🤹 Debt ceiling circus

Plus: No rest for renters | Monday, January 23, 2023

Open in app View in browser   Presented By SmartAsset   Axios Markets By Matt Phillips and Emily Peck · Jan 23, 2023 🙋‍♀️Welcome back. Emily here. It's Monday and the start of the tax filing season. I'm not rushing to file though. Like most journalists, I push it to the deadline. For taxes, it's April 18 this year. Are you an early filer or a procrastinator? Reply to this email and tell us your strategy. OK. Let's get into it. Today's newsletter is 697 words, 3 minutes.     1 big thing: Flirting with default, and disaster Illustration: Aïda Amer/Axios   The debt ceiling circus has arrived in D.C. and seems poised for a monthslong stay, Matt writes. The big picture: The closer Uncle Sam comes to potentially stiffing creditors, the bigger the implications will be for the markets and the economy. Driving the news: While the debt limit was hit last week, it just means the Treasury Department has to start using "extraordinary measures" (i.e. accounting maneuvers) like running down cash balances — and deferring contributions to certain government pension funds — to keep paying its bills. State of play: Treasury says it can keep juggling payments at least until June. Between the lines: For now, markets don't seem to be too worried. Yes, but: The more drawn-out the debt ceiling fight gets — and the closer the government comes to outright default — the jumpier markets will get. Flashback: That's what happened in the summer of 2011, the last time we came close to going over the edge into default. That year, as the crisis intensified over July and into early August, the S&P 500 plunged 15%. During the same period, credit spreads that determine costs for home mortgages and corporate borrowings jumped, as investors grew leery of lending in the face of growing risks. The other side: Those who want to cut government debt levels may argue that the ruckus the debt fight raised was well worth it. The Budget Control Act of 2011 — the law that emerged from that debt limit fight — helped cut Federal deficits sharply in subsequent years. The bottom line: The fight over raising the debt ceiling and avoiding default is going to hang over the markets for most of the year. And, at least for investors, it's likely to be a bummer. Go deeper     2. Housing activity still on the skids Data: FactSet; Chart: Axios Visuals The U.S. housing market continued its extended slump in December, Matt writes. Driving the news: Fresh data on previously built homes — known as "existing" homes, rather than new builds — notched their 11th straight decline in the last month. The median price for such a home — the vast majority of the market — fell 1.5% from the previous month's $367,000. That's still up roughly 18% from the previous year. But it's down 11% from the June 2022 peak of almost $414,000. What they're saying: "Total sales have not been this low since November 2010; as such, it stands to reason there is not much further room to fall, if any," Barclays analysts wrote in a note to clients Friday.     3. Catch up quick 🛻 How pickup trucks became so imposing. (Axios) 🔥 Ukraine war upended energy markets forever. (Axios) 😷 China says COVID outbreak has infected 80% of population. (Reuters) 💸 Activist investor Elliott sets its sights on Salesforce. (Axios)     A message from SmartAsset The tool that ends complicated retirement planning     This Princeton grad's startup raised $161 million to help people plan for retirement. SmartAsset simplified the time-consuming process of finding a financial advisor with a free, 5-minute quiz — now you can easily get matched with up to 3 vetted advisors serving your area. Try it yourself.     4. Weary renters find no rest Data: Moody's Analytics; Chart: Axios Visuals The average American household is now considered "rent-burdened," with a record-high share of renters spending more than 30% of income on rent each month, according to Moody's Analytics. Why it matters: This is a painful surge for many, coming at a time when inflation (while on the decline) has driven up the cost of food and energy. "The average American household continues to be squeezed," said Thomas LaSalvia, Moody's Analytics director of economic research. "And it's having ramifications on quality of life." What's next: Rents are sticky. They aren't likely to climb much further, LaSalvia said, but don't expect them to fall much from where there are now. Read more   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. Big Labor's quandary Data: Bureau of Labor Statistics; Chart: Erin Davis/Axios Visuals Here's something odd: Union support neared record-high levels last year, yet union membership hit an all-time low simultaneously, Emily and Closer's Nathan Bomey write. Why it matters: The shortcoming can be pinned on a powerful mix of forces: Institutional labor's missteps, well-funded corporate pushback, and weak federal and local laws have all helped suppress U.S. union membership. Driving the news: Data from the Labor Department, out last week, showed that despite an increase of 273,000 new unionized workers in 2022, union membership as a share of the workforce is at an all-time low. Meanwhile, companies are spending hundreds of millions of dollars fighting organizing efforts with little to fear from the National Labor Relations Board, which can only levy weak penalties when companies illegally move to fire organizers or push back in other ways. Read more     A message from SmartAsset Critical tips for estate planning     What legacy do you want to leave? If you've worked hard to build a business, a portfolio of stocks or real estate, an estate plan can ensure the proper distribution of your assets. There are 7 tips to keep in mind, including: Define your objectives. Get a pro to help structure your assets. See all 7.   1 last thing from Matt: My snowdrops are almost out — early for us, late January! — after a remarkably mild winter. Of course, things could still take a bitter cold turn over the next couple of months. And yes, there's a bit of the Northern gardener's guilt about enjoying climate change too much. But even so, it's nice to see a sprig of spring. Today's newsletter was edited by Javier E. David and copy edited by Mickey Meece. Why stop here? Let's go Pro. 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