This is an audio transcript of the FT News Briefing podcast episode: ‘US expected to hit debt ceiling’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, January 19th, and this is your FT News Briefing.

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The US government is expected to max out on its giant credit card today. Microsoft is cutting jobs, but it’s still spending on what it sees as the future. Plus, the FT’s Katie Martin has been hearing a lot about European Union frustration with the US climate subsidies.

Katie Martin
We have just heard so much bellyaching from the Europeans saying this isn’t fair. There’s been quite a kind of diplomatic spat.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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The US is expected to hit its debt ceiling today. That means the federal government won’t be able to borrow any more money. And hitting this $31tn limit will set the stage for a dramatic showdown between Democrats and Republicans. Here’s the FT’s deputy Washington bureau chief, Lauren Fedor.

Lauren Fedor
Once upon a time, this was a fairly straightforward process. But in the last decade, 15 years or so, we’ve seen it become increasingly partisan. They need to pass a piece of legislation just like any other piece of legislation in order to raise this limit. But this time around, we already have a very vocal group of Republican lawmakers who are saying they’re not up for doing that unless the other side makes some concessions.

Marc Filippino
OK. We should point out that this battle over the debt limit happens regularly in Washington. It’s almost like a ritual. And in the end, Democrats and Republicans manage to come to some sort of agreement. Why does it seem like people are getting so worked up this time around?

Lauren Fedor
So the main reason why we’re getting worked up is that the margins in the House of Representatives — which Republicans currently control after the result of last year’s midterms — are very, very narrow. That means that it only takes a handful of objectors to hold up a bill. And it takes a handful of objectors in this case to hold up raising the debt ceiling. What they want, more or less, are very, very big budget cuts.

Marc Filippino
Now, Treasury secretary Janet Yellen has indicated that the Treasury could step in with a lifeline to help the government meet its debt obligations. How reliable would this be?

Lauren Fedor
Right. So I think lifeline is exactly the right word here. It’s a short-term stop-gap measure. It means that the US is not going to default today and the government will be able to continue to make good on its obligations. But that stop-gap measure is going to run out. People in Washington and economists are calling that as its “X date”. Now, there are different projections about when that might be, could be soon, as soon as a couple of months from now. It could be as late as the end of the year. A lot of that depends on tax revenues and a couple of other factors. But, you know, the clock starts now in terms of getting a long-term solution here.

Marc Filippino
So, Lauren, could this affect markets or the US credit rating?

Lauren Fedor
Absolutely. So, you know, right now we’re not seeing a huge amount of market panic. But as that “X date” gets closer, we could see a real market rollercoaster. We could see a downgrade of US debt by the credit rating agencies. And even if a default is averted at the eleventh hour, you still might see some of those things. Back in 2011, when lawmakers and the Obama administration got really close to that deadline, there was a lot of market unrest and a downgrade.

Marc Filippino
Lauren Fedor is the FT’s deputy Washington bureau chief.

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Lay-offs in the US tech industry continue. Microsoft yesterday announced plans to cut nearly 5 per cent of its global workforce this year, which is about 10,000 people. This cost-cutting measure comes as Microsoft is considering spending $10bn on the artificial intelligence company OpenAI. Here’s the FT’s Richard Waters on where Microsoft CEO Satya Nadella is taking the company.

Richard Waters
In his memo to staff announcing these job cuts, the CEO, Nadella, really did something quite extraordinary, which is, he said we’re looking ahead to the next boom. We’re looking ahead to the next investment wave. Yes, we’re cutting some jobs here. It’s under 5 per cent. It’s in, you know, many ways, it’s less than a lot of people on Wall Street had expected. But he’s also saying we are hiring people. We’re looking ahead. And the biggest danger in the tech industry is to miss a platform shift. If the whole basis of competition in the tech world starts to change, as it did with smartphones and so on, if there’s another thing like that happening right now, then we simply can’t afford to be left behind. And so he’s really signalling, I think, that when you look at the headline job numbers, in a year from now, Microsoft won’t have, won’t have contracted. I think it’s gonna keep increasing. It’s just cutting some areas that are less important now, but the hiring is really gonna carry on.

Marc Filippino
Richard Waters is the FT’s west coast editor. He covers all things tech.

