US lost AAA rating during last comparable debt crisis

Congress is preparing for another political battle over raising the nation's borrowing limit, which could have dire consequences for the economy if not resolved. The federal government is likely to reach its statutory borrowing limit in the next few weeks, and fears are growing that the upcoming debt limit battle could cause financial chaos and threaten an economy on the brink of recession. Republicans, who will take control of the House of Representatives in January, have said they want to pair the debt ceiling hike with spending cuts, including cuts to Medicare and Social Security, which Democrats have vowed to oppose. If the debt limit is not raised, the federal government would need to shift its money around to avoid defaulting on debt, which could hit consumer confidence hard. The good news is that there is still time to avoid default, with the Treasury Department able to borrow as usual until late February or early March. The government is also sitting on a stockpile of $500 billion that could finance the deficit until August. However, after that, funds could quickly run dry.

In other news, Apple's supply chain diversification away from China to countries like India and Vietnam could speed up following supply disruptions related to Covid-19 shutdowns and worker protests that were costing Apple roughly $1 billion a week in lost iPhone sales. Executives do not feel comfortable having so much business tied up in China after recent upheavals, and the company is actively telling suppliers to plan more actively for assembling Apple products elsewhere in Asia. Meanwhile, the United Kingdom could face a "lost decade" of growth if action is not taken to address slumping business investment and worker shortages. The Confederation of British Industry (CBI) said that three-quarters of companies are struggling to find the skills and workers they need. It urged changes in government policy, including a more flexible immigration system and tax breaks to boost investment. The United Kingdom is the only G7 economy that still has not fully recovered from the pandemic, and soaring energy and food costs drove inflation to a 41-year high in October.


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