Economics in the News – May 8 - 14. 2023

Economics impacts our lives every day. Below are some of last week’s top storylines that relate to economics.

• Treasury Secretary, Janet Yellen, warned that failure to increase the debt ceiling could result in “an economic and financial catastrophe.” Default would cause a global downturn. Ms. Yellen uses special accounting measures to pay the government’s bills but stated the money could run out as early as June 1st. She also encouraged Congress to consider doing away with the cap.

The United States has never defaulted on its debt. But if the debt ceiling is not raised, its options would be not to pay interest on the money borrowed, or the government would need to choose what obligations it would not pay, such as Social Security, its employees, and contracted services. Failure to act would increase interest rates, slow the economy, and hinder America’s national security and international presence. (Bloomberg) 

• Five years ago, the US Supreme Court ruled that all 50 states could have legal gambling outlets. Since then, two-thirds of the states offer outlets, and Americans have bet $220 billion.

States are attracted to the tax revenue outlets generate. But the betting is not without problems. Calls to gambling hotlines have increased by 15%, according to Keith Whyte, executive director of the National Council of Problem Gambling. Several NFL players have been suspended for gambling on games. Ohio, Pennsylvania, and New Jersey Regulators uncovered suspicious betting in the baseball game pitting Alabama against LSU on April 28th. Alabama coach Brad Bohannon was fired, but no criminal charges have been filed. (ABC News)

• Title 42, a law passed during President Trump’s last year to slow the spread of COVID, ended May 11th. Border towns are bracing for a large influx of migrants in southern and northern border cities. Under Title 42, border patrols expelled migrants even if they wanted to request asylum. More migrants are fleeing economic and political instability from faraway places such as Venezuela, Russia, and India.

Tens of thousands of migrants are gathered in many cities on the Mexican side of the US border. Now migrants can request asylum, but most will not qualify. The new law denies asylum to anyone who has passed through another country without seeking refuge there first. (The New York Times)

• The pandemic is officially over! More than 1.1 million Americans died of COVID-related illnesses. With the declaration comes the end of many government programs enacted to assist people during the pandemic. The government will no longer pay for COVID testing. States will receive less help from FEMA for disaster-related services.

Many families will receive less help through the Supplemental Nutritional Assistance Program, better known as food stamps. The program was more generous during the pandemic. However, vaccines are still free until they run out, which the government expects will be sometime during the summer. (The Economist)

• Scammers cheated borrowers with student loans out of millions of dollars. President Biden announced last May that he would cancel as much as $20,000 of student loan debt to qualified borrowers. But the proposal is on hold until the Supreme Court rules on its constitutionality. 

Companies are telling borrowers they have taken over the servicing of their debt or that they can cancel their debt for a fee. Some are using the scheme to gather personal information. The Education Department expects borrowers to resume their payments approximately 60 days following the court’s decision. (The Wall Street Journal)