Weekly jobless claims fell to 290,000 last week, landing at a new pandemic-era low.
Economists expected filings for unemployment benefits to edge higher to 300,000.
Continuing claims fell to 2.48 million for the week that ended October 9, also beating estimates.
Filings for unemployment insurance slid again last week, placing them at another pandemic-era low.
Jobless claims reached 290,000 last week, the Labor Department said Thursday. The median estimate from economists surveyed by Bloomberg was for a slight increase to 300,000 claims. The print marked a third consecutive decline.
The previous week's total was revised to 296,000 from 293,000.
Continuing claims - which count Americans filing for ongoing unemployment insurance benefits - dipped to 2.48 million for the week that ended October 9. That beat the median estimate of 2.55 million claims. The print also placed continuing claims at another pandemic-era low.
Claims resumed their slide to fresh lows last week after hovering at elevated levels through much of September. Weekly claims are still higher than the pre-crisis average of about 200,000, and continuing claims have yet to return to their 2019 lows of about 1.7 million. Still, the steady decline suggests more Americans are finding work, and that fewer are being laid off.
The Thursday report follows a similarly encouraging update on Americans' spending through the Delta wave. Spending at US retailers and restaurants unexpectedly rose 0.7% in September to $625 billion, beating forecasts for a 0.2% decline and placing monthly sales just below record highs. Consumer spending counts for roughly 70% of economic activity, making the increase a promising sign that the recovery is pushing forward.
The retail-sales data also suggests the Delta wave will only have a minor effect on the US rebound. Daily case counts peaked in mid-September and have fallen since. The seven-day average for new cases is now the lowest its been since late July.
Inflation measures track prices of common goods, but they fail to capture worrying COVID-era trends.
The labor shortage and supply-chain crisis have simply made customer service worse in many cases.
Economists have no way to track this, leaving experts in the dark as they navigate the recovery.
You've probably been out to eat recently. If it was your first time out in a while, you noticed some changes.
That $6 beer might be $9, if you live in New York City, and the menu is probably more limited. Maybe there's a QR code you have to scan to bring up the menu, too.
This is what economists mean when they talk about inflation and automation as big changes brought on by the pandemic.
But did you find yourself ... waiting a long time for your food? Or for someone to even talk to you? Was the wait so long you got a little angry and snapped at the wait staff? (Take it easy, now, don't make a scene.)
This is a very real thing impacting the economy, but there's no way to measure it in any data that any economist has ever dreamed up.
The country's top inflation measures - the Personal Consumption Expenditures price index and the Consumer Price Index - both track price changes across a wide range of goods and services. They have remained elevated in August as the Delta wave intensified and supply-chain bottlenecks worsened, but they don't tell the story of the slow, annoying experience described above.
Inflation is changing what you get for the same pre-pandemic price and leaving Americans with worse quality than before. The total blindness of this for the economist profession shows how little we still know about what inflation actually is, and what you can't see can hurt you.
What economists can and can't see
One of the key features of inflation indexes like PCE and CPI is "hedonic adjustment." As the quality of goods and services changes over time, BEA and BLS adjust prices to reflect whether you're getting more or less for your money.
The classic example is TV sets: In the 1990s, a big screen TV cost well over $1,000, but was also massive, awkward, and generally suffered from blurry image quality. In 2021, you can get a 50-inch TV set for under $500 - a huge decline in price in and of itself - but that also has a photo-realistic 4K resolution and connects directly to the internet, allowing for instant high-definition "The Office" binge-watching sessions. That increase in quality is factored into the BLS' price estimates for TVs, which have seen a 98% decline in their price index since 1990.
But it's not really possible to measure hedonic changes for many things. Counting the ever-increasing number of pixels on a TV screen is one thing, but quantifying the effect of an overworked restaurant server is another.
BLS only measures hedonic adjustment for a fraction of the goods and services in the CPI basket, owing to those difficulties. Even without factoring in those hard-to-measure quality changes, prices for things like restaurant meals have been marching up since the pandemic:
From its onset, the COVID recession was different. The downturn was self-imposed as the government forced strict lockdowns and business closures. The path of recovery hasn't been dictated by economic activity, but by the coronavirus's spread. Now, as inflation emerges in areas beyond simple prices, it's forcing a rethink of just how effective the typical indicators are at measuring the economy.
