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  • White House launches last ditch effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’ | CNN Politics

    White House launches last ditch effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’ | CNN Politics

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    Washington
    CNN
     — 

    The Biden administration has launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.

    The push comes ahead of Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that is widely expected to announce a significant cut to output in an effort to raise oil prices. That in turn would cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.

    For the past several days, President Joe Biden’s senior-most energy, economic and foreign policy officials have been enlisted to lobby their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the UAE to vote against cutting oil production.

    Members of the Saudi-led oil cartel and its allies including Russia, known as OPEC+, are expected to announce production cuts potentially up to more than one million barrels per day. That would be the largest cut since the beginning of the pandemic and could lead to a dramatic spike in oil prices.

    Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”

    “It’s important everyone is aware of just how high the stakes are,” said a US official of what was framed as a broad administration effort that is expected to continue in the lead up to the Wednesday OPEC+ meeting.

    The White House is “having a spasm and panicking,” another US official said, describing this latest administration effort as “taking the gloves off.” According to a White House official, the talking points were being drafted and exchanged by staffers and not approved by White House leadership or used with foreign partners.

    In a statement to CNN, National Security Council spokesperson Adrienne Watson said, “We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that.”

    For Biden, a dramatic cut in oil production could not come at a worse time. The administration has for months engaged in an intensive domestic and foreign policy effort to mitigate soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to pay off, with US gasoline prices falling for almost 100 days in a row.

    But with just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid. As US officials have moved to gauge potential domestic options to head off gradual increases over the last several weeks, the news of major OPEC+ action presents a particularly acute challenge.

    Watson, the NSC spokesperson declined to comment on the midterms, saying instead, “Thanks to the President’s efforts, energy prices have declined sharply from their highs and American consumers are paying far less at the pump.”

    Amos Hochstein, Biden’s top energy envoy, has played a leading role in the lobbying effort, which has been far more extensive than previously reported amid extreme concern in the White House over the potential cut. Hochstein, along with top national security official Brett McGurk and the administration’s special envoy to Yemen Tim Lenderking, traveled to Jeddah late last month to discuss a range of energy and security issues as a follow up to Biden’s high-profile visit to Saudi Arabia in July.

    Officials across the administration’s economic and foreign policy teams have also been involved with reaching out to OPEC governments as part of the latest effort to stave off a production cut.

    The White House has asked Treasury Secretary Janet Yellen to make the case personally to some Gulf state finance ministers, including from Kuwait and the UAE, and try to convince them that a production cut would be extremely damaging to the global economy. The US has argued that in the long-run a cut in oil production would create more downward pressure on prices – the opposite of what a significant cut would be designed to accomplish. Their logic is that “cutting right now would increase risks of inflation,” lead to higher interest rates and ultimately a greater risk of recession.

    “There is great political risk to your reputation and relations with the United States and the west if you move forward,” the White House draft talking points suggested Yellen communicate to her foreign counterparts.

    A senior US official acknowledged that the administration has been lobbying the Saudi-led coalition for weeks to try to convince them not to cut oil production.

    It comes less than three months after President Joe Biden traveled to Saudi Arabia and met with Crown Prince Mohammed bin Salman on a trip that was driven in part by a desire to convince Saudi Arabia, the de facto leader of OPEC, to increase oil production which would help bring down the then-skyrocketing gas prices.

    President Joe Biden (L) and Saudi Crown Prince Mohammed bin Salman (R) arrive for the family photo during the Jeddah Security and Development Summit (GCC+3) at a hotel in Saudi Arabia's Red Sea coastal city of Jeddah on July 16, 2022.

    When OPEC+ agreed a few weeks later to a modest 100,000 barrel increase in production, critics argued Biden had gotten little out of the trip.

    The trip was billed as a meeting with regional leaders about issues critical to US national security, including Iran, Israel and Yemen. It was criticized for its lack of results and for rehabbing the image of the crown prince who had been directly blamed by Biden for orchestrating the killing of Washington Post columnist Jamal Khashoggi.

    In the months leading up to the meeting, Biden’s top aides for the Middle East and energy, McGurk and Hochstein, shuttled between Washington and Saudi Arabia planning and coordinating the visit.

    One diplomatic official in the region described the US campaign to block production cuts as less of a hard sell, and more of an effort to underscore a critical international moment given the economic fragility and ongoing war in Ukraine. Though another source familiar with the discussions told CNN it was described by a diplomat from one of the countries approached as “desperate.”

    A source familiar with the outreach says a call was planned with the UAE but the effort was rebuffed by Kuwait. Kuwait’s embassy in Washington did not immediately respond to a request for comment. Neither did Saudi Arabia’s. The UAE embassy declined to comment.

    Publicly, the White House has cautiously avoided weighing in on the possibility of a dramatic oil production cut.

    “We are not members of OPEC+, and so I don’t want to get ahead of what could potentially come out of that meeting,” White House press secretary Karine Jean-Pierre told reporters Monday. The US focus, Jean-Pierre said, remains “taking every step to ensure markets are sufficiently supplied to meet demand for a growing global economy.”

    OPEC+ members are weighing a more dramatic cut due to what has been a precipitous decline in prices, which have dropped sharply to below $90 per barrel in recent months.

    Hanging over Wednesday’s OPEC+ meeting in Vienna will also be the looming oil price cap that European nations intend to impose on Russian oil exports as punishment for Russia’s invasion of Ukraine. Many OPEC+ members, not only Russia, have expressed unhappiness with the prospect of a price cap because of the precedent it could set for consumers, rather than the market, to dictate the price of oil.

    Included in the White House talking points to Treasury was a US proposal that if OPEC+ decides against a cut this week the US will announce a buyback of up to 200 million barrels to refill its Strategic Petroleum Reserve (SPR), an emergency stockpile of petroleum that the US has been tapping into this year to help lower oil prices.

    The administration has made it clear to OPEC+ for months, the senior US official said, that the US is willing to buy OPEC’s oil to replenish the SPR. The idea has been to convey to OPEC+ that the US “won’t leave them hanging dry” if they invest money in production, the official said, and therefore, that prices won’t collapse if global demand decreases.

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  • The 10 Senate seats most likely to flip in 2022 | CNN Politics

    The 10 Senate seats most likely to flip in 2022 | CNN Politics

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    CNN
     — 

    The race for the Senate is in the eye of the beholder less than six weeks from Election Day, with ads about abortion, crime and inflation dominating the airwaves in key states as campaigns test the theory of the 2022 election.

    The cycle started out as a referendum on President Joe Biden – an easy target for Republicans, who need a net gain of just one seat to flip the evenly divided chamber. Then the US Supreme Court’s late June decision overturning Roe v. Wade gave Democrats the opportunity to paint a contrast as Republicans struggled to explain their support for an abortion ruling that the majority of the country opposes. Former President Donald Trump’s omnipresence in the headlines gave Democrats another foil.

    But the optimism some Democrats felt toward the end of the summer, on the heels of Biden’s legislative wins and the galvanizing high court decision, has been tempered slightly by the much anticipated tightening of some key races as political advertising ramps up on TV and voters tune in after Labor Day.

    Republicans, who have midterm history on their side as the party out of the White House, have hammered Biden and Democrats for supporting policies they argue exacerbate inflation. Biden’s approval rating stands at 41% with 54% disapproving in the latest CNN Poll of Polls, which tracks the average of recent surveys. And with some prices inching back up after a brief hiatus, the economy and inflation – which Americans across the country identify as their top concern in multiple polls – are likely to play a crucial role in deciding voters’ preferences.

    But there’s been a steady increase in ads about crime too as the GOP returns to a familiar criticism, depicting Democrats as weak on public safety. Cops have been ubiquitous in TV ads this cycle – candidates from both sides of the aisle have found law enforcement officers to testify on camera to their pro-police credentials. Democratic ads also feature women talking about the threat of a national abortion ban should the Senate fall into GOP hands, while Republicans have spent comparatively less trying to portray Democrats as the extremists on the topic.

    While the issue sets have fluctuated, the Senate map hasn’t changed. Republicans’ top pickup opportunities have always been Nevada, Georgia, Arizona and New Hampshire – all states that Biden carried in 2020. In two of those states, however, the GOP has significant problems, although the states themselves keep the races competitive. Arizona nominee Blake Masters is now without the support of the party’s major super PAC, which thinks its money can be better spent elsewhere, including in New Hampshire, where retired Army Brig. Gen. Don Bolduc is far from the nominee the national GOP had wanted. But this is the time of year when poor fundraising can really become evident since TV ad rates favor candidates and a super PAC gets much less bang for its buck.

    The race for Senate control may come down to three states: Georgia, Nevada and Pennsylvania, all of which are rated as “Toss-up” races by Inside Elections with Nathan L. Gonzales. As Republicans look to flip the Senate, which Minority Leader Mitch McConnell has called a “50-50 proposition,” they’re trying to pick up the first two and hold on to the latter.

    Senate Democrats’ path to holding their majority lies with defending their incumbents. Picking off a GOP-held seat like Pennsylvania – still the most likely to flip in CNN’s ranking – would help mitigate any losses. Wisconsin, where GOP Sen. Ron Johnson is vying for a third term, looks like Democrats’ next best pickup opportunity, but that race drops in the rankings this month as Republican attacks take a toll on the Democratic nominee in the polls.

    These rankings are based on CNN’s reporting, fundraising and advertising data, and polling, as well as historical data about how states and candidates have performed. It will be updated one more time before Election Day.

    Incumbent: Republican Pat Toomey (retiring)

    Sarah Silbiger/Pool/Getty Images

    The most consistent thing about CNN’s rankings, dating back to 2021, has been Pennsylvania’s spot in first place. But the race to replace retiring GOP Sen. Pat Toomey has tightened since the primaries in May, when Republican Mehmet Oz emerged badly bruised from a nasty intraparty contest. In a CNN Poll of Polls average of recent surveys in the state, Democrat John Fetterman, the state lieutenant governor, had the support of 50% of likely voters to Oz’s 45%. (The Poll of Polls is an average of the four most recent nonpartisan surveys of likely voters that meet CNN’s standards.) Fetterman is still overperforming Biden, who narrowly carried Pennsylvania in 2020. Fetterman’s favorability ratings are also consistently higher than Oz’s.

    One potential trouble spot for the Democrat: More voters in a late September Franklin and Marshall College Poll viewed Oz has having policies that would improve voters’ economic circumstances, with the economy and inflation remaining the top concern for voters across a range of surveys. But nearly five months after the primary, the celebrity surgeon still seems to have residual issues with his base. A higher percentage of Democrats were backing Fetterman than Republicans were backing Oz in a recent Fox News survey, for example, with much of that attributable to lower support from GOP women than men. Fetterman supporters were also much more enthusiastic about their candidate than Oz supporters.

    Republicans have been hammering Fetterman on crime, specifically his tenure on the state Board of Pardons: An ad from the Senate Leadership Fund features a Bucks County sheriff saying, “Protect your family. Don’t vote Fetterman.” But the lieutenant governor is also using sheriffs on camera to defend his record. And with suburban voters being a crucial demographic, Democratic advertising is also leaning into abortion, like this Senate Majority PAC ad that features a female doctor as narrator and plays Oz’s comments from during the primary about abortion being “murder.” Oz’s campaign has said that he supports exceptions for “the life of the mother, rape and incest” and that “he’d want to make sure that the federal government is not involved in interfering with the state’s decisions on the topic.”

    Incumbent: Democrat Catherine Cortez Masto

    02 democrat immigration legislation 0717

    CNN

    Republicans have four main pickup opportunities – and right now, Democratic Sen. Catherine Cortez Masto’s seat looks like one of their best shots. Biden carried Nevada by a slightly larger margin than two of those other GOP-targeted states, but the Silver State’s large transient population adds a degree of uncertainty to this contest.

