agreement yet,” Mr. McCarthy told reporters at the White House after the meeting. “But I did feel like the discussion was productive,” he said, adding later that he believed the tone of the talks was “better than any other time we’ve had discussions.”“I believe we can still get there,” Mr. McCarthy said. “I believe we can get it done.”He said he expected to speak with Mr. Biden daily until a deal could be struck.With a default looming as soon as June 1, both Mr. Biden and Mr. McCarthy began their latest meeting sounding upbeat about finding common ground in an effort to avoid economic catastrophe and left dispatching their top advisers to hammer out an agreement in the coming days.“We still have some disagreements, but I think we may be able to get where we have to go,” Mr. Biden said as the two sat down in the Oval Office. “We both know we have a significant responsibility.”Mr. Biden said in a brief statement after the meeting that the talks were “productive.”“We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement,” he added, saying that he and his negotiating team would continue talking with Mr. McCarthy and his.Still, the two sides remained at loggerheads. The White House has called Republicans’ demands for spending cuts extreme, while Mr. McCarthy and his aides have accused White House officials of being unreasonable.The number of legislative days for Congress to vote to raise the debt ceiling before the projected deadline is rapidly dwindling. Treasury Secretary Janet L. Yellen on Monday reiterated her warning to Congress that the United States could exceed its authority to borrow to pay its bills as soon as June 1. She said in an interview with NBC’s “Meet the Press” over the weekend that the odds of the government being able to hold out until mid-June — when a substantial amount of quarterly tax revenue is expected to roll in, giving the Treasury more breathing room to cover its obligations — were “quite low.”And Republicans hinted that no deal was likely to materialize until a default was truly imminent. When asked on Monday evening what it would take to break the deadlock, Mr. McCarthy replied simply: “June 1.”Chief among the outstanding issues is how much to spend overall next fiscal year on discretionary programs and how long any spending caps should be in place. Republicans want to allow military spending to increase while cutting other programs. But they have shown some flexibility around how long they would seek to cap spending overall, coming down from their initial demand of a decade to six years.That is longer than Mr. Biden wants. White House officials have proposed holding both military and other spending — which includes education, scientific research and environmental protection — constant over the next two years.“These are tough issues,” said Representative Patrick T. McHenry, Republican of North Carolina and a key ally of Mr. McCarthy who has been involved in the talks and attended the White House meeting. “A directive to cut spending year over year is the toughest thing to do in Washington, D.C. But that is the speaker’s directive to his negotiating team. It is our expectation to be able to get that.”Hard-right members of Mr. McCarthy’s conference have continued to pressure the speaker not to accept anything less than the spending cuts that House Republicans passed in their debt limit bill last month, which would have amounted to a reduction of an average of 18 percent over a decade.“Republicans must #HoldTheLine on the debt ceiling to bring spending back to reality and restore fiscal sanity in DC,” the House Freedom Caucus wrote on Twitter. “We spend $100+ billion more than federal tax revenues EVERY MONTH. Washington has a spending problem, not a revenue problem.”Mr. McCarthy expressed confidence that he could keep his conference largely united around whatever deal he strikes with Mr. Biden, telling reporters at the Capitol before the meeting that he believed it would draw the support of both Democrats and Republicans.“I firmly believe what we’re negotiating right now, a majority of Republicans will see that it is a right place to put us on a right path,” he said.But he also hinted that members of his conference should prepare to accept a final product that falls short of what some lawmakers have demanded.“I don’t want you to think at the end of the day, the bill that we come up with is going to solve all this problem,” he said. “But it’s going to be a step to finally acknowledge our problem and put one step in the right direction. And we’re going to come back the next day and get the next step.”Once negotiators agree to a deal, it will take time to translate it into legislative text. Mr. McCarthy has promised that he will give lawmakers 72 hours to review the bill, and said on Monday that he believed negotiators would need to agree to a compromise this week in order to pass legislation raising the debt ceiling before the projected June 1 deadline.Lawmakers in the House were still left uncertain about when they would need to be present to cast a vote to avert a default. The House, as of Monday evening, was set to depart Washington beginning on Thursday afternoon ahead of the Memorial Day weekend.The two sides have found some agreement in talks in the last week, including on clawing back some unspent funds from previously approved Covid relief legislation.But many other issues have yet to be resolved, including tightening work requirements for able-bodied adults without dependents for certain safety social net programs. The bill passed by House Republicans contained stricter requirements for recipients of Temporary Assistance for Needy Families and food stamps, and is a key demand of conservatives in the House.Mr. McCarthy said on Monday that he would continue to push for their inclusion in whatever deal he strikes with Mr. Biden, and White House negotiators have shown openness to finding some compromise on the issue.Carl Hulse More