Each month brings a new normal for consumer spending. That's put CPI and PCE to the test, and throughout the US economy, they're failing to tell just how bad the situation is.
The global supply-chain crisis is already easing ahead of the spending-heavy holiday season, Jefferies said.
There are signs "we are past peak pinch," and "significant improvement" will arrive by the middle of 2022, the bank added.
Still, US-China tensions and overwhelming demand stand in the way of a swift recovery.
The shipping mess that's making online orders a nightmare is already healing, Jefferies economists said Friday.
There are signs that "we are past the peak pinch" on the cargo ship delays, port bottlenecks, and labor shortages that have disrupted worldwide supply chains for months, according to economists led by Aneta Markowska. The team anticipates the global supply chain will see "significant improvement" by the second half of 2022, with Octoberlikely marking the peak of the problem.
"Between shipping costs, labor shortages, raw materials, and input availability, the global supply chain has been stretched remarkably thin," the economists said, adding "we may be already witnessing the worst of it."
The team expects a rebound once the holiday shipping window closes in mid-October, with improvements will first emerging in "baseline" shipping, or less time-sensitive transportation. Concerns and disruptions for regular goods should improve soon after.
Reviving the supply chain won't be easy
Still, supply faces a steep uphill climb before it matches demand. Spending is still close to pandemic-era highs in many categories despite decade-high inflation, Markowska said in the Friday note. Americans' spending at retailers and restaurants jumped 0.7% to $625 billion in September, trouncing the median estimate of a 0.2% decline. US virus case counts have only declined since, signaling spending at in-person venues could climb even higher in October.
That, coupled with shipping bottlenecks, should intensify shortages during the holiday season, but as they wind down and seasonal trends push more activity toward services, supply chains can heal faster, she said.
US-China tensions could also hamper shipping recovery
President Donald Trump started the process of decoupling the US and China supply chains, arguing it would benefit American manufacturers and help the US catch up in the global economic race. Yet billions of dollars in tariffs were largely passed down to consumers, and both countries' economies remain reliant on each other.
That's made the supply-chain disaster worse. Trump's trade war has contributed to shortages of key products like semiconductors. That's already slowed US car production, worsened electronics shortages, and boosted inflation throughout the economy.
Despite the current shipping issues, the Biden administration has maintained the Trump-era playbook. And new pandemic-era trends are making matters worse, Sean Darby, global equities strategist at Jefferies, said. China's shortages and lack of investment in production have further slammed its ability to shore up supply. Disappointing vaccine rollouts in other manufacturing hubs like Vietnam have kept alternatives from picking up the slack.
Still, the headwinds shouldn't delay recovery too long, the bank said. The supply-chain crisis's impact will ease considerably through the start of next year. So while this year's holiday shopping might be more difficult than usual, it should be back to normal by winter of 2022.
Home prices could surge another 16% in 2022 as the supply-demand mismatch continues, Goldman Sachs said.
Prices have already shot up 20% this year as the housing shortage fueled bidding wars across the US.
This could bleed into rentals, with shelter inflation soaring to 4.5% from 2.4%, the economists added.
Goldman Sachs has some mixed news for US homebuyers who have struggled with a white-hot housing market all year.
The good news: Prices won't surge as much next year as they have in 2021. The bad news: They're still going to go up a lot.
Prices for US homes will climb another 16% through 2022, Goldman economists led by Jan Hatzius said in a Monday note. The forecast gives prospective buyers little to cheer as the new year looms. Prices have already surged 20% through the past year, as a dire home shortage has given way to frenzied bidding wars. Builders have moderately accelerated construction of new houses, but they're far from hitting the pace needed to match demand.
The shortage will linger into next year, and it's uncertain whether the market will normalize then, the team said.
"Of all the shortages afflicting the US economy, the housing shortage might last the longest," they said. "While the supply of homes for sale has increased modestly since the spring, it remains well below pre-pandemic levels and the outlook offers no quick fixes for the shortage."
The mismatch between buyer demand and nationwide supply is the basis for the bank's expectation that prices will boom well into the 2020s.
