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    How Close Is the U.S. to Hitting the Debt Ceiling? How Bad Would That Be?

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    The United States has a cap on the amount of money it can borrow. That means it can run out of cash if the limit isn’t lifted.Washington is gearing up for another big fight over whether to raise or suspend the nation’s debt limit, with Treasury Secretary Janet L. Yellen warning last week that the United States will reach its existing borrowing cap of $31.4 trillion on Thursday.The United States borrows huge sums of money by selling Treasury bonds to investors across the globe and uses those funds to pay existing financial obligations, including military salaries, safety net benefits and interest on the national debt. Once the United States hits the cap, Treasury can use “extraordinary measures” — suspending some investments and exchanging different types of debt — to try to stay beneath the cap for as long as possible. But eventually, the United States will need to either borrow more money to pay its bills or stop making good on its financial obligations, including possibly defaulting on its debt.Responsibility for lifting or suspending the borrowing cap falls to Congress, which must get a simple majority in both the House and Senate to vote for any change to the debt limit. Raising the debt limit has become a perennial fight, with Republican lawmakers using it as leverage to try to force spending cuts.This year is shaping up to be the messiest fight in at least a decade. Republicans now control the House and they have adopted new rules governing legislation that make it more difficult to raise the debt limit and strengthen Republicans’ ability to demand that any increase be accompanied by spending cuts. Senate Republicans have also insisted that increases to the debt limit should be tied to “structural spending reform.”President Biden has said he will oppose any attempt to tie spending cuts to raising the debt ceiling, raising the likelihood of a protracted standoff.All of this drama raises the question of what the debt limit really is, how it got here and why the United States does not do away with debt limit entirely and spare the nation from its periodic face-off with an economic time bomb.What is the debt limit?The debt limit is a cap on the total amount of money that the federal government is authorized to borrow to fulfill its financial obligations. Because the United States runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. That includes funding for social safety net programs, interest on the national debt and salaries for troops. The debt ceiling debate often elicits calls by lawmakers to cut back on government spending, but lifting the debt limit does not authorize any new spending and in fact simply allows the United States to finance existing obligations.Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More

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    U.S. Will Hit Debt Limit on Thursday, Yellen Tells Congress

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    The Treasury Department expects to begin taking “extraordinary measures” to continue paying the government’s obligations before what is expected to be a big fight to raise the borrowing cap.WASHINGTON — Treasury Secretary Janet L. Yellen warned on Friday that she would have to begin employing “extraordinary measures” on Thursday to continue paying the nation’s bills if lawmakers did not act to raise the statutory debt limit and that her powers to delay a default could be exhausted by early June.Ms. Yellen’s letter to Congress was the first sign that resistance by House Republicans to lifting the borrowing cap could put the U.S. economy at risk and signals the beginning of an intense fight in Washington this year over spending and deficits.“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability,” Ms. Yellen wrote.Ms. Yellen said on Friday that considerable uncertainty surrounded how long she could use measures to delay a default. She said she would begin suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan this month to avoid breaching the debt limit.The letter is the beginning of what is expected to be a protracted and potentially damaging economic fight. Republicans, who assumed control of the House last week, have insisted that any increase to the debt limit be accompanied by significant spending curbs, most likely including cuts to both the military and domestic issues.Speaker Kevin McCarthy has cited reducing the national debt — which topped $31 trillion last year and has increased during both Republican and Democratic administrations, including about a 40 percent increase under former President Donald J. Trump — as a central focus of his party’s agenda.“The American people are the ones that’s demanding the cut in spending,” Representative Jason Smith, a Missouri Republican and the chairman of the powerful House Ways and Means Committee, said Friday on Fox News. “We have to have fiscal reforms moving forward. We cannot just give an unlimited credit card.”Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More

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    Speaker Drama Raises New Fears on Debt Limit

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    An emboldened conservative flank and concessions made to win votes could lead to a protracted standoff on critical fiscal issues, risking economic pain.WASHINGTON — Representative Kevin McCarthy of California finally secured the House speakership in a dramatic middle-of-the-night vote early Saturday, but the deal he struck to win over holdout Republicans also raised the risks of persistent political gridlock that could destabilize the American financial system.Economists, Wall Street analysts and political observers are warning that the concessions he made to fiscal conservatives could make it very difficult for Mr. McCarthy to muster the votes to raise the debt limit. That could prevent Congress from doing the basic tasks of keeping the government open, paying the country’s bills and avoiding default on America’s trillions of dollars in debt.The speakership battle suggests President Biden and Congress could be on track later this year for the most perilous debt-limit debate since 2011, when former President Barack Obama and a new Republican majority in the House nearly defaulted on the nation’s debt before cutting an 11th-hour deal.“If everything we’re seeing is a symptom of a totally splintered House Republican conference that is going to be unable to come together with 218 votes on virtually any issue, it tells you that the odds of getting to the 11th hour or the last minute or whatever are very high,” Alec Phillips, the chief political economist for Goldman Sachs Research, said in an interview Friday.Representative Kevin McCarthy won the speakership early Saturday only after making a deal with hard-right lawmakers.Kenny Holston/The New York TimesThe federal government spends far more money each year than it receives in revenues, producing a budget deficit that is projected to average in excess of $1 trillion a year for the next decade. Those deficits will add to a national debt that topped $31 trillion last year.Federal law puts a limit on how much the government can borrow. But it does not require the government to balance its budget. That means lawmakers must periodically pass laws to raise the borrowing limit to avoid a situation in which the government is unable to pay all of its bills, jeopardizing payments including military salaries, Social Security benefits and debts to holders of government bonds. Goldman Sachs researchers estimate Congress will likely need to raise the debt limit sometime around August to stave off such a scenario.Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More

