But time is running out.
Since the U.S. brushed up against the debt limit in January, Treasury Secretary Janet Yellen has been stretching the government’s money as far as possible using “extraordinary measures” to buy time for Congress. One listener thought to ask: How, exactly, does that work? And how long could they last? We’ll get into it and answer more of your questions about where the funds for military assistance to Ukraine come from and why the Federal Reserve’s strategy to bring down inflation may come with unwanted side effects. Plus, a little self-care talk.
Here’s everything we talked about today:
“How ‘Extraordinary Measures’ Can Postpone a Debt Limit Disaster” from The New York Times
“Meet the budget bureaucrat in charge of tracking the U.S. debt” from The Washington Post
“The U.S. hit its debt ceiling. Now it’s time for ‘extraordinary measures.'” from Marketplace
“How Much Aid Has the U.S. Sent Ukraine? Here Are Six Charts.” from the Council on Foreign Relations
“How much money has the US given Ukraine since Russia’s invasion?” from USA Facts
“‘We’re right at the beginning of the hard part’ of taming inflation, Atlanta Fed CEO says” from Marketplace
“Once a fringe theory, ‘greedflation’ gets its due” from Axios
“What the Fed’s interest rate hike could mean for you” from Vox
Got a question about the economy, business or technology for the hosts? Leave us a voicemail at 508-U-B-SMART or email us at makemesmart@marketplace.org.
Make Me Smart May 31, 2023 Transcript
Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.
Kai Ryssdal
No such thing as too much…
Kimberly Adams
Hello, I’m Kimberly Adams. Welcome back to make me smart where we make today make sense.
Kai Ryssdal
I’m Kai Ryssdal. Thanks for joining us on what do you want to know Wednesday? It’s question and answer time. If you have a question you’d like us to answer, you can leave us voicemail at 508-UB-SMART or email us it makesmesmart (clears throat) Excuse me makemesmart@marketplace.org. Happens to the best of us.
Kimberly Adams
Do you need some water?
Kai Ryssdal
No, I’m good. I got a cup of coffee.
Kimberly Adams
Nice. All right. Our first question is an email from Gareth about the so popular topic du jour, the debt ceiling
Kai Ryssdal
Oh kill me. Kill me.
Kimberly Adams
Can’t have enough of it! All right here’s what it says. “What are the extraordinary measure” or extra-ordinary measures depending on how you want to say it “that the Treasury is using right now? You’ve said before that it involves moving funds around but could you give a specific example. If the debt ceiling is lifted do they all get reversed?” Kai this is your favorite topic go ahead.
Kai Ryssdal
I just… I’m so over this. First of all, it’s so stupid. It’s so stupid. This debt limit is so stupid. God it kills me. God! Alright. Anyway, sorry. So Secretary of the Treasury Janet Yellen said I believe it was in January for the first time, but she’s, you know, been intimating for as long as she had has had the job, that she will use whatever extraordinary measure she has up until she can’t anymore. And then we’re really going to be in a jam and we are now in a jam. Effective Monday June 5th is when she will be unable, she says, to meet “American obligations.” So those extraordinary measures. She literally moves money around. Special accounting maneuvers that the Treasury secretary can do is she can stop certain investments in, for example some federal employee savings and retirement funds to free up some room under the debt limit. There is a special fund that the government has called the “ESF” Exchange Stabilization Fund for stabilizing exchange rates and global currency markets in the foreign exchange markets, right? We want them stabilized, we don’t want them going crazy. And the Treasury Department takes global responsibility for settling those out. There’s lots of things she can do. There is… I recommend highly, and I think I said this at the time when it came out an article in the Washington Post about the most senior civil servant in the Treasury Department whose job it is to keep an eye on exactly how much money the federal government has in its bank every day. It’s a great piece, and I’ll take it out and we’ll put it on the show page. But that’s what Janet Yellen does. She uses accounting maneuvers to make sure that we are not required to borrow any more money. Now, two interesting thoughts about that. One is, we’ve got something like $30 billion left in the bank, which for a 20 something trillion dollar economy is stupidly low. Once again, the debt limit is stupid. But also, once this gets fixed, and first of all to the question, yes, all of these exchange, all of these accounting maneuvers will get reversed, right? And all the retirement funds will be funded and all the Exchange Stabilization Funds will be funded and everything will go back to the way it is. But Janet Yellen is going to need a ton of cash. And so in the period immediately after the debt limit gets raised, she’s going to have to go out and sell into the open market something like a trillion dollars of US debt, which is, even for the government, a lot of debt to be selling. So..
