Today's Scoop:

Hey friends, here’s what you need to know today…

1. The government is trying to figure out its spending problem.

2. Small businesses are losing optimism.

3. It’s still hard for companies to find workers.

S&P 500: 4,119.17
1Mo: +1% | 1Yr: +3% | 5Yr: +51%

The market inched lower without any decisive news drivers. The April inflation report comes out tomorrow.

The US government is trying to figure out its spending problem amidst the approaching financial catastrophe of US default. The White House and Congress met today to negotiate terms for raising the debt ceiling. Treasury Secretary Yellen warned the country could default on its bills as early as June 1st if Congress does not approve an extension of the debt limit. [🤓]

Small businesses are losing faith amidst a competitive hiring market. The NFIB's Small Business Optimism Index declined in April for the 16th straight month below average. The biggest concern is finding qualified workers to fill open roles. Nearly half of small businesses reported jobs they could not fill last month. Of that, 92% reported few or no qualified applications for the positions they were trying to fill.

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• Virgin Galactic sends humans back to space after 2 years

• IBM reboots Watson with a fresh focus on AI

• Mattel unveils a Down’s Syndrome Barbie

• PayPal tries to find post-covid profits

• Palantir plans to capture the whole AI market

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Debt Ceiling

Regardless of the political party in power, the US government regularly faces the risk of defaulting on our debt and being unable to pay our bills.

Every year, Congress directs the Treasury to spend money (on defense, infrastructure, etc.), and the Treasury pays from its income (taxes) or charges bills to the credit card (issues Treasury bonds). Congress regularly directs the Treasury to spend more than it can afford, and the Treasury hits its credit limit. When that happens, only Congress can raise the Treasury’s borrowing limit. Raising the debt ceiling doesn’t approve more spending; it just allows the Treasury to pay for the spending Congress already approved. Congress has lifted the debt limit 78 times since 1960.

Suppose Congress chooses not to raise the limit. In that case, the US government will be unable to pay its bills, potentially ceasing all government operations, freezing all social benefits, and defaulting on debt payments. Besides the direct impact of halted government function, US government default could destabilize the entire financial system.

The impacts of that are unprecedented and could push the US economy and the world into a downward spiral. So it’s doubtful Congress would choose not to raise the debt ceiling, but risks are high.

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