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    Sam Bankman-Fried’s Parents Under Scrutiny in FTX Collapse

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    The FTX founder Sam Bankman-Fried’s mother and father, who teach at Stanford Law School, are under scrutiny for their connections to their son’s crypto business.At the height of its corporate power, the cryptocurrency exchange FTX convened a group of athletes and celebrities for a charity event in March at the Miami Heat’s N.B.A. arena. Local high school students competed for more than $1 million in prizes, pitching “Shark Tank”-style business ideas to a panel of judges that included David Ortiz, the former Boston Red Sox slugger, and Kevin O’Leary, an actual “Shark Tank” host.But the event’s organizer was a figure better known in academic circles — Joseph Bankman, a longtime tax professor at Stanford Law School and the father of Sam Bankman-Fried, the now-disgraced founder of FTX.Wearing a baseball cap with FTX’s logo, Mr. Bankman walked onstage to help announce the winners of two $500,000 checks. Behind the scenes, he played the role of FTX diplomat, introducing his son to the head of a Florida nonprofit organization that was helping adults in the area set up bank accounts linked to the crypto exchange’s platform. Two months later, Mr. Bankman-Fried promoted the partnership in testimony to Congress, where he was pushing crypto-friendly legislation.In the months before FTX filed for bankruptcy on Nov. 11, Mr. Bankman was a prominent cheerleader for the company, helping to shape the narrative that his son was using crypto to save the world by donating to charity and giving low-income people access to the financial system.He and his wife, the Stanford Law professor Barbara Fried, were more than just supportive parents backing their child’s business. Mr. Bankman was a paid FTX employee who traveled frequently to the Bahamas, where the exchange was based. Ms. Fried did not work for the company, but her son was among the donors in a political advocacy network that she orchestrated.Now Mr. Bankman and Ms. Fried are under scrutiny for their connections to a business that collapsed amid accusations of fraud and misuse of customer funds. No evidence has emerged linking them to the potentially criminal practices that caused the exchange to implode. But their son was arrested on Monday in the Bahamas after U.S. prosecutors filed criminal charges against him, and his fortune has dwindled to almost nothing. The charitable work that Mr. Bankman spearheaded has largely collapsed.The couple’s careers have been upended. Ms. Fried, 71, resigned last month as chairwoman of the board of a political donor network, Mind the Gap, which she had helped start to support Democratic campaigns and causes. Mr. Bankman, 67, has postponed a Stanford class he had been scheduled to teach in the winter, and he’s recruited a white-collar criminal defense lawyer to represent him. The family faces huge legal bills, and they have become the subject of gossip on Stanford’s campus.“I had a friend who said, ‘You don’t want to be seen with them,’” said Larry Kramer, a former dean of the law school and a close friend of the Bankman-Fried family. “I don’t see how this doesn’t bankrupt them.”In a statement, Risa Heller, a spokeswoman for the couple, said that Mr. Bankman worked for FTX for 11 months but that Ms. Fried had no role in the company. “Joe has spent a lot of his life trying to figure out ways to lift people up out of poverty,” Ms. Heller said. “Most of his time was spent identifying worthy health-related charities.”Mr. Bankman-Fried, 30, said in an interview that his parents “weren’t involved in any of the relevant parts” of the business. “None of them were involved in FTX balances or risk management or anything like that,” he said.Mr. Bankman-Fried said in an interview that his parents “weren’t involved in any of the relevant parts” of the business.Stefani Reynolds/BloombergLong before their son became a billionaire celebrity, Mr. Bankman and Ms. Fried were popular faculty members at Stanford, where they have taught since the late 1980s. At their home on campus, they regularly hosted Sunday dinners with friends and colleagues, which multiple attendees compared to a modern salon.A leading taxation expert, Mr. Bankman has been an outspoken advocate for simplifying the tax filing system and has testified in Congress on tax matters. He also has a degree in clinical psychology and practices as a therapist.The Aftermath of FTX’s DownfallThe sudden collapse of the crypto exchange has left the industry stunned.A Spectacular Rise and Fall: Who is Sam Bankman-Fried and how did he become the face of crypto? The Daily charted the spectacular rise and fall of the man behind FTX.Market Manipulation Inquiry: Federal prosecutors are said to be investigating whether Mr. Bankman-Fried manipulated the market for two cryptocurrencies, leading to their collapse.Congressional Testimony: The FTX founder said on Twitter that he would appear before a House committee, but he was quiet about a similar request from a Senate committee. Frantic Exchanges: Texts from a group chat that included crypto leaders from rival companies showed the chief executive of Binance, another crypto exchange, accusing Mr. Bankman-Fried of orchestrating trades to destabilize the industry.Ms. Fried, who retired this year, is an expert on the intersection of law and philosophy, and has written about effective altruism, the charitable movement embraced by Mr. Bankman-Fried that uses data to maximize the benefits of donations. In 2018, she helped start Mind the Gap, hoping to bring “Moneyball”-style analytics to political spending, people familiar with her role in the group said.The couple’s lives transformed after Mr. Bankman-Fried started FTX in 2019. He grew the company into a $32 billion business, cultivating a reputation as a hard-working do-gooder who