    Republicans have tried to tie the first-term senator to Washington spending and inflation, which may be particularly resonant in a place where average gas prices are now back up to over $5 a gallon. Democrats are zeroing in on abortion rights and raising the threat that a GOP-controlled Senate could pass a national abortion ban. Former state Attorney General Adam Laxalt – the rare GOP nominee to have united McConnell and Trump early on – called the 1973 Roe v. Wade ruling a “joke” before the Supreme Court overturned the decision in June. Democrats have been all too happy to use that comment against him, but Laxalt has tried to get around those attacks by saying he does not support a national ban and pointing out that the right to an abortion is settled law in Nevada.

    Incumbent: Democrat Raphael Warnock

    Sen Raphael Warnock 10 senate seats

    Megan Varner/Getty Images

    The closer we get to Election Day, the more we need to talk about the Georgia Senate race going over the wire. If neither candidate receives a majority of the vote in November, the contest will go to a December runoff. There was no clear leader in a recent Marist poll that had Democratic Sen. Raphael Warnock, who’s running for a full six-year term, and Republican challenger Herschel Walker both under 50% among those who say they definitely plan to vote.

    Warnock’s edge from earlier this cycle has narrowed, which bumps this seat up one spot on the rankings. The good news for Warnock is that he’s still overperforming Biden’s approval numbers in a state that the President flipped in 2020 by less than 12,000 votes. And so far, he seems to be keeping the Senate race closer than the gubernatorial contest, for which several polls have shown GOP Gov. Brian Kemp ahead. Warnock’s trying to project a bipartisan image that he thinks will help him hold on in what had until recently been a reliably red state. Standing waist-deep in peanuts in one recent ad, he touts his work with Alabama GOP Sen. Tommy Tuberville to “eliminate the regulations,” never mentioning his own party. But Republicans have continued to try to tie the senator to his party – specifically for voting for measures in Washington that they claim have exacerbated inflation.

    Democrats are hoping that enough Georgians won’t see voting for Walker as an option – even if they do back Kemp. Democrats have amped up their attacks on domestic violence allegations against the former football star and unflattering headlines about his business record. And all eyes will be on the mid-October debate to see how Walker, who has a history of making controversial and illogical comments, handles himself onstage against the more polished incumbent.

    Incumbent: Republican Ron Johnson

    Sen Ron Johnson 10 senate seats

    Leigh VogelPool/Getty Images

    Sen. Ron Johnson is the only Republican running for reelection in a state Biden won in 2020 – in fact, he broke his own term limits pledge to run a third time, saying he believed America was “in peril.” And although Johnson has had low approval numbers for much of the cycle, Democrats have underestimated him before. This contest moves down one spot on the ranking as Johnson’s race against Democratic Lt. Gov. Mandela Barnes has tightened, putting the senator in a better position.

    Barnes skated through the August primary after his biggest opponents dropped out of the race, but as the nominee, he’s faced an onslaught of attacks, especially on crime, using against him his past words about ending cash bail and redirecting some funding from police budgets to social services. Barnes has attempted to answer those attacks in his ads, like this one featuring a retired police sergeant who says he knows “Mandela doesn’t want to defund the police.”

    A Marquette University Law School poll from early September showed no clear leader, with Johnson at 49% and Barnes at 48% among likely voters, which is a tightening from the 7-point edge Barnes enjoyed in the same poll’s August survey. Notably, independents were breaking slightly for Johnson after significantly favoring Barnes in the August survey. The effect of the GOP’s anti-Barnes advertising can likely be seen in the increasing percentage of registered voters in a late September Fox News survey who view the Democrat as “too extreme,” putting him on parity with Johnson on that question. Johnson supporters are also much more enthusiastic about their candidate.

    Incumbent: Democrat Mark Kelly

    Mark Kelly AZ 1103

    Courtney Pedroza/Getty Images

    Democratic Sen. Mark Kelly, who’s running for a full six-year term after winning a 2020 special election, is still one of the most vulnerable Senate incumbents in a state that has only recently grown competitive on the federal level. But Republican nominee Blake Masters is nowhere close to rivaling Kelly in fundraising, and major GOP outside firepower is now gone. After canceling its September TV reservations in Arizona to redirect money to Ohio, the Senate Leadership Fund has cut its October spending too.

    Other conservative groups are spending for Masters but still have work to do to hurt Kelly, a well-funded incumbent with a strong personal brand. Kelly led Masters 51% to 41% among registered voters in a September Marist poll, although that gap narrowed among those who said they definitely plan to vote. A Fox survey from a little later in the month similarly showed Kelly with a 5-point edge among those certain to vote, just within the margin of error.

    Masters has attempted to moderate his abortion position since winning his August primary, buoyed by a Trump endorsement, but Kelly has continued to attack him on the issue. And a recent court decision allowing the enforcement of a 1901 state ban on nearly all abortions has given Democrats extra fodder to paint Republicans as a threat to women’s reproductive rights.

    Incumbent: Republican Richard Burr (retiring)

    Sen Richard Burr 10 senate seats

    Demetrius Freeman/Pool/Getty Images

    North Carolina slides up one spot on the rankings, trading places with New Hampshire. The open-seat race to replace retiring GOP Sen. Richard Burr hasn’t generated as much national buzz as other states given that Democrats haven’t won a Senate seat in the state since 2008.

    But it has remained a tight contest with Democrat Cheri Beasley, who is bidding to become the state’s first Black senator, facing off against GOP Rep. Ted Budd, for whom Trump recently campaigned. Beasley lost reelection as state Supreme Court chief justice by only about 400 votes in 2020 when Trump narrowly carried the Tar Heel state. But Democrats hope that she’ll be able to boost turnout among rural Black voters who might not otherwise vote during a midterm election and that more moderate Republicans and independents will see Budd as too extreme. One of Beasley’s recent spots features a series of mostly White, gray-haired retired judges in suits endorsing her as “someone different” while attacking Budd as being a typical politician out for himself.

    Budd is leaning into current inflation woes, specifically going after Biden in some ads that feature half-empty shopping carts, without even mentioning Beasley. Senate Leadership Fund is doing the work of trying to tie the Democrat to Washington – one recent spot almost makes her look like the incumbent in the race, superimposing her photo over an image of the US Capitol and displaying her face next to Biden’s. Both SLF and Budd are also targeting Beasley over her support for Democrats’ recently enacted health care, tax and climate bill. “Liberal politician Cheri Beasley is coming for you – and your wallet,” the narrator from one SLF ad intones, before later adding, “Beasley’s gonna knock on your door with an army of new IRS agents.” (The new law increases funding for the IRS, including for audits. But Democrats and the Trump-appointed IRS commissioner have said the intention is to go after wealthy tax cheats, not the middle class.)

    Incumbent: Democrat Maggie Hassan

    Sen Maggie Hassan 10 senate seats

    Erin Scott/Getty Images

    A lot has been made of GOP candidate quality this cycle. But there are few states where the difference between the nominee Republicans have and the one they’d hoped to have has altered these rankings quite as much as New Hampshire.

    Retired Army Brig. Gen. Don Bolduc, who lost a 2020 GOP bid for the state’s other Senate seat, won last month’s Republican primary to take on first-term Democratic Sen. Maggie Hassan. The problem for him, though, is that he doesn’t have much money to wage that fight. Bolduc had raised a total of $579,000 through August 24 compared with Hassan’s $31.4 million. Senate Leadership Fund is on air in New Hampshire to boost the GOP nominee – attacking Hassan for voting with Biden and her support of her party’s health care, tax and climate package. But because super PACs get much less favorable TV advertising rates than candidates, those millions won’t go anywhere near as far as Hassan’s dollars will.

    A year ago, Republicans were still optimistic that Gov. Chris Sununu would run for Senate, giving them a popular abortion rights-supporting nominee in a state that’s trended blue in recent federal elections. Bolduc told WMUR after his primary win that he’d vote against a national abortion ban. But ads from Hassan and Senate Majority PAC have seized on his suggestion in the same interview that the senator should “get over” the abortion issue. Republicans recognize that abortion is a salient factor in a state Biden carried by 7 points, but they also argue that the election – as Bolduc said to WMUR – will be about the economy and that Hassan is an unpopular and out-of-touch incumbent.

    Hassan led Bolduc 49% to 41% among likely voters in a Granite State Poll conducted by the University of New Hampshire Survey Center. The incumbent has consolidated Democratic support, but only 83% of Republicans said they were with Bolduc, the survey found. Still, some of those Republicans, like those who said they were undecided, could come home to the GOP nominee as the general election gets closer, which means Bolduc has room to grow. He’ll need more than just Republicans to break his way, however, which is one reason he quickly pivoted on the key issue of whether the 2020 election was stolen days after he won the primary.

    Incumbent: Republican Rob Portman (retiring)

    Sen Rob Portman 10 senate seats

    TING SHEN/AFP/POOL/Getty Images

    Ohio – a state that twice voted for Trump by 8 points – isn’t supposed to be on this list at No. 8, above Florida, which backed the former President by much narrower margins. But it’s at No. 8 for the second month in a row. Republican nominee J.D. Vance’s poor fundraising has forced Senate Leadership Fund to redirect millions from other races to Ohio to shore him up and attack Rep. Tim Ryan, the Democratic nominee who had the airwaves to himself all summer. The 10-term congressman has been working to distance himself from his party in most of his ads, frequently mentioning that he “voted with Trump on trade” and criticizing the “defund the police” movement. Vance is finally on the air, trying to poke some holes in Ryan’s image.

    But polling still shows a tight race with no clear leader. Ryan had an edge with independents in a recent Siena College/Spectrum News poll, which also showed that Vance – Trump’s pick for the nomination – has more work to do to consolidate GOP support after an ugly May primary. Assuming he makes up that support and late undecided voters break his way, Vance will likely hold the advantage in the end given the Buckeye State’s solidifying red lean.

    Incumbent: Republican Marco Rubio

    Sen Marco Rubio 10 senate seats

    DREW ANGERER/AFP/POOL/Getty Images

    Democrats face an uphill battle against GOP Sen. Marco Rubio in an increasingly red-trending state, which Trump carried by about 3 points in 2020 – nearly tripling his margin from four years earlier.

    Democratic Rep. Val Demings, who easily won the party’s nomination in August, is a strong candidate who has even outraised the GOP incumbent, but not by enough to seriously jeopardize his advantage. She’s leaning into her background as the former Orlando police chief – it features prominently in her advertising, in which she repeatedly rejects the idea of defunding the police. Still, Rubio has tried to tie her to the “radical left” in Washington to undercut her own law enforcement background.

    Incumbent: Democrat Michael Bennet

    Sen Michael Bennett 10 senate seats

    DEMETRIUS FREEMAN/AFP/POOL/Getty Images

    Democratic Sen. Michael Bennet is no stranger to tough races. In 2016, he only won reelection by 6 points against an underfunded GOP challenger whom the national party had abandoned. Given GOP fundraising challenges in some of their top races, the party hasn’t had the resources to seriously invest in the Centennial State this year.

    But in his bid for a third full term, Bennet is up against a stronger challenger in businessman Joe O’Dea, who told CNN he disagreed with the Supreme Court’s decision to overturn Roe v. Wade. His wife and daughter star in his ads as he tries to cut a more moderate profile and vows not to vote the party line in Washington.

    Bennet, however, is attacking O’Dea for voting for a failed 2020 state ballot measure to ban abortion after 22 weeks of pregnancy and arguing that whatever O’Dea says about supporting abortion rights, he’d give McConnell “the majority he needs” to pass a national abortion ban.

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  • Wages are the most important number to watch in the jobs report | CNN Business

    Wages are the most important number to watch in the jobs report | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN Business
     — 

    Investors, economists and members of the Federal Reserve will be poring over the September jobs report on Friday morning for clues about the health of the economy. But one figure may matter more than most…and it’s not the number of jobs added or the unemployment rate. It’s wage growth.

