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The U.S. House of Representatives on Wednesday voted 241-187 in favor of a procedural measure tied to a crucial debt-limit bill, keeping the Republican-run chamber on track to hold its actual vote on that bill around 8:30 p.m. Eastern.
There were 189 Republicans and 52 Democrats voting “yea” for the procedural measure, while 29 Republicans and 158 Democrats voted “nay.”
Those…
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Lawmakers and the White House appear set to avert a calamitous U.S. government default, but stock-market investors need to be aware that what comes next could still make for a bumpy ride.
“Some time in the next several days, markets will trade their last bit of angst over raising the debt ceiling for what was always going to be the real problem — handling the massive fundraise by Treasury,” said Steven Blitz, chief U.S. economist at TS Lombard, in a Wednesday note warning of a “potent liquidity squeeze” ahead.
For…
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BEIJING (AP) — Asian stock markets sank Wednesday ahead of a vote by Congress on a deal to avert a government debt default, while a downturn in Chinese factory activity deepened, adding to signs global economic activity is weakening.
Shanghai, Tokyo, Hong Kong and Sydney retreated. Oil prices declined.Wall Street’s benchmark S&P 500 index edged up less than 0.1% on Tuesday as President Joe Biden and U.S. House Speaker Kevin McCarthy tried to line up votes in support of their deal to allow the government to borrow more. Without…
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WASHINGTON — Even with the new spending restraints in the debt limit deal that cut borrowing by $1.5 trillion, the U.S. government’s deficits are still on course to keep climbing to record levels over the next few decades.
The projections are a sign that the two-year truce between President Joe Biden and House Speaker Kevin McCarthy, R-Calif., might be only a pause before a far more wrenching set of showdowns over the federal budget. The Congressional Budget Office said Tuesday that the agreement would reduce spending by $1.3 trillion and interest payments by $188 billion over 10 years. But that sum is too modest to fully offset the growing costs of Social Security, Medicare and Medicaid.
Both Biden and McCarthy ruled out any cuts to Social Security and Medicare, two programs that benefit older voters, before their teams even began their budget talks. That omission reflects the politics around two popular programs as Democrats and Republicans prepare for next year’s presidential election.
It also means the agreement finalized on Sunday keeps the risk of ever-escalating debt on the table, setting up the possibility of another bruising battle when the debt limit needs to be raised again in 2025.
“You should think of this as one step,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget. “The question is, can they take the next step after that?”
Lawmakers know there are difficult choices ahead and that the only way through them likely involves some combination of deep spending cuts, broad tax hikes and major changes to the retirement income and health care programs that consume an ever-growing share of federal spending.
Mandatory spending — which includes Social Security, Medicare and Medicaid — already account for the majority of government spending. That category is equal in size to 14% of U.S. gross domestic product, and the CBO expects it will grow to 15.6% by 2023. By contrast, discretionary spending was 6.5% of gross domestic product last year and was already projected to fall to 6% within 10 years.
Goldwein said he’s optimistic that leaders in both parties will find ways to reduce the growth in spending for health care programs. Social Security will also face a reckoning as its trust fund will be unable to pay out full benefits within a decade.
But some budget experts saw the deal as more focused on optics than sustainability.
“This debt limit agreement is shaking out to be a political face-saving deal without much substance in terms of changing the U.S. debt trajectory,” said Romina Boccia, director of budget and entitlement policy at the libertarian Cato Institute.
The agreement, which still has to be approved by Congress, would hold discretionary spending essentially flat for the coming year, while allowing increases for military and veterans accounts. Spending growth would be capped at 1% for 2025, essentially a cut given the likely rate of inflation.
Some Democratic allies see the deal as problematic because it cedes ground to Republicans who want to use the debt limit fight as an opportunity to press their policy aims, despite the risk of a default.
“Looking forward, we must find a path to abolish the debt ceiling and end the absurd debt ceiling hostage-taking that Republicans engage in when they can use it as a bludgeon against a Democratic president,” said Sharon Parrott, president of the Center on Budget and Policy Priorities, a liberal think tank.
Other economic analysts took issue with GOP suggestions that the U.S. was already hamstrung by debt, even though investors continue, for the moment, to buy Treasury notes. While total federal debt — including money the government owes itself — exceeds $31 trillion, the U.S. economy possesses more than $143 trillion worth of non-financial assets in a sign that the current debt loads are manageable.
“It is simply not true that the United States is broke and on the verge of a debt and deficit crisis,” said Joe Brusuelas, chief economist at the consultancy RSM U.S.
But even if there isn’t an immediate reckoning over debt, there is a long-term problem that the talks purposefully ignored. The president challenged Republicans to shield Social Security and Medicare from cuts at his State of the Union address in February. GOP lawmakers jeered him for suggesting they would dare to cut the programs, leading Biden to declare, “We’ve got unanimity.”
Biden specifically hailed the bipartisan agreement on Sunday for protecting Social Security and Medicare, while saying the agreement that must pass the House and Senate would prevent a possibly catastrophic default that could occur on June 5.
“This is a deal that’s good news,” the president said, “for the American people.”
Yet House members received a specific briefing in March indicating that entitlement programs would drive up the debt. CBO director Phillip Swagel gave a presentation showing that publicly held debt would more than double to 195% of gross domestic product in 2053. The key challenge is that an aging population means that programs for older people have costs that exceed tax revenues.
Swagel provided 17 policy options for reducing the debt, six of which were tax hikes that could raise trillions of dollars over 10 years. Tax increases have been a nonstarter with Republicans, while Democrats have generally shied away from reductions to benefits.
His slide deck included this warning: “The longer action is delayed, the larger the policy changes would need to be.”
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The Democratic president and Republican speaker spoke with each other Sunday evening as negotiators rushed to draft the bill text so lawmakers can review compromises that neither the hard-right or left flank is likely to support. Instead, the leaders are working to gather backing from the political middle as Congress hurries toward votes before a June 5 deadline to avert a damaging federal default.
“Good news,” Biden declared Sunday evening at the White House.
“The agreement prevents the worst possible crisis, a default, for the first time in our nation’s history,” he said. “Takes the threat of a catastrophic default off the table.”
The president urged both parties in Congress to come together for swift passage. “The speaker and I made clear from the start that the only way forward was a bipartisan agreement,” he said.
The compromise announced late Saturday includes spending cuts but risks angering some lawmakers as they take a closer look at the concessions. Biden told reporters at the White House upon his return from Delaware that he was confident the plan will make it to his desk.
McCarthy, too, was confident in remarks at the Capitol: “At the end of the day, people can look together to be able to pass this.”
The days ahead will determine whether Washington is again able to narrowly avoid a default on U.S. debt, as it has done many times before, or whether the global economy enters a potential crisis.
In the United States, a default could cause financial markets to freeze up and spark an international financial crisis. Analysts say millions of jobs would vanish, borrowing and unemployment rates would jump, and a stock-market plunge could erase trillions of dollars in household wealth. It would all but shatter the $24 trillion market for Treasury debt.