On the supply side, builders can't ramp up construction even if they wanted to. Firms don't just face pandemic headwinds like supply shortages and delays, but pre-crisis problems like a lack of workers and land scarcity as well, the economists said.
Those obstacles will limit new home construction to roughly 1.65 million units per year, or a net increase of 1.4 million per year after demolitions, they added. That's only just above the pace seen in August, but well below the annual rate of 2 million homes the National Association of Realtors says is needed to fill the deficit caused by years of underbuilding.
On the other side of the equation, demand shows no signs of letting up. Millennials are in their peak buying age and they're set to power a once-in-a-lifetime boost to household formation. And while Americans' attitudes toward buying a home are at the lowest point since the 1980s, there are still plenty of "reluctant bulls" on the sidelines, the team said. These buyers plan to buy homes in the near future, even through their sentiments toward the market have soured.
With the market rife with reluctant bulls and struggling homebuilders, prices won't cool off for years, Goldman said.
Renters aren't safe, either. It just won't be as bad.
Much of the housing turmoil has already bled into the rental market. Prices have surged above their pre-pandemic highs in many cities, and in places where deals can still be had, they're expected to fade in a matter of months.
The bank expects that price surge to continue through 2022. Goldman sees shelter inflation rising to a year-over-year rate of 4.5% by the end of next year, a sharp acceleration from the current 2.4% pace and the fastest price growth in 20 years.
The forecast is concerning, especially since inflation already sits at decade-highs. The bank's shelter inflation tracker - which lumps a collection of alternative rent measures into a single forecast - has leaped from 2.1% to 4.6% in just six months.
There's reason to believe the actual increase won't be as steep as that measure suggests, the economists said. For example, some of the measures track private rent indexes, and those focus more on rents that turn over to new tenants instead of continuing leases. Landlords tend to raise rents more for new tenants than existing ones, and less than 5% of rentals turn over in a given month, Goldman said.
Separately, a wide range of cities and states also enacted rent freezes during the pandemic, and governments will likely regulate how fast rents can climb during reopening.
Housin is in the process of cooling off from its wild pace earlier this year. But those hoping for a quick return to the pre-crisis normal are set to be disappointed.
US job openings dropped to 10.4 million from 11.1 million in August, according to JOLTS data published Wednesday.
The reading missed the median estimate of 10.9 million openings and snapped a five-month streak of record highs.
The report also shows openings continuing to exceed workers and hiring slowing sharply.
Job openings fell for the first time in six months as the labor market's recovery slumped in August.
Openings fell to 10.4 million from 11.1 million, according to Job Openings and Labor Turnover Survey, or JOLTS, data published Tuesday. Economists surveyed by Bloomberg expected openings to drop to 10.93 million. The reading marks the first decline since December 2020.
The report signals the labor shortage still going strong in August as the Delta wave intensified. Openings first shot higher through the spring as businesses struggled to attract workers. The labor shortage quickly led some firms to raise wages, while others waited for the virus threat to fade. And while job creation boomed through the summer, openings kept rising to fresh records.
August payroll growth shows Delta's impact on job creation. The US economy added just 366,000 jobs that month, down from the 1.1-million-payroll gain seen in July and less than half the median forecast. The Delta variant was now officially hampering the hiring recovery, and September gains weren't any better. Data out Friday showed the US creating just 194,000 payrolls last month, marking the smallest one-month gain of the pandemic era.
The August JOLTS data suggests labor demand held strong amid the hiring slowdown. The worker-to-opening ratio tells a similar story. There were roughly 0.8 available workers for every job opening in August, matching the July reading and ending a steady decline. Readings below mean there are more listings than workers to fill them, and the ratio first fell below 1 in June.
Typically, an abundance of openings comes late in economic expansions. Yet the extraordinary amount of unfilled postings pulled the ratio below zero far more quickly than in past recoveries.
Separately, quits rocketed to a record-high 4.3 million from 4 million in August. Quits have been elevated throughout the spring and summer as workers ditch their old jobs for new work. The extraordinary amount of quitting shows Americans' confidence in their ability to find work. Still, the shakeup is sure to slow the return to pre-pandemic employment levels.
Where Americans can find jobs and where they're leaving them
The JOLTS data lags the government's payrolls reports by one month, meaning some takeaways are already stale by the time they're published. Still, the Tuesday report reveals just where labor demand is booming and where it's drying up.
