Biden, Fed policies are debt limit X factors

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Jan 19, 2023 View in browser   By Zachary Warmbrodt Presented by Sallie Mae® Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. The debt ceiling debate is now squarely atop Washington's policy agenda, with the U.S. government likely hitting its borrowing limit today. Look for Treasury to confirm that it's activating "extraordinary measures" to keep paying the government's bills. Just how long can Treasury buy time for Congress to strike a deal to raise the debt limit? The window may be smaller than first expected thanks to Biden administration and Fed policy moves weighing on the government's finances. Victoria Guida and I have a new piece this morning that breaks down some of the factors that could influence the timing of the debt limit "X date," the deadline for when the government will be unable to meet all its obligations. The Bipartisan Policy Center, a go-to think tank for X-date projections, is looking at the Education Department's decision to extend the freeze for federal student loan payments potentially into this summer – a policy that has halted government inflows from millions of borrowers. The group is also weighing the effects of Fed rate hikes and the extent to which they've increased the government's borrowing costs. "On both of these counts, you're talking about tens of billions of dollars," said BPC's director of economic policy, Shai Akabas. BPC last year said it was unlikely the X date would land before the third quarter. The think tank is now guessing that it could hit closer to the middle of the year. BPC plans to update its estimate when CBO releases budget projections in the coming weeks. A word of caution — The interplay of many factors will decide the ultimate deadline, including the upcoming tax season and the effects of inflation. As Treasury Secretary Janet Yellen warned lawmakers last week, the time the U.S. has left to avoid a default is subject to "considerable uncertainty." "There's no reason why anyone should be complacent about how much time they have," former CBO Director Douglas Holtz-Eakin, now president of the American Action Forum, told MM. The shadow of the debt ceiling fight is beginning to loom over government programs like federal food assistance, which Democrats are warning may be at risk as Republicans seek budget cuts. POLITICO's Meredith Lee Hill reports that Rep. Jim McGovern, a top Democrat on the House Agriculture and Rules Committees, is already trying to rally support to protect programs including SNAP, formerly known as food stamps. We're in the home stretch — Happy Friday Eve. Please send tips to zwarmbrodt@politico.com. Driving the Day The Treasury is expected to start using extraordinary measures to avoid a debt limit breach … Federal Reserve Vice Chair Lael Brainard discusses the economic outlook at the University of Chicago at 1:15 p.m. … New York Fed President John Williams will speak at a Fixed Income Analysts Society event in New York at 6:30 p.m. … Yellen plans China trip— Treasury Secretary Janet Yellen will travel to China soon, a step that the WSJ says is aimed at rebuilding the U.S.-China relationship. Get well soon, Jay — Fed Chair Jerome Powell on Wednesday tested positive for Covid-19 and was experiencing mild symptoms. White House eyes renter safeguards— Our Katy O'Donnell reports that the White House is preparing to roll out new tenant protections after post-pandemic price spikes. The housing industry is trying to head off the measures. The view from Davos: A world without Russia— POLITICO's Erin Banco reports from Switzerland that Western sanctions have shut out Russia's main power brokers from the elite confab in the Alps. Russia's absence has officials and executives questioning how long the business community can ignore Moscow and find new markets. — More on that theme, from WSJ's Greg Ip: "Geopolitical rivalry, technology decoupling and protectionism have increasingly altered the world's business and political landscape, adding new risks and threats and, for some, opportunity, say executives and officials meeting this week at the World Economic Forum." Businesses in Fed survey expect little growth in months ahead— The Fed's latest Beige Book survey of businesses nationwide found economic activity was tepid, according to Reuters. Fed's Harker ready to downshift — Reuters: "Philadelphia Federal Reserve President Patrick Harker reiterated on Wednesday that he's ready for the U.S. central bank to move to a slower pace of interest rate rises amid some signs that hot inflation is cooling off." Bullard wants to stay in gear— WSJ: "The Federal Reserve should keep on rapidly raising interest rates until they get above 5% in order to prevent a return of inflationary pressures, Federal Reserve Bank of St. Louis President James Bullard said Wednesday." A message from Sallie Mae®: The vast majority of college-bound students believe a degree will lead to better opportunities but only about four in 10 feel confident about financing their higher education. Free tools and resources offered by Sallie Mae can help families responsibly and confidently navigate planning and paying for college. Learn more about how Sallie Mae is setting students up for success.   Crypto CFTC commissioner has a crypto warning for Congress — Our Declan Harty reports that CFTC Commissioner Christy Goldsmith Romero is urging lawmakers against porting to the crypto world a futures market procedure in which exchanges can "self-certify" new contracts without express approval from regulators. Russian crypto exchange owner arrested in U.S. money laundering case— U.S. authorities in Miami arrested the Russian founder of the Hong Kong-based cryptocurrency exchange Bitzlato, alleging that the company was a hub for illicit finance. Thiel fund exits bitcoin bet— The FT reports that the venture capital firm co-founded by billionaire GOP backer Peter Thiel closed most of its eight-year bet on cryptocurrencies just before the market crashed, generating about $1.8 billion in returns. Genesis prepares for bankruptcy— Crypto lender Genesis is laying the groundwork for a bankruptcy filing as soon as this week after experiencing a liquidity crunch, according to Bloomberg.   A message from Sallie Mae®:   Regulatory Corner $100 million deli case gets crazier with arrest in Thailand — Authorities arrested a man in Thailand linked to market manipulation involving a New Jersey deli that saw its valuation hit $100 million, the FT reports.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Fly Around Surveillance program has eyes on U.S. money transfers abroad— WSJ: "Hundreds of federal, state and local U.S. law-enforcement agencies have access without court oversight to a database of more than 150 million money transfers between people in the U.S. and in more than 20 countries, according to internal program documents and an investigation by Sen. Ron Wyden." Microsoft to lay off 10,000 employees — NYT: "Microsoft employed about 221,000 workers as of the end of June, and the cuts amount to less than 5 percent of its global work force." People moves — Rex Wackerle is stepping down as the head of Prudential's Washington office after more than two decades. David Burns will be the new head of federal affairs at the insurer. Shoshana Kaplan has been promoted to be special adviser to the general counsel for the Commerce Department. Maryam Janani-Flores is now chief of staff at Commerce's Economic Development Administration. (h/t Daniel Lippman and POLITICO Influence) A message from Sallie Mae®: As a responsible private lender and education solutions provider, Sallie Mae is working to make higher education accessible and affordable for students from all backgrounds. We provide free resources – from scholarship search tools to guides for completing the FAFSA – to help students take advantage of "free money" before taking out a loan. If a student does take out a loan with us, we help to set them up for successful repayment. Roughly 9 in 10 of Sallie Mae private student loans in repayment are being paid on time. We are here to make sense of the complex and confusing college financing process and ensure that students and families feel confident and informed on how to plan and pay for higher education. Learn more.     DOWNLOAD THE POLITICO MOBILE APP: Stay up to speed with the newly updated POLITICO mobile app, featuring timely political news, insights and analysis from the best journalists in the business. The sleek and navigable design offers a convenient way to access POLITICO's scoops and groundbreaking reporting. Don't miss out on the app you can rely on for the news you need, reimagined. DOWNLOAD FOR iOS– DOWNLOAD FOR ANDROID.       Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

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