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due soon as the world watches American leadership at stake.
McCarthy and his negotiators portrayed the deal as delivering for Republicans though it fell well short of the sweeping spending cuts they sought. Top White House officials were briefing Democratic lawmakers and phoning some directly to try to shore up support.
As Sunday dragged on, negotiators labored to write the bill text and lawmakers raised questions.
McCarthy told reporters at the Capitol on Sunday that the agreement “doesn’t get everything everybody wanted,” but that was to be expected in a divided government. Privately, he told lawmakers on a conference call that Democrats “got nothing” they wanted.
A White House statement from the president, issued after Biden and McCarthy spoke by phone Saturday evening and an agreement in principle followed, said the deal “prevents what could have been a catastrophic default.”
Support from both parties will be needed to win congressional approval before a projected June 5 government default on U.S. debts. Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.
Negotiators agreed to some Republican demands for increased work requirements for recipients of food stamps that House Democrats had called a nonstarter.
With the outlines of an agreement in place, the legislative package could be drafted and shared with lawmakers in time for House votes as soon as Wednesday, and later in the coming week in the Senate.
Central to the compromise is a two-year budget deal that would essentially hold spending flat for 2024, while boosting it for defense and veterans, and capping increases at 1% for 2025. That’s alongside raising the debt limit for two years, pushing the volatile political issue past the next presidential election.
Driving hard to impose tougher work requirements on government aid recipients, Republicans achieved some of what they wanted. It ensures people ages 49 to 54 with food stamp aid would have to meet work requirements if they are able-bodied and without dependents. Biden was able to secure waivers for veterans and homeless people.
The deal puts in place changes in the landmark National Environmental Policy Act designating “a single lead agency” to develop environmental reviews, in hopes of streamlining the process.
It halts some funds to hire new Internal Revenue Service agents as Republicans demanded, and rescinds some $30 billion for coronavirus relief, keeping $5 billion for developing the next generation of COVID-19 vaccines.
The deal came together after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers did not act in time. Lifting the nation’s debt limit, now at $31 trillion, allows more borrowing to pay bills already insurred.
McCarthy commands only a slim Republican majority in the House, where hard-right conservatives may resist any deal as insufficient as they try to slash spending. By compromising with Democrats, he risks losing support from his own members, setting up a career-challenging moment for the new speaker.
“I think you’re going to get a majority of Republicans voting for this bill,” McCarthy said on “Fox News Sunday,” adding that because Biden backed it, “I think there’s going to be a lot of Democrats that will vote for it, too.”
House Democratic leader Hakeem Jeffries of New York said on CBS’ “Face the Nation” that he expected there will be Democratic support but he declined to provide a number. Asked whether he could guarantee there would not be a default, he said, “Yes.”
A 100-strong group of moderates in the New Democratic Coalition gave a crucial nod of support on Sunday, saying in a statement it was confident that Biden and his team “delivered a viable, bipartisan solution to end this crisis” and were working to ensure the agreement would receive support from both parties.
The coalition could provide enough support for McCarthy to make up for members in the right flank of his party who have expressed opposition before the bill’s wording was even released.
It also takes pressure off Biden, facing criticism from progressives for giving into what they call hostage-taking by Republicans.
Democratic Rep. Pramila Jayapal of Washington state, who leads the Congressional Progressive Caucus, told CBS that the White House and Jeffries should worry about whether caucus members will support the agreement.
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WASHINGTON — The reviews are starting to come in as details emerge about the debt ceiling agreement reached by President Joe Biden and House Speaker Kevin McCarthy.
Already, some lawmakers are criticizing the deal as not doing enough to tackle the nation’s debt, while others worry it’s too austere and will harm many low-income Americans.
The legislation will likely need support from a significant number of lawmakers from both parties to clear the closely divided House and gain the 60 votes necessary to advance in the Senate.
Final text of the agreement is expected Sunday. Many lawmakers say they are withholding judgment until they see the final details.
A look at how the agreement is going over so far:
EARLY CONCERNS
Some of the earliest objections are coming from the most conservative members of Congress, particularly members of the hardline House Freedom Caucus that often clashes with GOP leadership.
“I think it’s a disaster!” tweeted Matt Rosendale, R-Mont.
“Fake conservatives agree to fake spending cuts,” tweeted Sen. Rand Paul, R-Ky.
“This ‘deal’ is insanity,” tweeted Rep. Ralph Norman, R-S.C. “A $4T debt ceiling increase with virtually no cuts is not what we agreed to. Not gonna vote to bankrupt our country. The American people deserve better.”
GOP leaders knew all along that they would lose some members’ support in any compromise with a Democratic-led White House and Senate. The question has always been whether the deal would pick up enough Democratic support to offset those defections.
DEMOCRATS WEIGH IN
As much as some Democrats dislike what is roughly a spending freeze on non-defense programs next year and chafe at work requirements being extended to more food stamp recipients, initial reaction has been circumspect as they await more details.
Rep. Annie Kuster, D-N.H., and chair of a center-left group known as the New Dems, which has roughly 100 members, said they are “confident” that White House negotiators delivered a “viable, bipartisan solution to end this crisis.”
The likeliest opposition will come from the more liberal members of the caucus. Rep. Pramila Jayapal, D-Wash., has been voicing vocal opposition to additional work requirements for some of those getting food and cash assistance. She called it terrible policy Sunday on CNN’s “State of the Union.”
But she said she is also waiting for legislative text to determine the level of exemptions to the work requirements that Biden was able to win for veterans, the homeless and people coming out of foster care.
“And so what do the numbers look like at the end of the day, I’m not sure. However, it is bad policy. I told the president that directly when he called me last week on Wednesday that this is saying to poor people and people who are in need that we don’t trust them,” said Jayapal, who serves as chair of the Congressional Progressive Caucus.
Asked if the Democrats at the White House and in leadership have to worry about whether the progressive caucus will support the bill, Jayapal said: “Yes, they have to worry.”
BUSINESS GROUP BACKING
With the nation roughly a week away from the risk of a default that could roil the global economy, major business groups have been urging Washington to quickly on a debt-ceiling increase.
The Business Roundtable, a group of more than 200 chief executive officers, called on Congress to pass the bill as soon as possible.
“In addition to raising the debt ceiling, this agreement takes steps toward putting the U.S. on a more sustainable fiscal trajectory. This deal also makes a down payment on permitting reform, helping to clear the path for new energy infrastructure projects,” said the group’s CEO, Joshua Bolten.
The U.S. Chamber of Commerce also urged a yes vote and noted that the vote will be included when the group rates or “scorecards” members of Congress based on how they vote on business priorities.
Economists have been clear that the economy would be roiled with even a short-term breach in the nation’s ability to fully pay its bills as interest rates would rise and financial markets swoon.