    Inflation is not just a function of the price of oil and other commodities and production costs like manufacturing and shipping. How much workers take home in their paychecks is also a big part of the inflation picture.

    When people have more money in their wallets (virtual or good old-fashioned leather ones), they tend to be more willing to spend it. That gives companies additional flexibility to raise prices.

    Average hourly wages rose 5.2% over the past 12 months according to the August jobs report. That’s down from a 2022 peak growth rate of 5.6% in March.

    So how aggressively will the Fed need to raise rates going forward? A lot will depend on whether wage growth continues to slow.

    Companies can’t raise prices as much if workers are making less or they risk big destruction in demand.

    The problem is that wage growth above 5% is still historically high. Before the pandemic, wages typically rose just 3% year-over-year. But labor shortages, due to Covid-19 and people dropping out of the workforce, shifted power from employers to employees when it came to worker pay.

    That’s another reason why companies have continued to raise prices: To offset rising costs.

    The government reported Friday that its preferred inflation metric, personal consumption expenditures (PCE), rose 6.2% from a year ago in August. That was lower than July’s reading.

    But the so-called core PCE figure, which excludes food and energy prices, rose 4.9% through August, up from a 4.7% increase in July.

    What’s more, the Fed typically is looking for just a 2% growth rate in the headline PCE number as a sign of price stability. That’s not going to happen anytime soon. In fact, the Fed’s latest forecasts suggest that the central bank thinks PCE will rise 5.4% this year, up from projections of 5.2% in June.

    “I don’t see anything in the near-term to give the Fed tons of comfort that inflation is on the trajectory to 2%,” said David Petrosinelli, senior trader with InspireX. “Wages will remain elevated and that will keep the Fed in a pickle.”

    But there’s another concern. Wages, while still rising, are not actually keeping pace with the increase in consumer prices. You don’t need to be a math genius to realize that 5.2% is less than 6.2%.

    “Wages are a real pain point. People are paying more but not making more,” said Marta Norton, chief investment officer of the Americas with Morningstar Investment Management. With that in mind, Norton said there is a “higher probability of stagflation.”

    Stagflation is the nasty economic combination of stagnant growth and persistent inflation.

    Retail sales have held up relatively well despite inflation pressures, but Norton warns that can’t last forever. American shoppers would eventually reach their breaking point and just start buying essentials. A slowdown in consumption will inevitably lead to lower prices…but also slower economic growth.

    “Inflation is its own cure. Consumers have the power to spend or not spend,” she said.

    The third quarter is mercifully over. It’s been another doozy for the market. September in particular was bleak. It was the worst month for the Dow since the start of the pandemic in March 2020.

    But even though we’re seemingly in a bear market for everything as bonds, gold and bitcoin have all tumbled this year as well, there are some hopeful signs for the next few months.

    The fourth quarter is typically a festive time on Wall Street. Investors tend to buy stocks in anticipation of robust consumer shopping during the holidays. Businesses typically spend more as well to flush out those yearly budgets. And major companies also often give rosy guidance in October about earnings expectations for the coming year.

    “October has been a turnaround month—a ‘bear killer’ if you will,” said Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac, in a recent blog post.

    Hirsch added that a dozen bear markets since World War II have ended in the month of October. And of those twelve, seven market bottoms happened during midterm election years.

    Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. That could lead to more gridlock in DC, which investors tend to like.

    Whether or not Corporate America and investors are going to be so bullish this October is up for debate given the concerns about inflation, interest rates and the global economy. After all, October is also famous for huge crashes, most recently in 2008 but also in 1987 and, of course, 1929.

    So stocks definitely could take another turn for the worse. But experts are hopeful that the end of the bear market is in sight.

    “We’re nearer to a bottom,” said Christopher Wolfe, chief investment officer of First Republic Private Wealth Management. “A lot of quality companies are on sale. It’s a time to be patient and reposition.”

    Monday: US ISM manufacturing; China stock markets closed all week

    Tuesday: US job openings and labor turnover (JOLTS); Japan inflation; Australia interest rate decision

    Wednesday: US ADP private sector jobs; US ISM services; OPEC+ meeting

    Thursday: US weekly jobless claims; earnings from ConAgra

    (CAG)    , Constellation Brands

    (STZ)    , McCormick

    (MKC)     and Levi Strauss

    (LEVI)

    Friday: US jobs report; Germany industrial production; earnings from Tilray

    (TLRY)

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  • UK PM Liz Truss admits mistakes on controversial tax cuts plan, but doubles down on it anyway | CNN

    UK PM Liz Truss admits mistakes on controversial tax cuts plan, but doubles down on it anyway | CNN

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    London
    CNN
     — 

    British Prime Minister Liz Truss admitted mistakes had been made with her government’s controversial “mini-budget” announced last week – which sent the pound to historic lows and sparked market chaos – but stood by her policies.

    Speaking to the BBC’s Laura Kuenssberg on Sunday morning Truss said: “I do accept we should have laid the ground better and I’ve learned from that, and I’ll make sure I’ll do a better job of laying the ground in the future.”

    She said that she wanted “to tell people I understand their worries about what happened this week and I stand by the package we announced and I stand by the fact we announced it quickly.”

    Last week, Truss’ government announced that they would cut taxes by £45 billion ($48 billion) in a bid to get the UK economy moving again, with a package that includes scrapping the highest rate of income tax for top earners from 45% to 40% and a big increase in government borrowing to slash energy prices for millions of households and businesses this winter.

    Many leading economists described the unorthodox measures as a reckless gamble, noting that the measures came a day after the Bank of England warned that the country was already likely in a recession.

    Truss said the reforms were not agreed by her cabinet, but were a decision made by Chancellor Kwasi Kwarteng. “It was a decision the chancellor made,” she told the BBC.

    She doubled down on that decision however, saying that her government made the “right decision to borrow more this winter to face the extraordinary consequences we face,” referring to the energy crisis caused by the war in Ukraine. She claimed that the alternative would be for people to pay up to £6,000 in energy bills, and that inflation would be 5% higher.

    “We’re not living in a perfect world, we are living in a very difficult world, where governments around the world are taking tough decisions,” Truss said.

    Regarding the rising cost of living in the UK, namely the rise of mortgage rates, Truss said that is mostly driven by interest rates and is “a matter for the independent Bank of England.”

    The Bank of England said Wednesday it would buy UK government debt “on whatever scale is necessary” in an emergency intervention to halt a bond market crash that it warned could threaten financial stability.

    Meanwhile, Credit Suisse said that UK house prices could “easily” fall between 10% and 15% over the next 18 months if the Bank of England aggressively hikes interest rates to keep inflation in check.

    The fallout could make it harder for people to get approved for mortgages, and encourage prospective buyers to delay their purchases. A drop in demand would lead to falling prices.

    Truss defended her government’s policies to the BBC as the Conservative party’s annual conference kicked off in in Birmingham.

    The party is bitterly divided, with its poll ratings sinking lower than they were even under the disgraced leadership of Boris Johnson.

    On Sunday, that chill was evident, as Nadine Dorries, the former culture secretary who backed Truss to be prime minister, accused Truss of throwing Chancellor Kwasi Kwarteng “under a bus” in her BBC interview, when she said the tax cut decision were made by him and not the Cabinet.

    “One of @BorisJohnson faults was that he could sometimes be too loyal and he got that. However, there is a balance and throwing your Chancellor under a bus on the first day of conference really isn’t it. [Hope] things improve and settle down from now,” Dorries said on Twitter.

    Conservative members of parliament fear the combination of tax cuts along with huge public spending to help people cope with energy bills, rising inflation, rising interest rates and a falling pound are going to make winning the next general election impossible.

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  • How Spam became cool again | CNN Business

    How Spam became cool again | CNN Business

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    New York
    CNN Business
     — 

    Spam is cool.

    The 85-year-old canned block of meat has undergone a cultural reinvention.

    Hormel

    (HRL)     has sold a record amount of Spam for seven straight years, and 2022 is on pace for another such milestone. The conglomerate behind Skippy and Jennie-O turkey says it can’t make Spam fast enough and is increasing production capacity.

    Spam is a trending ingredient on TikTok and on the menu at fine-dining restaurants in coastal cities. In 2019, a limited-edition Spam pumpkin spice flavor sold out in minutes. (You can still buy it on Ebay, where it goes for up to $100 per can.)

    What is behind this phenomenon? Why does this slab of cooked pork that has long been stigmatized as fake meat, linked to wartime rations and hilariously spoofed on Monty Python now have cachet with foodies?

    Spam’s popularity in Hawaiian, Asian and Pacific Island cuisine has influenced its growth in the United States. As more immigrants came to the United States and fusion dishes and ethnic cuisines entered the cultural mainstream, Spam has reached new, younger foodies, say Hormel, food analysts and researchers.

    Edgy and clever advertising campaigns also have helped Spam attract a broader customer range than the Baby Boomers who grew up eating it, sometimes reluctantly.

    “Spam has undergone a reputation makeover,” said Robert Ku, an associate professor of Asian and Asian American studies at Binghamton University and the author of “Dubious Gastronomy: Eating Asian in the USA.” “A lot of celebrity chefs have been Asian and Asian American, and reintroduced Spam to a new audience.”

    More than 100,000 visitors stream into the Spam museum every year in Austin, Minnesota, with stories to tell about Spam and recipes to share, said Savile Lord, the manager of the museum in the brand’s hometown. Visitors most often ask her and other museum “Spambassadors” how Spam got its name and what the heck is in it.

    Spam first hit shelves in 1937 as a 12-ounce, 25-cent, convenient and long-lasting protein in a tin can during the lean years of the Great Depression. Spam contained nothing but pork shoulder, chopped ham, water, sugar and sodium.

    It was a concoction of George Hormel and his son, Jay, meatpackers in Austin. The Hormels had been working on the “problem of canning a nonperishable pork product for a good many years and at last we solved it,” Jay told The New Yorker in 1945.

    They offered a $100 prize for the best name for the food. It needed to be short for display purposes and to fit on one-column newspaper advertisements. It also had to pronounceable in any language.

    The brother of a corporate executive threw out “Spam,” a combination of “spice” and “ham,” at a party, and Hormel “knew then and there that the name was perfect.”

    From the beginning, Spam was marketed as a time-saver and a food for any meal: Spam and eggs. Spam and pancakes. Spam and beans, spaghetti, macaroni and crackers. Spamwiches.

    A pie made with Spam-brand canned meat, potatoes, scallions, and cream of mushroom soup during the 1950s or 1960s.

    “Never have you imagined a meat could turn into so many interesting uses. Morning, noon or night – cold or hot – Spam hits the spot!” read one early advertisement. Spam was a “miracle meat,” the company told consumers in newspaper spots and radio ads.

    And then came the United States’ entrance into World War II in 1941, the decisive moment in Spam’s growth.

    At many Pacific outposts, which had little refrigeration or local sources of meat, American and Allied troops relied on the canned meat that could be stored away for months and eaten on the go.

    Hormel says more than 100 million pounds of Spam were shipped overseas to help feed the troops during the war. Uncle Sam became known as Uncle Spam, much to the dismay of troops forced to eat it every single day.

    “During World War II, of course, I ate my share of Spam along with millions of other soldiers,” Dwight D. Eisenhower later wrote to Hormel’s president. “I’ll even confess to a few unkind remarks about it – uttered during the strain of battle.”

    For the citizens of conflict-wracked countries in the Pacific struggling with hunger and famine during the war and rebuilding years, however, Spam was a symbol of access to American goods and services. Sometimes, it was the only protein source available. After US troops left, Spam remained, becoming an ingredient in local dishes.

    “Spam became part of Asian culture,” said Ayalla Ruvio, a consumer behavior researcher at Michigan State University who studies identity and consumption habits. “It represented a piece of America. It’s like Coca-Cola or McDonald’s.”