Openings dropped the most in the health care and social assistance sector, with related businesses losing 224,000 postings. Hotels, restaurants, and bars shed 178,000 openings, and public schools cut 124,000 openings. Despite the declines, the three sectors still count for a great deal of the country's job openings.
Openings increased by 22,000 across federal government roles, according to the report.
The sectors with the biggest declines in openings also saw quits soar. Quits rose at hotels, restaurants, and bars by 157,000, while they increased by 25,000 at public schools. The wholesale trade sector gained 26,000 quits in August as well.
With Delta case counts ripping higher throughout the month, the latest data reflects an exodus from in-person jobs. Just as the August jobs report showed hiring following the path of the virus, the JOLTS data suggest service businesses will struggle to fill openings until the coronavirus poses less of a threat.
Another month of the Delta wave, another disappointing jobs report. US businesses added fewer jobs than forecast in September, signaling the recovery was still on the ropes as fall began.
The country gained just 194,000 nonfarm payrolls last month, the Bureau of Labor Statistics said Friday morning. That fell badly short of the 500,000-payroll estimate from economists surveyed by Bloomberg. At the same time, August job growth was revised to 366,000 from 235,000 payrolls.
The data signals hiring faltered again last month. Although the print marks a ninth straight month of job additions, it more importantly shows a slowdown from even the dismal growth seen in August.
The household survey, which is used as the basis for the unemployment rate, showed much better news than the headline non-farm payroll numbers. The number of unemployed Americans dropped by a healthy 710,000, leaving roughly 7.7 million workers unemployed by the time the government's survey period ended in mid-September.
According to that survey, employment rose by 526,000. That combination led to a better-than-expected drop in the unemployment rate to 4.8% from 5.2%, handily beating the median forecast of a 5.1% rate.
Another promising sign: The average hourly wage increased by 19 cents, or 0.6%, between August and September to $30.85. That beat the average forecast of a 0.4% gain. The average wage has taken on increased importance in recent months as businesses struggle to rehire amid the unusual labor shortage. While some firms have waited for more Americans to rejoin the workforce, others have raised pay to attract workers and quickly fill openings.
Broadly, the Friday report shows a labor market moving slower toward a full recovery amid the Delta wave hitting its peak. Daily case counts hit a record high on September 7 and started to decline through the second half of the month. Since the jobs report's survey period ended halfway through the month, it missed the weeks in which cases began to drop.
If the slide in new cases holds, October job gains could be even stronger, as the pace of recovery has closely mirrored the virus's spread. The Delta wave is widely believed to have dented job growth in August as some economic restrictions were reinstated and Americans' hopes for the recovery cratered.
The Friday report includes insights beyond the broad job gains and the unemployment rate. It reveals where hiring accelerated, which sectors fell behind, whether more Americans entered the workforce, and how the pandemic continues to roil the labor market.
The leisure and hospitality sector added the most jobs throughout September, with an addition of 74,000 payrolls. That sector had counted for much of the hiring recovery in the spring and summer before drastically slowing down to a near-halt in August.
Local government education shed 144,200 jobs, according to the report, making it the biggest loser of the month. However, BLS noted that this is a bit of an anomaly - the algorithm used to adjust the numbers for seasonal patterns in hiring and layoffs expect a big surge in hiring at the start of the school year, but the vagaries of remote and hybrid learning over the last two years threw those typical patterns into chaos in 2021. The public school sector actually added over 600,000 jobs on a non-seasonally adjusted basis, which is still less than the seasonal adjustment expected.
The U-6 unemployment rate - which includes Americans marginally attached to the workforce and those working part-time for economic reasons - dipped to 8.5% from 8.8%.
Finally, the labor-force participation rate moved slightly lower, to 61.6% from 61.7% in August, showing that some Americans stopped looking for work through the month. September saw the federal government's boost to unemployment insurance lapse nationwide, after 26 states had ended the federal benefit prematurely, leaving recipients with weaker assistance amid the Delta surge. The $300-per-week boost ended on September 6 and filings for UI aid have hovered at elevated levels since, suggesting the expiration did little to encourage job takeup.