“The gravity of this moment cannot be overstated,” said Suzanne Clark, the business group’s president and CEO.
WATCHDOG GROUPS APPROVE
Some advocacy groups have long warned of the propensity of Congress to enact policy priorities without fully paying for them. Their concerns generally go unheeded. But some see the agreement as a step in the right direction.
The Committee for a Responsible Federal Budget noted that if the legislation passes, it would be the first major deficit-reducing budget agreement in almost a dozen years.
“”The process was tense, risky and ugly, but in the end, we have a plan to enact savings and lift the debt ceiling, and that is what is needed,” said Maya MacGuineas, the group’s president.
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WASHINGTON — The reviews are starting to come in as details emerge about the debt ceiling agreement reached by President Joe Biden and House Speaker Kevin McCarthy.
Already, some lawmakers are criticizing the deal as not doing enough to tackle the nation’s debt, while others worry it’s too austere and will harm many low-income Americans.
The legislation will likely need support from a significant number of lawmakers from both parties to clear the closely divided House and gain the 60 votes necessary to advance in the Senate.
Final text of the agreement is expected Sunday. Many lawmakers say they are withholding judgment until they see the final details.
A look at how the agreement is going over so far:
EARLY CONCERNS
Some of the earliest objections are coming from the most conservative members of Congress, particularly members of the hardline House Freedom Caucus that often clashes with GOP leadership.
“I think it’s a disaster!” tweeted Matt Rosendale, R-Mont.
“Fake conservatives agree to fake spending cuts,” tweeted Sen. Rand Paul, R-Ky.
“This ‘deal’ is insanity,” tweeted Rep. Ralph Norman, R-S.C. “A $4T debt ceiling increase with virtually no cuts is not what we agreed to. Not gonna vote to bankrupt our country. The American people deserve better.”
GOP leaders knew all along that they would lose some members’ support in any compromise with a Democratic-led White House and Senate. The question has always been whether the deal would pick up enough Democratic support to offset those defections.
DEMOCRATS WEIGH IN
As much as some Democrats dislike what is roughly a spending freeze on non-defense programs next year and chafe at work requirements being extended to more food stamp recipients, initial reaction has been circumspect as they await more details.
Rep. Annie Kuster, D-N.H., and chair of a center-left group known as the New Dems, which has roughly 100 members, said they are “confident” that White House negotiators delivered a “viable, bipartisan solution to end this crisis.”
The likeliest opposition will come from the more liberal members of the caucus. Rep. Pramila Jayapal, D-Wash., has been voicing vocal opposition to additional work requirements for some of those getting food and cash assistance. She called it terrible policy Sunday on CNN’s “State of the Union.”
But she said she is also waiting for legislative text to determine the level of exemptions to the work requirements that Biden was able to win for veterans, the homeless and people coming out of foster care.
“And so what do the numbers look like at the end of the day, I’m not sure. However, it is bad policy. I told the president that directly when he called me last week on Wednesday that this is saying to poor people and people who are in need that we don’t trust them,” said Jayapal, who serves as chair of the Congressional Progressive Caucus.
Asked if the Democrats at the White House and in leadership have to worry about whether the progressive caucus will support the bill, Jayapal said: “Yes, they have to worry.”
BUSINESS GROUP BACKING
With the nation roughly a week away from the risk of a default that could roil the global economy, major business groups have been urging Washington to quickly on a debt-ceiling increase.
The Business Roundtable, a group of more than 200 chief executive officers, called on Congress to pass the bill as soon as possible.
“In addition to raising the debt ceiling, this agreement takes steps toward putting the U.S. on a more sustainable fiscal trajectory. This deal also makes a down payment on permitting reform, helping to clear the path for new energy infrastructure projects,” said the group’s CEO, Joshua Bolten.
The U.S. Chamber of Commerce also urged a yes vote and noted that the vote will be included when the group rates or “scorecards” members of Congress based on how they vote on business priorities.
Economists have been clear that the economy would be roiled with even a short-term breach in the nation’s ability to fully pay its bills as interest rates would rise and financial markets swoon.
“The gravity of this moment cannot be overstated,” said Suzanne Clark, the business group’s president and CEO.
WATCHDOG GROUPS APPROVE
Some advocacy groups have long warned of the propensity of Congress to enact policy priorities without fully paying for them. Their concerns generally go unheeded. But some see the agreement as a step in the right direction.
The Committee for a Responsible Federal Budget noted that if the legislation passes, it would be the first major deficit-reducing budget agreement in almost a dozen years.
“”The process was tense, risky and ugly, but in the end, we have a plan to enact savings and lift the debt ceiling, and that is what is needed,” said Maya MacGuineas, the group’s president.
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WASHINGTON — President Joe Biden and House Speaker Kevin McCarthy reached an “agreement in principle” to raise the nation’s legal debt ceiling late Saturday as they raced to strike a deal to limit federal spending and avert a potentially disastrous U.S. default.
However, the agreement risks angering both Democratic and Republican sides with the concessions made to reach it. Negotiators agreed to some Republican demands for increased work requirements for recipients of food stamps that had sparked an uproar from House Democrats as a nonstarter.
Support from both parties will be needed to win congressional approval next week before a June 5 deadline.
The Democratic president and Republican speaker reached the agreement after the two spoke earlier Saturday evening by phone, said McCarthy. The country and the world have been watching and waiting for a resolution to a political standoff that threatened the U.S. and global economies.
“The agreement represents a compromise, which means not everyone gets what they want,” Biden said in a statement late Saturday night. “That’s the responsibility of governing,” he said.
Biden called the agreement “good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost.”
McCarthy in brief remarks at the Capitol, said that “we still have a lot of work to do.”
But the Republican speaker said: “I believe this is an agreement in principle that’s worthy of the American people.”
With the outlines of a deal in place, the legislative package could be drafted and shared with lawmakers in time for votes early next week in the House and later in the Senate.
Central to the package is a two-year budget deal that would hold spending flat for 2024 and impose limits for 2025 in exchange for raising the debt limit for two years, pushing the volatile political issue past the next presidential election.
The agreement would limit food stamp eligibility for able-bodied adults up to age 54, but Biden was able to secure waivers for veterans and the homeless.
The two sides had also reached for an ambitious overhaul of federal permitting to ease development of energy projects and transmission lines. Instead, the agreement puts in place changes in the the National Environmental Policy Act that will designate “a single lead agency” to develop economic reviews, in hopes of streamlining the process.
The deal came together after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers did not act in time to raise the federal debt ceiling. The extended “X-date” gave the two sides a bit of extra time as they scrambled for a deal.
Biden also spoke earlier in the day with Democratic leaders in Congress to discuss the status of the talks.
The Republican House speaker had gathered top allies behind closed doors at the Capitol as negotiators pushed for a deal that would avoid a first-ever government default while also making spending cuts that House Republicans are demanding.