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Yesterday was yet another bad day for crypto. Sources told the FT that crypto broker Genesis is preparing to file for bankruptcy. That could happen as soon as this week and it would make Genesis yet another casualty following the implosion of Sam Bankman-Fried’s FTX exchange. And then there’s the crypto publication, CoinDesk. Yesterday it said it’s hired investment bankers to explore a sale of part or all of the company. And finally, bitcoin. It was having a fantastic run recently, surging past $21,000 for the first time since November. But yesterday it fell about 2 per cent.

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The European Union and the US are steadfast partners, and they have been for a while. But there’s been transatlantic tension over the massive American spending package, the Inflation Reduction Act. The IRA, as it’s known for short, provides hundreds of billions of dollars in subsidies for green energy. Well, this week the EU came out with a green pitch of its own. European Commission president Ursula von der Leyen said Brussels would ease up on rules for state aid and pump cash into climate-friendly businesses.

Ursula von der Leyen
We Europeans also need to get better at nurturing our own clean tech industry.

Marc Filippino
She was speaking to executives at the World Economic Forum in Davos. To find out more, I’ve got the FT’s Katie Martin on the line. She’s in Davos. Hey, Katie.

Katie Martin
Hey, how are you doing?

Marc Filippino
I’m good. How’s Davos?

Katie Martin
It’s cold. (laughter)

Marc Filippino
Yeah, I can imagine.

Katie Martin
Yeah, it’s pretty cold. It’s pretty full on. It’s Davos. That’s what it does best.

Marc Filippino
Well, I hope you’re bundled up, Katie. So, anyway, getting back to the task at hand, folks in the European Union were pretty upset at the US subsidies, which were part of the IRA. Can you remind us what Europeans are unhappy about? I mean, the law is trying to curb climate change, which, you know, the EU also wants to do.

Katie Martin
In the run-up to the meeting in Davos, we have just heard so much bellyaching from the Europeans saying this isn’t fair. We’re worried that it’s going to take European companies over to the States. And one of the, kind of, complaints from the Europeans has been, well, it feels like we’re a bit of an afterthought in how this act has been, this legislation has been pulled together. You get to Davos and the view from, for example, American chief executives is no, sure, Europe really was an afterthought (laughter) in this whole thing.

Marc Filippino
It’s such an American reaction. Quit whining.

Katie Martin
Yeah . . . 

Marc Filippino
Pull yourself up by your bootstraps.

Katie Martin
It is, it’s really funny, ‘cause the Americans are just like, it’s like dogs watching television. And they’re like, well, just looking absolutely puzzled, like . . .

Marc Filippino
Yeah.

Katie Martin
 . . . why is this my problem?

Marc Filippino
 . . . should be of concern to you, would it like, do we need a permission slip?

Katie Martin
Well, that exactly is really ironic because it’s taken as read that Europe has the lead in the green transition and that the US is a laggard. Now, that’s absolutely flipped and the US has managed to get absolutely ahead of this process without spending two years like the Europeans did discussing what green energy really is. The Americans are just like, here it is, and thrown money at the situation.

Marc Filippino
So how is this playing out in Davos? What are the Europeans saying? Are they still complaining about the Inflation Reduction Act?

Katie Martin
So the discussion, well, first of all, there appear to be lots of European companies that are sort of hobnobbing around in Davos, figuring out where the opportunities might be for them in the States. And Ursula von der Leyen from the EU side made a big speech earlier this week talking about OK, we hear you. We’re going to loosen restrictions on subsidies in Europe. We’re going to accelerate permits to make it easier for companies to operate in this space. But there’s still a lot to figure out there. It depends on member states. It depend- you know, if there’s gonna be some sort of common financial backing for this, then that’s something that always takes the EU absolutely ages to sort out. So it’s just really clear that the shoe is on the other foot, that the US is taking this agenda forward and quickly, and it’s not wasting time around definitions and that sort of thing. And investors are excited about it. Europe’s really got to speed up if it wants to compete here.

Marc Filippino
Katie Martin is the FT’s markets editor. Thank you, Katie.

Katie Martin
Pleasure.

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Marc Filippino
Before we go, knowing what our listeners think is a huge part of how we improve our show and we wanna know what you’d like to hear more of. So we’re running a survey which you can find at FT.com/briefingsurvey. It takes around 10 minutes to complete and you’ll have a chance to win a pair of Bose QuietComfort Earbuds. Thanks in advance for your feedback and we’ll have that link in the show notes.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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