    American troops also introduced Spam in Korea during the Korean War in the early 1950s, and Budae Jjigae (Army Stew) became a popular Korean dish. Spam also remains a common ingredient in dishes almost anywhere US soldiers were stationed, such as Guam, the Philippines and Okinawa, Japan.

    In Hawaii, where the US military has long been a major presence, more Spam is consumed per person than any other state. It’s stacked on a block of rice and wrapped in seaweed to make Spam musubi and sold at fast-food chains like McDonald’s in Hawaii. There’s even an annual Waikiki Spam Jam festival.

    Many US soldiers returning from World War II vowed never to eat Spam again, and the brand became linked to rationing and economic hardship. But Spam has appealed to new consumers in the United States in recent years.

    Spam musubi, a common Japanese lunch dish that was created in Hawaii.

    “When I first started getting into the brand, we started to notice this transition to a stronger multicultural set of consumers,” said Brian Lillis, who has been product’s brand manager for six years. “They brought with them the traditions of utilizing the product in their home country or where maybe their ancestors came from.”

    Hormel has worked with chefs at Korean, Taiwanese and Vietnamese restaurants to get Spam on menus. As more people have been introduced to these dishes, they go home and try to make their own versions, Lillis said.

    Spam highlights its versatility in dishes on social media and TV advertisements. There are ads for Spam and eggs, as well as Spam fried rice, Spam musabi, yakitori, and poke.

    Spam has made a comeback in the United States because Asian and Asian American chefs such as Chris Oh have tried to reinvent it in their own ways, said Ku, the Binghamton University professor. “They brought some of the culinary influences of Asia and the Pacific and upscaled it.”

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  • Why the ghost of 2008 still haunts us in 2022 | CNN Business

    Why the ghost of 2008 still haunts us in 2022 | CNN Business

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    This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN Business
     — 

    All week, there have events in the news that have come in under of the banner of “this hasn’t happened since 2007/2008.”

    Yields on the 10-year Treasury briefly surpassed 4%, a level not seen since 2008. That movement helped push mortgage rates to their highest level, 6.7%, since — wait for it — July 2007. Across the pond, where the UK bond market crashed earlier this week, one seemingly frazzled London banker told the Financial Times: “At some point this morning I was worried this was the beginning of the end. It was not quite a Lehman moment. But it got close.”

    The timing of all these events is indeed a bit spooky: Today, September 29, marks 14 years to the day that stock markets around the world cratered, ushering in the worst global financial crisis since the Great Depression.

    With all that gloom, it’s natural to wonder whether history is about to repeat itself.

    To be clear: The market ended up recovering completely — though it took years. And in so many ways, the economic and financial angst playing out around the world is absolutely not a repeat of the run-up to the Great Recession. It’s a whole different beast now.

    But it is precisely because of those 2008 scars, still potent memories for many, that economists and analysts become nervous when things go as haywire as they have in recent weeks.

    Right now, the prevailing mood is fear. Economies hobbled by inflation and soaring borrowing costs are vulnerable to economic shocks — whether those shocks come from a catastrophic hurricane, or a superpower declaring war on a neighbor, or a radical unfunded tax scheme. Or, heaven forbid, a resurgent pandemic.

    All of that means there aren’t many good places for investors to put their money right now. Stocks and bonds are both in bear territory, and many analysts say the market could remain volatile until inflation gets under control (which, if we crash into a recession, could happen pretty soon… not a great silver lining, I know.)

    If there’s a lesson to hold onto from the Great Recession, it’s not to panic. Per my colleague Jeanne Sahadi:

    Let’s say you’d invested $10,000 at the start of 1981 in the S&P 500. That money would have grown to nearly $1.1 million by the end of March 2021. But had you missed just the five best trading days during those 40 years, it would only have grown to roughly $676,000.

    In other words: Hold on tight, friends, and try to avoid looking at your 401(k) balance for the foreseeable future.

    Stocks fell Thursday, giving up Wednesday’s big gains and plunging the Dow back into a bear market.

    The S&P 500, one of the broadest measures of the health of Corporate America, fell 2.1%, hitting a new low for the year. The Dow and S&P 500 are once again not far from their lowest levels since November 2020.

    Heckuva way to wrap up the third quarter, eh? The stock market actually had a promising start to the quarter in July. But fears about inflation, rate hikes, rising bond yields and recession returned with a vengeance in August and September.

    Continuing a grand tradition of Corporate Rebranding Nonsense, Johnson & Johnson is putting all of its consumer health products under a newly formed parent company.

    Soon, Band-Aid, Tylenol, Benadryl and Johnson’s baby powder will all be sold under the umbrella brand identity “Kenvue.”

    That’s pronounced “Ken,” like the doll, “view.”

    Here’s the deal: Johnson & Johnson, the owner of these labels, is in the process of splitting into two companies — one focused on medical devices and medications, the other on consumer health products, my colleague Nathaniel Meyersohn reports.

    J&J is keeping its recognizable name for its larger pharmaceutical business, but it needed something new for the smaller consumer arm.

    The company said Wednesday that it landed on Kenvue, a combination of “Ken,” an English word for knowledge primarily used in Scotland, and “vue,” a reference to sight.

    “Kenvue” is the winning moniker that a small team from J&J, working with a naming agency, landed on. The goal was to be memorable. And, crucially, to clear trademarks in more than 100 markets and “pass linguistic and cultural screenings in 89 languages and dialects.”

    The company also released Kenvue’s new logo — white letters against a green background, the limbs of the letter “K” resembling a sideways heart.

    What does it mean? Absolutely nothing, and that is the point.

    Corporations gravitate to names that are squeaky clean. There’s no possibility for a negative connotation, because it’s a made-up word. It doesn’t, as far as I can tell, sound like it might resemble a swear word in some other language. Kenvue is inoffensive. Bloodless. It is the tofu of corporate branding.

    “It’s really just a holding company behind all these other brands,” one expert told Nathaniel. “They want a name that will disappear in the background and the brands will stick out.”

    (Mission accomplished. I’ve already forgotten the new name and I just typed it 40 seconds ago.)

    MY TWO CENTS

    The best review I can give of the new brand is that it’s forgettable. Other companies have famously (infamously?) failed to stick the landing with new names.

    Netflix, back in 2011, quickly backtracked after trying to rechristen its DVD mailing service as “Qwikster.” More recently, Fiat Chrysler and PSA Group merged in 2020 under the collective name “Stellantis,” which is still the company’s name, but I still think it sounds like something you should ask your doctor about if you have signs of seasonal depression.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

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  • US officials troubled by controversial UK tax cut plan | CNN Business

    US officials troubled by controversial UK tax cut plan | CNN Business

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    New York
    CNN
     — 

    US officials are increasingly troubled by the United Kingdom’s proposal to slash taxes at a time of crushing inflation, a plan that has ignited turbulence in financial markets.

    UK Prime Minister Liz Truss’s tax-cut plan has drawn criticism from economists and investors and prompted the Bank of England to calm panicked markets with an emergency intervention on Wednesday.

    The Biden administration, including the Treasury Department, is concerned by the UK’s tax-cut plan, an administration official familiar with the matter told CNN Thursday.

    The risk for the United States is that any trouble on the other side of the Atlantic could spill over to the global financial system and world economy.

    US Commerce Secretary Gina Raimondo criticized Truss’s plan Wednesday, pointing out that the British pound has “plummeted” since the proposal was unveiled.

    “The policy of cutting taxes, and simultaneously increasing spending, isn’t one that is going to fight inflation in the short term or put you in good stead for long-term economic growth,” Raimondo said in response to a question at an event held by The Hamilton Project at the Brookings Institution.

    Raimondo sought to contrast the UK’s approach with that of the Biden administration.

    “We’re pursuing a different strategy … We’re taking inflation seriously, letting the Federal Reserve do its job, watching deficit spending,” she said. “Investors, businesspeople want to see world leaders taking inflation very seriously. And it’s hard to see that out of this new government.”

    Biden officials have conveyed their worries about the UK plan through the International Monetary Fund, according to Bloomberg News, which previously reported on the concerns of US officials.

    The United States is the largest shareholder in the IMF, which issued a rare criticism of the UK plan this week and urged the country’s officials to “reevaluate” the tax cuts.

    “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” an IMF spokesperson said earlier this week.

    Truss defended her tax plan, telling CNN’s Jake Tapper last week that her government is incentivizing businesses to invest and helping ordinary people with their taxes.

    Some US officials have been careful not to directly criticize their UK counterparts.

    US Treasury Secretary Janet Yellen on Tuesday declined to comment directly on the UK economic plan, though she noted the UK is dealing with “significant inflation problems” — just like the United States.

    Asked if she is concerned about disorderly markets, Yellen said “markets are functioning well” and she hasn’t seen liquidity problems emerge.

    Yet the large swings in bond and currency markets raise questions about just how well markets are functioning.

    A day after Yellen’s comments, the Bank of England announced an emergency intervention. The central bank promised to buy UK government debt “on whatever scale is necessary” to prevent a bond market crash and ease “dysfunction” in financial markets.

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  • The UK is gripped by an economic crisis of its own making | CNN Business

    The UK is gripped by an economic crisis of its own making | CNN Business

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    London
    CNN Business
     — 

    A week ago, the Bank of England took a stab in the dark. It raised interest rates by a relatively modest half a percentage point to tackle inflation. It couldn’t know the scale of the storm that was about to break.

    Less than 24 hours later, the government of new UK Prime Minister Liz Truss unveiled its plan for the biggest tax cuts in 50 years, going all out for economic growth but blowing a huge hole in the nation’s finances and its credibility with investors.

    The pound crashed to a record low against the US dollar on Monday after UK finance minister Kwasi Kwarteng doubled-down on his bet by hinting at more tax cuts to come without explaining how to pay for them. Bond prices collapsed, sending borrowing costs soaring, sparking mayhem in the mortgage market and pushing pension funds to the brink of insolvency.

    Financial markets were already in a febrile state because of the rising risk of a global recession and the gyrations caused by three outsized rate increases from a US central bank on the warpath against inflation. Into that “pressure cooker” stumbled the new UK government.

    “You need to have strong, credible policies, and any policy missteps are punished,” said Chris Turner, global head of markets at ING.

    After verbal assurances by the UK Treasury and Bank of England failed to calm the panic — and the International Monetary Fund delivered a rare rebuke — the UK central bank pulled out its bazooka, saying Wednesday it would print £65 billion ($70 billion) to buy government bonds between now and October 14 — essentially protecting the economy from the fallout of the Truss’ growth plan.

    “While this is welcome, the fact that it needed to be done in the first place shows that the UK markets are in a perilous position,” said Paul Dales, chief UK economist at Capital Economics, commenting on the bank’s intervention.

    The emergency first aid stopped the bleeding. Bond prices recovered sharply and the pound steadied Wednesday against the dollar. But the wound hasn’t healed.

    The pound tumbled 1%, falling back below $1.08 early Thursday. UK government bonds were under pressure again, with the yield on 10-year debt climbing to 4.16%. UK stocks fell 2%.

    “It wouldn’t be a huge surprise if another problem in the financial markets popped up before long,” Dales added.

    The next few weeks will be critical. Mohamed El-Erian, who once helped run the world’s biggest bond fund and now advises Allianz

    (ALIZF)    , said that the central bank had bought some time but would need to act again quickly to restore stability.

    “The Band-Aid may stop the bleeding, but the infection and the bleeding will get worse if they do not do more,” he told CNN’s Julia Chatterley.

    The Bank of England should announce an emergency rate hike of a full percentage point before its next scheduled meeting on November 3. The UK government should also postpone its tax cuts, El-Erian said.

    “It is doable, the window is there, but if they wait too long, that window is going to close,” he added.

    The UK government has previewed rolling announcements in the coming weeks about how it plans to change immigration policy and make it easier to build big infrastructure and energy projects to boost growth, culminating in a budget on November 23 at which it has promised to publish a detailed plan for reducing debt over the medium term.