But as another day dragged on with financial disaster looming closer, it had appeared some of the problems over policy issues that dogged talks all week remained unresolved.
Both sides have suggested one of the main holdups was a GOP effort to expand work requirements for recipients of food stamps and other federal aid programs, a longtime Republican goal that Democrats have strenuously opposed. The White House said the Republican proposals were “cruel and senseless.”
Biden has said the work requirements for Medicaid would be a nonstarter. He seemed potentially open to negotiating minor changes on food stamps, now known as the Supplemental Nutrition Assistance Program, or SNAP, despite objections from rank-and-file Democrats.
McCarthy, who dashed out before the lunch hour Saturday and arrived back at the Capitol with a big box of takeout, declined to elaborate on those discussions. One of his negotiators, Louisiana Rep. Garret Graves, said there was “not a chance” that Republicans might relent on the work requirements issue.
Americans and the world were uneasily watching the negotiating brinkmanship that could throw the U.S. economy into chaos and sap world confidence in the nation’s leadership.
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due next week.
Yellen said failure to act by the new date would “cause severe hardship to American families, harm our global leadership position and raise questions about our ability to defend our national security interests.”
The president, spending part of the weekend at Camp David, continued to talk with his negotiating team multiple times a day, signing off on offers and counteroffers.
Any deal would need to be a political compromise in a divided Congress. Many of the hard-right Trump-aligned Republicans in Congress have long been skeptical of the Treasury’s projections, and they are pressing McCarthy to hold out.
Lawmakers are not expected to return to work from the Memorial Day weekend before Tuesday, at the earliest, and McCarthy has promised lawmakers he will abide by the rule to post any bill for 72 hours before voting.
The Democratic-held Senate has largely stayed out of the negotiations, leaving the talks to Biden and McCarthy. Senate Majority Leader Chuck Schumer of New York has pledged to move quickly to send a compromise package to Biden’s desk.
Weeks of talks have failed to produce a deal in part because the Biden administration resisted for months on negotiating with McCarthy, arguing that the country’s full faith and credit should not be used as leverage to extract other partisan priorities.
But House Republicans united behind a plan to cut spending, narrowly passing legislation in late April that would raise the debt ceiling in exchange for the spending reductions.
With the outlines of a deal in place, the legislative package could be drafted and shared with lawmakers in time for votes early next week in the House and later in the Senate.
Central to the package is a two-year budget deal that would hold spending flat for 2024 and impose limits for 2025 in exchange for raising the debt limit for two years, pushing the volatile political issue past the next presidential election.
Background: What’s in the emerging debt-ceiling deal? A cut to IRS funding, among other items.
Negotiators agreed to some Republican demands for enhanced work requirements on recipients of food stamps that had sparked an uproar from House Democrats as a nonstarter.
Biden also spoke earlier in the day with Democratic leaders in Congress to discuss the status of the talks, according to three people familiar with the situation, who spoke on condition of anonymity because they were not authorized to discuss the matter publicly.
The Republican House speaker had gathered top allies behind closed doors at the Capitol as negotiators pushed for a deal that would raise the nation’s borrowing limit and avoid a first-ever default on the federal debt, while also making spending cuts that House Republicans are demanding.
As he arrived at the Capitol early in the day, McCarthy said that Republican negotiators were “closer to an agreement.”
McCarthy’s comments had echoed the latest public assessment from Biden, who said Friday evening that bargainers were “very close.” Biden and McCarthy last met face-to-face on the matter Monday.
Their new discussion Saturday by phone came after Treasury Secretary Janet Yellen told Congress that the United States could default on its debt obligations by June 5 — four days later than previously estimated — if lawmakers do not act in time to raise the federal debt ceiling. The extended “X-date” gives the two sides a bit of extra time as they scramble for a deal.
Americans and the world were uneasily watching the negotiating brinkmanship that could throw the U.S. economy into chaos and sap world confidence in the nation’s leadership. House negotiators left the Capitol at 2 a.m. the night before, only to return hours later.
Failure to lift the borrowing limit, now $31 trillion, to pay the nation’s incurred bills, would send shockwaves through the U.S. and global economy. Yellen said failure to act by the new date would “cause severe hardship to American families, harm our global leadership position and raise questions about our ability to defend our national security interests.”
Anxious retirees and others were already making contingency plans for missed checks, with the next Social Security payments due next week.
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BRUSSELS — The European Union has been at the forefront of the fight against climate change and the protection of nature for years. But it now finds itself under pressure from within to pause new environmental efforts amid fears they will hurt the economy.
With the next European Parliament elections set for 2024, some leaders and lawmakers are concerned about antagonizing workers and voters with new binding legislation and restrictive measures and are urging the 27-nation bloc to hit the brakes.
Since Ursula von der Leyen took the helm of the powerful European Commission back in 2019, environmental policies have topped the EU agenda. EU nations have endorsed plans to become climate neutral by 2050 and adopted a wide range of measures, from reducing energy consumption to sharply cutting transport emissions and reforming the EU’s trading system for greenhouse gases.
But cracks in the European united front against climate change have emerged in recent months.
The first sign was earlier this year when Germany, the bloc’s economic giant, delayed a deal to ban new internal combustion engines in the EU by 2035 amid ideological divisions inside the German government.
An agreement was finally reached in March, but just weeks later, the bloc’s other powerhouse, France, called for a pause on EU environmental regulation, causing controversy.
As he presented a bill on green industry earlier this month, French President Emmanuel Macron said it was time for the EU to implement existing rules before adopting new ones.
“We have already passed a lot of regulations at European level, more than our neighbors,” he said. “Now we have to execute, not make new rules, because otherwise we will lose all players.”
Macron has been particularly concerned by a U.S. clean energy law that benefits electric vehicles and other products made in North America, fearing it will expose European companies to unfair competition. Although Europeans and their American partners keep working to resolve the challenges posed by the U.S. law, Macron’s logic basically holds that a pause on environmental constraints would help EU businesses keep producing on home soil, despite competition from countries such as China that have lower environmental standards.
Belgian Prime minister Alexander De Croo quickly followed suit, calling this week for a moratorium on the introduction of EU legislation aimed at nature preservation, creating a rift within the governing coalition including green politicians.
The law proposed by the EU’s executive arm aims, by 2030, to cover at least 20% of the EU’s land and sea areas with nature restoration measures, “and eventually extend these to all ecosystems in need of restoration by 2050,” the commission said.
De Croo said that climate legislation should not be overloaded with restoration measures or limits on agricultural nitrogen pollution, warning that businesses would no longer be able to keep up.
“That’s why I’m asking that we press the pause button,” he told VRT network. “Let’s not go too far with things that, strictly speaking, have nothing to do with global warming. These other issues are important too, but measures to address them must be taken in phases.”
Macron and De Croo have found allies at the European Parliament, where members of the biggest group, the Christian Democrat EPP, have asked the European Commission to withdraw the nature restoration law proposal on grounds that it will threaten agriculture and undermine food security in Europe.
