The Treasury Department on Wednesday called on Congress to address a looming cap on the amount of debt the government can issue, warning that a surge of expenditures related pandemic could render its traditional tools for keeping the nation from breaching the debt limit less effective.
A divided congress passed a two-year budget deal in 2019 that suspended the so-called debt ceiling until July 31. The agreement, which was made before the pandemic struck, was intended to put off budget battles and give clarity over spending going into a presidential election year. Now, the Biden administration and a Congress controlled by Democrats must make sure the government can continue borrowing to pay its bills.
“If Congress has not acted by July 31, Treasury, as it has in the past, may take certain extraordinary measures to continue to finance the government on a temporary basis,” said Brian Smith, Treasury’s deputy assistant secretary for federal finance. “In light of the substantial Covid-related uncertainty about receipts and outlays in the coming months, it is very difficult to predict how long extraordinary measures might last.”
Negotiations over raising or suspending the debt limit are often fraught, and Treasury has developed tools over the years to give the federal government more flexibility as the deadline approaches. Those “extraordinary measures” include suspending sales of State and Local Government Series Treasury securities and suspending reinvestment of the Exchange Stabilization Fund. Treasury can also redeem existing investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspend reinvestment of the Government Securities Investment Fund.
In the past, those measures have allowed the Treasury Department to extend the debt limit deadline on its own for months. But Mr. Smith said that Treasury is studying potential scenarios “in which extraordinary measures could be exhausted much more quickly than in prior debt limit episodes.”
Asked in a press briefing if Treasury was considering prioritizing payments if the deadline is missed, Mr. Smith said: “Congress needs to raise or suspend the debt limit, that’s the way to resolve this issue.”
The debt limit warning came as part of the Treasury Department’s quarterly announcement about its financing plans. Treasury said earlier this week that it expects to borrow more than $1 trillion during the rest of the fiscal year as the United States continues spending heavily to combat the coronavirus crisis.
Uber said its business was recovering from the slowdown caused by the pandemic, although it continued to lose money.
The company said on Wednesday that revenue was $2.9 billion in the first three months of the year, down 11 percent from the same period a year ago.
The decline in earnings included $600 million that Uber has earmarked to pay for settlements with drivers in Britain, where the Supreme Court ruled in February that drivers should be classified as workers and be entitled to a minimum wage and vacation time.
Excluding the settlement fund, Uber’s revenue was $3.5 billion, an 8 percent increase from the previous year that outpaced Wall Street expectations of $3.28 billion.
Uber lost $108 million, an improvement from the previous year, when it lost $2.9 billion. Uber attributed the change to the sale of its autonomous vehicle unit, which was acquired by the self-driving truck start-up Aurora in December. Uber’s operating loss for the quarter was $1.5 billion — also made worse by the British driver settlement.
On Tuesday, Uber’s primary competitor in the United States, Lyft, said that it was also recovering from the slowdown caused by the pandemic as riders began to return to the platform. Still, Lyft’s revenue for the quarter was $609 million, a 36 percent decline from the previous year. Losses were $427.3 million, 7 percent more than its losses the previous year.
“Uber is starting to fire on all cylinders, as more consumers are riding with us again while continuing to use our expanding delivery offerings,” Dara Khosrowshahi, Uber’s chief executive, said in a statement.
While consumers have avoided travel over the past year, Uber’s business has been bolstered by its food delivery service, Uber Eats. Revenue from delivery was $1.7 billion, a 270 percent increase from a year ago. Despite reopenings in Sydney and New York City, Uber said that customers have continued to order food delivery at a strong pace.
But while riders have started returning to Uber and Lyft, drivers have been more hesitant. Both companies said they have faced driver shortages. During a call on Tuesday with financial analysts, Lyft’s president, John Zimmer, said he expected drivers who saw food delivery as a safer option during the pandemic would return to ride hailing because the pay is better and because drivers miss social interactions with riders.
Uber said it had 3.5 million active drivers and couriers during the first three months of the year, down 22 percent from the previous year.
Lawmakers lashed out at the ruling by Facebook’s oversight board on Wednesday to uphold the social network’s ban on former President Donald J. Trump, at least for now.
Driving the discontent was that the oversight board, a quasi-court that confers over some of Facebook’s content decisions, did not make a black-and-white decision about the case. Mr. Trump had been blocked from the social network in January after his comments online and elsewhere incited the storming of the Capitol building.
While the oversight board said on Wednesday that Facebook was justified in suspending Mr. Trump at the time because of the risk of further violence, it also said the company needed to revisit its action. The board said Facebook’s move was “a vague, standardless penalty” without defined limits, which needed to be reviewed again for a final decision on Mr. Trump’s account in six months.
