Relief checks news summary | 31 May 2023
US FINANCE: LATEST UPDATES
Headlines | Wednesday, 31 May 2023
- House of Representatives approved bill to increase the country's debt limit, avoiding a default
- Full vote in the House on spending cuts and raising debt ceiling expected Wednesday 31 May
- 10 Jobs that could be at risk in the future due to AI
- The day the US could default on its debts, otherwise known as the 'X Date', extended from 1 June to 5 June
- US employment still going strong with fewer initial UI claims than expected, continuous UI claims drop
- The median selling price of homes sold in the US fell to $420,800 in April, the lowest level recorded in the last year.
- Experts remain divided over whether the Fed will announce another rate hike in June.
- The impact of a default could present greater challenges for some states over others.
- Can President Biden use the Fourteenth Amendment to increase the debt limit?
Read more from AS USA:
The National Association of Realtors (NAR) reported that while the median price of homes sold remained lower than the level recorded a year earlier, prices are increasing. The median reached $388,000 in April, rising from $361,000 since January.
According to the chart displayed above, the Federal Reserve initiated a hike in interest rates which led to a decline in housing prices. However, the current year has seen a reversal of these trends despite the rates remaining high. During the pandemic, there was a rapid surge in housing prices as household income and savings increased, thus attracting new buyers. By raising interest rates, the Fed is making mortgages more expensive, resulting in a decrease in the number of buyers in the market. Interestingly, only those buyers who can afford to purchase in cash or obtain alternate financing will remain in the market, as those who can’t afford a mortgage are priced out.
Read our full coverage for more details on why housing prices are moving up once again.
Retired workers receive benefits from the Social Security Administration (SSA) every month. The SSA also sends out benefits for Supplemental Security Income (SSI), disability, and survivor benefits.
The SSA will distribute the first batch of payments for June tomorrow, Thursday, 1 June.
Read more in our full coverage.
White House responds to the passage of a bill to increase the debt ceiling in the House of Representatives
Tonight, the House took a critical step forward to prevent a first-ever default and protect our country’s hard-earned and historic economic recovery. This budget agreement is a bipartisan compromise. Neither side got everything it wanted. That’s the responsibility of governing. I want to thank Speaker McCarthy and his team for negotiating in good faith, as well as Leader Jeffries for his leadership.
This agreement is good news for the American people and the American economy. It protects key priorities and accomplishments from the past two years, including historic investments that are creating good jobs across the country. And, it honors my commitment to safeguard Americans’ health care and protect Social Security, Medicare, and Medicaid. It protects critical programs that millions of hardworking families, students, and veterans count on.
I have been clear that the only path forward is a bipartisan compromise that can earn the support of both parties. This agreement meets that test. I urge the Senate to pass it as quickly as possible so that I can sign it into law, and our country can continue building the strongest economy in the world.
Debt ceiling to be voted in House today
Despite facing opposition from a minority of staunch Republicans, the agreement to increase the debt ceiling is scheduled to be presented on the floor of the House of Representatives for voting tonight.
Bernie Sanders will not vote for the debt ceiling agreement
Considering the debt ceiling bill has been thrashed out by two of the most senior politicians from both parties there should be broad bipartisan agreement to get the bill passed. Expect many votes against it from progressive Democrats and right-wing Republicans.
"The fact of the matter is that this bill is totally unnecessary. The President has the authority and the ability to eliminate the debt ceiling today by invoking the 14th Amendment. I look forward to the day when he exercises this authority and puts an end, once and for all, to the outrageous actions of the extreme right-wing to hold our entire economy hostage in order to get what they want," he said in a statement.
President Biden announced that his administration would cancel up to $20,000 in student loan debt last year. However, that proposal has been held up in court after lawsuits were brought against it. The Supreme Court will decide later this year on the challenges, merits, and legality of the program. However, eligible student loan borrowers may be able to have their debt forgiven after ten years, including potentially those years during the moratorium even if no payments were made.
Student loan repayments are set to restart at the end of August but, as this report tells us, eligible borrowers may be able to take advantage of a program to erase their debt.
First quarter decline in bank deposits largest in 39 years
Banks lost $472 billion in deposits in the first quarter, according to a new quarterly report from the Federal Deposit Insurance Corporation.
