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Speaker 1: My name is Lily Maddon and I'm a proud Arunda

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Speaker 1: Bunjelung Calcoltin woman from Gadigol Country. The Daily oz acknowledges

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Speaker 1: that this podcast is recorded on the lands of the

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Speaker 1: Gadigol people and pays respect to all Aboriginal and Torres

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Speaker 1: Straight island and nations. We pay our respects to the

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Speaker 1: first peoples of these countries, both past and present.

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Speaker 2: Good morning, and welcome to the Daily Ods. It's Monday,

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Speaker 2: the eighth of May. I'm Sam, I'm Sarah. The United

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Speaker 2: States could be on the verge of running out of money.

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Speaker 1: Are you buckled up?

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Speaker 3: You better be, because Treasury Secretary.

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Speaker 4: Janet Yellen just warned of a new and earlier drop

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Speaker 4: dead date for.

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Speaker 3: The debt ceiling. The Treasury Secretary now warning the US

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Speaker 3: could run out of money to pay its bills in

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Speaker 3: a matter of weeks. If the US were too default,

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Speaker 3: we should expect the markets to tumble, nearly six million

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Speaker 3: jobs wiped out, unemployment, surging social security payments, and doubt

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Speaker 3: healthcare coverage and doubt, student lunch programs in doubt, and

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Speaker 3: so much more.

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Speaker 2: We're going to tell you what you need to know

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Speaker 2: in today's deep dive, but first, let's do the headlines.

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Speaker 2: King Charles the Third was officially anointed to the throne

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Speaker 2: on Saturday local time. The service was attended by world leaders,

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Speaker 2: including Australian PM Anthony Albanizi. After the ceremony, a military

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Speaker 2: parade featuring four thousand troops was held on the streets

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Speaker 2: of London, where there were some anti monarchist protesters arrested.

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Speaker 4: The state funeral for Father Bob McGuire took place at

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Speaker 4: Saint Patrick's Cathedral in Melbourne on Friday. Father Bob, as

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Speaker 4: he was affectionately known, was a social justice activist and

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Speaker 4: ran the Father Bob maguire Foundation out of Melbourne. He

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Speaker 4: was made a Member of the Order of Australia in

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Speaker 4: nineteen eighty nine and was named Victorian of the Year

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Speaker 4: in twenty eleven. He died last month, aged eighty eight.

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Speaker 2: At least nine people have been killed in a mass

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Speaker 2: shooting at a shopping mall in Texas. The assailant was

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Speaker 2: killed by police on the scene, and a motive of

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Speaker 2: the attack is not yet known. Seven victims remain in

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Speaker 2: either a serious or critical condition, with their ages raging

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Speaker 2: from five to sixty one, and.

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Speaker 4: The good news. New York will be the first US

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Speaker 4: state to ban natural gas in most new buildings, and

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Speaker 4: that is under a provision aimed at phasing out fossil

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Speaker 4: fuel use. It'll mean that new buildings will use climate

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Speaker 4: friendly sources for heating and cooking, such as induction stoves.

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Speaker 4: Hospitals and restaurants will be among the buildings excluded from

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Speaker 4: the provision, which will come into effect in twenty twenty five.

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Speaker 2: The US could be on the verge of running out

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Speaker 2: of money, and it's all because of a government borrowing

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Speaker 2: limit called the debt ceiling. There is a way to

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Speaker 2: increase the ceiling, but a stalemate in Congress has put

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Speaker 2: the government in a very tricky situation. And if the

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Speaker 2: US were to run out of my money and fail

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Speaker 2: to pay back its debts, government officials say it would

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Speaker 2: trigger an economic catastrophe.

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Speaker 4: Debt ceiling strikes me as one of those terms that

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Speaker 4: is always in the headlines and never explained.

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Speaker 2: What is it okay to understand a debt ceiling? We

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Speaker 2: have to understand how governments fundamentally make and spend money.

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Speaker 4: Which is our favorite talking point. A day before the budget.