The Senate approved a measure to extend the debt limit through early December, defusing a perilous showdown that brought the US to the edge of default. The bill now goes to the House for a vote sometime next week.
The tally was 50-48 with every Senate Republican opposed to the measure during final passage. But 11 GOP senators, including Senate Minority Leader Mitch McConnell, joined Democrats to cut off debate and break the filibuster's 60-vote threshold in an initial procedural vote.
"Republicans played a risky and partisan game, and I am glad their brinkmanship didn't work," Senate Majority Leader Chuck Schumer of New York said in a floor speech.
"We need to be able to get on this," Sen. Lisa Murkowski of Alaska told Insider. "The only way we're gonna be able to get on this is if we can get 60 votes. I'm gonna be one of those 60."
Most Senate Republicans were lined up in opposition to the debt limit extension. "Debt is not the friend of the American public and we should resist it," Sen. Rand Paul of Kentucky told Insider.
The debt ceiling is the statutory cap on how much the government can borrow to repay its bills. Suspending the limit gives the US more time to pay its bills for pandemic stimulus and other key aid programs from the last two years. If Congress fails to raise the limit, the government can default on its debt and plunge the US into a new economic crisis.
Thursday's deal essentially kicks the can down the road, leaving Congress where it started heading into the holiday season. Democrats are still reluctant to use the time-consuming reconciliation process to lift the limit on their own. And McConnell was adamant on Wednesday that Republicans won't offer any more support.
"This will moot Democrats' excuses about the time crunch they created and give the unified Democratic government more than enough time to pass standalone debt limit legislation through reconciliation," he said in a statement.
Senate Republicans had maintained that Democrats must unilaterally raise the debt ceiling, arguing the GOP wants no part in financing the $3.5 trillion social spending plan. But Democrats argued that raising the ceiling is a bipartisan responsibility. Doing so would cover debt incurred from both the Trump and the Biden administrations, including President Donald Trump's $900 billion stimulus package from last December.
"Not only are Republicans refusing to do their job, they're using their power to prevent us from doing our job of saving the economy from a catastrophic event," Biden said during the Monday press conference. "I think, quite frankly, it's hypocritical, dangerous, and disgraceful."
Brace for December deadlines
The GOP started to blinked on Wednesday as Democrats explored several options for raising the ceiling on their own. One solution to emerge was a one-time change to the filibuster that would let Democrats raise the limit with a party-line vote. Biden floated blowing a hole in the filibuster on Tuesday, telling reporters it was "a real possibility" to avoid a federal default.
It may very well have forced McConnell's hand. "It's not an insignificant part of the calculation, I'm quite sure," Sen. Kevin Cramer of North Dakota told Insider in an interview.
The minority leader has long warned that eliminating or weakening the filibuster would plunge the Senate into chaos. Moderate Democrats Joe Manchin and Kyrsten Sinema were strongly opposed to any filibuster changes, but pressure on them to reverse course would likely intensify as the country hurtled toward the October 18 deadline.
While the deal only delays an inevitable debt-ceiling battle until the winter, it also staves off a horrific economic threat. Failure to raise the ceiling would be calamitous. Government funding would quickly freeze for Social Security beneficiaries, members of the armed services, and public workers. The country would slide into a recession and lose nearly 6 million jobs, Moody's Analytics estimated. American household wealth would plummet by $15 trillion as fears of a government default could tank stocks.
Hitting the ceiling would also be disastrous for the country's global strength. The US dollar serves as the world's reserve currency, and its power relies on trust in the government to pay its debt.
Nothing would be "more harmful" to the currency than a default, Treasury Secretary Janet Yellen warned September 27. The dollar would quickly lose its relevance, interest rates would shoot higher, and Americans' payments on everything from credit-card bills to home loans would soar, she added.
The Federal Reserve won't come to the economy's rescue if the US defaults on its debt, central bank chair Jerome Powell said Wednesday.
Congress is, once again, coming dangerously close to a debt-ceiling crisis. Lawmakers have until mid-October to either raise or suspend the borrowing limit or allow the US to default on its debt. The latter outcome would freeze spending on several critical public programs, spark massive job losses, throw financial markets into chaos, and likely plunge the US into a self-inflicted recession.
