Happy Thursday. Here’s what we’re looking at as we seek some shade on what could be one of the hottest days ever recorded on Earth.
Biden Faces Backlash Over Student Debt Plan
Advocates for student loan debtors are pushing back against a White House plan that will provide a 12-month grace period for those resuming loan payments starting in October. While the grace period will allow debtors to skip payments without being reported to credit agencies as delinquent, interest will continue to accrue on the loans, pushing balances higher as the year progresses.
The Biden administration announced the alternate plan following the Supreme Court’s rejection last week of an earlier effort to forgive as much as $20,000 in student loan debt for millions of Americans. But advocates say the new plan isn’t enough and want the administration to take further steps.
“People should not be incurring interest during this 12-month on-ramp period,” Rep. Alexandria Ocasio-Cortez told The Hill. “So, I highly urge the administration to consider suspending those interest payments.
The Biden administration says it has no choice. “The law requires us to end the payment pause this summer,” a White House spokesperson said. “We believe in the rule of law, and plan to follow it.”
Republican critics of the new White House plan, including Rep. Virginia Foxx, say it violates the debt ceiling agreement, which requires the pandemic-era pause in student loan payments to end this fall.
The bottom line: Although the Supreme Court delivered a mortal blow to President Joe Biden’s student loan forgiveness plan, the battle over student loan debt isn’t over. The White House is still looking for ways to soften the decision for debtors as it attempts to line up a new legal justification for mass student loan forgiveness.
Number of the Day: $6.9 Billion
The Biden administration intends to allocate $6.9 billion to the Gateway Program, a massive infrastructure project focused on building a second rail tunnel under the Hudson River connecting New York and New Jersey, an important chokepoint along the Northeast Corridor. Assuming the project’s manager, the Gateway Development Commission, meets all the necessary requirements, the funding will be the largest transportation grant ever dedicated to a single project.
The effort to build a new tunnel – the current tunnels were built in 1910 and were heavily damaged in Hurricane Sandy in 2012 – has been delayed for years, in large part due to disputes over funding. In 2010, New Jersey Gov. Chris Christie halted an earlier version of the effort, known as the ARC project, saying it placed too much of a burden on his state’s taxpayers. The Gateway project was supposed to move forward during the Trump administration, under an agreement that the federal government would split the cost with New York and New Jersey, but progress came to a halt amid a political battle between former President Donald Trump and Sen. Chuck Schumer of New York.
Schumer hailed the agreement Thursday. “This was the major hurdle, getting this kind of very large investment from the federal government, and here it is,” Schumer said. “This is real, and it means there’s no turning back now.”
Schumer said the project’s managers are also seeking an additional $3.8 billion from the Federal Railroad Administration to help defray any additional costs that pop up during the long construction schedule.
More Signs of Economic Strength
Although new data provides a mixed picture of the labor market, the U.S. economy still looks remarkably robust overall, boosting the odds that the Federal Reserve will move ahead with another rate hike at the end of the month.
Initial jobless claims rose by 12,000 last week to 248,000, the Labor Department reported Thursday. Meanwhile, the U.S. Bureau of Labor Statistics said that the number of job openings fell to 9.8 million in May, reducing the ratio of available jobs to unemployed to 1.6, down from 1.8 the month before.
At the same time, layoffs fell and the number of people quitting their jobs – seen as a positive sign of labor market strength – rose. In addition, human resources firm ADP shocked analysts Thursday when it reported that private payrolls increased by 497,000 in June, well above expectations. Although the ADP numbers don’t always track the official government jobs report, which is due Friday, the sheer size of the jobs gain was enough to send the stock market sharply lower as traders contemplated the likelihood of more interest rate hikes ahead.
“The labor market remains too hot for the Fed’s comfort,” said Bloomberg economist Stuart Paul. “With little chance that the supply of skilled labor will surge, the Fed will likely need to maintain its higher-for-longer rate posture into next year to suppress labor demand and sustainably rein in inflation.”
Former Obama administration economist Jason Furman summed up the situation in the labor market in the chart below. Key variables are softening but remain quite strong compared to historical norms. “Mixed signals: the job openings rate fell but the quits rate rose,” Furman wrote. “Both remain well above pre-pandemic rates indicating the labor market remains tight.”
FDA Gives Full Approval to Alzheimer’s Drug
The Food and Drug Administration granted full approval to Leqembi, an IV-administered drug that delays the onset of Alzheimer’s disease. It’s the first time such a drug has received full approval, and it clears the way for Medicare to partially cover the cost of the treatment for some patients.
“Today’s action is the first verification that a drug targeting the underlying disease process of Alzheimer’s disease has shown clinical benefit in this devastating disease,” said Teresa Buracchio, acting director of the Office of Neuroscience in the FDA’s Center for Drug Evaluation and Research. “This confirmatory study verified that it is a safe and effective treatment for patients with Alzheimer’s disease.”
The announcement comes after Leqembi, produced by Japanese drugmaker Eisai, demonstrated effectiveness in accelerated clinical trials. The testing indicates that the drug can slow the progression of the disease by five months over an 18-month period. However, the drug may also cause swelling or bleeding in the brain, and so will come with a “boxed warning” or label describing the risks.
The drug is expected to cost more than $26,000 a year. Medicare has said it would cover 80% of the cost once the drug received full approval, though only for patients who are in a nationwide registry that tracks results. Advocates say that requirement could sharply limit the number of people who participate.
About 6.7 million people in the U.S. have Alzheimer’s. Eisai estimates that 10,000 patients could be taking Leqembi by March 2024, and 100,000 by the end of 2026.
Fiscal News Roundup
- Biden Touts Enphase Energy Investments as ‘Bidenomics in Action’ – Bloomberg
- Hudson Tunnel Project to Get $6.9 Billion in Largest U.S. Transit Grant – New York Times
- Student Debt: White House Faces Backlash for Restarting Interest on Loans – The Hill
- Biden to Crack Down on ‘Junk’ Health Insurance – Politico
- US Will Provide Cluster Munitions to Ukraine as Part of a New Military Aid Package – Associated Press
- Marjorie Taylor Greene Booted out of Freedom Caucus, Member Says – Politico
- Navy Set to Lose Out on Jets Due to Row With Boeing – Politico
- The US Is Building Factories Again, but Who Will Work There? – Bloomberg
Views and Analysis
- The Truth About the GOP and the Deficit: All They Do Is Raise It – Timothy Noah, New Republic
- The Two Charts President Biden Wants Voters to See – Jordan Weissmann, Semafor
- Central Banks Should Stop Hammering the Economy Into Recession – Marcus Ashworth, Bloomberg
- The Little-Known Provision That Could Revolutionize Highway Travel – Clifford Winston
- U.S. Institutions Are Polling About as Well as King George III Did in 1776 – Charles Lane, Washington Post
- It’s Useful to Remember How Little Many Americans Know About Politics – Philip Bump, Washington Post