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Speaker 2: It's a big week for money, so governments fund things

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Speaker 2: in two ways. They raise money through taxes, or they

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Speaker 2: borrow money and acquire debt. Now, the idea of this

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Speaker 2: is not new to us. Tom spoke about it last

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Speaker 2: week on the podcast when he gave us some context

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Speaker 2: of what's going to go down in Federal Parliament tomorrow

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Speaker 2: nights in the budget. Now, every country in the world

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Speaker 2: does a bit of both taxing and borrowing. Debt can

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Speaker 2: be a really useful tool if the borrowed money is

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Speaker 2: spent in ways that make a country richer in the

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Speaker 2: long term. But on the other hand, large amounts of

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Speaker 2: debt can be expensive to repay and burden future tax payers. Now,

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Speaker 2: what makes this situation a little bit different is that

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Speaker 2: the US government has a legal limit on how much

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Speaker 2: debt it can take on, and that's what's called the

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Speaker 2: debt ceiling. It's actually only one of two developed countries

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Speaker 2: with this kind of debt limit.

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Speaker 4: I was going to ask, does Australia have a similar.

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Speaker 2: Australia does not. The only other developed country that does

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Speaker 2: is Denmark.

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Speaker 4: And so what happened when and if the US hypothetically

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Speaker 4: hits that debt ceiling.

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Speaker 2: Well, the tap turns bounce off.

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Speaker 4: So it's such a visceral image in my mind of

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Speaker 4: just being a brown.

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Speaker 2: Well, the tap turns off, and it means the government

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Speaker 2: literally cannot borrow any more money. Now, remember, they still

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Speaker 2: have the money that they're going to generate through taxes,

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Speaker 2: but it will mean a dramatic change in the amount

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Speaker 2: of cash that the government has at its disposal. It

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Speaker 2: also means, ultimately that the government could fail to pay

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Speaker 2: back what it's owing in debt, and that's called a default,

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Speaker 2: and that would be a serious hit to US credibility.

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Speaker 2: It would impact their ability to borrow money in the

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Speaker 2: future and how much interest their charge. Think about it

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Speaker 2: like this, if you've forgotten to pay off your credit card,

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Speaker 2: your credit card rating would take a hit. But the

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Speaker 2: US has never been in a scenario where they have

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Speaker 2: defaulted on all their obligations before. But if the debt

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Speaker 2: ceiling isn't raised, that could all be about to change.

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Speaker 4: And how likely is it that the debt ceiling will

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Speaker 4: be raised in time?

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Speaker 2: Well, the current debt ceiling is wait for it, thirty

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Speaker 2: one point four trillion US dollars. The ceiling was actually

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Speaker 2: hit back in January. They brush their head across the roof.

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Speaker 2: But the US Treasury has been able to use special

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Speaker 2: arrangements to keep afloat, but now time is running out,

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Speaker 2: and Treasury Secretary Janet Yellen has warned the government may

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Speaker 2: run out of money by the first of June, so

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Speaker 2: there's a couple of weeks left. In a letter to

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Speaker 2: Congress last week, Yellen said it was imperative that a

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Speaker 2: law be passed to change the debt ceiling. Now, in theory,

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Speaker 2: it's relatively easy for Congress to do so, they just

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Speaker 2: have to pass the law, and they have successfully done

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Speaker 2: so on seventy eight other occasions since nineteen sixty.

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Speaker 4: It strikes me as so funny. And when we uploaded

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Speaker 4: this to Instagram, a lot of the comments reflected this,

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Speaker 4: that there's this rule, there's this ceiling, and yet there

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Speaker 4: are just exceptions time and time again. I think you

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Speaker 4: said something like seventy eight times, so clearly it's been

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Speaker 4: done before. What's the issue now, Well.

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Speaker 2: The issue is a political one. It's a stalemate in Congress.

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Speaker 2: So you've got to remember that we have President Joe Biden.

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Speaker 2: He's a Democrat. He's demanded the House raise the debt

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Speaker 2: ceiling without conditions attached to it. But then Republicans, who

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Speaker 2: are led by Speaker Kevin McCarthy, have refused that. Instead,

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Speaker 2: the Republicans propose a bill which would raise the ceiling.

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Speaker 2: So they've come to the table on that point. But

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Speaker 2: they want stuff in exchange. They want slashing of government spending,

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Speaker 2: and that means that Biden's plan to cancel student debts,

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Speaker 2: some climate related funding, and tighter restrictions on welfare would

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Speaker 2: all have to come into play. So, just to explain

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Speaker 2: how that works, there's two parts of Congress which must

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Speaker 2: vote to pass a law of Representatives and the Senate.

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Speaker 2: The House is controlled by Republicans, so the bill proposed

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Speaker 2: by Republicans pass there, But the Senate is a different matter.

