On The Money — Debt ceiling showdown could send US into tailspin

Democrats are facing pressure to raise the federal debt limit before a likely loss of control in Congress next year.

We’ll also look at the jump in mortgage rates, organized labor’s reaction to the continued interest rate hikes from the Federal Reserve, and more.

But first, have you seen why Rihanna fans are rejoicing?

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom.

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Democrats facing pressure to act on debt limit

Democrats are under pressure to raise the federal debt limit before a likely loss of control in Congress next year to prevent a potential showdown with Republicans.

The U.S. has almost a year until experts say the federal government will hit its borrowing limit, which gives Congress plenty of time to avert a default.

• Experts say a pledge by the GOP to use the debt ceiling as leverage, if they take a chamber of Congress, could lead to a partisan clash with devastating effects, should the government default.
  

• Democrats already have a packed agenda to finish off in the few remaining weeks of the year, giving President Biden’s party little time to push through another debt ceiling increase. And only the lengthy and complicated budget reconciliation process allows Democrats to raise the ceiling without Republican support. But that doesn’t mean they aren’t looking at their options.
  

• Sen. Elizabeth Warren (D-Mass.) said Congress should take immediate action to “deal with the debt limit and it ought to be a bipartisan vote,” but she added lawmakers “must avoid default by any means necessary.”

The background: While the debt ceiling doesn’t control how much money the federal government can spend, it does limit how much debt the Treasury Department can take on while paying for expenses already approved by lawmakers and the White House.

If the federal government fails to raise the debt ceiling, the U.S. could miss payments on debt owed and slip into default, plunging the global economy into chaos. The U.S. already suffered credit downgrades and financial market turmoil after down-to-the-wire showdowns in 2011 and 2013, and experts don’t want to see another.

Sylvan and Aris have the details here.

‘GREATEST HARM I COULD EVER IMAGINE’

Organized labor blasts Fed rate hikes

Organized labor is expressing anger about continued interest rate hikes from the Federal Reserve, joining a chorus of voices on the left arguing that lower inflation is not worth the pain of recession.

Unions maintain that the central bank’s rate hikes are divorced from the root cause of inflation, which is affecting many different countries across a huge range of goods and services. By slowing demand and making it more expensive to transact throughout the economy, the Fed is essentially missing the ball, they say.

• Bill Spriggs, chief economist of the AFL-CIO labor union federation, said that international supply costs are propelling prices upward, particularly with agricultural commodities hit by severe weather events related to climate change.
  

• Food prices are up in the U.S. 11.2 percent since last year, and groceries up more than 13 percent. Spriggs said diminished global agricultural production needs to be at the center of the inflation conversation.
  

• He pointed to a major drought affecting rice-growing regions in China, a heat wave in Europe that destroyed much of the corn crop and massive flooding in Pakistan that wiped out huge swaths of different crops, including 20 percent of the cotton harvest. The United Nations Food and Agricultural Organization reports that food prices globally are up 5.5 percent since last year.

The Hill’s Tobias Burns has more on this here.

HIGHER & HIGHER

Mortgage rates rise to highest level since 2001

U.S. mortgage rates rose for the 10th consecutive week, climbing above 7 percent last week to their highest level since 2001, according to data released Wednesday by the Mortgage Bankers Association (MBA).

The MBA’s weekly survey shows that the 30-year fixed mortgage rate rose to 7.16 percent, up from 6.94 percent a week earlier, while purchase applications dipped to their lowest level in seven years.

• “Mortgage rates increased for the 10th consecutive week, with the 30-year fixed rate reaching 7.16 percent, the highest rate since 2001,” Joel Kan, the MBA’s vice president and deputy chief economist, said in a statement.
  

• The share of adjustable-rate mortgage applications decreased slightly to 12.7 percent of total applications, while refinance activity increased to 28.8 percent of total applications from 28.3 percent the previous week.

The Hill’s Adam Barnes breaks it down here.

HOT N COLD

New home sales plummeted 11 percent in September amid sky-high mortgage rates

New home sales fell rapidly in September amid sky-high mortgage rates that are pushing buyers out of the once-hot housing market.

Sales of new single-family homes in September fell by 10.9 percent to a seasonally adjusted annual rate of 603,000 units, according to data released by the Census Bureau on Wednesday.

• The median sales price of new houses sold last month was $470,600, while the average sales price was $517,700.
  

• The housing market has cooled significantly in recent weeks as the Federal Reserve’s ongoing fight with persistent inflation led to a series of baseline interest rate hikes over the summer.

The Hill’s Adam Barnes lays it out here.

Good to Know

More than half of U.S. residents polled in a new survey said they are looking to work more hours to help cover rising prices for basic needs.

In a survey of 1,000 U.S. adults released last week, 57 percent said they were seeking overtime or extra shifts, while 38 percent said they were seeking a second job.

Respondents with children were far more likely to seek extra hours at their current jobs (64 percent) and look for an additional job (47 percent).

Here’s what else we have our eye on:

• Meta’s earnings for the past three months declined compared to the same period last year, marking the second quarter in a row the tech giant saw a dip in revenue after years of growth.
  

• The White House announced on Wednesday its plan to expand its public-private cybersecurity partnership to include the chemical sector.
  
  

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and check out more newsletters here. We’ll see you tomorrow.

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