barely slept and intended to donate his fortune to causes backed by the effective altruist movement.Mr. Bankman and Ms. Fried supported their son’s work, though Ms. Fried expressed concerns about his lifestyle. “The sleep worries me,” she said in an interview with The New York Times in May. “I just hope that it’s not exacting a high price on him.”Mr. Bankman-Fried’s business and political empire was always a family affair. The FTX founder was a prolific political donor, and he was part of a network of contributors who gave money to groups recommended by Mind the Gap, people familiar with the organization said. He also helped bankroll a nonprofit organization called Guarding Against Pandemics that was run by his 27-year-old brother, Gabe Bankman-Fried.Mr. Bankman was deeply involved in FTX. In its early days, he helped the company recruit its first lawyers. Last year, he joined FTX staff in meetings on Capitol Hill and advised his son as Mr. Bankman-Fried prepared to testify to the House Financial Services Committee, a person familiar with the matter said. FTX employees occasionally consulted him on tax-related matters, the person said.“From the start whenever I was useful, I’d lend a hand,” Mr. Bankman said on an FTX podcast in August.Mr. Bankman visited the FTX offices in the Bahamas as often as once a month, a person who saw him there said. Among the much-younger staff, he cultivated an avuncular persona, regaling employees with stories from his son’s youth, the person said. He and Ms. Fried stayed in a $16.4 million house in Old Fort Bay, a gated community in Nassau, the capital of the Bahamas; the couple’s names appear on real estate documents, according to Reuters, though Mr. Bankman-Fried has said the house was “intended to be the company’s property.”Ms. Heller, the couple’s spokeswoman, said Mr. Bankman and Ms. Fried “never intended to and never believed they had any beneficial or economic ownership in the house.”As an employee, Mr. Bankman focused on FTX’s charitable operations. He put together the Miami event, selecting the teams of high school students who competed for $1 million in FTX grants. Mr. Bankman also leveraged family connections to expand FTX’s reach. His sister, Barbara Miller, works in Florida as a political consultant and introduced him to Newton Sanon, the chief executive of OIC of South Florida, a nonprofit organization that helps people with work force development training to promote economic mobility. (Ms. Miller did not respond to a request for comment.)Mr. Sanon worked with Mr. Bankman on a financial literacy initiative for low-to-moderate-income adults enrolled in education programs. As part of the collaboration, students who did not have bank accounts could open one linked to FTX’s platform, giving them the option to spend their money on cryptocurrency. Nobody was pushed to buy digital currencies through FTX, Mr. Sanon said, but one participant chose to do so.In Washington, Mr. Bankman-Fried invoked the Florida program as he pressed for legislation to make the United States more hospitable to the crypto industry, testifying to a House committee that the initiative would help low-income people “build savings.”After FTX collapsed, however, Mr. Sanon informed Mr. Bankman that some participants in the FTX initiative may have lost funds they had stored on the platform (including money students had received as a stipend for joining the program).“They wired money in for us to be able to take care of students,” Mr. Sanon said. He declined to specify the amount that the organization received, but he said it was “substantial and very kind.”Mr. Bankman used his personal funds to cover the losses, according to his spokeswoman. Mr. Sanon said that “none of us are happy with how this played out,” but that “those folks were very good to us.”Not all of Mr. Bankman’s partners were so lucky. On Nov. 11, the day that FTX filed for bankruptcy, Mr. Bankman wrote to a Chicago nonprofit that had been promised $600,000 by FTX’s charitable arm. The money wasn’t going to materialize, Mr. Bankman explained, and he couldn’t afford to make up for the shortfall himself.“I’ll be spending substantially all of my resources on Sam’s defense,” he wrote in an email, which was obtained by The Times.Mr. Bankman-Fried’s whole family has felt the effects of his actions. Gabe Bankman-Fried resigned from Guarding Against Pandemics in November. (He did not respond to requests for comment.) Ms. Fried stepped down from Mind the Gap, which held a meeting last month to elect an interim chair and discuss how to proceed without her, people familiar with the matter said. The stress of the situation is exacting a toll: Mr. Bankman looks as if he’s aged 10 years in one month, a friend said.Mr. Bankman and Ms. Fried are part of a small group offering Mr. Bankman-Fried legal advice, according to a person familiar with the matter. The couple has also turned to the Stanford faculty for support: David Mills, a criminal law professor at Stanford and a close family friend, is part of Mr. Bankman-Fried’s legal team. Mr. Bankman has his own lawyer, the former federal prosecutor Ronald G. White.Colleagues and family acquaintances are wrestling with what to say the next time they run into Mr. Bankman and Ms. Fried. Their son has widely been compared to Bernie Madoff, the notorious fraudster who ran the largest Ponzi scheme in history.Still, many people in the family’s social circle view the situation through a sympathetic lens, according to interviews with more than a dozen friends and colleagues. They insist that Mr. Bankman and Ms. Fried couldn’t have known about any wrongdoing at FTX, while acknowledging that Mr. Bankman may have been naïve in his embrace of crypto.“It’s like a Greek tragedy,” said John Donohue, a colleague who has attended Sunday dinners at the Bankman-Fried home. “The story of flying too close to the sun, and having your wings singed.”Emily Flitter More