The deposit decline was the largest since the FDIC began collecting quarterly data in 1984 and marked the fourth consecutive quarter of industry outflows.
The drop in deposits, which amounted to 2.5%, was due mostly to movement by uninsured bigger depositors who were above the $250,000-per account level covered by the FDIC. They pulled out $663 billion, while insured deposits actually increased by $255 billion, according to Yahoo! Finance.
Those who own Nvidia stock are feeling pretty good right now, and those that don’t are wondering if they missed the boat. The tech company that produces graphics processing units, basically powerful chips, has seen its valuation on the Nasdaq skyrocket in recent days. The rise in Nvidia’s stock price began late last year but the surge that began on 24 May now has those shares value up nearly 180 percent since the beginning of the year.
This report details how the sudden bonanza has much to do with a gamble the company made 15 years ago.
Debt. ceiling deal could cost government $140 billion
The budget deal agreed to by President Joe Biden and top congressional Republican Kevin McCarthy would move $20 billion away from the Internal Revenue Service over the next two years. The change shores up cash for other agencies, but projections suggest the IRS funding would’ve made a significant step toward closing the government’s $925 billion budget gap.
Biden approved $80 billion of new cash for the IRS in 2021, arguing the funding would strengthen enforcement and increase revenue collection. The non-partisan Congressional Budget Office backs that assertion.
The CBO estimated in 2021 that for every $1 increase to IRS funding the government would recoup $6.40 to $7.10. The $20 billion being diverted from the agency could therefore raise as much as $142 billion through 2031.
President Joe Biden and House Speaker Kevin McCarthy reached a compromise on the debt ceiling over the holiday weekend to avert a potential economic crisis brought about by a default.
One of the most salient points of the agreement was the change in work requirements for some recipients of the Supplemental Nutrition Assistance Program.
What are these changes and whom will they affect?
Like gas prices and airline tickets, the cost of many products and services changes frequently. These price changes also apply to days of the week. During the week, some days are better than others for shopping.
President Joe Biden and House Speaker Kevin McCarthy brokered a deal that will suspend the debt ceiling for two years effectively raising it. In exchange the White House agreed to some of the Republicans demands to cut federal spending, but not nearly the amount the House GOP had proposed going into the negotiations.
There is good new for veterans in the agreement though. It includes Biden’s proposals for the 2024 budget to fund the VA's medical care, including the money for additional VA health care and benefits included in the PACT Act requested by the White House.
With June just a few days away, here is some important news.
Every month, the Social Security Administration (SSA) issues millions of payments to beneficiaries of the Social Security Program, who are mostly retired workers and people who receive Supplemental Security Income (SSI).
In fact, the latter will see an increase in their monthly checks starting in June thanks to the complementary payment plan approved in 33 states across the nation.
Over the next ten years, the Bureau of Labor Statistics estimates that around 2.1 million jobs will be lost, with one of the main drivers being the growth of automation and artificial intelligence (AI). However alarming that statistic may be, the BLS also projects the economy to add 10.4 million jobs by 2031. Together this means that the US economy will see around eight million jobs created over the next decade.
When trying to identify the ten jobs more threatened by AI, we must consider if we are talking about the total number of jobs lost or the percent of jobs lost for a certain profession. This is where the distraction between AI and automation, as they relate to job erasure and creation.
Read more for what jobs are at risk in our full coverage.
The Federal Open Market Committee (FOMC) is due to meet 13 and 14 June to decide on its future policy regarding interest rates. Since March 2022, the US central bank has raised rates at each meeting ten consecutive times. Those increases have pushed the overnight bank funding rate from near zero to the range of 5.00% to 5.25%.
There had been hope after the last meeting in May that policymakers would hold off on any more rate hikes. However, new economic data last week showed that the US economy is powering forward and inflation is not abating as much as the Fed would like.
That has Wall Street preparing for another hike.
Are higher wages pushing inflation? The San Francisco Fed took a look
Policymakers at the Fed have been ratcheting up interest rates in an effort to bring inflation back to its target of 2%. Currently, the rate of price increases is more than double that goal. While there are many factors behind the reason for the rising cost of living, one that has been highlighted is nonhousing services inflation and the effect of the tight labor market is having on it.
On Tuesday, the Federal Reserve Bank of San Francisco published a new analysis on the effect that labor-cost growth has on inflation. SF Fed Vice President Adam Shapiro explains that “labor-cost growth has a small effect on nonhousing services (NHS) inflation, as well as inflation overall.”
