1 US shutdown isn't the worst of it (Linda Yueh on BBC) A bigger problem
than the US government shutdown is, if the Democrats and Republicans continue
to disagree, then the US would breach its "debt ceiling" - that means
there's a chance that the world's biggest economy could default on its debt.
Coincidentally, the first government shutdown happened on this day in 1976. Since then, there have been 17 occasions when there was no agreement on the funding of government spending. The last time was 17 years ago during the Clinton administration, which also saw the House and Senate divided over spending priorities.
There would be a fairly big impact on the economy. Economists estimate that a two-week shutdown could cut GDP growth by 0.3 percentage points and one that lasted three-to-four weeks could cut growth by as much as 1.4 percentage points. And then it could get worse - the US could default on its debt. Technically, the $16.699 trillion debt ceiling was hit on 19 May. The US Treasury has been using extraordinary measures to keep going. If Congress doesn't raise the so-called "debt ceiling", then the Treasury estimates that it can only stretch out the money until 17 October. At which point, it could run out of money to pay the interest on US government debt, and the US defaults in a technical sense if it misses an interest payment.
That is what the debt ceiling is. It is the amount of debt the US can borrow. The problem is the ceiling could now prevent the US from borrowing to pay the interest on the money that it has already borrowed. Until recently, it wasn't a big issue. Since 1960, the debt ceiling has been raised 78 times. However, it has become a bargaining point with a divided Congress. And it has been damaging. In 2011, the US lost its top AAA credit rating for the first time. Two years later, the impasse has again reared its head. The timing couldn't be worse as the US recovery is just gaining steam. And the fragile world economy doesn't need the possibility of default by the world's economic engine dangling over it. http://www.bbc.co.uk/news/business-24329706
2 One in seven US students in loan default (Janet Lorin & John Hechinger in San Francisco Chronicle) About 1 in 7 borrowers defaulted on their federal student loans, showing how former students are buckling under higher-education costs in a weak economy. The default rate, for the first three years that students are required to make payments, was 14.7 percent, up from 13.4 percent the year before, the US Education Department said. Based on a related measure, defaults are at the highest level since 1995.
The rising number of defaults shows the pain of borrowers, said Rory O'Sullivan, policy and research director at Young Invincibles, a Washington nonprofit group. "Our generation is behind in the economic recovery and not recovering as fast as we need to," said O'Sullivan, whose group represents the interests of people ages 18 to 34.
US borrowers owe $1.2 trillion in student-loan debt - including government loans and those from private lenders. That sum surpasses all other kinds of consumer borrowing except for mortgages. Public colleges reported a 13 percent default rate while nonprofit private schools had a rate of 8.2 percent. For-profit colleges fared the worst, at almost 22 percent.
Coincidentally, the first government shutdown happened on this day in 1976. Since then, there have been 17 occasions when there was no agreement on the funding of government spending. The last time was 17 years ago during the Clinton administration, which also saw the House and Senate divided over spending priorities.
There would be a fairly big impact on the economy. Economists estimate that a two-week shutdown could cut GDP growth by 0.3 percentage points and one that lasted three-to-four weeks could cut growth by as much as 1.4 percentage points. And then it could get worse - the US could default on its debt. Technically, the $16.699 trillion debt ceiling was hit on 19 May. The US Treasury has been using extraordinary measures to keep going. If Congress doesn't raise the so-called "debt ceiling", then the Treasury estimates that it can only stretch out the money until 17 October. At which point, it could run out of money to pay the interest on US government debt, and the US defaults in a technical sense if it misses an interest payment.
That is what the debt ceiling is. It is the amount of debt the US can borrow. The problem is the ceiling could now prevent the US from borrowing to pay the interest on the money that it has already borrowed. Until recently, it wasn't a big issue. Since 1960, the debt ceiling has been raised 78 times. However, it has become a bargaining point with a divided Congress. And it has been damaging. In 2011, the US lost its top AAA credit rating for the first time. Two years later, the impasse has again reared its head. The timing couldn't be worse as the US recovery is just gaining steam. And the fragile world economy doesn't need the possibility of default by the world's economic engine dangling over it. http://www.bbc.co.uk/news/business-24329706
2 One in seven US students in loan default (Janet Lorin & John Hechinger in San Francisco Chronicle) About 1 in 7 borrowers defaulted on their federal student loans, showing how former students are buckling under higher-education costs in a weak economy. The default rate, for the first three years that students are required to make payments, was 14.7 percent, up from 13.4 percent the year before, the US Education Department said. Based on a related measure, defaults are at the highest level since 1995.
The rising number of defaults shows the pain of borrowers, said Rory O'Sullivan, policy and research director at Young Invincibles, a Washington nonprofit group. "Our generation is behind in the economic recovery and not recovering as fast as we need to," said O'Sullivan, whose group represents the interests of people ages 18 to 34.
US borrowers owe $1.2 trillion in student-loan debt - including government loans and those from private lenders. That sum surpasses all other kinds of consumer borrowing except for mortgages. Public colleges reported a 13 percent default rate while nonprofit private schools had a rate of 8.2 percent. For-profit colleges fared the worst, at almost 22 percent.
http://www.sfgate.com/business/article/Student-loan-default-rate-now-1-in-7-and-growing-4857495.php
3 Merck axes another 8,500 jobs (BBC) US pharmaceutical giant
Merck has announced it will cut 8,500 further jobs in an attempt to cut $2.5bn from
its costs by 2015. The new losses, combined with 7,500 job cuts announced in
2011 and 2012, amount in total to 20% of its workforce. Merck said it will be
shifting its focus to areas it sees as high growth, such as cancer treatment. It
is also pulling products in late-stage trials it estimates will not be so
successful, and licensing other products to alternative companies.
The New
Jersey-based company anticipates its costs will be reduced by $1bn at the end
of 2014, from cutting marketing, administrative, research and development
operations. Merck will also be selling property in New Jersey to help save
costs. Alex Arfaei, analyst at BMO Capital Markets, said he was concerned Merck
was putting too much faith in a handful of experimental drugs.
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