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    California Panel Sizes Up Reparations for Black Citizens

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    In the two years since nationwide social justice protests followed the murder of George Floyd, California has undertaken the nation’s most sweeping effort yet to explore some concrete restitution to Black citizens to address the enduring economic effects of slavery and racism.A nine-member Reparations Task Force has spent months traveling across California to learn about the generational effects of racist policies and actions. The group, formed by legislation signed by Gov. Gavin Newsom in 2020, is scheduled to release a report to lawmakers in Sacramento next year outlining recommendations for state-level reparations.“We are looking at reparations on a scale that is the largest since Reconstruction,” said Jovan Scott Lewis, a professor at the University of California, Berkeley, who is a member of the task force.While the creation of the task force is a bold first step, much remains unclear about whether lawmakers will ultimately throw their political weight behind reparations proposals that will require vast financial resources from the state.“That is why we must put forward a robust plan, with plenty of options,” Dr. Lewis said.The effort parallels others on a local level, in California and elsewhere, to address the nation’s stark racial disparities and a persistent wealth gap. The median wealth of Black households in the United States is $24,100, compared with $188,200 for white households, according to the most recent Federal Reserve Board Survey of Consumer Finances.In a preliminary report this year, the task force outlined how enslaved Black people were forced to California during the Gold Rush era and how, in the 1950s and 1960s, racially restrictive covenants and redlining segregated Black Californians in many of the state’s largest cities.Californians eligible for reparations, the task force decided in March, would be descendants of enslaved African Americans or of a “free Black person living in the United States prior to the end of the 19th century.” Nearly 6.5 percent of California residents, roughly 2.5 million, identify as Black or African American. The panel is now considering how reparations should be distributed — some favor tuition and housing grants while others want direct cash payments.The task force has identified five areas — housing discrimination, mass incarceration, unjust property seizures, devaluation of Black businesses and health care — in discussions for compensation. For example, from 1933 to 1977, when it comes to housing discrimination, the task force estimates compensation of around $569 billion, with $223,200 per person.Final figures will be released in the report next year; it would then be up to the Legislature to act upon the recommendations and determine how to fund them.The state and local efforts have faced opposition over the potentially steep cost to taxpayers and, in one case, derided as an ill-conceived campaign to impose an “era of social justice.”More on CaliforniaJaywalking Law: California has had one of the strictest jaywalking laws in the nation. Starting Jan. 1, that will no longer be the case.Remaking a River: Taming the Los Angeles River helped Los Angeles emerge as a global megalopolis, but it also left a gaping scar across the territory. Imagining the river’s future poses new challenges.A Piece of Black History Destroyed: Lincoln Heights — a historically Black community in a predominantly white, rural county in Northern California — endured for decades. Then came the Mill fire.Employee Strike: In one of the nation’s biggest strikes in recent years, teaching assistants, researchers and other workers across the University of California system walked off the job to demand higher pay.A two-day public meeting of the state task force this fall, in a makeshift hearing room tucked inside a Los Angeles museum, included a mix of comments from local residents on how they had been personally affected and how the disparities should be addressed, along with testimony from experts who have studied reparations.While even broad-scale reparations would be unlikely to eliminate the racial wealth gap, they could narrow it significantly, and proponents hope California’s effort will influence other states and federal legislators to follow suit.“Calling these local projects reparations is to some degree creating a detour from the central task of compelling the federal government to do its job,” said William A. Darity Jr., a professor at Duke University and a leading scholar on reparations. Even so, Dr. Darity, who is advising the California task force, said “there is an increasing recognition” that the lasting effects of slavery must be addressed.Every year for almost three decades, Representative John Conyers Jr. of Michigan introduced legislation that would have created a commission to explore reparations, but the measure consistently stalled in Congress. After Mr. Conyers retired in 2017, Representative Sheila Jackson Lee of Texas began championing the measure, which passed a House committee for the first time last year, but stalled on the floor.Underscoring the political hurdles, opinions on reparations are sharply divided by race. Last year, an online survey by the University of Massachusetts Amherst found that 86 percent of African Americans supported compensating the descendants of slaves, compared with 28 percent of white people. Other polls have also shown wide splits.Still, several efforts have gotten off the ground recently.In 2021, officials in Evanston, Ill., a Chicago suburb, approved $10 million in reparations in the form of housing grants. Three months later, officials in Asheville, N.C., committed $2.1 million to reparations. And over the summer, the Los Angeles County Board of Supervisors approved a plan to transfer ownership of Bruce’s Beach — a parcel in Manhattan Beach that was seized with scant compensation from a Black couple in 1924 — to the couple’s great-grandsons and great-great-grandsons.