That angered both Republicans and Democrats. Republican lawmakers have pointed to Mr. Trump’s ouster by Facebook, Twitter and others as evidence of an alleged anti-conservative campaign by tech companies, calling the decisions a dangerous precedent for censorship of political figures.
Senator Ted Cruz, Republican of Texas, tweeted that the board’s decision on Wednesday was “disgraceful” and warned it could have dangerous ripple effects.
“For every liberal celebrating Trump’s social media ban, if the Big Tech oligarchs can muzzle the former President, what’s to stop them from silencing you?” Mr. Cruz said in his tweet.
Senator Marsha Blackburn, Republican of Tennessee, said in a statement that the move showed that “it’s clear that Mark Zuckerberg views himself as the arbiter of free speech.” Republican members of the House judiciary committee tweeted that the decision was “pathetic,” and Jim Jordan of Ohio, the ranking member, tweeted about Facebook: “Break them up.”
Democrats, also dissatisfied with the murky decision, took aim at how Facebook can be used to spread lies. Frank Pallone, the chairman of the House energy and commerce committee, tweeted: “Donald Trump has played a big role in helping Facebook spread disinformation, but whether he’s on the platform or not, Facebook and other social media platforms with the same business model will find ways to highlight divisive content to drive advertising revenues.”
Representative Ken Buck, Republican of Colorado and the ranking member of the House antitrust subcommittee, accused the oversight board of political bias.
“Facebook made an arbitrary decision based on its political preferences, and the Oversight Board, organized and funded by Facebook, reaffirmed its decision,” he said.
But scholars who support free speech welcomed the decision. They have warned that as social media companies become more active in determining what stays online and what doesn’t, that could potentially lead to a slippery slope where tech giants have too much sway over digital speech.
“The Facebook Oversight Board has said what many critics noted — the ban of former President Trump, while perhaps justified, was worrisome in its open-endedness and lack of process,” said Gautam Hans, a law professor at Vanderbilt University. “To the degree that the decision draws attention to how ad hoc, manipulable, and arbitrary Facebook’s own content policies get enforced, I welcome it.”
Mike Isaac contributed reporting.
A Facebook-appointed panel of journalists, activists and lawyers ruled on Wednesday to uphold the social network’s ban of former President Donald J. Trump, ending any immediate return by Mr. Trump to mainstream social media and renewing a debate about tech power over online speech.
But the board also said that Facebook’s penalty of an indefinite suspension was “not appropriate,” and that the company should apply a “defined penalty.”
Read our ongoing coverage here:
A company-appointed panel ruled that the ban was justified at the time but added that the company should reassess its action and make a final decision in six months.
The panel of about 20 people includes academics and political leaders.
In the On Tech newsletter, Shira Ovide explains the decision on the company, its implications and the board’s severe limits.
“What’s to stop them from silencing you?” Senator Ted Cruz replied on Twitter.
A federal judge on Wednesday struck down the Centers for Disease Control and Prevention moratorium on evictions enacted by Congress last spring and extended by President Biden until June 30.
In a 20-page decision, Judge Dabney Friedrich of the U.S. District Court for the District of Columbia, who was appointed by former President Donald J. Trump, ruled that the Department of Health and Human Services had exceeded its authority when it imposed the freeze. The moratorium had been enacted under the Public Health Service Act of 1944, which gives the federal government the power to impose quarantines and other measures to deal with health emergencies.
“The question for the court is a narrow one: Does the Public Health Service Act grant the C.D.C. the legal authority to impose a nationwide eviction moratorium?” wrote Friedrich, a one-time staff member to former Senator Orrin Hatch and was appointed to the court in 2017. “It does not.”
A White House spokesman did not immediately comment on the ruling.
The CARES Act, passed in March 2020, included a 120-day moratorium on evictions from rental properties participating in federal assistance programs or underwritten by federal loans.
On August 8, 2020, Mr. Trump extended the moratorium through an executive order, citing the possibility that evictions could spread the virus by forcing a large number of families to relocate to new shelter — or double up in overcrowded situations.
Shortly after taking office, President Biden extended the moratorium. He did so over the objections of landlords, real estate agents and residential apartment trade associations who argued that the freeze was an unfair interference in the free market, despite the inclusion of billions in emergency housing assistance in recent congressional relief packages.