  • 138 Shares149 Views

    in Economy

    Yellen Warns the U.S. Could Default as Soon as June 1

    Treasury Secretary Janet L. Yellen reiterated on Monday that the United States could be unable to pay its bills as soon as June 1, an announcement that maintains pressure on the White House and congressional leaders as they negotiate how to raise the nation’s debt limit.The warning to Congress comes as President Biden and Speaker Kevin McCarthy are set to meet on Monday afternoon at the White House to try and resolve the impasse. Representatives for Mr. Biden and Mr. McCarthy have been engaged in talks over the past week to devise a plan that would cap federal spending and reduce the deficit while raising the $31.4 trillion borrowing cap.Ms. Yellen warned that the nation’s finances remain in a precarious state, saying that it was “highly likely” the United States would run out of cash by early June, rather than her previous letters, which called that time-frame “likely.”“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Ms. Yellen wrote.In her previous letter, issued a week ago, Ms. Yellen offered the caveat that her estimates could be off because of the unpredictability of incoming government tax revenue. She said that the actual date that Treasury will exhaust the so-called extraordinary measures that she is using to delay a default “could be a number of days or weeks later.”On Monday, Ms. Yellen did not suggest that there might be more time and she warned that failing to lift the debt limit would be disastrous for the economy.“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” Ms. Yellen said.The nation’s cash balance has been running perilously low. On Sunday, Ms. Yellen dismissed hopes that the so-called extraordinary measures that she has been using to delay a default would be sufficient to maintain normal government operations beyond mid-June.Republicans have refused to raise the debt limit without spending cuts, forcing Democrats to the negotiating table to avoid a default that could cause a recession and financial crisis. The two sides remain far apart on key issues, including on caps for federal spending, new work requirements for some recipients of federal antipoverty assistance and funding meant to help the Internal Revenue Service crack down on tax evasion by high earners and corporations.The Treasury secretary said over the weekend that a failure to raise the debt limit would force the government to confront difficult choices about how to meet the nation’s financial obligations. Benefits payments to retirees and veterans are likely to be disrupted, and the uncertainty could cause interest rates to surge and stock prices to plunge.The Biden administration has downplayed the idea that it could essentially ignore the debt limit and continue borrowing by invoking the 14th Amendment, which says that the validity of U.S. debt shall not be questioned. Although the administration’s lawyers have studied the idea, officials believe that the expected legal challenges and uncertainty would destabilize markets.“There can be no acceptable outcomes if the debt ceiling isn’t raised,” Ms. Yellen said on “Meet the Press” on NBC. More