“We want to see the land and economic wealth stolen from Black families all across this country returned,” said Kavon Ward, an activist who advocated on behalf of the Bruces’ descendants and has since started a group, Where Is My Land, that seeks to help Black Americans secure restitution.“We are in a moment that we cannot let pass.”A so-called blight law from 1945, the task force’s interim report explains, paved the way for officials to use eminent domain to destroy Black communities, including shuttering more than 800 businesses and displacing 4,700 households in San Francisco’s Western Addition beginning in the 1950s.After work on Interstate 210 began later that decade, the report goes on, the freeway was eventually built in the path of a Black business district in Pasadena, where city officials offered residents $75,000 — less than the minimum cost to buy a new home in the city — for their old homes.And there is Russell City, an unincorporated parcel of Alameda County near the San Francisco Bay shoreline where many Black families fleeing racial terror in the Deep South built lives during the Great Migration. Testimony to the task force by Russell City residents recounts the community’s rise and ultimate bulldozing.A mural honoring the history of Russell City in what is now Hayward, Calif.Jim Wilson/The New York TimesMonique Henderson-Ford grew up hearing stories from her elders about Russell City, where many Black families fleeing racial terror in the Deep South built lives during the Great Migration.Jim Wilson/The New York TimesThe town was demolished to make way for an industrial park.Jim Wilson/The New York TimesUnlike neighboring Hayward and San Leandro, Russell City didn’t have racist housing covenants stipulating that only white families could own certain homes. After World War II, it grew into a small but tight community of Black and Latino families that once included seven churches.On weekends, children played on the unpaved streets as their parents, many of whom worked in the shipyards, sat on porches, and on some foggy nights, Ray Charles and Big Mama Thornton played shows at one of the town’s music venues, called the Country Club.“It was vibrant,” said Monique Henderson-Ford, who grew up hearing stories about Russell City from her mother, grandmother and cousins.After leaving Louisiana in the 1950s, her grandparents lived briefly in San Francisco but were displaced by an urban renewal project. Using savings from years of work at Pacific Gas & Electric, her grandfather paid $7,500 for their property and home in Russell City, and the family soon added three small houses to the homestead for their sons.“This was their American dream,” Ms. Henderson-Ford said in an interview.But it didn’t last long.Lacking sewer lines and reliable electricity, the area was designated as a blight, and officials called for its destruction and the area to be turned into an industrial park. Russell City was annexed into Hayward, and the city and county bought up some properties and seized others through eminent domain. Residents, including Ms. Henderson-Ford’s grandmother, pleaded with officials to be allowed to remain in their homes.“I got a nice place,” she told the Alameda County Board of Supervisors during a public meeting in 1963, according to a transcript. “Allow me a break.”In exchange for their property and homes, county officials gave the family roughly $2,200, less than a third of what it had originally paid, according to Ms. Henderson-Ford.On a recent morning, Ms. Henderson-Ford and her cousin joined a reporter on a walk through what was once Russell City but is now an industrial park.They passed the spot where their grandfather used to fish, yanking up striped bass from the bay as he peered northwest and watched San Francisco’s skyline take its distinctive shape.“Imagine if the houses were still here,” Ms. Henderson-Ford said. “We would all be sitting on a fortune.”Amid the uproar in 2020 over the murder of Mr. Floyd, a Black man, in police custody in Minneapolis, Artavia Berry, who lives in Hayward, knew she had to do something.“We could not look away from what happened right here,” said Ms. Berry, who learned the history of Russell City after moving to the region from Chicago a decade ago.Ms. Berry, who leads the Community Services Commission, a municipal advisory body, composed what would become a formal apology from the City of Hayward to onetime residents of Russell City. Last November, the City Council approved the resolution, as well as several follow-up steps.An aerial view of the area as the industrial park that replaced Russell City, lower right, was under construction in 1971.Hayward Area Historical SocietyA kindergarten class on the playground at a school in Russell City in 1949.Hayward Area Historical SocietyBut in a public letter to city officials, Hayward Concerned Citizens, the group that railed against an “era of social justice,” said the apology was misguided, arguing that Alameda County, not the City of Hayward, had pushed residents out.“We are strongly opposed to any direct financial reparations,” the group wrote.For Gloria Moore, who grew up in Russell City, the words stung.Now 79, she was 3 when her parents arrived in Russell City from Texarkana, Ark. Her mother worked as a cook at a local elementary school and her father worked for Todd Shipyards in the Bay Area. She still has vivid memories of walking to school in the mud when it rained, because the streets weren’t paved and there was no public transportation.After their home was taken for about $2,200, the family members struggled to regain the financial stability and community they had built in Russell City.By the 1970s, Ms. Moore had moved to Los Angeles to begin a career in city government, and she remembered noticing how many of her co-workers owned their own homes. She was renting.Over the years, she and other former residents of Russell City have gathered at a park in Hayward for a Labor Day reunion, where they share stories and often tears.“Sometimes things were suppressed because it was too painful,” she recalled. “But no one ever forgot.” More