The move came after two parliamentary committees, the Fisheries Committee and the Agriculture Committee, rejected the planned legislation.
EPP lawmakers claim that abandoning farmland will lead to an increase in food prices, more imports and drive farmers out of businesses.
“This is an exceptional step and shows that the Parliament is not ready to accept a proposal that only increases costs and insecurity for farmers, fishers and consumers,” said Siegfried Mureşan, the vice-chairman of the EPP Group responsible for budget and structural policies.
The growing opposition to the nature restoration law has caused great concern among environmental NGOs, and Frans Timmermans, the EU Commission’s top climate official in charge of its Green Deal, warned he would not put forward an alternative proposal because there isn’t time.
“You can’t say I support the Green Deal, but not the ambition to restore nature. It’s not ‘à la carte menu,’” Timmermans said.
The EU commission has also proposed setting legally binding targets to reduce the use of pesticides by 50% by 2030 and a ban on all pesticide use in public parks, playgrounds and schools. To ease the transition to alternative pest control methods, farmers would be able to use EU funds to cover the cost of the new requirements for five years.
“If one piece falls, the other pieces fall. I don’t see how we can maintain the Green Deal without the nature pillar, because without the nature pillar, the climate pillar is also not viable,” Timmermans told EU lawmakers. “So we need to get these two together.”
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WASHINGTON — Commerce Secretary Gina Raimondo and her Chinese counterpart, Wang Wentao, expressed concern Thursday about policies of each other’s governments following Chinese raids on consulting firms and U.S. curbs on exports of semiconductor technology, their governments said.
The two sides announced no progress in disputes over technology and security but said Raimondo and Wang promised to strengthen exchanges on trade issues.
Companies from both sides have been buffeted by tighter official controls on trade in semiconductors and other activity on security grounds. Political relations between the two governments are at their lowest level in decades following disputes over technology, security, China‘s territorial claims and Beijing’s treatment of Hong Kong and ethnic minorities.
Raimondo “raised concerns” about Chinese actions against U.S. companies in China, her office said in a statement. It said they also discussed the trade and investment environment and “areas for potential cooperation” but gave no details.
Chinese police raided offices of consultants Bain & Co. and Capvision and a due diligence firm, Mintz Group, following the expansion of national security and intelligence laws. Authorities have given no explanation for the raids.
The raids rattled foreign companies, which the British Chamber of Commerce in China said this week want “greater clarity” about enforcement. Chinese authorities have said companies are obliged to obey the law but have given no indication whether they see possible violations.
Wang “expressed key concerns” about U.S. policy on semiconductors, exports and trade, his ministry said. It gave no details.
Chinese leader Xi Jinping in March accused Washington of trying to hold back China’s development after the U.S. government blocked access to technology to manufacture advanced processor chips, hampering the ruling Communist Party’s efforts to develop its own semiconductor producers for smartphones, artificial intelligence and other advanced applications.
President Joe Biden has tightened restrictions imposed by his predecessor, Donald Trump, on access to design, manufacturing and other technologies that Washington and its allies say might be used to improve Chinese weapons at a time when Beijing is threatening to attack Taiwan and is involved in territorial disputes with other neighbors.
The two governments have yet to resume face-to-face negotiations over ending a tariff war that was sparked by Trump’s increase in import taxes on Chinese goods over complaints about Beijing’s industrial policy and complaints about technology theft.
Wang was due to meet later with the U.S. trade representative, Kathering Tai, according to the Chinese government.
Wang is in the United States to attend the Asia-Pacific Economic Cooperation meeting in Detroit.
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Pfizer Inc.
PFE,
said Thursday it has received full Food and Drug Administration approval for its Paxlovid oral treatment for COVID-19 for use in adult patients with high risk of developing severe disease. The treatment has been available in the U.S. since December of 2021 under an Emergency Use Authorization. To date, more than 11.6 million treatment courses have been prescribed. There are still about 14,500 reported cases of COVID in the U.S. every week, but many others are not reported. The U.S. ended the COVID public health emergency on May 11. Pfizer’s stock was down 2% Thursday, and has fallen 26% in the year to date, while the S&P 500 has gained 8%.
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U.S. stock futures were mixed Thursday as Nvidia results boosted tech but debt ceiling concerns weighed on the Dow.
On Wednesday, the Dow Jones Industrial Average
DJIA,
fell 256 points, or 0.77%, to 32800, the S&P 500
SPX,
declined 30 points, or 0.73%, to 4115, and the Nasdaq Composite
COMP,
dropped 76 points, or 0.61%, to 12484.
Recurring fiscal concerns are battling with a nascent technological paradigm for the market’s lead. Fears about the looming debt-ceiling deadline is counteracted by ebullience over AI to deliver a stark bifurcation.
Futures for the Dow Jones Industrial Average — a gauge arguably currently more sensitive to broader economic conditions — were under pressure early Thursday, while futures for the tech-rich Nasdaq 100 — powered by optimism over a secular AI shift — surged strongly.
“The prospect of the U.S. government being unable to meet its financial obligations continues to be a key influence on investor sentiment in global equity markets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.
Ructions at the short end of the Treasury market — where some 1-month bill yields
TMUBMUSD01Y,
broke above 7% — illustrate trader anxiety that unless Congress can reach an agreement to extend the debt-ceiling the U.S. government may technically default at the beginning of June.
Ratings agency Fitch late Wednesday said it was placing Washington’s AAA credit rating on watch for a possible downgrade given what it termed the debt ceiling “brinkmanship”.
However, results and comments from chipmaker Nvidia
NVDA,
whose stock is soaring 25% in premarket action, have boosted hopes that AI will deliver the next period of strong growth for a number of tech companies.
“The AI revolution may be making a lot of noise but results from microchip firm Nvidia hint at some substance behind the hype,” said Russ Mould, investment director at AJ Bell.
CS.ai Inc.
AI,
and Advanced Micro Devices
AMD,
were among those bathing in Nvidia’s AI glow early Thursday.
The optimism over semiconductors bade well for the wider tech sector, according to Mark Newton, head of technical strategy at Fundstrat: “Semis in relative terms to broader technology, have the potential to break back out to new all-time highs this week on a ratio basis. That would be important and positive for this leading sector to show such strength.”
U.S. economic updates set for release on Thursday include the weekly initial jobless claims data and the second reading of first quarter GDP, both at 8:30 a.m. Eastern. Pending home sales for April will be published at 10 a.m..
Fed officials making comments include Richmond Fed President Tom Barkin speaking at 9:50 a.m. and Boston Fed President Susan Collins talking at 10:30 a.m.
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If the U.S. government cannot pay all its bills because of a debt-ceiling impasse, household borrowing costs could soar, the job market could shed millions of jobs and stock-market valuations could shrink, according to forecasts.