In November, the Alabama Association of Realtors and a similar group of real estate agents in Georgia filed a lawsuit, claiming that the moratorium, and similar ones passed by states, shift the burden for rent payments “from the tenants to landlords, and that landlords across the nation stand to lose billions collectively if the ban is extended into 2021.”
Groups representing tenants have argued that the moratorium, while not universally effective, has prevented thousands of evictions of low-income tenants, especially among women-led households that are often the most likely to fall behind in payments.
The Biden administration has been stepping up pressure on the nation’s biggest residential landlords following reports that apartment building owners were seeking to evict tens of thousands of renters despite the moratorium.
Inflation jitters are popping up in earnings call chatter, spooking investors and dominating business television talk shows. One place they aren’t taking over, it would appear, is the Federal Reserve.
America’s central bank is tasked with fostering maximum employment and stable inflation — making it the first line of defense against rising prices. Fed officials have been clear for months that they expect prices to pop this spring and summer as the economy reopens but that they think the jump will prove temporary. By and large, they are sticking to that script.
During a volley of speeches and appearances on Wednesday, central bank policymakers made it clear that they do not think incipient price pressures are going to prove painful or long-lasting. Some suggested they would even welcome what a hotter economy might have to offer.
“You talk about the economy overheating, you kind of go: ‘Gosh, I kind of like producing as much as we can,’” Charles Evans, president of the Federal Reserve Bank of Chicago, said during a call with reporters. “Why would you like unemployment to be higher when it can be lower? It depends on what the added cost is.”
The Fed aims for inflation at 2 percent on average over time, so it is currently angling for a period of slightly higher price gains to offset years and years of very weak gains. Price pressures are picking up a bit as they lap very slow readings from the worst pandemic shutdown last year, and economists think supply bottlenecks could keep them elevated as producers try to ramp up amid reopening.
Officials have been clear they do not expect that situation to be long-lived and do not expect it to force them to rapidly dial back the policies they have in place to bolster the economy — which include buying $120 billion of government-backed bonds per month and keeping interest rates at rock-bottom.
“My view is that this acceleration in the rate of price increases is likely to prove temporary,” Eric Rosengren, the president of the Federal Reserve Bank of Boston, said in a speech Wednesday. “Toilet paper and Clorox were in short supply at the outset of the pandemic, but manufacturers eventually increased supply, and those items are no longer scarce.”
Still, Mr. Rosengren did counsel vigilance, saying the Fed should be paying attention to make sure the economy has not changed in ways that will make wages and prices more responsive to a tightening labor market.
A global shortage of computer chips that has forced automakers to idle plants in recent weeks is expected to take an even heavier toll on the industry in second quarter.
General Motors said on Wednesday that it made a $3 billion profit in the first three months of the year, up from just $294 million a year earlier. But the company warned that its profit would be significantly smaller in the second quarter because of the shortage.
“Every region of the world has been dealing with the supply-demand imbalance for semiconductors, and we’ve been working through some significant disruptions to production,” G.M.’s chief executive, Mary Barra, said in a conference call with reporters.
The company expects net income for the first half of the year to total about $3.5 billion, implying a profit of around $500 million in the second quarter. It said it expected a rebound in the second half of 2021 and predicted net income for the full year to range from $6.8 billion to $7.6 billion.
The G.M. forecast comes a week after Ford Motor said the shortage would likely cut its output of cars and trucks in half in the second quarter of the year from its previously planned level. Separately, Stellantis, the company formed by the merger of Peugeot SA and Fiat Chrysler, said on Wednesday that its production in the first quarter was 11 percent lower than planned because of the chip shortage, and it also warned that the second quarter would be weaker than the first.
Stellantis reported revenue of 34 billion euros ($41 billion) since the merger was completed on Jan. 17. Had the merger been completed earlier, the new company’s revenue for the full first quarter would have been 37 billion euros, up 14 percent over the same period a year ago.
Modern vehicles require dozens of computer chips for the electronics that control everything from brakes and transmissions to entertainment and navigation systems and tire-pressure monitors.
Last year, as many automakers closed factories to prevent the spread of the coronavirus, sales of consumer electronics like laptops and game consoles took off, and semiconductor manufacturers shifted their production.
Now, chip makers are struggling to meet demand to the type of chips used by automakers, which are seeing a strong rebound in demand for cars and trucks.
Ms. Barra said G.M. was helped in the first quarter by directing the chips it did have to plants making its more profitable and top-selling models. “A lot of really good work is being done across our company to source semiconductors, allocate them to our most in-demand, capacity-constrained products,” she said.