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    Leaders in Congress Say They Will Act to Prevent Rail Strike

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    Democratic and Republican leaders prepared to intercede as President Biden warned the prospect of a December strike put the U.S. economy “at risk.”After a meeting with President Biden, Democratic and Republican leaders pledged to pass legislation that would avert a planned nationwide rail strike in December.Doug Mills/The New York TimesWASHINGTON — Democratic and Republican leaders in Congress vowed on Tuesday to pass legislation averting a nationwide rail strike, saying they agreed with President Biden that a work stoppage during the holidays next month would disrupt shipping and deal a devastating blow to the nation’s economy.The rare bipartisan promise to act came as some of the nation’s largest business groups warned of dire consequences from a rail shutdown. Mr. Biden, who had promised to be the most pro-union president in the country’s history, said the federal government must short-circuit collective bargaining in this case for the good of the country as a whole.“It’s not an easy call, but I think we have to do it,” he told the top four lawmakers from both parties during a meeting at the White House on Tuesday morning, as the Dec. 9 strike deadline loomed. “The economy is at risk.”Speaker Nancy Pelosi said the House would vote Wednesday on a tentative agreement that Mr. Biden’s administration had helped negotiate between rail companies and the unions earlier this year. The agreement raised wages but lacked provisions for paid medical or family leave.Late Tuesday, facing substantial frustration among progressives who demanded that the offer include paid leave, Ms. Pelosi said she would also bring up a separate proposal to add seven days of paid sick leave to the agreement. It is unclear whether Republicans in the Senate would agree to such an addition, but the plan to hold a vote illustrated the degree of discontent among pro-union liberals about the agreement Mr. Biden had struck.“They demand the basic dignity of paid sick days. I stand with them,” Representative Alexandria Ocasio-Cortez, Democrat of New York, said on Twitter. “If Congress intervenes, it should be to have workers’ backs and secure their demands in legislation.”Senate leaders said they would work to pass legislation to avert the strike quickly after it passes the House, as expected. Senator Mitch McConnell of Kentucky, the minority leader, told reporters that “we’re going to need to pass a bill,” suggesting that Republicans did not intend to try to block such a move. Representative Kevin McCarthy of California, the House minority leader, said, “I think it will pass.”If it does, it will be bittersweet for Mr. Biden, who has built a decades-long political career by stressing his support for unions in their battles against management. Aides said the president had been reluctant to override the will of union workers, but ultimately changed his mind when three of his cabinet secretaries told him that negotiations had broken down and a strike seemed inevitable.Officials said Mr. Biden concluded that the effects of a strike, including hundreds of thousands of lost jobs, would be too damaging. Frozen train lines would snap supply chains for commodities like lumber, coal and chemicals, and delay deliveries of automobiles and other consumer goods, driving up prices even further.The American Trucking Associations, an industry group, recently estimated that relying on trucks to work around a rail stoppage would require more than 450,000 additional vehicles — a practical impossibility given the shortage of equipment and drivers.Understand the Railroad Labor TalksCard 1 of 5Averting a shutdown. More

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    Michael Pertschuk, Antismoking and Auto Safety Crusader, Dies at 89

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    As an obscure but muscular congressional staffer and chairman of the Federal Trade Commission, he helped usher into law a raft of consumer protections.Few people outside Washington had ever heard of the consumer advocate Michael Pertschuk by the mid-1970s, but he was considered so influential in Congress that friends and foes alike anointed him “the 101st senator,” and the cigarette maker Philip Morris proclaimed him the company’s “number one enemy.”While he never held elective public office, Mr. Pertschuk occupied, as The Washington Post wrote in 1977, “the top stratum of an invisible network of staff power and influence in the Senate, with impact on the life of every citizen of the United States.”Probably more than any other individual, he was responsible for the government’s placing warning labels on cigarettes, banning tobacco advertising from television and radio, requiring seatbelts in cars and putting in place other consumer protections — all by helping to draft those measures into law as the chief counsel and staff director of the Senate Commerce Committee and later as the chairman of the Federal Trade Commission under President Jimmy Carter.