    But it shows no sign of backing away from the fundamental policy choice of borrowing heavily to fund tax cuts that will mainly benefit the rich at a time of high inflation. And the UK Treasury says it won’t bring forward the November announcement.

    Truss, speaking publicly for the first time since the crisis erupted, blamed global market turmoil and the energy price shock from Russia’s invasion of Ukraine for this week’s chaos.

    “This is the right plan that we’ve set out,” she told local radio on Thursday.

    One big problem identified by investors, former central bankers and many leading economists is that her government only set out half a plan at best. It went ahead without an independent assessment from the country’s budget watchdog of the assumptions underlying the £45 billion ($48 billion) annual tax cuts, and their longer term impact on the economy. It fired the top Treasury civil servant earlier this month.

    Charlie Bean, former deputy governor at the Bank of England, told CNN Business that the government was guilty of “really stupid” decisions. His former boss at the bank, Mark Carney, accused the government of “undercutting” UK economic institutions, saying that had contributed to the “big knock” suffered by the country’s financial system this week.

    “This is an economic crisis. It is a crisis… that can be addressed by policymakers if they choose to address it,” he told the BBC.

    British newspapers have started to speculate that Truss will have to fire Kwarteng, her close friend and political soulmate, if she wants to regain the political initiative and prevent her government’s dire poll ratings from plunging even further.

    “Every single problem we have now is self-inflicted. We look like reckless gamblers who only care about the people who can afford to lose the gamble,” one former Conservative minister told CNN.

    But for now she’s trying to tough it out, and cling onto the Reaganite experiment.

    “Raising, postponing, or abandoning tax cuts will be avoided by Truss at all costs as such a reversal would be humiliating and could leave her looking like a lame duck prime minister,” wrote Mujtaba Rahman and Jens Larson at political risk consultancy Eurasia Group.

    The only alternative left to balance the books would be to slash government spending, and that would prove equally politically difficult as the country enters a recession with its public services under enormous strain and a restive workforce that has shown it’s ready to strike in large numbers over pay.

    “Truss and Kwarteng are now facing a severe economic crisis as the world’s financial markets wait for them to make policy changes that they and the Conservative party will find unpalatable,” the Eurasia analysts wrote.

    The foreign investors who keep the British economy solvent are left scratching their heads for another eight weeks, leaving plenty of time for doubts to surface again about the UK government’s commitment to responsible fiscal policymaking.

    “The message of financial markets is that there is a limit to unfunded spending and unfunded tax cuts in this environment and the price of those is much higher borrowing costs,” Carney said.

    That leaves the Bank of England in a tight spot. A week ago it was pressing the brakes on the economy to take the heat out of price increases, even as the government tried to juice growth. The task got even harder this week when it was forced to dust off its crisis playbook and bail out the government.

    It may not be long before it has to intervene again, this time with an emergency rate hike.

    “[Wednesday’s] intervention is designed to stabilize UK government bond prices, keep the bond market liquid and prevent financial instability but that won’t necessarily stop sterling falling further, with its attendant inflationary consequences,” Bean, the former central banker, told CNN Business.

    “I think there is still a good chance they will need to act ahead of the November meeting,” he added.

    — Julia Horowitz, Luke McGee, Anna Cooban, Rob North, Livvy Doherty and Morgan Povey contributed to this article.

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  • There’s a 98% chance of a global recession, research firm warns | CNN Business

    There’s a 98% chance of a global recession, research firm warns | CNN Business

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    New York
    CNN Business
     — 

    Warning lights are flashing in the global economy as high inflation, drastic rate hikes and the war in Ukraine take their toll.

    There is currently a 98.1% chance of a global recession, according to a probability model run by Ned Davis Research.

    The only other times that recession model was this high has been during severe economic downturns, most recently in 2020 and during the global financial crisis of 2008 and 2009.

    “This indicates that the risk of a severe global recession is rising for some time in 2023,” economists at Ned Davis Research wrote in a report last Friday.

    As central banks ramp up their efforts to get inflation under control, economists and investors are growing gloomier.

    Seven out of 10 economists surveyed by the World Economic Forum consider a global recession at least somewhat likely, according to a report published Wednesday. Economists dialed back their forecasts for growth and expect inflation-adjusted wages to keep falling the rest of this year and next.

    Given surging food and energy prices, there are concerns that the high cost of living could lead to pockets of unrest. Seventy-nine percent of the economists surveyed by the World Economic Forum expect rising prices to trigger social unrest in low-income countries, compared to a 20% expectation in high-income economies.

    Investors are also getting more concerned, with the Dow Jones Industrial Average sinking into a bear market Monday for the first time since March 2020.

    “Our central case is a hard landing by the end of ’23,” billionaire investor Stanley Druckenmiller said at the CNBC Delivering Alpha Investor Summit Wednesday. “I will be stunned if we don’t have a recession in ’23.”

    Even Federal Reserve officials have conceded there is a growing risk of a downturn.

    Still, there are clearly bright spots, especially in the United States, the world’s largest economy.

    The US jobs market remains historically strong, with the unemployment rate sitting near the lowest levels since 1969. Consumers continue to spend money and corporate profits are sturdy.

    There are also hopes that the worst US inflation in 40 years will cool off in the coming months as supply catches up with demand.

    The Ned Davis researchers said that although recession risks are rising, its US recession probability model is “still at rock-bottom levels.”

    “We do not have conclusive evidence that the US is currently in recession,” the researchers wrote in the report.

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  • Why are so many Americans unhappy with the state of the US today? Here’s what they said in CNN’s latest poll | CNN Politics

    Why are so many Americans unhappy with the state of the US today? Here’s what they said in CNN’s latest poll | CNN Politics

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    CNN
     — 

    It’s one of the most commonly asked poll questions: How do Americans feel about the state of the nation? And recently, the answer has usually been a negative one.

    But figuring out why people are unhappy is complicated. CNN’s latest polling asked Americans whether things in the country were going well or badly – and then, to explain in their own words, why they felt that way.

    Among the 69% who said things were going either pretty or very badly, dim views of the nation’s economic conditions were a top driver. The smaller share who were more positive often cited their own, rosier takes on the economy.

    Other factors that influenced Americans’ outlooks, whether positive or negative, included their views of the current occupant of the White House, opinions on social issues, conclusions drawn from their daily lives or a combination of disparate concerns. Their explanations help shed light on what respondents really mean when they answer the broad, state-of-the-nation questions frequently included on surveys.

    Here’s a look at some common themes that emerged in our latest poll, as well as a sampling of responses from people across the country. Some answers have been lightly edited for length, grammar and clarity.

    Views of the nation and the economy often go hand in hand. Asked to explain their view of how things are going in the US today, both 35% of those who said things were going well and 52% who said things were going badly mentioned economic factors.

    Slightly over half of women, men, Whites, people of color, those younger than 45 and those 45 and older who said things were going badly all mentioned the economy when asked to explain why they felt that way.

    But there were differences both along and within partisan lines among this pessimistic group.

    A 58% majority of Republicans and Republican-leaning independents cited the economy as a reason for their discontent, with a smaller 42% of Democrats and Democratic leaners saying the same.

    Democrats and Democratic-leaning independents younger than 45 were 11 points likelier than their older counterparts to cite an economic reason. Among Republicans, there was no difference by age in the share citing the economy.

    Beyond general concerns about the economy, issues such as inflation and the cost of living hit home for many Americans who said the country was doing badly.

    • “Cost of living is way too high. Just seems like the economy is not doing very well, but it has been like this for years. Housing market is terrible, gas prices are terrible. Student loan debt is astronomical. Even though I agree students should pay their own loan, it shouldn’t be that expensive in the first place.” – Republican man, 29, from Pennsylvania
    • “A single mother cannot effectively support a household on one income. The price of everything is too high. Rent [is] outrageous while people trying to get a loan to buy a home is also unreachable to most.” – Republican woman, 30, from Iowa
    • “The economy is TERRIBLE. My cost of living is MUCH MUCH MUCH higher. Go to the grocery store and you will find out.” – Republican-leaning man, 71, from Illinois

    By contrast, those in the positive camp largely focused on the availability of jobs and a perception that the economy was improving. Among this group, Americans in households making $50,000 or more annually were 19 percentage points more likely than those in lower-earning households to name economic factors as a reason to say things were going well, 44% to 25%.

    • “The economy is doing well. I’m unhappy with women losing bodily autonomy, and the creeping fascism from the right, but I believe Biden is doing an excellent job with the economy, the environment, and international relations.” – Democratic woman, 65, from North Dakota
    • “There are still changes that I hope will be made, but for the most part we’re heading in the right direction. There is food on the shelves at the grocery stores. There are jobs at slightly better pay than before the pandemic.” – Democratic woman, 52, from Michigan
    • “Unemployment is at a historic low, economy isn’t bad. Inflation is a sign that people have more money.” – Democratic-leaning man, 51, from Massachusetts

    The public’s views of the economy are often deeply polarized, with Americans far more likely to rate conditions as good when their party holds the White House – either because their political beliefs drive them to different conclusions or because they treat survey questions as a way to tout their partisan allegiances.

    Views about the broader state of the US were also deeply polarized in CNN’s latest poll, with a near-unanimous 91% of Republicans and Republican-leaning independents saying things in the US were going badly, a view shared by 48% of Democrats and Democratic-leaning independents.

    Among those who said things were going badly, 11% put the blame primarily on President Joe Biden or the Democrats, with smaller shares pointing to Congress or the government as a whole. Among Republicans and Republican leaners in that camp, the share was 17%

    • “My country is having a real rough time under Biden’s presidency. Things have gone downhill the past few years.” – Republican woman, 80, from Pennsylvania
    • “This country is going down the tubes. He has ruined it with everything he’s done. At least Trump was making America great again.” – Republican woman, who did not give her exact age, from New York
    • “Congress is simply not focused on working together to resolve the problems facing our country.” – Republican man, 65, from Colorado

    Among those who said things were going well, 5% credited Biden or the Democratic Party, and 6% offered comments opposing former President Donald Trump, with others citing improvements in government leadership or a general sense of stability.

    • “We have moved out of the dishonest and corrupt shadows of the Trump and ‘conservative’ fascist dominated term of misgovernance.” – Democratic man, 44, from Nebraska
    • “I think it could be so much worse, and the president is doing the best he can do with all the problems we have.” – Democratic-leaning woman, 67, from New Jersey
    • “Democrats are in office. Republicans will NEVER do anything to help the working class and poor.” – Democratic man, 60, from Indiana

    Others saw polarization itself as the issue. Of those who said things in the US were going badly, 7% said it was because they were concerned about political or societal divisions in the country. Democrats (13%) and those with college degrees (12%) were likelier than others to mention the issue as a main reason for their discontent.

    • “We’re more divided than we’ve ever been. The GOP is trying to destroy diversity, take away women’s and LGBTQ rights. It’s a disaster here.” – Democratic woman, 37, from Connecticut
    • “We have never been so divided as a nation on almost every topic and Biden is making it worse.” – Republican man, 60, from Kansas
    • “The division among the citizens continues to grow. Nobody cares about their neighbors and the community.” – independent man, 38, from Texas

    Among those unhappy with the state of the country, a significant share, 16%, cited crime or gun violence. But their precise focus varied widely, spanning everything from concerns about unrest and lawlessness to dismay about school shootings. Women were slightly more likely than men to express such concerns. A smaller share of Americans also mentioned a related constellation of issues, including policing, the criminal justice system, homelessness and drugs.

    Another 10% of those who said things were going badly mentioned immigration or the situation at the border, with that concern relatively high among Republicans (17% of whom cited the issue), those age 45 and older (15%) and White Americans (12%).