One positive from the shortage for automakers is that tight inventories of new vehicles has forced consumers to pay close to list prices for many models. G.M. said the average price paid for the vehicles it sold in North America in the first quarter was $3,500 higher than a year ago, lifting the company’s profit in the region.
Dogecoin, the cryptocurrency that started as a joke, is on a tear. A surge in the past day pushed it to another record, sending it some 14,000 percent higher than it started the year.
One theory is that the upcoming appearance of Elon Musk, the Tesla chief executive and noted Dogecoin superfan, as the host of “Saturday Night Live” on May 8 could get more people interested in trading the crypto token. It’s as good a reason as any for those who try to rationalize its movements.
The latest bout of Dogecoin mania has somewhat overshadowed what’s going on in Ethereum, the second-largest cryptocurrency, which also set records this week and made its 27-year-old co-creator, Vitalik Buterin, a billionaire (in dollars). The price of Ether, the crypto token built on the Ethereum blockchain, is up more than 350 percent for the year to date, outpacing Bitcoin’s relatively pedestrian 90 percent gain — which, for context, outpaces every stock in the S&P 500 over that period.
The European Union’s administrative arm said Wednesday that it would take action against foreign companies that received financial support from their governments, a move clearly aimed at China amid signs of deteriorating ties.
The tougher line against China comes only four months after Brussels and Beijing seemed to be moving closer, working out an agreement in December intended to make it easier for European companies to invest in what has become the bloc’s most important trading partner for goods.
But since then, relations have gone downhill because of tension over Chinese policy toward minority groups in the Xinjiang region.
Legislation proposed by the European Commission on Wednesday would give it power to investigate and take measures against foreign companies that used government subsidies to get an unfair advantage over domestic competitors, an accusation often leveled at China. A separate proposal, also announced Wednesday, is intended to make Europe less dependent on China for crucial goods like semiconductors, drugs and batteries.
A day earlier, Valdis Dombrovskis, the European commissioner for trade, said work on making the December investment agreement with Beijing final was on hold because of repressive Chinese policies.
In March, the European Commission issued sanctions against four Communist Party officials after accusing them of being responsible for human rights violations against members of the Muslim Uyghurs and other minority groups in Xinjiang.
China retaliated with sanctions against numerous members of the European Parliament, several scholars, and employees of human rights organizations and think tanks that have been critical of China.
In light of the sanctions war, Mr. Dombrovskis told Agence France-Presse on Tuesday that “it’s clear the environment is not conducive for ratification of the agreement.”
To be clear: this is not a formal suspension decision, just means there’s no political outreach right now to promote the agreement – see end of quote. pic.twitter.com/P1CgzkMu8e
— Vanessa Mock (@vanessamock) May 4, 2021
Europe’s tougher line toward China brings it closer to the stance adopted by the Biden administration, which objected to the investment agreement. But Europe remains divided over how to approach an important trading partner that is also a geopolitical rival.
Markus J. Beyrer, director general of BusinessEurope, a leading business lobby, said in a statement Wednesday that the proposal on subsidies was “a step in the right direction in addressing existing legal loopholes and preventing market distortions.”
But a prominent business group in Germany, which is highly dependent on exports to China, was critical.
“The proposed regulation is very complex, and there is a risk that its implementation will lead to considerable additional bureaucracy and legal uncertainty for our member companies,” said Ulrich Ackermann, managing director of foreign trade at V.D.M.A., which represents German makers of industrial equipment.
Stocks on Wall Street were mixed on Wednesday.
The S&P 500 rose 0.1 percent, while the Nasdaq composite dropped 0.4 percent.
The Stoxx Europe 600 index rose 1.8 percent, and the FTSE 100 in Britain gained 1.7 percent.
Oil markets ended the day mostly unchanged.
New data on the European economy from IHS Markit reflected continued strengthening. The eurozone composite purchasing managers’ index (PMI) for April grew for the second consecutive month. Significantly, the service sector grew after seven months of contraction.
“The updated services PMIs for April confirmed that the worst for the eurozone economy should be over,” said Nicola Nobile, the lead eurozone economist for Oxford Economics, in a note to clients. “The vaccination progress and the gradual reopening of some of the economies point to” an increase in economic output already underway, she added.
More chip worries
Stellantis, the name for the merger of Fiat Chrysler and PSA, the maker of Peugeot, said the semiconductor shortage caused an 11 percent decline in production of automobiles in the first quarter, representing about 190,000 vehicles.
Dealer inventories were down in all areas, “primarily due to the semiconductor shortage,” the company said. Despite that, Stellantis reported net revenue up 14 percent. The company’s shares gained 7 percent in Europe and the U.S.