United States of America eSeries: 'No one would be spared' 🚨

'No one would be spared' 🚨

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It's the autumnal equinox, which means for the next three months the pumpkin spice goes straight into my veins and I don't leave the house without a leather jacket, regardless of the weather. These are the rules; I just work here. Let's get into it.

by Allison Morrow

⚠️ DEFAULT FALLOUT

We try not to be alarmist around here, but it's hard not to be dramatic when the stakes are as high as they are right now.

Here's the deal: America has bills to pay, and it's up to Congress to put aside partisan bickering and authorize the money to pay them. The US has never once defaulted on its debts. But this could be the year.

Republicans have dug in their heels, saying they won't vote to raise the debt ceiling. Why? Because they can't be seen to be cooperating with Democrats, and they don't like President Biden's spending plans. And just to be clear: That's a fine opinion to hold, but the reality is that raising the debt ceiling doesn't pay for future spending — it pays for the stuff both Democrats and Republicans have already agreed to. Like Trump-era tax cuts, for example.

So here's our best-case/worst-case breakdown, via CNN's Matt Egan and Phil Mattingly:

Best case: The US economy would enter a mild recession. And even that would short-circuit the fragile pandemic recovery in ways we can't fully anticipate.
Worst case: An unmitigated financial disaster that will last months. Tens of billions in Covid-19 economic recovery aid would be shut down. Stock prices would plummet. Credit markets would seize up. As many as 6 million jobs would be lost, according to Moody's estimates.

If that worst-case scenario sounds like more of a problem for Wall Street than Main Street, think again: Failure to raise the debt limit would halt paychecks to federal workers, Medicare benefits, military salaries, tax refunds, Social Security checks and payments to federal contractors. Not to mention a very bad run for anyone hoping to retire on their 401(k).

In other words: "No one would be spared," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "It would be such a self-imposed disaster that we wouldn't recover from, all at a time when our role in the world is already being questioned."

WHAT'S NEXT?

The clock is ticking. The Treasury Department estimates that it will run out of cash and accounting gimmicks at some point next month. Once we hit the federal borrowing limit, Washington would be unable to issue new debt — an untenable situation because America doesn't bring in enough revenue to pay for its spending.

On Tuesday, the House passed legislation to avert a government shutdown and raise the debt ceiling. The bill now faces an uphill battle in the Senate. By attaching the debt limit suspension to the must-pass funding bill, Democrats are essentially daring Republicans to vote no and spark a shutdown.

So, let's strap in, get the popcorn ready and pray that politicians manage to see past their own myopic self-interest and stop holding the entire nation and the global financial system hostage.

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#️⃣ NUMBER OF THE DAY

$356,700

America's housing market is starting to cool ever so slightly, but prices are still bonkers. Although sales are slowing, the median home price in August was $356,700, up nearly 15% from a year ago. Just to be clear: A 15% annual price increase is nuts — 3% to 5% would be the pre-pandemic standard. But it's closer to normal than the 20% growth recorded in previous months.

'WHEN AND NOT IF'

Time is running out for China's Evergrande. Whether it can survive past Thursday is anyone's guess. (In fact by the time you read this it may already be in freefall. )

Markets famously hate uncertainty, but that's all the news we're getting out of China regarding its biggest and most indebted property developer. While US investors seem to have shrugged off their earlier fears about Evergrande's contagion risk, the company is still flirting with a collapse that could devastate the world's second-largest economy.

Interest worth $83.5 million is due Thursday. At least publicly, no one from Evergrande has said whether it can make that payment. Fueling the uncertainty, Beijing has stayed mum on whether it will bail Evergrande out (unlikely) or otherwise intervene to blunt the impact on banks, investors, homebuyers and other parties who stand to lose big if the company defaults on its $300 billion mountain of debt.

Key quote: "There appears to be an acceptance that an Evergrande failure is more a matter of when and not if, and the real question is how any fallout is managed," wrote Michael Hewson, chief market analyst at CMC Markets in a report on Wednesday, noting that the company had already missed loan repayments earlier this week.

WHAT ELSE IS GOING ON?

🏦 The Federal Reserve isn't taking its foot off the stimulus gas pedal just yet. As expected, the central bank kept interest rates near zero and made no changes to its easy-money policies that have been propping up Wall Street since the pandemic hit last year. Naturally, investors cheered the news and markets closed in the green Wednesday.

📱 Apple will not allow Fortnite back on its devices until its legal battle with the video game's maker, Epic Games, has fully concluded. That could be years from now.

📈 European natural gas prices have soared so high that hundreds of millions of people could be facing cold homes or inflated energy bills over winter.

💄 Clinique's Black Honey lip color has been around since the Nixon administration. But after it went viral on TikTok, beauty stores can't keep it on the shelves.