    • “The massive amount of senseless gun violence” – Democratic woman, 30, from California
    • “The biggest thing is the violence in major cities.” – Republican woman, 71, from Ohio
    • “Too many people killing kids and adults. Too much aggression and violence.” – independent woman, 40, from Oregon
    • “I say things are going pretty badly because they are not handling the gun violence and school shootings. Children do not feel safe going to schools because they are afraid of someone in their school or someone coming to their school shooting it up, because it’s so easy to buy a gun now, and because most parents have them and are not watching them or locking them up away from their children. … As an African American, I feel scared for my life every time I step out the house, because I never know when something is going to happen or I get into a situation with a cop and it goes badly.” – independent woman, 18, from Texas
    • “Country is headed for a depression with all these illegal immigrants costing us in money, resources, etc. Getting close to World War III. Lawlessness pervades us.” – Republican-leaning woman, 66, from Kansas

    In stark contrast to the widespread discontent with the state of the nation, most Americans tend to be relatively satisfied with the course of their own lives. That shaped the broader outlooks of some of those surveyed – among those who said that things in the country were going well, 8% pointed at least in part to positive aspects of their own lives.

    • “For me, I have a job, a family and have everything that I need.” – Democratic man, 70, from Texas
    • “I’m not living in a box or a tent.” – Republican man, 63, from Pennsylvania
    • “I’m in the military and my life hasn’t been impacted like others have.” – independent woman, 26, from Oklahoma
    • “I’m looking in the mirror. You listen to the news but also to your own world.” – Democratic man, 60, from Pennsylvania
    • “Everything comes down to our individual personal situation, and mine is better than it has been throughout most of my life. … Our environmental issues for future generations do not apply to me as it is highly unlikely there will be a future generation of my family. … Inflation is of little concern to me as I have always waited to buy everything on sale, and I know how to cook economically. My health is excellent. My finances are sound.” – Republican woman, 78, from Nebraska

    The CNN Poll was conducted by SSRS from March 1 through March 31 among a random national sample of 1,595 adults initially reached by mail. Surveys were either conducted online or by telephone with a live interviewer. Results for the full sample have a margin of sampling error of plus or minus 3.3 percentage points; it is larger for subgroups.

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  • Biden expected to meet with Hill leaders Tuesday following ‘productive’ debt limit meetings among staff | CNN Politics

    Biden expected to meet with Hill leaders Tuesday following ‘productive’ debt limit meetings among staff | CNN Politics

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    CNN
     — 

    President Joe Biden is expected to meet Tuesday with congressional leaders on the debt ceiling limit following “productive” staff-level negotiations over the weekend, two sources familiar with the talks told CNN on Sunday, as the US barrels toward a deadline that could come as soon as June 1.

    Negotiators have been able to pinpoint some areas on which congressional staff and the White House can find common ground, including revising the permitting process, rescinding unspent Covid-19 relief funds and potentially cutting spending, the sources said.

    Biden and the top four congressional leaders – House Speaker Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell – held talks on the debt limit last week in the Oval Office. Tuesday’s meeting, which has not yet been officially confirmed, according to the sources, comes after a planned Friday meeting was postponed as the staff-level talks continued.

    Deputy Treasury Secretary Wally Adeyemo told CNN’s Dana Bash on “State of the Union” on Sunday that talks between the two sides have been “constructive.”

    Biden, Adeyamo said, “looks forward to getting together with the leaders to talk about how we continue to make progress.”

    Biden himself indicated on Sunday that he expected principal-level debt ceiling discussions to take place Tuesday.

    “We’re working on it right now,” he said in brief remarks to reporters as he completed a bike ride in Rehoboth Beach, Delaware.

    There is still not a clear path forward to avoid a default with just four more days before June 1 when both the House and Senate are scheduled to be in session. Biden also confirmed Sunday that he expects to depart Wednesday for Hiroshima, Japan, for the G7 summit.

    “That’s my plan as it stands now,” he told reporters in Rehoboth Beach.

    It’s become increasingly clear that some spending cuts must be included for a deal to materialize, one of the sources said, and that point of discussion has been the main sticking point in negotiations so far.

    Biden said Sunday that he was waiting to hear Republicans’ exact proposals on work requirements for certain government aid programs. He said he has voted in the past for “tougher aid programs” that are now law but “for Medicaid, it’s a different story.”

    White House spokesperson Michael Kikukawa later elaborated on the president’s answer, saying in a statement that Biden would evaluate the GOP proposals guided by the principle that they would “not take away people’s health coverage” or “push Americans into poverty.”

    Negotiators recognize they will likely need to have an outline of a deal by the end of the week to ensure a bill can pass through Congress by June 1, the sources said, but they also think there are potential congressional tools that can be used to speed up the process if needed. The sources did not specify what those tools are.

    Adeyemo reiterated Sunday that the US “can’t” default on its debt but declined to provide details on areas of agreement. He echoed Treasury Secretary Janet Yellen’s assessment that default could happen “as early as June 1” but said it “can be sometime in early June,” calling on Congress to act as he warned that default would be “catastrophic.”

    Top Treasury official says debt ceiling negotiations have been ‘constructive’

    Pressed by Bash on the timing of a deal following McCarthy’s call for an agreement in principle by early this week and business leaders like JPMorgan Chase’s Jamie Dimon warning of market panic in the absence of a deal, Adeyemo said Biden “believes we should raise the debt limit as soon as possible.”

    “Because it’s not only financial markets, but the (University of Michigan) survey of consumer sentiment last week showed that consumers are now worried about the debt limit – it’s affecting the way they’re spending,” Adeyemo said.

    Meanwhile, top Biden economic adviser Lael Brainard on Sunday echoed previous White House comments on preferring a whole deal rather than a short-term fix.

    “Short-term is not a fix. It is not really addressing that core uncertainty that CEOs are talking about. It’s just really important to take default and address it, and Congress has the tools to do that,” the director of the National Economic Council said on “Face the Nation” on CBS.

    Biden expressed optimism Sunday for an eventual agreement.

    “I remain optimistic because I’m a congenital optimist. But I really think there’s a desire on their part, as well as ours, to reach an agreement. I think we’ll be able to do it,” he said in Rehoboth Beach.

    The president had indicated last week that he was prepared for talks to go down to the wire.

    “I’ve been involved in negotiations my whole career,” he told CNN during a trip to New York. “Some negotiations happen at the last second, some negotiations happen way ahead of time. So, we’ll see.”

    Biden resurfaced last week the controversial idea of lifting the borrowing cap without Congress by invoking the 14th Amendment, which some legal experts argue gives the president the authority to order the nation’s debts to be paid regardless of the debt limit Congress sets.

    But using the 14th Amendment to let the Treasury Department borrow above the debt ceiling to pay the nation’s obligations would almost certainly prompt a constitutional crisis and swift legal action.

    Asked Sunday whether the administration would consider invoking the 14th Amendment in the absence of a deal with Congress, Adeyemo said, “What the president said was that he did not think the 14th Amendment would solve our problems now. The only thing that can solve our problems now is for Congress to lift the debt limit.”

    This story and headline have been updated.

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  • McCarthy and hardliners reach tentative agreement to resume House floor business | CNN Politics

    McCarthy and hardliners reach tentative agreement to resume House floor business | CNN Politics

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    CNN
     — 

    Hardline conservatives have agreed to end their blockade of the House floor while they continue discussions with House Speaker Kevin McCarthy about future spending decisions and a new “power-sharing agreement,” according to multiple members leaving the speaker’s office.

    Conservatives who had voted against a procedural vote in retaliation for how GOP leadership handled the debt ceiling deal now say they are willing to support the procedural vote, after they received new commitments from McCarthy about how the California Republican plans to operate going forward, though they said the exact details are still being worked out and did not say whether they would ever be made public or put into a written statement.

    “I think you’re gonna see an agreement to move forward in the next day or two on moving the legislation we wanted to move last week,” said Rep. Bob Good, a Virginia Republican who has repeatedly criticized McCarthy.

    Rep. Ralph Norman, a South Carolina Republican, said of the nearly hourlong meeting in McCarthy’s office: “We aired our issues. We want to see this move forward as a body.”

    Norman said one of the things McCarthy agreed to was to involve conservatives more directly in future decision making.

    A group of hardline conservatives have held up legislative action in the GOP-led House for nearly a week in protest of the deal McCarthy struck with President Joe Biden to raise the nation’s borrowing limit last month. Conservatives wanted the debt ceiling deal to cut more federal spending than it did, and several far-right members of McCarthy’s conference accused him of reneging on commitments he made to them in private in order to win the speakership in January.

    McCarthy told the hardliners Monday that he wouldn’t have cut the debt ceiling deal had he known it would “divide us,” according to a GOP source familiar with the meeting.

    But McCarthy knew at the time that not all his members were going to be on board with the deal, with many of them publicly expressing their concerns with the direction of the talks.

    One of the concessions McCarthy agreed to as part of Monday’s developments was an ironclad commitment to bring a pistol brace bill from GOP Rep. Andrew Clyde of Georgia to the floor. Leadership has agreed to incorporate the bill, which would block a new Bureau of Alcohol, Tobacco, Firearms and Explosives rule on pistol braces, into an upcoming procedural vote.

    That vote, which is slated for Tuesday, will now combine a rule for the pistol brace bill with a rule for a gas stoves bill as well as a bill to rein in the administration’s regulatory powers.

    GOP Rep. Matt Gaetz of Florida said, “The power-sharing agreement that we entered into in January with McCarthy … it has to be renegotiated, so what happened on this debt ceiling bill never happens again.”

    Specifically, Gaetz said the hardliners want more tools to put more “downward pressure on spending,” and want a return to fiscal 2022 spending levels.

    House Appropriations Chairwoman Kay Granger announced Monday night that her panel will take up spending bills that would roll back funding to the levels demanded by the hardliners, a move that could ease tensions between the group and McCarthy while generating backlash from the White House and Senate Democrats.

    Gaetz said that while they’re willing to end their stand against the procedural vote this week, he warned that they’re willing to oppose future procedural votes if they don’t get their way.

    “If there’s not a renegotiated power sharing agreement then perhaps we’ll be here next week,” he said.

    House Freedom Caucus Chairman Scott Perry of Pennsylvania confirmed they’ve reached a “framework for moving forward” but did not provide details.

    Rep. Dusty Johnson of South Dakota, leaving McCarthy’s office, said they have a path forward now but said there will be no votes in the House tonight, as they had previously planned.

    This story has been updated with additional information.

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  • Biden cancels visits to Australia and Papua New Guinea as debt ceiling negotiations continue | CNN Politics

    Biden cancels visits to Australia and Papua New Guinea as debt ceiling negotiations continue | CNN Politics

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    CNN
     — 

    President Joe Biden is canceling his upcoming visits to Papua New Guinea and Australia due to the ongoing debt ceiling negotiations in Washington, the White House confirmed Tuesday.

    White House press secretary Karine Jean-Pierre said in a statement Biden spoke to Australian Prime Minister Anthony Albanese earlier Tuesday to inform him he will be “postponing” the trip and invited the prime minister for an official state visit “at a time to be agreed by the teams.” Jean-Pierre added that the “President’s team engaged” with the prime minister of Papua New Guinea.

    Biden will still travel to Japan starting Wednesday as part of what was supposed to be a weeklong trip through the Pacific region.

    Earlier Tuesday, National Security Council coordinator for strategic communications John Kirby told reporters that the White House was “reevaluating” the stops to Papua New Guinea and Australia.

    “What I can speak to is the G7 and going to Hiroshima. The president is looking forward to that. We are taking a look at the rest of the trip,” Kirby told reporters.

    The cancellation canes as congressional leaders met with Biden at the White House to discuss the debt limit. The Treasury Department has warned that the government default could come as early as June 1, and Treasury Secretary Janet Yellen has said a default would trigger a global economic downturn.

    This story has been updated with additional developments.