  • 113 Shares99 Views

    in Economy

    Debt Limit Negotiators Debate Spending Caps to Break Standoff

    The strategy, which was used in 2011, could allow both sides to save face but would most likely do little to chip away at the national debt.As negotiators for the White House and House Republican leaders struggle to reach a deal over how to raise the nation’s debt limit, a solution that harks back to old budget fights has re-emerged as a potential path forward: spending caps.Putting limits on future spending in exchange for raising the $31.4 trillion borrowing cap could be the key to clinching an agreement that would allow Republicans to claim that they secured major concessions from Democrats. It could also allow President Biden to argue that his administration is being fiscally responsible while not caving to Republican demands to roll back any of his primary legislative achievements.The Biden administration and House Republican leaders have agreed in broad terms to some sort of cap on discretionary federal spending for at least the next two years. But they are hung up on the details of those caps, including how much to spend on discretionary programs in the 2024 fiscal year and beyond, and how to divide that spending among the government’s many financial obligations, including the military, veterans affairs, education, health and agriculture.What could a spending cap deal look like?The latest White House offer would hold military and other spending — which includes education, scientific research and environmental protection — constant from the current 2023 fiscal year to next fiscal year, according to a person familiar with both sides’ proposals. That move would not reduce what is known as nominal spending, which simply means the level of spending before adjusting for inflation. Republicans are pushing to cut nominal spending in the first year.One reason the White House is willing to entertain holding spending essentially flat has to do with politics. Given that Republicans control the House, getting an increase in funding for discretionary programs outside the military would have been nearly impossible. Congress would not have approved increases through the appropriations process, the normal way in which Congress allocates money to government programs and agencies.Republicans have repeatedly said that they will not accept a deal unless it results in the government spending less money than it did in the last fiscal year. They have said that simply freezing spending at current levels, as the White House has proposed, does not enact the kind of meaningful cuts many in their party have long called for.But Republican negotiators have shown some flexibility around how long they would require those spending caps to last. House G.O.P. leaders are now looking to set spending caps for six years, rather than 10. Still, that is longer than the White House is proposing, with Democrats offering to cap spending for two years.“The numbers are foundational here,” Representative Garret Graves, Republican of Louisiana and one of Speaker Kevin McCarthy’s lead negotiators, said on Sunday. “The speaker has been very clear: A red line is spending less money and unless and until we’re there, the rest of it is really irrelevant.”The approach is evoking debt limit déjà vu.If spending caps sound familiar, that is because they were employed during the last big debt limit fight in 2011.During that episode of brinkmanship, lawmakers agreed to impose limits on both military and nonmilitary spending from 2012 to 2021. The Budget Control Act caps were somewhat successful at keeping spending in check, but not entirely.A Congressional Research Service report published this year noted that during the decade that the caps were in place, Congress and the president repeatedly enacted laws that increased the spending limits. Certain types of expenditures — for emergencies and military engagements — were exempt from the caps and the federal government spent $2 trillion over 10 years on those programs. And spending on so-called mandatory programs such as Social Security was not capped, and those make up about 70 percent of total government spending.Still, the Congressional Research Service pointed out that spending was lower each year from 2012 to 2019 than had been projected before the caps were put in place.The strategy is no fiscal panacea.Caps that limit spending around current levels will help slow the growth of the nation’s debt, but will not cure the government’s reliance on borrowed money.The Congressional Budget Office said this month that annual deficits — the gap between what America spends and what it earns — are projected to nearly double over the next decade, totaling more than $20 trillion through 2033. That deficit will force the United States to continue to rely heavily on borrowed funds.Marc Goldwein, the senior policy director for the Committee for a Responsible Federal Budget, estimated that it would require $8 trillion of savings over 10 years to hold the national debt to its current levels. However, he said that did not mean that enacting spending caps would not be worthwhile.“We’re not going to fix this all at once,” Mr. Goldwein said. “So we should do as much as we can, as often as we can.”The group has called for spending caps to be accompanied by spending cuts or tax increases as a plan to reduce the national debt.Spending caps are not the only issue.Finding an agreement on the extent and duration of spending caps will be a critical part of getting a deal.But negotiators are still working to resolve several other issues, including whether to put in place tougher work requirements for social safety net programs including food stamps, Temporary Assistance for Needy Families and Medicaid, and whether to expedite permitting rules for energy projects, two key Republican priorities that White House negotiators have shown some openness to.Jim Tankersley More