In other words, defaulting on government debt is "just not something we can or should contemplate," Powell told reporters in a press conference. Failure to raise the ceiling could spark "severe damage to the economy," and the ball is solely in lawmakers' hands, the Fed chair added.
"I think we can agree the United States shouldn't default on any of its obligations and should pay them when due," he said. "No one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure."
Debt scares aren't anything new to those on Capitol Hill. The ceiling has already been suspended or lifted 57 times in the last five decades. But the 117th Congress is on track to be the first to break the threshold.
On the other side of the aisle, Democrats are pinning the blame on Republicans' past actions. Lifting the limit only allows the government to cover its past spending. After the GOP and President Donald Trump added roughly $8 trillion in debt through tax cuts and stimulus, Republicans "are threatening not to pay the bills," Senate Majority Leader Chuck Schumer tweeted Wednesday.
Schumer and House Speaker Nancy Pelosi revealed on Monday a measure that would suspend the limit through December. Yet fervent GOP opposition, a fragile Democratic majority in the Senate, and a looming deadline stand in the way of its passage.
What's at stake if the US defaults
As lawmakers barrel toward the threshold, experts have painted a dismal picture of what a US default would look like. The White House told state and local governments on Friday that failing to lift the ceiling would swiftly freeze funding for programs including Medicaid, the Children's Health Insurance Program, and FEMA disaster relief. The resulting recession would prompt "economic catastrophe," Treasury Secretary Janet Yellen added Monday.
Outside the White House, assessments have been even bleaker. Failure to lift or suspend the ceiling would power a downturn reminiscent of the 2008 financial crisis, Moody's Analytics economists led by Mark Zandi said Tuesday. The US would shed nearly 6 million jobs, and the unemployment rate would leap to 9% from 5.2%.
The resulting market crash would also cripple everyday Americans. Stock prices would tumble more than 30% before recovering, the team said. Losses from the selloff would total $15 trillion in household wealth, according to Moody's.
Such a slump would also come as the country remains mired in a COVID-slammed economy. The Fed held its ultra-accommodative policy intact on Wednesday, leaving key supports in place as 8.4 million Americans remain unemployed. Powell hinted that a pullback could start in November, but even then, it will likely take years for Fed policy to fully return to pre-crisis norms.
Failure to raise the limit on how much the US government can borrow could spark one of the biggest stock-market crashes in history and erase trillions of dollars in household wealth, Moody's Analytics said in a Tuesday report.
Congress has mere weeks to avoid that, and progress so far has been slow.
Democrats are pushing forward with their own bill to suspend the debt limit, allowing the government to keep borrowing cash and paying off its bills. But GOP lawmakers have made it clear they won't support such legislation. And Democrats' slim majority in the Senate means any dissent within their ranks could kill the effort.
Treasury Secretary Janet Yellen has warned that the government will hit the ceiling in mid-October. If the limit isn't lifted by then, the country faces "cataclysmic" economic fallout, economists led by Mark Zandi said. The team's simulations show a default on US debt powering a downturn similar to that seen during the Great Recession. Gross domestic product would slide by nearly 4%. The country would lose almost 6 million jobs. The unemployment rate would surge to 9% from 5.2%.
And stock prices would crash by one-third during the worst of the selloff. The market nosedive would swiftly wipe out $15 trillion in household wealth.
"If lawmakers are unable to increase or suspend the debt limit ... the resulting chaos in global financial markets will be difficult to bear," the Moody's economists said, adding the US and global economies "still have a long way to go to recover" from the COVID recession.
A recession of Congress' own making
The Tuesday report sheds more light on just how dangerous a government default would be. It also joins several warnings already made by the Biden administration and other economists.
The White House told state and local governments on Friday that failure to lift the debt ceiling would force stark cuts to federal support. Programs ranging from free school lunches to Medicaid would face a funding freeze. Disaster relief from FEMA would be dramatically scaled back. And the country would likely slide into recession as governments are forced to balance their budgets and slash jobs.
David Kelly, chief global strategist at JPMorgan, used more colorful terms to describe the fallout. Congress's last-minute negotiations over the debt ceiling are similar to kids playing with a "box of dynamite," he said in a September 13 note. Each generation of lawmakers has been "just a little more reckless and irresponsible than the last," and it may be time to retire the debt limit entirely before it forces a government default, he added.