“I spent a good part of my life making life miserable for the tobacco companies,” Mr. Pertschuk had said, “and I’m not sorry about that.”He died on Nov. 16 at his home in Santa Fe, N.M. He was 89. His wife, Anna Sofaer, said the cause was complications of pneumonia.Mr. Pertschuk, second from right in the foreground, and other appointees take the oath of office in a White House ceremony in April 1977. He was named F.T.C. chairman. His wife, Anna Sofaer, is at right. Justice William J. Brennan of the Supreme Court administered the oath, with President Jimmy Carter flanking him. Associated PressFor ordinary consumers who were vexed by the government’s lax oversight of the tobacco and auto industries beginning in the mid-1960s, Mr. Pertschuk was their unseen legal guardian.He helped draft the Natural Gas Pipeline Safety Act, the Recreational Boat Safety Act, the Federal Railroad Safety Act, the Consumer Product Safety Act, the Toxic Substances Act and the Safe Drinking Water Act. Decades later, he lifted the veil on government sausage-making in his book “When the Senate Worked for Us: The Invisible Role of Staffers in Countering Corporate Lobbies” (2017).“Few have done more to reduce tobacco use in the United States and to galvanize and empower the tobacco control movement than Mike Pertschuk,” Matthew L. Myers, the president of the Campaign for Tobacco-Free Kids, said in a statement.He added, “He arguably became the most aggressive Federal Trade Commission chair in history and pursued powerful preventive health measures, including a proposed ban on advertising targeted at children.”The consumer advocate Ralph Nader, with whom Mr. Pertschuk collaborated closely on auto safety and other issues, described him as “a brilliant strategist, organizer and human relations genius while he was reshaping the Commerce Committee into the ‘Grand Central Station’ of consumer protection.”“He also ignited the anti-tobacco industry movement on Capitol Hill and later traveled the world motivating other countries to do the same,” Mr. Nader said in a statement.Mr. Pertschuck in 1984. He remained an F.T.C. commissioner after Ronald Reagan became president. Stepping down, he said the administration’s “ideological blindness led to a new era of regulatory nihilism and just plain nuttiness.” George Tames/The New York TimesMichael Pertschuk was born on Jan. 12, 1933, in London to a Jewish family who had sold furs in Europe for generations but who fled in 1937 as Nazi Germany codified anti-Semitism and girded for war. His father, David, opened a fur store in Manhattan. His mother, Sarah (Baumgarten) Pertschuk, was a homemaker.He graduated from Woodmere Academy on Long Island, where he grew up, earned a bachelor’s degree in literature from Yale in 1954, served in an Army artillery unit from 1954 to 1956 and was discharged as a first lieutenant. He received his law degree from Yale Law School in 1959.After clerking for Chief Judge Gus J. Solomon of the U.S. District Court in Oregon, he was hired in Washington in 1964 as a legislative assistant to Senator Maurine B. Neuberger, an Oregon Democrat. About the same time, the United States surgeon general released his groundbreaking report linking smoking to cancer and probably heart disease, and a year later Mr. Nader published his book “Unsafe at Any Speed,” which labeled the compact Chevrolet Corvair, with its engine mounted in the rear, as a “One-Car Accident.” Emerging as the Senate’s leading staff expert on tobacco control legislation, Mr. Pertschuk was recruited by Senator Warren G. Magnuson, the Oregon Democrat who was chairman of the Commerce Committee. Mr. Pertschuk served as a counsel to the committee from 1964 to 1968 and as chief counsel and staff director from 1968 to 1977, when he was named chairman of the Federal Trade Commission.He relinquished the chairmanship after Ronald Reagan was elected president in 1980 but remained a commissioner until 1984. During his tenure he forced the funeral industry to itemize its charges, but as the climate for regulation cooled, he failed in his effort to ban TV commercials aimed at marketing sugary foods to children.On leaving office, Mr. Pertschuk blamed the Republican administration for fostering de-regulaton, he said, whose “extremism and ideological blindness led to a new era of regulatory nihilism and just plain nuttiness.”Mr. Pertschuk’s first marriage, in 1954, to Carleen Joyce Dooley, ended in divorce in 1976. He married Anna Phillips Sofaer in 1977.In addition to his wife, he is survived by two children from his first marriage, Amy and Mark Pertschuk; a stepson, Daniel Sofaer; and three grandchildren.He and his wife moved from Washington to Santa Fe in 2003.Asked what motivated Mr. Pertschuk to embark on his consumer crusade, Joan Claybrook, who headed another of his progenies, the National Highway Traffic Safety Administration, during the Carter administration, said in a phone interview: “The facts. The more he learned, the more adamant he became. The more he learned about tobacco, the more outraged he became and the more determined he was to do something about it. And he was in a position of enormous power to do something about it.”After leaving government, Mr. Pertschuk founded, with David Cohen, a former president of Common Cause, the Advocacy Institute, which trained social justice adherents in the United States and emerging democracies.Mr. Pertschuk explained why he hadn’t capitalized on his enormous congressional and commission experience by going to work for a law firm, or for corporate clients or for foreign governments.“There is a career to be made out of the craft of lobbying for things you believe in,” he told The New York Times in 1987. “You may lag behind your contemporaries in BMW’s, if not Cuisinarts, but it really is worth it.”“This is more fun,” he said. More