  • 125 Shares199 Views

    in Economy

    Companies Are Pushing Back Harder on Union Efforts, Workers Say

    Apple, Starbucks, Trader Joe’s and REI are accused of targeting union supporters after organizing efforts gained traction, charges the companies deny.After working for more than seven years at an Apple store in Kansas City, Mo., Gemma Wyatt ran into trouble.Last year, she said, managers disciplined her for clocking in late a few times over the previous several weeks. Then, in February, Apple fired her after she missed a store meeting because she was sick but failed to notify managers soon enough, according to Ms. Wyatt.She was at least the fifth Apple employee the store had fired since this fall, all of whom had been active in union organizing there. The terminations came after two other Apple stores voted to unionize.“It took us time to realize they weren’t firing us just because of time and attendance,” said Ms. Wyatt, who is part of a charge filed with the National Labor Relations Board in March accusing Apple of unfair labor practices.Apple said it had not disciplined or fired any workers in retaliation for union activity. “We strongly deny these claims and look forward to providing the full set of facts to the N.L.R.B.,” a spokeswoman said.A pattern of similar worker accusations — and corporate denials — has arisen at Starbucks, Trader Joe’s and REI as retail workers have sought to form unions in the past two years.Initially, the employers countered the organizing campaigns with criticism of unions and other means of dissuasion. At Starbucks, there were staffing and management changes at the local level, and top executives were dispatched. But workers say that in each case, after unionization efforts succeeded at one or two stores, the companies became more aggressive.Some labor relations experts say the companies’ progressive public profiles may help explain why they chose to hold back at the outset.“You’re espousing these values but saying this other organization claiming the same values” — the union — “isn’t good for your work force,” said David Pryzbylski, a labor lawyer at Barnes & Thornburg who represents employers. “It puts you in a little bit of corner.”Once the union wins a few elections, however, “you pull out all the stops,” Mr. Pryzbylski said.In some cases, the apparent escalation of company pushback has coincided with a slowing down of the union campaigns. At Starbucks, filings for union elections fell below 10 in August, from about 70 five months earlier, and no Apple store has filed for a union election since November.At Starbucks, the company unlawfully dismissed seven Buffalo-area employees last year, not long after the union won two elections there, according to a ruling by a federal administrative judge.A Trader Joe’s store in Louisville, Ky., which was the third at the company to unionize, fired two employees who were supportive of the union campaign and has formally disciplined several more, said Connor Hovey, a worker involved in the organizing. Documents shared by Mr. Hovey show the company citing a variety of issues, such as dress-code violations, tardiness and excessively long breaks.And in advance of a recent union election at an REI near Cleveland, management sought to exclude certain categories of workers from voting, according to the Retail, Wholesale and Department Store Union. It said the chain, a co-op that sells recreational gear, had made no such challenge in two previous elections, in which workers voted to unionize. (The union said the company had backed down after workers at the Cleveland-area store walked out, and the store voted to unionize in March.)Jess Raimundo, a spokeswoman for the United Food and Commercial Workers, which is also seeking to unionize REI stores, said the co-op had formally disciplined one employee in Durham, N.C., and put another on leave and later fired him over a workplace action that took place after the workers filed for a union election last month.Starbucks, which is appealing the ruling involving the Buffalo-area employees, has said the firings and discipline were unrelated to union organizing. A Trader Joe’s spokeswoman said that the company had never disciplined an employee for seeking to unionize but that unionizing efforts didn’t exempt an employee from job responsibilities.An REI spokeswoman said that the co-op sought to exclude certain categories of workers near Cleveland because it believed their duties made them ineligible to join a union, and that it had reached an agreement on the issue independent of the walkout. The spokeswoman said the two Durham employees had been disciplined for violations of company policies, not union activity.Across the companies, the shift is such that some organizers look back on their union campaigns’ early days with an odd measure of nostalgia.