To be sure, Democrats and Republicans are both confident the government will avoid a debt-ceiling downturn. After all, this debate has happened 57 times in the last 50 years, and solutions were reached each of those times. Lawmakers are just split on how to solve the problem today.
The easiest solution requires 10 Senate Republicans to join Democrats in voting to lift or suspend the limit. Yet Senate Minority Leader Mitch McConnell has been adamant that GOP members won't support such action.
Democrats, however, have slammed Republicans for failing to undertake the historically bipartisan action. The GOP is pursuing a "dine-and-dash of historic proportions," as they racked up trillions of dollars in debt with their 2017 tax cuts and last year's stimulus spending, Senate Majority Leader Chuck Schumer tweeted Tuesday.
Democrats will need all 50 Senate members to back the House's last-ditch fix if they're to sidestep Republicans and go it alone. With members already disagreeing over other legislation, the "political brinkmanship ... is thus painful to watch," Moody's said.
If the US is a house, lawmakers are children, and the possibility of Congress defaulting on the national debt is a "box of dynamite," David Kelly, chief global strategist at JPMorgan, said in a Monday note.
For the 58th time in 50 years, Congress is faced with the task of either raising or suspending the government's debt ceiling to avoid a catastrophic recession. Democrats have just a few weeks to stop picking on each other or get their Republican friends to play nice and agree on a fix
Every generation of children, Kelly said, "seems just a little more reckless and irresponsible than the last."
The debt ceiling is a simple concept. Borrowing is a regular part of government operations to keep the country running. The limit - created at the start of World War I - refers to the amount of money the Treasury Department can borrow before risking default.
The Treasury last suspended the ceiling on July 31, which froze the limit just above the present-day amount of debt. Treasury Secretary Janet Yellen has since kept debt just below that limit using several accounting tricks. Yellen warned lawmakers last week that this temporary solution would only last through mid-October, but Congress has yet to agree on a fix.
Democrats, however, maintain Republicans are at least partially responsible for the ballooning debt pile. House Speaker Nancy Pelosi likened raising the ceiling to "paying the Trump credit card," and President Joe Biden said Thursday that the GOP's 2017 tax cut drove the deficit sharply higher.
What happens when the fuse is lit
Should Congress fail to lift the ceiling, the fallout could be drastic, as Yellen has warned.
Federal support for disaster relief, education, infrastructure, and public health would end. Lawmakers would be forced to take a sharp turn toward austerity, slashing spending on social programs and other sources of aid to cut down the budget deficit. And taxes would likely be raised to make sure the government can cover its expenses.
To take such action in a time of normal growth would dramatically slow economic activity. To do so in October would "potentially trigger a catastrophic default on US government debt," Kelly said. Though the US has rebounded from the worst of the COVID downturn, it's still far from fully recovered. More than 8 million Americans remain unemployed. Consumers' confidence in the economy sits at decade lows. And the Delta wave is more powerful than ever, with daily case counts exceeding those seen during the coronavirus's winter resurgence.
The Biden administration is keenly aware of the risks and warned state and local governments of the consequences in a recent memo. The document, obtained by Insider, details how the country could fully reverse its recovery from COVID-19 if the limit isn't lifted.
"Hitting the debt ceiling could cause a recession. Economic growth would falter, unemployment would rise, and the labor market could lose millions of jobs," the White House said.
Democrats have just weeks to either sway Republicans or rally their disparate ranks around a last-minute plan. And whether the limit is raised before or after the October deadline, lawmakers have to once again face the prospect of hitting the ceiling again.
According to Kelly, there's an "obvious solution": eliminate the debt ceiling entirely. This would help avoid last-minute haggling on the issue, which happens every time the debt pile nears the government-set ceiling. There's "no evidence" that having a borrowing limit has ever slowed the growth of government debt, says Kelly.
Plus, raising the ceiling only provides a temporary fix for a decades-old problem.
The government has long run a budget deficit, meaning it spends more than it raises in taxes. Eliminating the ceiling can let Congress spend more time crafting a sustainable budget, Kelly said. Lawmakers should focus on "the more relevant questions" of how much the US should tax, who it should tax the most, and how that cash should be spent, he added.