“The estimates imply that the recent surge in the employment cost index explains only about 0.1 percentage point (pp) of current elevated inflation readings,” which are a “negligible portion” of the 3% core PCE inflation for nonhousing services.
Since the results of the analysis “cast some doubt” that higher wages are driving inflation there is room for other explanations. Shapiro puts forth that “recent evidence shows that wage growth tends to follow inflation, as well as expectations of future inflation.”
Wage inflation will be one of the features of economic data due out prior to the Fed’s June meeting that experts will be focusing on. It is expected to have slowed month-over-month to 0.3% in May from 0.5% the month before. However, the SF Fed economist says that “recent labor-cost growth is likely to be a poor gauge of risks to the inflation outlook.”
Last year, after inflation reached historical levels, several states across the US approved the sending of stimulus checks and tax refunds to their residents to provide economic relief in the face of high prices.
The number of states that are sending money is decreasing, but residents of some cities and counties in the United States may be eligible to participate in pilot guaranteed income programs that have been set up and that will issue payments of $500 or more each month.
Here's a look at programs providing those who are eligible with monthly payments as part of these initiatives.
The economy of the United States could be facing a crisis very soon if Congress fail to pass the legislation based on the deal between President Biden and Speaker McCarthy to raise the debt ceiling.
The ceiling refers to the limit of money that the federal government can borrow. While the Biden administration seeks to increase funding, lawmakers- mostly Republicans- refuse to do so unless spending is cut. The last time the ceiling was raised was in December 2021, increasing the total budget to $31.4 trillion.
According to Treasury Secretary Janet Yellen, the federal government may no longer be able to meet its financial responsibilities as of June 5, and would therefore face a default. This would affect a broad range of payments from the military to civil servants, as well as those receiving Social Security.
Each month, the Social Security Administration (SSA) sends Social Secuirty checks and makes payments for Supplemental Security Income (SSI), in addition to distributing disability and survivor benefits.
The SSA is preparing to send out June benefits, and certain beneficiaries will receive a double payment next month. Here’s who’s eligible, the amounts, payment dates, and why sometimes two payments are made.
Like much of the agreement reached between the White House and Congressional Republicans over the debt ceiling, the terms related to student cancellation are much less significant than what GOP leaders are trying to tell their caucus.
Read more on the agreement in our full coverage.
Right-wingers vow to stop debt ceiling negotiations
Considering it has been thrashed out by two of the most senior politicians from both parties, there should be broad bipartisan agreement to get the bill passed. Expect many votes against it from progressive Democrats and right-wing Republicans.
“It has historic reductions in spending, consequential reforms that will lift people out of poverty into the workforce, rein in government overreach - there are no new taxes, no new government programs,” boasted McCarthy.
But not everyone in his party is pleased.
Negotiations for the debt ceiling concluded over the weekend, potentially staving off a debt default and government shutdown. Measures include: keeping non-defence government spending flat, temporarily expand work requirements for certain adults receiving food stamps, and cut IRS funding amongst other agreements.
It “represents a compromise, which means not everyone gets what they want,” conceded President Biden.
Twitter's value is hurtling downward
It’s been seven months since Elon Musk took over Twitter after a long-drawn out, tumultuous negotiating period. There has been a lot of controversy since he positioned himself at the helm of the social media platform, including massive layoffs and a wave of right-wing dominance on the platform.
He closed the deal to acquire Twitter on Oct. 28, after paying his original officer price of $54.20 a share for a grand total of approximately $44 billion. Now it is worth a third of that.
Finance and economic news: welcome
US markets, closed on Monday for Memorial Day were open for the first time since President Biden and Speaker McCarthy reached a deal on raising the debt ceiling. While there was positive sentiment for the agreement worries about it getting through Congress dampened trading.
The non-partisan debt ceiling and spending cuts deal passed its first hurdle getting the greenlight in the House Rules Committee despite opposition from two GOP members of the panel. A full vote on the legislation to make the agreement law is expected on Wednesday 31 May, after which it will head to the Senate for passage.
Congress must pass the bill and get it to President Biden's desk for signing before the X Date, when the US will no longer be able to pay its bills in full, set to fall on Monday 5 June.