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  • Top House progressive says Democratic leaders should be concerned about debt deal support | CNN Politics

    Top House progressive says Democratic leaders should be concerned about debt deal support | CNN Politics

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    Washington
    CNN
     — 

    Washington Rep. Pramila Jayapal, the chair of the Congressional Progressive Caucus, said Sunday that White House negotiators and Democratic leaders should be concerned about progressive support for the tentative deal to raise the debt ceiling for two years

    “Yes, they have to worry,” Jayapal told CNN’s Jake Tapper on “State of the Union,” referring to some of the concessions made by the White House to reach the agreement with Republicans.

    Following the announcement of the deal Saturday night, the White House and Republican leaders in Congress have been mounting an intensive push to consolidate support. But the marathon is far from over, and there remains little certainty the nation will avoid a default.

    Whether House progressives will ultimately support the deal depends on the specifics of the agreement, Jayapal said, including how many people would be affected by expanded work requirements for certain adults receiving food stamps. The deal would also expand exemptions for certain recipients.

    “It is really unfortunate that the president opened the door to this, and while at the end of the day, you know, perhaps this will – because of the exemptions – perhaps it will be OK, I can’t commit to that. I really don’t know,” Jayapal said.

    The Washington Democrat said that she was briefed by top White House official Lael Brainard after the current framework came together but that she will not make her position clear until she can see legislative text.

    “That’s always, you know, a problem, if you can’t see the exact legislative text. And we’re all trying to wade through spin right now,” Jayapal said.

    The deal – which would also freeze spending on domestic programs and increase spending on defense and veterans issues, among other things – was meant to include provisions that could sway members of both parties to vote for it.

    Senior White House officials have been calling House Democrats since Saturday night to shore up support as some in the party say the Biden administration conceded too much.

    Connecticut Rep. Jim Himes, the former chair of the pro-business New Democrat Coalition, told “Fox News Sunday” he was leaning toward a “no” vote on the tentative deal.

    Himes said he did not want to validate the negotiating process used by Republicans, “which at the end of the day is a hostage-taking process,” adding that, “as the speaker said, there is absolutely nothing for the Democrats in these things.”

    But in a positive sign for the White House’s efforts to wrangle in Democratic votes, New Hampshire Rep. Ann McLane Kuster, the current head of the New Democrats bloc, signaled that her 99-member group may support the plan.

    “Our Members are encouraged that the two sides have reached an agreement, and are confident that President Biden and White House negotiators have delivered a viable, bipartisan solution to end this crisis,” Kuster said in a statement. “We are doing our due diligence as lawmakers to ensure that this agreement can receive support from both parties in both chambers of Congress.”

    Republican Rep. Dusty Johnson of South Dakota, one of the GOP negotiators on the deal, maintained that there were “no wins for Democrats” in the agreement.

    “There is nothing after the passage of this bill that will be more liberal or more progressive than it is today. It is a remarkable conservative accomplishment,” the chair of the center-right Republican Main Street Caucus said in a separate interview on “State of the Union.”

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  • EU officials accuse Google of antitrust violations in its ad tech business | CNN Business

    EU officials accuse Google of antitrust violations in its ad tech business | CNN Business

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    Washington
    CNN
     — 

    Google’s advertising business should be broken up, European Union officials said Wednesday, alleging that the tech giant’s involvement in multiple parts of the digital advertising supply chain creates “inherent conflicts of interest” that risk harming competition.

    The formal accusations mark the latest antitrust challenge to Google over its sprawling ad tech business, following a lawsuit by the US Justice Department in January that also called for a breakup of the company.

    The EU Commission has submitted its allegations to Google in writing, officials said, kicking off a legal process that could potentially end in billions of dollars in fines in addition to a possible breakup that could impact part of its core advertising business.

    The commission alleges that since 2014, Google has unfairly boosted its own proprietary ad exchange — the online auction house known as AdX that matches advertisers and publishers — through its simultaneous ownership of some of the most popular ad tools for publishers and advertisers.

    For example, the commission claims, advertisers who used Google’s ad buying tools frequently had their purchases routed to AdX instead of to rival ad exchanges.

    Meanwhile, Google’s publisher-facing tools unfairly gave AdX a leg up over rival ad exchanges, the commission alleged, because Google’s publisher tools gave AdX competitive bidding information that the exchange could use to help advertisers win an auction.

    One proposed solution by the commission would spin off Google’s ad exchange and publisher tools from the ad-buying tools it provides to advertisers.

    “@Google controls both sides of the #adtech market: sell & buy,” tweeted Margrethe Vestager, the commission’s top competition official. “We are concerned that it may have abused its dominance to favour its own #AdX platform. If confirmed, this is illegal.”

    In a statement, Dan Taylor, Google’s vice president of global ads, said the EU’s probe “focuses on a narrow aspect of our advertising business,” that the company opposes the commission’s preliminary conclusions and that Google plans to “respond accordingly.”

    “Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers. Google remains committed to creating value for our publisher and advertiser partners in this highly competitive sector,” Taylor said.

    A Google spokesperson told CNN Wednesday that the company has only just received the commission’s complaint and that it will take time to review the commission’s claims. Google also added that it will oppose calls for a breakup.

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  • No. 3 House Republican defends party’s debt ceiling bill | CNN Politics

    No. 3 House Republican defends party’s debt ceiling bill | CNN Politics

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    CNN
     — 

    House Majority Whip Tom Emmer said Sunday that President Joe Biden “doesn’t have to negotiate” over the debt ceiling, saying that “Republicans in the House, led by Kevin McCarthy, have passed the solution.”

    House Republicans last week narrowly passed their bill to raise the nation’s $31.4 trillion debt limit by an additional $1.5 trillion. But the measure faces nearly impossible odds of passing in the Democratic-led Senate. Emmer disagreed with that contention in an interview with CNN’s Dana Bash on “State of the Union.”

    “To say that it’s dead on arrival in the Senate, when you’ve got even Joe Manchin suggesting support for this type of approach, I think that’s not exactly accurate,” the Minnesota Republican said. “If you don’t like something in it, if you have ideas of your own, our speaker is more than willing, I’m sure, to listen to those.”

    The House GOP measure was aimed at boosting Republicans’ efforts to negotiate with Democrats as the country approaches its default deadline as soon as this summer. But the White House has said it will not negotiate a debt ceiling increase and will accept only a clean proposal to raise the nation’s borrowing limit.

    Following passage of the GOP bill, Biden told reporters Wednesday that he would be “happy to meet with McCarthy, but not on whether or not the debt limit gets extended. That’s not negotiable.”

    Separately on Sunday, House Majority Leader Steve Scalise said Biden needs to come to the table to negotiate with Republicans on spending and the debt limit.

    “The White House needs to ultimately get into this negotiation. The president has been in hiding for two months,” the Louisiana Republican said on ABC’s “This Week.”

    “That’s not acceptable to Americans. They expect the president to sit in a room with Speaker McCarthy and start negotiating,” he added.

    The US hit its debt ceiling in January and can’t continue to borrow to meet its obligations unless Congress raises or suspends it. The Treasury Department is avoiding default – which would happen this summer or early fall – by using cash on hand and “extraordinary measures,” which should last at least until early June, Treasury Secretary Janet Yellen said in January.

    A breach of the US debt ceiling could spark a 2008-style economic catastrophe, wiping out millions of jobs and setting America back for generations, Moody’s Analytics has warned.

    Emmer, when asked by Bash if he could guarantee that the US government will not default on its debts, said, “I can, assuming that our president and the (Chuck) Schumer Senate recognize the gravity of the problem. This is no longer about politics.”

    “House Republicans will not allow America to default on its debt,” he added. “We showed that last week.”

    Emmer also disputed the characterization of some of the GOP bill’s provisions to reduce spending as “cuts.”

    “These are spending reforms. And all we’re doing is going back to the Biden-Pelosi budget of last year,” he said, referring to former House Speaker Nancy Pelosi.

    The debt ceiling legislation, dubbed the “Limit, Save, Grow Act,” proposes sizable cuts to domestic programs but would spare the Pentagon’s budget. It would return funding for federal agencies to 2022 levels while aiming to limit the growth in spending to 1% per year. The nonpartisan Congressional Budget Office said the bill would trim government deficits by $4.8 trillion over 10 years.

    As part of the 320-page bill, the GOP is also proposing to block Biden’s plan to grant student loan forgiveness, repeal green energy tax credits and kill new Internal Revenue Service funding enacted as part of the Inflation Reduction Act last year. The plan would also expedite new oil drilling projects while rescinding funding enacted to respond to the Covid-19 pandemic.

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  • First on CNN: New bipartisan bill in Senate could address TikTok security concerns without a ban | CNN Business

    First on CNN: New bipartisan bill in Senate could address TikTok security concerns without a ban | CNN Business

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    CNN
     — 

    Five US senators are set to reintroduce legislation Wednesday that would block companies including TikTok from transferring Americans’ personal data to countries such as China, as part of a proposed broadening of US export controls.

    The bipartisan bill led by Oregon Democratic Sen. Ron Wyden and Wyoming Republican Sen. Cynthia Lummis would, for the first time, subject exports of US data to the same type of licensing requirements that govern the sale of military and advanced technologies. It would apply to thousands of companies that rely on routinely transferring data from the United States to other jurisdictions, including data brokers and social media companies.

    The legislation comes amid a flurry of proposals to regulate how TikTok and other companies may handle the sensitive and valuable data of Americans — not just their names, email addresses and phone numbers but also potentially their behavioral data such as location information, search and browsing histories and personal interests.

    “Massive pools of Americans’ sensitive information — everything from where we go, to what we buy and what kind of health care services we receive — are for sale to buyers in China, Russia and nearly anyone with a credit card,” Wyden said in a statement. “Our bipartisan bill would turn off the tap of data to unfriendly nations, stop TikTok from sending Americans’ personal information to China, and allow nations with strong privacy protections to strengthen their relationships.”

    Lawmakers have scrutinized TikTok, in particular, for its ties to China through its parent company, ByteDance. Much of the existing legislation addressing TikTok at the federal and state level has focused on bans of the app. But Wyden’s bill subjecting US data to export licensing could address the issue without wading into the thorny legal issues surrounding a potential ban, an aide said, and simultaneously avoid giving broad new powers to the executive branch.

    Wednesday’s legislation, known as the Protecting Americans’ Data From Foreign Surveillance Act, does not identify TikTok by name. Instead, it directs the Commerce Department to maintain lists of countries that are considered trustworthy and untrustworthy for the purposes of receiving US data.

    There would be no restrictions applied to personal information transferred to trustworthy states, and no restrictions on individual internet users’ own transfers of their personal data, but companies seeking to transfer Americans’ personal information to countries outside of the trustworthy list would be required to apply for a license. Transfers to countries on the untrustworthy list would be automatically prohibited unless companies could prove they have a valid reason for a transfer, according to a copy of the bill text reviewed by CNN.

    Factors the Commerce Department would need to consider when building its lists include whether a country has enough of its own privacy safeguards — reflected in laws, regulations and norms — to prevent sensitive US data from being transferred further to one of the untrustworthy countries. Another factor includes whether a country has engaged in “hostile foreign intelligence operations, including information operations, against the United States,” language that appears to refer to China, Russia and other foreign adversaries.

    The Commerce Department would also be authorized to identify the specific types of information that would be subject to licensing requirements, based on their sensitivity, as well as how much information a company could transfer to a non-approved country before needing a license.

    A previous version of the bill was introduced last summer. The newest version, the Wyden aide said, includes fresh language that targets TikTok indirectly by prohibiting data transfers from one company to a parent company that may receive data requests by a hostile foreign government, when the company holds data on more than one million users.

    TikTok has faced criticism from US officials who say the company’s links to China pose a national security risk. TikTok has said it has never received a request for US user data from the Chinese government and would never comply with such a request.

    TikTok has also said it is working on securing US user data by storing it on servers controlled by Oracle and by establishing special US access protocols to prevent unauthorized use of the information.

    Should TikTok abide by its plan, known as Project Texas, Wednesday’s legislation would not affect the company, according to the Wyden aide, but if TikTok or ByteDance did seek to move US user data to China, then those transfers would potentially be subject to the proposed Commerce Department restrictions.