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Speaker 2: It's Democrat controlled and the bill is unlikely to have

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Speaker 2: ever made it through the Senate. The Republicans knew it

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Speaker 2: wouldn't go through the Senate, but they were using the

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Speaker 2: bill as an opportunity to pressure the Democrats to review

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Speaker 2: their spending. We know there's going to be a meeting

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Speaker 2: at the White House this week between the leaders of

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Speaker 2: the two parties, but it's still unclear whether an agreement

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Speaker 2: will actually be reached.

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Speaker 4: Okay, so that meeting is happening this week. But if

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Speaker 4: they don't reach an agreement, and I mean, we know

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Speaker 4: that we exist in this kind of hyperpartisan, very divided

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Speaker 4: political context, So what happens.

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Speaker 2: Well, we don't really know what could happen if there's

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Speaker 2: no agreement reached, because it would be very unfamiliar territory.

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Speaker 2: The government would face an interesting legal obligation. They would

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Speaker 2: be unable to borrow on the one hand because they

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Speaker 2: haven't got no money, but they'd be required to spend

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Speaker 2: on the other hand. A similar situation came up back

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Speaker 2: in twenty eleven when the Obama administration was preparing for

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Speaker 2: them to hit a potential debt ceiling. And what they

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Speaker 2: did there was put in a plan that would have

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Speaker 2: seen the government delay welfare payments so it could keep

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Speaker 2: paying back its borrowers. So that kind of plan would

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Speaker 2: likely unleash more legal challenges.

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Speaker 4: Okay, so it feels like chaos is not the situation

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Speaker 4: and not the path we want to go down. Are

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Speaker 4: there any other alternatives, any other ideas?

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Speaker 2: There are some unusual alternatives that have been floated, and

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Speaker 2: I must admit that when we get to this part

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Speaker 2: of the discussion, the abstract nature of money really comes

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Speaker 2: to the forefront, and I start to profound I start

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Speaker 2: to not really make sense of much. Basically, there's this

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Speaker 2: idea that the Treasury could mint a one off trillion

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Speaker 2: dollar platinum coin and give it to the US Central

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Speaker 2: Bank as a way of paying back its debts, which

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Speaker 2: is as absurd as it sounds, very very absurd, super weird.

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Speaker 2: I imagine it to be a heavy.

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Speaker 4: Coin, lots of zeros.

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Speaker 2: On the back of that one, Another idea is the

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Speaker 2: Treasury could simply ignore the debt ceiling because the US

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Speaker 2: Constitution states the validity of the public debt of the

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Speaker 2: United States shall not be questioned, which is a very

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Speaker 2: American sentence. Both of those options don't sound particularly practical

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Speaker 2: to me, and even if either of them played out,

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Speaker 2: we wouldn't avoid the economic instability that would come with it.

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Speaker 4: My favorite question, what does this mean for US? I mean,

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Speaker 4: we're talking here about what could become an economic crisis

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Speaker 4: in the US. What does that mean for us here

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Speaker 4: in Australia.

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Speaker 2: The US is the center of the global financial system,

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Speaker 2: so when something major like a US default happens over there,

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Speaker 2: it would be felt around the world. And that does

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Speaker 2: not exclude US. In Australia. Now, in the past, economic

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Speaker 2: turbulence in the US has unleashed a global recession, most

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Speaker 2: recently the GFC of two thousand and eight. Remember that

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Speaker 2: began in the US housing market. A US government official

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Speaker 2: has recently warned a US downturn would spike what he

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Speaker 2: said was global downturn of unknown but substantial severity, which

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Speaker 2: sounds spooky. It comes at the same time as well,

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Speaker 2: if you put it in a wider economic context of

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Speaker 2: other economic uncertainties like inflation, bank failures, and concerns about

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Speaker 2: global peace and security out of Ukraine. So taking all

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Speaker 2: of that together, it's not the best start to our Monday.

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Speaker 2: It does put observers on edge. Some experts are saying

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Speaker 2: there could be a big storm to come, but it's

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Speaker 2: not in anyone's interests for this to happen. Neither Democrats

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Speaker 2: or Republicans will want to let American default, so I'm

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Speaker 2: still reasonably confident they will find a solution in time,

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Speaker 2: and will keep you posted of any news as it

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Speaker 2: comes out of the White House.

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Speaker 4: Thanks for joining us on the Daily OS. If you

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Speaker 4: learned something from today's episode, don't forget to hit subscribe.

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Speaker 4: So there's a TVA episode Waiting for You every weekday morning.

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Speaker 4: We'll be back again tomorrow morning, but until then, have

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Speaker 4: a brilliant day.

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Speaker 3: Him