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    Battle Over Wage Rules for Tipped Workers Is Heating Up

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    A system counting tips toward the minimum wage is being fought in many places. Critics say it’s often abused. Defenders say workers benefit overall.With Americans resuming prepandemic habits of going out, eating out and traveling, leisure and hospitality businesses have scrambled to hire, sometimes offering pay increases that outpace inflation.But for many whose pay is linked to tips, like restaurant servers and bartenders, base wages remain low, and collecting what is owed under the law can be a struggle.In all but eight states, employers can legally choose to pay workers who receive tips a “subminimum” wage — in some places as low as $2.13 an hour — as long as tips bring their earnings to the equivalent of the minimum wage in a pay period. Economists estimate that at least 5.5 million workers are paid on that basis.The provision, known as the tip credit, is a unique industry subsidy that lets employers meet pay requirements more cheaply. And even in a tight labor market, it is often abused at the employees’ expense, according to workers, labor lawyers, many regulators and economists.“It’s baked into the model,” said David Weil, the administrator of the Wage and Hour Division of the Labor Department under President Barack Obama, referring to the frequency of violations. “And it’s very problematic.”Terrence Rice, a bartender from Cleveland who has worked in the bar and restaurant industry since 1999, chuckled at the notion that the law is consistently followed.“As long as I’ve been doing this, I have never, ever — not one time — met anyone that’s been compensated” for a below-minimum pay period, he said, adding that slow weeks with inadequate pay are viewed as the “feast or famine” norm in the industry. Busier seasons, weekends or shifts can bring a rush of a cash followed by slow weekdays, bad-weather weeks or economic turbulence.Now the yearslong arrangement is coming under increasing challenge.In the District of Columbia, a measure on the November ballot would ban the subminimum wage by 2027. A ballot proposal in Portland, Maine, would ban subminimum base pay and bring the regular minimum wage to $18 an hour over three years.Employers in Michigan are bracing for increased expenses in February, when the state tipped minimum of $3.75 an hour is set to be discontinued and the regular state minimum wage will rise to $12 from $9.87.Xander Gudejko, a district manager for Mainstreet Ventures Restaurant Group, which owns spots throughout Michigan, offered a common view in the local business community: “When I think of the potential positives for us, I can’t really think of anything.”Though tipped employees can include hotel housekeepers, bellhops, car washers and airport wheelchair escorts, most are in food and beverage service jobs. Perfect compliance may involve a complex dance of having workers clock in at the minimum-wage rate for setup work until opening, clock out, then clock back in at a tipped wage.Businesses using the two-tier system are prohibited from having tipped employees spend more than 20 percent of their shifts on side work like rolling silverware or cleaning. They also cannot include back-of-house employees, like kitchen workers, in tip pooling — the collection and redistribution of all gratuities at a certain rate, usually set by the employer.The last robust compliance investigation of full-service restaurants by the Labor Department is somewhat dated, having ended in 2012, but it found that 83.8 percent of the examined firms were in violation of labor law, with a large share of the infractions related to tips.The National Restaurant Association, which represents over 500,000 small and larger restaurants, argues that instances of illegal underpayment of tipped workers are overstated and that workers, customers and employers, in general, find the system workable.“There’s a reason people choose tipped restaurant jobs — they know the economics are in their favor,” said Sean Kennedy, the group’s executive vice president of public affairs. “For many servers, they’ve chosen restaurants as a career because their industry skills and knowledge mean high earning potential in a job that’s flexible to their needs.”Ryan Stygar, a labor lawyer and a managing partner at Centurion Trial Attorneys, whose practice mostly represents workers in wage-theft cases but also defends businesses accused of violations, called the network of laws surrounding tipped workers “so bizarre and obscure” that employers acting in good faith can still make legal mistakes.Even when the law is followed to the letter, Mr. Stygar said, the system is unfair to workers. “You are sacrificing your tips to meet the employers’ minimum-wage obligations,” he said.Employers are required to keep records of tips and usually do so through a mix of their own accounting, credit card receipts and self-reporting from staff members. Most involved in the system say the tracking works in murky ways.“In reality, who’s monitoring this complex two-tier system?” said Sylvia Allegretto, a former chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley.“The onus is on you, the worker, to possibly enrage, or at least annoy, your boss, who also, coincidentally, controls your schedule,” she said.Talia Cella, a training manager at Illegal Pete’s, a fast-casual burrito spot in Boulder, Colo. The restaurant offers starting pay of $15 plus tips as well as health care coverage.Andrew Miller for The New York TimesIn many civil disputes, employment attorneys have successfully argued before courts that managers implicitly wield opportunities to work more lucrative shifts as a carrot for not rocking the boat on workplace abuse and as a stick to prevent retaliation.Sylvia Gaston, a waitress at a restaurant in Astoria, Queens, said her base wage is $7.50 an hour — even though New York City’s legal subminimum is $10, which must come to at least $15 after tips. Ms. Gaston, 40, who is from Mexico, feels that undocumented workers like her have a harder time fighting back when they are shortchanged.“It doesn’t really matter if you have documents or not — I think folks are still getting underpaid in general,” she said. “However, when it comes to uplifting your voices and speaking about it, the folks who can get a little bit more harsh repercussions are people who are undocumented.”Subminimum base pay for some tipped workers in the state, such as car washers, hairdressers and nail salon employees, was abolished in 2019 under an executive order by Gov. Andrew M. Cuomo, but workers in the food and drinks industry were left out.Gov. Kathy Hochul, Mr. Cuomo’s successor, said while lieutenant governor in 2020 that she supported “a solid, full wage for restaurant workers.” And progressive legislators plan a bill in January that would eliminate the two-tier wage system by the end of 2025.When The New York Times asked if she would support such changes, Ms. Hochul’s office did not answer directly. “We are always exploring the best ways to provide support” to service workers, it said.Proponents of abandoning subminimum wages say there could be advantages for employers, including less turnover, better service and higher morale.David Cooper, the director of the economic analysis and research network at the Economic Policy Institute, a progressive think tank, contends that when wage laws are changed to a single-tier system, business owners can have the assurance that “every single person they compete with is making the same exact adjustment,” reducing the specter of a competitive disadvantage.Still, he acknowledged, there would downsides. Restaurants and bars with less popularity and lower productivity could lose out in a substantially higher-wage environment, leading to higher prices and potentially closings.“This is not costless,” Mr. Cooper said. “But for a long time, we haven’t been internalizing the costs of paying workers less than they can live on.”Some employers who could use the two-tier wage system are taking a different approach.Talia Cella, 33, is a training manager at Illegal Pete’s, a burrito spot founded in Boulder, Colo., with locations throughout Arizona and Colorado. Those states have a subminimum wage under $10 an hour for tipped workers, and a regular minimum under $13. Illegal Pete’s offers starting pay of $15 plus tips as well as health care coverage.Before rising to her current position, Ms. Cella was hired as a server and trained as a bartender in 2016. She was previously making base pay of $5 an hour elsewhere as a waitress and hostess, unable to afford a car and biking to the bus stop in snow to make winter shifts.Even at what her company is paying, Ms. Cella said, recruiting and hiring are “more challenging than ever” because of labor shortages. But she said the business, with the help of a recent 10 percent price increase, remained profitable and was able to expand despite soaring food costs.She attributes this, in part, to “out-vibing” the competition.“Having work be a stable part of your life — where it’s like you go there, you’re getting paid a living wage, you have health insurance, you know this place cares about you — then you’re more likely to show up to work and give your best,” Ms. Cella said. “If you want people to give you more of themselves, more of their time, more of their effort, then you have to be willing to invest more of your company into the individual people as well.” More