The consequences of a prolonged default could be grim, according to Moody’s Analytics. The projected fallout from a brief default is less severe but still enough to push an “already fragile” economy into a mild recession, Moody’s says.
On Wednesday, Treasury Secretary Janet Yellen said it’s “almost certain” that the Treasury will run out of resources in early June. She also said she would provide a new update on the debt-limit deadline “pretty soon.”
For all the uncertainties, financial experts say there are ways individuals can prepare. Start by making sure your deposits are in accounts backed by the Federal Deposit Insurance Corp., and think hard about rate-sensitive purchases like a car or a house.
It’s important for people to have a plan in case there is a default, said Rob Williams, managing director of financial planning, retirement income and wealth management at the Schwab Center for Financial Research, a division of Charles Schwab Corp.
SCHW,
“On Wednesday, Treasury Secretary Janet Yellen said it’s ‘almost certain’ that the Treasury will run out of resources in early June.”
“Having a financial plan in place that looks at the long and short term is the best way to prepare for the debt ceiling or any other crisis,” he said.
There is still widespread expectation that Congress will strike a political deal that lifts the federal government’s $31 trillion borrowing limit. President Joe Biden and House Speaker Kevin McCarthy met again on Monday, and more talks are planned.
McCarthy on Wednesday said he “firmly believe[d]” the sides would reach a deal avoiding default.
But the window of time in which to act is getting smaller. It’s “highly likely” that the government will get to the point where it cannot pay all its bills and debt obligations in early June — possibly as early as June 1, Yellen said this week.
Meanwhile, new Federal Reserve figures offer a reminder that Americans’ personal finances over the last year have been under pressure, even as inflation rates retreat slowly.
More than one-third of people in the U.S. (35%) said they were worse off in 2022 than in 2021, according to the Fed’s annual look at economic well-being, released Monday.
That’s the largest percentage of people saying they were worse off since central bank researchers started asking the question nearly a decade ago.
“If there ever was a time for a rainy-day fund, this is it. But it’s not going to be able to help a lot of consumers,” said Rachel Gittleman, financial services outreach manager for the Consumer Federation of America.
For example, Social Security payments and payments to veterans could be delayed in the event of a default, she said. “There will be a lot of consumers who will be in an impossible financial situation,” Gittleman said.
Getty Images/iStockphoto
The FDIC guarantees deposits up to $250,000 on accounts including checking, savings and certificates of deposit. That won’t change in the case of any default, an FDIC spokesperson told MarketWatch.
Deposit-insurance coverage came into hard focus in early spring when Silicon Valley Bank and Signature Bank failed, putting other regional banks under pressure as many customers moved their money into bigger banks.
If economic conditions deteriorate after a default, Gittleman said, people will want assurance their money is safe. If you haven’t taken any of the recent bank failures as a sign to put money in an FDIC-insured account, “this would be the time,” she said.
During the early days of the pandemic when there were millions of job losses, many people had to quickly cut back on or delay regular expenses.
If a default puts people in an economic vise, Gittleman said they may need to be ready to shut down nonessential recurring payments and talk with their lenders and credit-card companies. “It’s thinking holistically about all of your financial expectations and where you can possibly either get forbearance or some leniency and ask for some help,” she said.
Credit-card debt reached $986 billion in the first quarter, according to the Federal Reserve Bank of New York, and delinquencies on credit cards and car loans continued to move higher after pandemic lows.
After more than a year of rising interest rates, it’s already a tough time to finance a major purchase. On Tuesday, the 30-year fixed mortgage rate climbed higher than 7% for the third time this year.
Any default lasting at least a month would push the 30-year mortgage up to 8.4% in September and price out hundreds of thousands of buyers, according to Zillow
Z,
But that is no reason to speed up a home purchase, said Daniel Milan, founder and managing partner of Cornerstone Financial Services.
“Any default lasting at least a month would push the 30-year mortgage up to 8.4% in September and price out hundreds of thousands of buyers, according to Zillow.”
The Federal Reserve doesn’t set mortgage rates, but its policies influence their direction. The big questions are when the central bank will stop increasing its benchmark rate and when it will begin to reduce the rate.
“The odds of a rate cut outweigh the fear or the rush into buying a home now because of the debt-ceiling crisis,” Milan said.
But the Schwab Center’s Williams noted that trying to time a major financial decision around market and political events is a difficult task.
Financial decisions are a mix of math and emotions, even though many people tend to focus more on the math, he said. That’s why it’s important to figure out a financial plan. Often the best course is to stick to your plan and say, “I’m not going to make major changes in the face of market news,” Williams said.
The Dow Jones Industrial Average
DJIA,
the S&P 500
SPX,
and the Nasdaq Composite
COMP,
closed sharply lower in volatile trading on Tuesday and opened lower and have stayed lower in Wednesday trading.
Tuesday marked the Dow’s third straight trading-day loss. By Wednesday afternoon, the index had shed more than 200 points.
The yields on short-term Treasury debt
TMUBMUSD01M,
maturing in early June are pushing toward 6% amid continued uncertainty about whether a debt-ceiling resolution can come together fast enough to avoid a government default. Bond prices and yields move in opposite directions, reflecting less investor appetite for debt.
There’s no one rule for preparing an investment portfolio for a debt default, financial advisers said. But older retired investors are in a trickier spot — especially in relation to the prospect of delayed Social Security checks — compared with younger investors who have more time to bounce back from adverse events.
“‘We continue to urge clients to make sure we know about any short-term cash needs so that those funds are not at risk.’”
Cash investments have proven attractive in rocky times. But the risk of a debt default could make a heftier cash allocation even more important for older investors, financial advisers said.
“We continue to urge clients to make sure we know about any short-term cash needs so that those funds are not at risk,” said Lisa A.K. Kirchenbauer, founder and president of Omega Wealth Management.
Kirchenbauer said she’s starting to hear from clients about debt-ceiling concerns. “I am making sure that larger [required minimum distributions] are in cash for 2023 now, before anything bad happens in the markets.”
Required minimum distributions are the minimum yearly amounts that have to be pulled out of qualified retirement accounts once the owner reaches a certain age, currently 73.
Preparing for any default is a mental exercise as much as asset allocation, said Amy Hubble, principal investment adviser with Radix Financial. If there’s been no change in a person’s personal circumstances, like job status, income needs or retirement timeline, they should avoid getting sidetracked by short-term issues, she said.
“There are only a small handful of things we can actually control when investing,” Hubble added. “So my advice is always to focus on that: keeping costs low, staying diversified, managing tax-recognition timing and avoiding stupid emotion-driven actions.”
Read also: BlackRock’s Rick Rieder sees ‘epic’ cash on sidelines as he takes lead role on new ETF
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When the U.S. debt-ceiling fight finally is resolved, the Treasury is expected to unleash a flood of bill issuance to help refill its coffers run low by the protracted standoff in Washington, D.C., over the government’s borrowing limit.