Kimberly Adams
I imagine they’ll be selling it like, not the best rates for us.
Kai Ryssdal
No, right. That’s exactly right. That’s exactly right. And look in part, yes, the Fed raising rates and rates were going up for a year now, but in part because of this debt limit stupidity, it’s going to cost the government more to sell all that debt and thus borrow money. It’s it’s crazy. Anyway. Yes, everybody gets made whole as it were. But oh my goodness, is this a dumb way to run an economy.
Kimberly Adams
I’m just imagine nailed like all the government workers, like in need of a new office chair in the last month. Who were just like, “yeah, probably not” I know that’s not what they’re doing. It’s just sort of like how it plays out in my head. It’s like extraordinary measures, no chair for you.
Kai Ryssdal
No chair for you! No soup for you! Alright. Next question is from Victoria. She’s in Indiana. And here’s how an email, the email goes. “I’m curious if you know where the money for military assistance to Ukraine comes from? Is there a specific pot of money for this?” Excellent question Virginia. Victoria rather sorry.
Kimberly Adams
Yes, we do know. It comes from you. And I hope that, you know, hopefully…
Kai Ryssdal
Thanks for coming to my Ted Talk.
Kimberly Adams
Yeah, but I’m guessing you want more specifics than that. So yes, these dollars come from the place that all the dollars that we spend on federal initiatives and government initiatives come from: tax dollars, you and I paying our taxes and other people not paying paying as many taxes as they should. Anyhow, it comes from a variety of sources, but most of it goes to the Department of Defense. So in terms of the total aid to Ukraine, the US has allocated about $77 billion. And that was tallied up by the Kiel Institute for the World Economy, which is his German Research Institute. The bulk of that money, $46 billion is specifically for military support. And then there are funds for humanitarian assistance, and also to support Ukrainians who’ve been displaced by the war. Now back to where it all comes from. All the money has been approved through four separate bills passed by Congress, signed into law by President Biden. These are called “supplemental appropriations bills.” Remember the other day we were talking about the difference between the budget and the spending and these 12 appropriations bills. When you need to spend money beyond the 12 appropriations bills, they are supplemental appropriations bills, and that’s what these were. There are four of them. And the money for those supplemental appropriations bills comes from different sources. So in some case, that assistance comes from funding that’s periodically tapped by the Biden administration in the form of what’s called a presidential drawdown and these presidential drawdowns are orders directing the Defense Department to immediately deliver defensive equipment and services to foreign countries in a crisis. So, and that equipment and that stuff, sometimes it’s medical equipment, can be delivered sometimes as quickly as days or hours. And Biden has signed 31 drawdowns for Ukraine as of the war’s one year anniversary. And these drawdowns from Department of Defense are intended to target, to work very quickly, specifically because they “drawdown” or pull from our existing stockpiles of military equipment. Additionally, there’s the Defense Department’s Ukraine Security Assistance Initiative. And that’s money in a Department of Defense LEAD program that’s focused on increasing Ukraine’s defenses against Russian aggression, either through military training, equipment, intelligence support, plus, you know, the money normally for weapons and medical supplies, which of course they are in dire need of. So, I mean, I’m surprised we didn’t give this one to you Kai, you’re the military guy.
Kai Ryssdal
No, but look, that’s a really good rundown from the pots of money that it’s coming from. But it’s important to remember that all those pots of money come from the taxes that we pay. And that’s just that’s, that’s how… the government’s money is our money. That’s the name of the game.