“Thinking about it, I wondered why they didn’t fight harder at our store,” said Maeg Yosef, a worker and an organizer at a Trader Joe’s in Massachusetts that became the company’s first store to unionize last year. “They were like, ‘Oops, you won’ and certified us. It was really hard, but relatively easy compared to the things they could have done.”The fight at Apple followed a similar trajectory. The company did not hide its suspicion of unions when workers at a U.S. store first filed for an election in April 2022, in Atlanta. Managers emphasized that employees could receive fewer promotions and less flexible hours if they unionized, and the company circulated a video of its head of retail questioning the wisdom of putting “another organization in the middle of our relationship.”Apple’s response was similar in two other union campaigns. But although the union withdrew its election filing in Atlanta, unions won elections in both subsequent cases — first in Towson, Md., in June and then in Oklahoma City in October.According to workers, the company became more aggressive once union organizers made inroads. Around the time that employees in Oklahoma City filed for a union election in September, managers at the Kansas City store disciplined several who supported unionizing for issues related to tardiness or absences that other workers typically have not been punished for, union backers said.Terminations began before the end of the year. D’lite Xiong, a union supporter who started at the Kansas City store in 2021 and uses gender-neutral pronouns, said they were told they were being fired just before Halloween. Mx. Xiong went on leave to buy time to appeal the decision, but was officially let go upon returning in January.D’lite Xiong, a union supporter, was fired from an Apple store in Kansas City, Mo. several months ago. Will Newton for The New York Times“It didn’t make sense to me — I had recently gotten promoted,” said Mx. Xiong, who speculated that the company discovered their role in union organizing after they sought to enlist co-workers. “I was praised for doing a great job.”The Communications Workers of America, which represents Apple workers in Oklahoma and has supported workers seeking to unionize the Kansas City store, filed the unfair labor practice charge against the company over the firings in March.John Logan, a professor at San Francisco State University who is an expert on anti-union campaigns, said companies often considered the potential dissatisfaction of customers, investors and even white-collar corporate employees when calibrating their response to a union campaign.“There’s something deeply threatening about the idea that you might be on the verge of losing them,” Mr. Logan said of corporate employees.But even these considerations, he said, tend to fade once a campaign gains traction: “The overriding priority is, ‘We have to crush this.’”This year, more than 70 Starbucks corporate employees placed their names on a petition calling on the company to stay neutral in union elections and to “respect federal labor laws.” The National Labor Relations Board has issued dozens of complaints against the company accusing it of illegal behavior, which the company denies.Howard Schultz, the former Starbucks chief executive, was quick to push back against such accusations while testifying before the Senate Health, Education, Labor and Pensions Committee in March, telling one senator, “I take offense with you categorizing me or Starbucks as a union-buster.”In late April, the labor board issued a complaint accusing the company of failing to bargain in good faith at more than 100 stores.A company spokesman attributed the delay to the union, including its insistence on broadcasting sessions using video-chat software, which could make it difficult to discuss sensitive topics.Apple, too, appears intent on signaling that it is not hostile to labor. The company agreed this year to assess its U.S. labor practices for consistency with its human rights policy. And the company has reached tentative agreements with the union at its Towson store on a handful of issues, such as a commitment that workers at the store will receive any improvement in 401(k) benefits that nonunion retail workers at the company might receive.Yet despite these gestures, there has been little progress on most of the union’s top noneconomic priorities, such as grievance procedures, and the company has sought broad contract provisions that could substantially weaken the union. For example, under a proposed a management-rights clause obtained by The New York Times, Apple would have wide latitude to use nonunion workers and contractors to do work performed by union members, which could shrink union membership. Labor negotiations typically start with noneconomic issues before moving to matters like wages and paid time off.Apple did not comment on the contract negotiations, but the workers in Oklahoma City have characterized their initial bargaining sessions as “very productive.”Mr. Pryzbylski, the lawyer who represents employers, said Apple’s preferred management-rights clause was “about as robust and aggressive as you can make it,” though he said it was not unusual for companies to seek such broad rights in their first contract.Workers expressed frustration at the breadth of the management proposal. “Everyone from the union at the table had never seen one so long,” said Kevin Gallagher, who serves on the bargaining committee in Towson. “They basically wanted to maintain all the rights of not having a union.” More