Treasury bills are debt issued by the U.S. government that mature in four to 52 weeks. New bill issuance could reach about $1.4 trillion through the end of 2023, with roughly $1 trillion flooding the market before the end of August, according to an estimate from BofA Global strategists.
They expect the deluge through August to be about five times the supply of an average three-month stretch in years before the pandemic.
“The good news is that we have a high degree of confidence around who is going to buy it,” said Mark Cabana, rates strategist at BofA Global, in a phone interview with MarketWatch. “The bad news is that it’s not going to be at current levels. Things have to cheapen.”
Cabana sees a key buyer of bill supply unleashed by a debt-ceiling deal in money-market funds, which have climbed to nearly $5.4 trillion in assets managed since the regional banking crisis erupted in March (see chart).
So people who yanked billions of dollars in deposits from banks after the collapse of Silicon Valley Bank in March and parked them in money-market funds could end up playing an encore performance in this year’s debt-ceiling drama.
BofA Global
Related: Money-market funds swell to record $5.4 trillion as savers pull money from bank deposits
Money-market funds have been the main reason why at least $2 trillion consistently sits overnight at the Federal Reserve’s reverse repo facility. The program was last offering a roughly 5% rate, a level Cabana said new Treasury bills might need to exceed by about 10-20 basis points.
“It’s an unintended consequence of a debt-ceiling deal getting done,” said George Catrambone, head of fixed income Americas at DWS Group, about market expectations for heavy short-term Treasury bill issuance, but he also expects money-market funds, foreign buyers and other institutions auctions to continue as buyers in the market.
“There’s always buyers. It’s a question of price.”
President Joe Biden and House Speaker Kevin McCarthy, R-Calif. met Monday to talk about potential ways to raise the $31.4 trillion borrowing limit and to avoid a “doomsday” scenario in financial markets if the U.S. defaults. As talks resumed Wednesday, McCarthy said, “I think we can make progress today.”
Congress has struck deals each time U.S. public debt has exceeded its debt ceiling in the past, including by suspending it eight times since 2016 (see chart).
Refinitive, RiverFront
That doesn’t mean financial markets have been sitting by idly. The 1-month Treasury yield
TMUBMUSD01M,
rose to 5.6% on Wednesday, while the 3-month yield
TMUBMUSD03M,
was 5.3%, according to FactSet. Bill maturing around the “X-date,” which could come as soon as June 1, have even higher yields.
Read: Debt-ceiling angst sends Treasury bill yields toward 6%
“Those are obviously pretty heady yields,” Catrambone said. “But it also exemplifies the market having to price in potential market disruptions in the month of June,” even though his team, like many in financial markets, expect that eventually “cooler heads will prevail” in Washington as the debt-ceiling standoff heads down to the wire.
Stocks were lower Wednesday, with the Dow Jones Industrial Average
DJIA,
off almost 300 points, or 0.9%, on pace for a fourth day in a row of losses, according to FactSet. The S&P 500 index
SPX,
was off 0.9% and the Nasdaq Composite Index was down 0.9%.
The Treasury in January hit its borrowing limit and began operating under “extraordinary measures” to avoid a default.
Cash balances at the Treasury Department have since dwindled to less than $100 billion, according to economists at Jefferies. Barclays strategists estimate its cash balance may fall below $50 billion between June 5-15.
“Basically, we are just draining our cash account to fund operations while we wait to figure out the debt ceiling,” said Lindsay Rosner, senior portfolio manager at PGIM Fixed Income.
But when the battle over the debt limit ends in a resolution, she expects longer-dated Treasury yields to increase, as haven buying on fears of potentially a full U.S. government default and a credit rating downgrade will have been taken off the table.
“The Armageddon, whatever small probability people were pricing in of catastrophe, remove that,” she said. “And that means the worst economic outcome has been removed.”
That’s also a reason why Rosner has been avoiding ultrashort Treasurys in the eye of the debt-ceiling fight in favor of 2, 3 or 4-year bonds offering some of the highest yields in years.
“We’re being afforded good yield, good spread, a couple of years out the curve,” she said. “Play that game.”
Read next: How will the Fed react to the debt ceiling breach? Here are some plays in the playbook.
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Continued uncertainty about whether a debt-ceiling resolution can come together fast enough to avoid a government default pushed yields on Treasury bills maturing between early and mid-June toward 6% on Tuesday.
The yield on Treasury bills maturing on June 6 touched that level before slipping slightly to 5.997% Tuesday afternoon, according to Bloomberg data. Meanwhile, the rate on T-bills maturing on June 8 was at 5.905%.
In addition, the one-year T-bill issued in June 2022 and which matures on June 15 was yielding 6.141%, though analysts said that was likely being impacted by a government auction on Tuesday. That 6.141% yield was the highest of any government obligation maturing within two weeks after the so-called X-date of June 1 — when Treasury Secretary Janet Yellen said the government might be unable to pay all its bills if no action is taken on the debt ceiling.
The Treasury bill market is where debt-ceiling angst has played out the most and Tuesday brought wild trading as investors questioned whether the government will be forced to miss payments after June 1. At the moment, the T-bill market is in a state of dislocation — one in which yields ranged from as little as 2.924% on the government obligation maturing on May 30 to as high as 6.141% on the 1-year bill maturing in three weeks.
The higher the yield on a Treasury obligation, the more investors are demanding to be compensated for the risk of holding that bill. Yields also rise when investors are selling off or staying away from the underlying maturity. Tuesday’s moves suggest that investors and traders are factoring in at least some risk that the government could cross the X-date without a debt-ceiling resolution.
Right now, the market regards bills maturing between June 6 and June 15 as “the most at risk for a delayed payment and no one wants to own” them, said Lawrence Gillum, the Charlotte, N.C.-based chief fixed income strategist at LPL Financial.
“Ultimately, markets expect something to get done, but money managers who have to own those T-bills are not taking any chances,” he said via phone.
For much of Tuesday, the broader financial market appeared to be relatively confident that a debt-ceiling agreement could be reached by June 1, a day after President Joe Biden and House Speaker Kevin McCarthy each described talks as “productive” on Monday. Then came word of McCarthy telling House Republicans on Tuesday that negotiators were nowhere near a deal yet, with Bloomberg citing Republican Representative Ralph Norman and another unidentified person in the room.
All three major U.S. stock indexes
DJIA,
COMP,
finished lower, while Treasury yields beyond the 2-year rate slipped toward the end of Tuesday’s New York trading session — a sign of fading optimism in the outlook for the U.S. economy.
Read: ‘Survival of the strongest’: How pandemic-era shifts may upend market’s recession narrative
One of the financial market’s favorite indicators of impending U.S. recessions — the difference between the 2- and 10-year Treasury yields — has been persistently inverted since July 5, 2022. That’s the longest such streak since May 1980, and yet no recession has been declared so far by the only arbiters who matter, those at the National Bureau of Economic Research.