Kimberly Adams
Exactly. You are paying for it. All right. Next question. Here’s what Chris wants to know. I’ve always been taught that having a job and savings were financially healthy, but I often hear that higher unemployment and lower savings among American consumers would be better for the economy right now. Can you make me smart on why up is down?
Kai Ryssdal
Yeah, so let’s just state, let’s just state straight out that having a job and having savings are good. Period. End of sentence. But what the Federal Reserve is trying to do right now is engineer what is called a “soft landing.” And one of the ways they have to do that, there aren’t many mechanisms that the Fed has. You hear Jay Powell talk all the time about how blunt his tools are, the Fed’s tools are right? One of the primary way they’re going to be able to do that is by raising the unemployment rate. That is to say, making people lose their jobs. If you put it that way to Jay Powell, he will disagree and say “I want as many people in this economy to have jobs as we can.” But the reality. Right, right. The reality of rising interest rates is that that is going to, the Fed hopes, lower aggregate demand. And once aggregate demand gets lowered, corporations will be selling to fewer people because fewer people will have means and jobs because money is getting more expensive, and thus those jobs will go away. It may be a million, it may be 2 million. I read the other day that there are some s admits that the unemployment rate is gonna have to go up as high as 4.3%, it’s 3.5% now, before we see any meaningful decrease in inflation. And that’s, that’s millions of people losing their jobs. And that’s a really bad thing. And Powell knows it and the Fed knows it. But they also have to consider aggregate demand, right? Their job is the whole economy, not the individual person. And, and it’s, that’s just, I mean, it’s terrible, right? It’s horrible, because losing your job is, losing your identity, it’s losing the means, it’s losing, you know, cohesion, it’s losing all of those things. But what he’s trying to do is lower demand. And one of the ways that works is by lowering employment in this economy. And that’s the best I can do.
Kimberly Adams
What’s wild about that is we’re getting more and more evidence that it’s not wages that are driving the bulk of inflation. We’re done with the supply chain disruptions. So that’s not driving inflation. We are getting more and more evidence, despite people swearing up and down, you know, a year ago, this wasn’t the case, that it is company profits driving inflation and profit taking in, you know, what was already a high inflation environment. And so what is effectively happening is because of inflation, driven by what the Democrats are certainly calling “corporate profiteering,” people are going to end up losing their jobs because the Fed in its attempt to reduce this inflation caused not by wage growth has to still take the same action because of that one blunt instrument. And that’s pretty wild to me.
Kai Ryssdal
Right. The the term of art for it these days is “greedflation” companies raising prices because they can do so under the cover inflation, and keep their margin steady at a time of rising input costs, or even increasing those margins. And the question is, what do we do about that? Elizabeth Warren, senator from Massachusetts, who is no fan of Jay Powell, actually blames him for greedflation. And I don’t quite understand how that works, because that’s not in the dual mandate anywhere. But but look, corporations are helping to drive this. And, and one wonders, when they’re going to decide not to do it anymore, you know?
Kimberly Adams
Well, and the most vulnerable workers in the economy are going to be hit the hardest by this. So the wealthiest, most powerful players in the economy have benefited from this period. And the most vulnerable players are going to suffer the most. Yay capitalism.
Kai Ryssdal
Okay. All right. Here we go. Last question of the day, Charlton Thorpe over to you.
Beth
Hey guys, this is Beth from Toledo, Ohio. Listen, I can turn off the news and go off and do other things and try to … you know, be more positive, but you guys are neck deep in it every day. How do you cope? I’m really curious. Make me smart. You guys take care.