    Congress has made several attempts in recent months to address data transfers to foreign adversaries. In February, House lawmakers advanced a bill that would all but require the Biden administration to ban TikTok over national security concerns about the app. The next month, Senate lawmakers introduced a bill that would give the Commerce Department wide latitude to assess all foreign-linked technologies and to take virtually any measures, up to and including imposing a nationwide ban, to restrict their domestic use.

    Those bills have provoked a backlash from industry and civil liberties groups, as well as among some fellow lawmakers. Among the concerns are their potential impact on Americans’ First Amendment rights and a potential conflict with laws facilitating the free flow of media to and from foreign rivals. Other concerns include whether the breadth of the legislation could give the US government too much power and whether it could end up harming industries that are not the target of the legislation.

    The new bill includes language requiring more input from privacy, civil rights and civil liberties experts, said Justin Sherman, founder and CEO of the research firm Global Cyber Strategies and a senior fellow at Duke University’s Sanford School of Public Policy who has seen the bill.

    “You don’t load up Excel sheets in a shipping crate and send them to a foreign port,” Sherman said, but data transfers are a “hugely and often ignored problem in national security.”

    “We need to get beyond just looking at a couple mobile apps and platforms, and start looking at all parts of this ecosystem, including how data gets sold and transferred,” Sherman added, “and this bill takes an important look at that issue.”

    Other senators co-sponsoring Wednesday’s legislation include Rhode Island Democratic Sen. Sheldon Whitehouse, Tennessee Republican Sen. Bill Hagerty, New Mexico Democratic Sen. Martin Heinrich and Florida Republican Sen. Marco Rubio. A companion bill in the House will also be unveiled Wednesday, sponsored by Ohio Republican Rep. Warren Davidson and California Democratic Rep. Anna Eshoo.

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  • Italy ties China’s hands at Pirelli over fears about chip technology | CNN Business

    Italy ties China’s hands at Pirelli over fears about chip technology | CNN Business

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    London
    CNN
     — 

    Italy has imposed several curbs on Pirelli’s biggest shareholder, Sinochem, in a move aimed at blocking the Chinese government’s access to sensitive chip technology.

    The Italian government decided last week to make use of its so-called “Golden Power” regulations, designed to protect assets of strategic importance to the country, Pirelli said in a statement Sunday.

    The government order risks inflaming tensions between Europe and Beijing, and follows similar intervention by Germany and the United Kingdom to protect their semiconductor technology.

    Earlier this year, Europe joined a US-led effort to restrict China’s access to the most advanced chipmaking technology when the Netherlands — home to ASML Holding, a key supplier to the global semiconductor industry — said it would introduce export controls.

    Italy’s move comes as US Secretary of State Antony Blinken wraps up a high-stakes visit to China aimed at repairing strained relations between the world’s two biggest economies.

    Sinochem, owned by the Chinese government, is Pirelli’s biggest single shareholder, with a 37% stake, and has 60% of seats on the board of the Italian tire maker. CNN has contacted Sinochem for comment.

    In a statement Friday, the Italian government said Pirelli’s Cyber Tyre, which uses chip technology to collect vehicle data, is “configured as a critical technology of national strategic importance.”

    “Improper use of this technology can pose significant risks not only to the confidentiality of user data, but also to the possible transfer of information relevant to security,” the statement added.

    The order sets a host of limitations on Sinochem’s involvement in Pirelli, including a bar on it devising the company’s strategy and financial plans, or appointing a CEO.

    The government said these curbs would protect the “autonomy” of Pirelli and its management, as well as “information of strategic importance.”

    Europe is heavily reliant on China for trade and investment, but relations have come under strain from ideological differences, including over Russia’s war in Ukraine, and recent moves by European Union regulators and governments to limit China’s access to sensitive technology.

    The order takes a page out of this playbook. It requires that Pirelli refuse any requests from Sinochem’s owner — China’s State-owned Assets Supervision and Administration Commission of the State Council — for information sharing, including any information connected to the “know-how” of proprietary technologies.

    The government said “some” strategic decisions would require approval from at least 80% of board directors, a further limitation on Sinochem’s influence.

    Separately, Rome is also assessing whether to renew its partnership with Beijing on the Belt and Road Initiative — China’s global infrastructure and investment megaproject. Italy is the only Group of Seven nation to have joined the initiative.

    In a further sign of the steps multinational companies are beginning to consider to protect their operations from growing geopolitical friction, drugmaker AstraZeneca

    (AZN)     has drawn up plans to spin off its China business and list it separately in Hong Kong, according to the Financial Times. AstraZeneca

    (AZN)     declined to comment.

    Earlier this month, Sequoia Capital, the Silicon Valley venture capital group, said it would separate its China investments into an independent unit.

    On Tuesday, the European Commission will unveil measures — possibly including screening of outbound investments and export controls — to keep prized EU technology from countries such as China, Reuters reported.

    — Laura He in Hong Kong contributed to this article.

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  • Federal judge rules Google tried to ‘hide the ball’ by deleting chat logs in a big antitrust case | CNN Business

    Federal judge rules Google tried to ‘hide the ball’ by deleting chat logs in a big antitrust case | CNN Business

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    Washington
    CNN
     — 

    Google intentionally sought to “hide the ball” in a high-profile antitrust case by automatically deleting employee chat messages that could have been used as evidence in the suit, a federal judge ruled Tuesday, dealing a blow to the tech giant.

    The ruling condemns Google’s document preservation practices and their impact on litigation, which could have a broader impact as the company defends a range of suits on multiple fronts.

    Google will not face immediate sanctions for its missteps apart from having to cover the legal fees that plaintiffs incurred in bringing the sanctions motion, wrote Judge James Donato in his order. A non-monetary penalty could still be imposed following further court proceedings. But Donato repeatedly criticized Google this week for trying to keep sensitive chat logs out of the record.

    “The Court concludes that Google intended to subvert the discovery process, and that Chat evidence was ‘lost with the intent to prevent its use in litigation’ and ‘with the intent to deprive another party of the information’s use in the litigation,’” Donato wrote.

    In what Donato described as a “fundamental problem,” Google appeared to turn a blind eye to employees’ liberal use of a chat feature that deletes the logs after 24 hours, according to the ruling. The feature enabled Google employees to have conversations about topics relevant to its app store practices — and the topic of the lawsuit — with greater confidence the messages would not be used in court. Employees were also given the discretion to determine for themselves what constituted conversations that needed to be preserved, Donato wrote.

    That was “in sharp contrast” to how Google automatically preserves company emails that are subject to a litigation hold, he added, saying that Google omitted any mention of its practices surrounding chats until it was specifically forced to address the matter by the plaintiffs’ sanctions motion.

    The Justice Department has filed a similar sanctions motion against Google in an ongoing antitrust suit over Google’s search business. Though that case is unfolding in a different federal court, Donato’s ruling Tuesday could give other courts more ammunition to reach the same conclusion.

    In a statement, Google said it has endeavored to meet its discovery obligations.

    “Our teams have conscientiously worked, for years, to respond to Epic and the state AGs’ discovery requests and we have produced over three million documents, including thousands of chats,” said a Google spokexperson. “We’ll continue to show the court how choice, security, and openness are built into Android and Google Play.”

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  • 5 ways a debt default could affect you | CNN Politics

    5 ways a debt default could affect you | CNN Politics

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    CNN
     — 

    President Joe Biden and House Republicans may have as little as a month to prevent the US from defaulting on its debt, which would impact millions of Americans and unleash economic and fiscal chaos here and around the world.

    Treasury Secretary Janet Yellen warned Monday that the government may not be able to pay all of its bills in full and on time as soon as June 1. However, the forecast was uncertain, and the default date might come several weeks later, she said. The US hit its $31.4 trillion debt ceiling in January, and Treasury has been using cash and “extraordinary measures” to satisfy obligations since then.

    Just what would happen if the nation defaults on its debt is unknown since it’s never actually happened before. A close call in 2011 roiled the financial markets and prompted Standard & Poor’s to downgrade the US’ credit rating to AA+ from AAA.

    Yellen gave a sense of the turmoil it would cause in her letter to House Speaker Kevin McCarthy on Monday.

    “If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she wrote.

    To be clear, a debt default doesn’t mean all payments would stop and people would permanently lose out on money they are owed. Treasury would have the funds to satisfy some obligations, but it’s not certain how the agency would handle the disbursements. Much would also depend on how long it takes Congress to address the borrowing cap.

    “Tens of millions of people across the country who expect payments from the federal government may not get them on time,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center.

    Here are five ways that Americans could be affected by debt default:

    About 66 million retirees, disabled workers and others receive monthly Social Security benefits. The average payment for retired workers is $1,827 a month in 2023.

    Almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.

    These payments could be delayed in a debt default scenario, though it’s possible Treasury could continue making on-time payments because of the entitlement program’s trust fund, Akabas said.

    The benefits are disbursed four times a month, on the third day of the month and on three Wednesdays. Roughly $25 billion a week is sent out, according to the Congressional Budget Office.

    “Even a short delay in the payment of Social Security benefits would be a burden for the millions of Americans who rely on their earned benefits to pay for out-of-pocket health care expenses, food, rent and utilities,” Max Richtman, the committee’s CEO, said in a statement.

    Many other government payments could also be affected, including funding for food stamps; federal grants to states and municipalities for Medicaid, highways, education and other programs; and Medicare payments to hospitals, doctors and health insurance plans.

    More than 2 million federal civilian workers and around 1.4 million active-duty military members could see their paychecks delayed. Federal government contractors could also see a lag in payments, which could affect their ability to compensate their workers.

    Also, certain veterans benefits, including disability payments and pensions for some low-income veterans and their surviving families, could be affected.

    “Such calamity would place further stress on our servicemembers, retirees, and veterans, as well as their families, caregivers, and survivors,” Rene Campos, senior director of government relations for the Military Officers Association of America, said in a blog post. “Though life in uniform is not always predictable, those who serve or have served their country expect their country to honor their commitment to service.”

    About $25 billion in pay or benefits for active-duty members of the military, civil service and military retirees, veterans and recipients of Supplemental Security Income is sent out on the first day of the month, according to the CBO.

    Americans’ investments would take a direct hit. Case in point: Markets had what was then their worst week since the financial crisis during the 2011 debt ceiling standoff after the Standard & Poor’s downgrade.

    Even if the debt ceiling impasse is resolved soon after a default, stocks could shed as much as a third of their value. That would wipe out around $12 trillion in household wealth, according to Moody’s Analytics.

    If a default occurs, yields on US Treasuries will inevitably rise to compensate for the increased risk that bondholders won’t receive the money they’re owed from the government.

    Since interest rates on loans, credit cards and mortgages are often based on Treasury yields, the cost of borrowing money and paying off debt would rise. That’s on top of the increased costs Americans are already facing from the Federal Reserve rate hikes.

    Families and businesses would also have a tougher time getting approved for lines of credit since banks would have to be more selective about to whom they loan money. That’s because their costs of borrowing money will also rise, which limits the amount of money they can lend out.

    A debt default could trigger an economic downturn, which would prompt a spike in unemployment. It would come at a particularly fragile time – when the nation is already dealing with rising interest rates and stubbornly high inflation.

    How much damage would be done would depend on how long the crisis continues. If the default lasts for about a week, then close to 1 million jobs would be lost, including in the financial sector, which would be hard hit by the stock market declines. Also, the unemployment rate would jump to about 5% and the economy would contract by nearly half a percent, according to Moody’s.

    But if the impasse dragged on for six weeks, then more than 7 million jobs would be lost, the unemployment rate would soar above 8% and the economy would decline by more than 4%, according to Moody’s. The effects would still be felt a decade from now.

    “It would be a body blow to the economy, and it would be a manufactured crisis,” said Bernard Yaros, an economist at Moody’s.

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