On Tuesday, fed funds futures traders priced in a 28.1% chance of another quarter-point rate hike by the central bank in June, which would take the main policy rate target to between 5.25%-5.5%. They also factored in a slight 5.6% likelihood of another similar-size rate hike in July.
Gillum and Greg Faranello, head of U.S. rates at AmeriVet Securities in New York, said they see a small chance of no debt-ceiling agreement by June 1. Under such a scenario, the Treasury market would fall into “disarray,” with T-bill yields spiking in a manner reminiscent of last year’s crisis of confidence in the U.K. bond market, they said. It would also make it harder for the Fed to hike rates on June 14, and likely lead to a flight-to-quality trade in longer-term Treasurys as equities sell off.
See: ‘Doomsday machine’: Here’s what could happen if the debt ceiling is breached
As of Tuesday, the T-bill market was “definitely showing some signs of stress, there’s no question about it,” Faranello said via phone. Meanwhile, “the economy is doing better than the narrative of recession,” even after the recent turmoil in regional banks, and a move toward 4% in the 10-year rate this year “can’t be ruled out.” However, that could change quickly based on the outcome of the debt-ceiling debate.
Getting something done on the debt ceiling by June 1 “is going to be a challenge,” Faranello said. The risk of default “is small but not a zero-percent probability,” as is the prospect of chaos if negotiators come too close to the wire and create a period of confusion in the Treasury market.
“At a minimum, there would be pretty severe economic damage” from a default or any confusion, it “could be chaotic,” and “you would see that impact on risk assets,” he said.
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CHEYENNE, Wyo. (AP) — Declaring a mission to liberate “Taco Tuesday” for all, Taco Bell is asking U.S. regulators to force Wyoming-based Taco John’s to abandon its longstanding claim to the trademark.
Too many businesses and others refer to “Taco Tuesday” for Taco John’s to be able to have exclusive rights to the phrase, Taco Bell asserts in a U.S. Patent and Trademark Office filing that is, of course, dated Tuesday.
It’s the latest development in a long-running beef over “Taco Tuesday” that even included NBA star LeBron James making an unsuccessful attempt to claim the trademark in 2019.
“Taco Bell believes ‘Taco Tuesday’ is critical to everyone’s Tuesday. To deprive anyone of saying ‘Taco Tuesday’ — be it Taco Bell or anyone who provides tacos to the world — is like depriving the world of sunshine itself,” the Taco Bell filing reads.
A key question is whether “Taco Tuesday” over the years has succumbed to “genericide,” New York trademark lawyer Emily Poler said. That’s the term for when a word or phrase become so widely used for similar products — or in this case, sales promotions — they’re no longer associated with the trademark holder.
Well-known examples of genericide victims include “cellophane,” “escalator” and “trampoline.”
“Basically what this is about is you cannot trademark something that is ‘generic,’ ” Poler said. “That means it doesn’t have any association with that particular source or product.”
Basketball legend James — a well-known taco lover — encountered this problem when he tried to trademark “Taco Tuesday” in 2019. The Patent and Trademark Office, in a ruling that didn’t refer to Taco John’s, deemed “Taco Tuesday” too much of a “commonplace term” to qualify as a trademark.
With more than 7,200 locations in the U.S. and internationally, Taco Bell — a Yum Brands
YUM,
chain along with Pizza Hut, KFC and the Habit Burger Grill — is vastly bigger than Cheyenne-based Taco John’s. Begun as a food truck more than 50 years ago, Taco John’s now has about 370 locations in 23 mainly in western and midwestern states.
The chain’s size hasn’t discouraged big-time enforcement of “Taco Tuesday” as trademark, which dates to the 1980s. In 2019, the company sent a letter to a brewery just five blocks from its corporate headquarters, warning it to stop using “Taco Tuesday” to promote a taco truck parked outside on Tuesdays.
Actively defending a trademark is required to maintain claim to it, and the letter was just one example of Taco John’s telling restaurants far and wide to stop having “Taco Tuesdays.”
Taco John’s responded to Taco Bell’s filing by announcing a new two-week Taco Tuesday promotion, with a large side of riposte.
Press release: Ring the Bell! Every Day is Taco Tuesday® at Taco John’s
“I’d like to thank our worthy competitors at Taco Bell for reminding everyone that Taco Tuesday is best celebrated at Taco John’s,” CEO Jim Creel said in an emailed statement. “We love celebrating Taco Tuesday with taco lovers everywhere, and we even want to offer a special invitation to fans of Taco Bell to liberate themselves by coming by to see how flavorful and bold tacos can be at Taco John’s all month long.”
The filing is one of two from Taco Bell involving “Taco Tuesday.” One contests Taco John’s claim to “Taco Tuesday” in 49 states, while a similar filing contests a New Jersey restaurant and bar’s claim to “Taco Tuesday” in that state. Both Taco John’s and Gregory’s Restaurant and Bar in Somers Point, N.J., have been using “Taco Tuesday” for over 40 years.
A Taco John’s franchisee in Minnesota first came up with “Taco Twosday” to promote two tacos for 99 cents on a slow day of the week, Creel told the Associated Press in a recent interview.
The Patent and Trademark Office approved the Taco John’s “Taco Tuesday” trademark in 1989. Even with its many letters, Creel said, the company — established in 1969 in Cheyenne, Wyo. — has never had to go to court over the phrase.
He’s not feeling too picked on, either, by the much bigger Taco Bell. “It’s OK. It’s kind of nice that they’ve noticed,” Creel said.
From the archives (January 2022): Taco Bell takes taco subscription program nationwide
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As President Joe Biden and House Speaker Kevin McCarthy prepare to meet Monday afternoon over the debt-ceiling standoff, it’s really getting to be crunch time.
“We need to see a deal by Friday to have confidence that it can clear both
chambers before the June 1 deadline,” Height Capital Markets analysts said in a note.
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Meta Platforms
META,
was fined a record €1.2 billion ($1.3 billion) by Ireland’s Data Protection Commission, according to reports. The fine was over allegations Facebook didn’t ensure data transfers from Europe to the U.S. had appropriate safeguards. Meta reportedly said it was singled out and has used the same legal mechanisms as thousands of other companies.
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By Anthony O. Goriainoff
The U.K. government said Monday that it had disposed of its shareholding in NatWest Group through an off-market purchase by the company of 469.2 million ordinary shares for a total consideration of 1.26 billion pounds ($1.57 billion).
The government said it sold the shares at 268.4 pence a share and that this was the closing price on Friday. It added that the purchase is expected to settle on Wednesday.
As a result of the transaction the U.K. Treasury’s participation in the company will fall to around 38.6% from a previous 41.4%.
NatWest said it will cancel 336.2 million of the purchased shares and hold the rest in treasury.
The government said that it “will keep other disposal options under active consideration, including by way of accelerated bookbuilds, when market conditions permit.”
Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com
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