Kai Ryssdal
Okay, you go first
Kimberly Adams
Therapy! I have a wonderful therapist. Um, there’s that. I like to take long baths. I exercise. I do what I can to try to be helpful. I mean, I have to say that and this is going to sound like all Pollyanna ish. But journalism as a career can be very fulfilling in that regard. And that when you do see the sort of horrors of the world, you might be able to do a little something to give people information and tools to change it, or sometimes by highlighting something that in itself can initiate change. And that can, you know, make me feel a sense of like, not shouting into the darkness. But yeah, it definitely gets to me sometimes, and especially covering the economy, it’s almost like the more you learn about the economy… exactly what we were just saying about corporations and the most vulnerable people in the economy. You know, sometimes, the more you learn about it, the more frustrated you get, especially as a consumer in this economy who actively does things that I often know are contributing to the problems I’m reporting on. But you know, my dad used to tell me, “all you can do is the best you can” and I really hold that What about you?
Kai Ryssdal
So, so, two things, three things. Number one, I’m on the record on this podcast, although not in a while I think, about being really bad at self care. So my response to job related stress, and this has been true my whole life, is just to grind it out. Which I understand is not helpful, I understand is not conducive to other aspects of my health, but that’s the way I’m built. So that’s number one. Number two, I go running in the mornings, or mountain biking in the mornings, super early, up in the mountains. And that gives me a whole lot of mental elasticity. And it’s me up in the mountains with the bunny rabbits and the coyotes and, and just kind of running around. And that really helps. And then, and then third… And and and I don’t know what to make of this, but I’ll just throw it out there and all y’all can can at me on Twitter or send us a note. Even on the the worst day I’m having, I get to go into the studio at two o’clock LA time every single day. And for 28 minutes and 45 seconds, I’m in my happy place. And I find that restorative. Not not always right. But most of the time. And that’s what does it for me now. Look, there’s a whole conversation to be had with my imaginary therapist about how I’m way too tied up in my identity and my job, but that’s a whole different thing. But anyway, so that’s what I do. How about that? Once again, Kai’s therapy session comes in the middle of a podcast.
Kimberly Adams
You know, having done a lot of reporting on mental health, I find that people get their mental self care a lot of different ways. And nature is also therapy. And I wouldn’t be so dismissive of what you’re you’re doing. By the way, I went mountain biking like a week and a half ago and oh my god, this painful experience I’ve ever had in my life. Anyhow.
Kai Ryssdal
I’m not, I’m not dismissive, dismissive of it at all. It is, it is literally sustaining for me. And when I can’t do it, because I’m injured, because I’m old, or if my bike is broken, or whatever, I get super, super cranky. So you know, it, it’s essential. Truly.
Kimberly Adams
And, and it’s sometimes the only accessible therapy for people because we do not have enough mental health professionals in this country. Mental health is often very unaffordable. And so like it’s a privilege to be able to have access to mental health care, which I would encourage you to take advantage of if you so desire. But anyway. Yeah, I think that’s… everybody copes in a different way. And I and I will not sugarcoat it, in our industry, in journalism, there is a lot of substance use, substance abuse, and substance use disorders. Because not everybody finds a healthy coping mechanism. And having hung out with a lot of journalists in the Middle East for a while, I can tell you that it doesn’t always end well for folks. So, you know. I’m sorry, that went to a real dark place. But we’re here! You know, we’re here and thank you for the question. And thank you for your care. We are all right. And we’re gonna be okay.
Kai Ryssdal
Yep. But that’s all we got for today, back tomorrow. Super quick before we go, a very, very quick thank you to everybody who gave to Marketplace and Make Me Smart during our May fundraiser. 3154 of you stepped up to support this program and this podcast and all the work that we do here. Didn’t quite get to the goal, but we got close. So thank you for all of that.
Kimberly Adams
Make me smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Our intern for a little bit longer is Antonio Barreras. Today’s program was engineered by Charlton Thorp
Kai Ryssdal
Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Mers, mmmm…. is Marissa Cabrera. Bridget Bonner is the director of podcast. Francesca Levy is in charge. Oh and the dogs are walking out, I guess they know I’m done.
Kimberly Adams
I will say the mountain biking was like super fun and definitely gave me an amazing sense of accomplishment that I survived. But man, I was in pain for a solid week.
Kai Ryssdal
I totally believe you. Totally believe you.
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