Welcome to the Weekly Scan. Here’s what we’re following for the week of October 4, 2021.
Who’s gonna budge? Congress approved a short-term funding bill to keep the government open through December 3, temporarily avoiding a government shutdown. The bill includes $28.6 billion for communities affected by natural disasters, and $6.3 billion towards the resettlement of Afghan refugees. In tandem with this spending compromise, Democrats are battling over a $3.5 trillion spending bill, and a $1 trillion infrastructure bill, both of which have stalled in recent weeks in the Senate. Congress still needs to raise the debt ceiling in the next few weeks, which could be complicated by partisanship. Senate Minority Leader Mitch McConnell has reportedly said that Democrats in Congress will need to bypass Republican support by using a budget reconciliation process to raise the debt ceiling.
- The takeaway: If Congress fails to raise that ceiling, the government could default on its loans, which could have serious implications for the entire economy. Treasury Secretary Yellen has written that the government will run out of money by October 18. Without an increase in the debt limit, it’s possible that Social Security payments, veteran pension benefits, and other federal obligations might be delayed. Defaulting on the national debt could in turn spark a downgrading of the U.S. credit rating, as it did in 2011. That could cause borrowing costs for the federal government to increase, and deal a severe blow to the economic recovery. For consumers, this could include a falling stock market and potential increases to unemployment.
Where’s my charger? Ford Motors said it will open a new assembly plant exclusively for electric vehicles in the U.S., as well as three factories dedicated to the production of batteries to power those cars. The assembly plant will be the company’s first in the U.S. in decades. Ford plans to spend $7 billion on the project, and will collaborate with South Korean battery maker SK Innovation, which will invest $4.4 billion in the initiative. SK’s investment will reportedly create 11,000 jobs, and help produce enough batteries for 1 million electric vehicles per year. Ford will build two of its new battery factories in Kentucky, and one in western Tennessee, where it will also build the assembly plant. The car manufacturer has pledged to spend $30 billion on the development of its electric vehicles through 2025.
- The takeaway: Ford’s decision demonstrates an increasing effort by carmakers to shift to electric power. The company’s CEO cited success with Ford’s early electric vehicles such as the Mustang Mach-E as one reason to invest further in the technology. Still, electric vehicles can be more expensive than gas powered cars for consumers and the U.S. lacks the number of charging stations needed for mass adoption. For its part, the Biden administration has called upon Congress to allocate $174 billion in electric vehicle spending, including $100 billion for consumer incentives. The Administration has also called for spending to build more charging stations. General Motors, Ford Motor, and Chrysler’s parent company Stellantis NV have all thrown support behind the plan.
Another dropout. Navient, one of the largest student loan servicers in the U.S., reached an agreement to end its contract with the Department of Education (DOE). As a result, Navient’s accounts will be transferred to a separate loan servicer, Maximus. Navient currently services six million borrowers, with debts totaling more than $237 billion in student loans. Borrowers whose loans are serviced by Navient will see their debts move over to Maximus. The transfer is expected to happen by the end of the year. Maximus reportedly plans to use the same servicing system that Navient has used, and some of Navient’s employees will be moved over to Maximus, to help with continuity of service to borrowers.
- The takeaway: Earlier this year, two other loan servicers, the Pennsylvania Higher Education Assistance Agency—also known as FedLoan Servicing—and Granite State Management and Resources also exited their contracts with the DOE. These changes also arrive as the DOE figures out how to resume federal student loan payments, which have been in a period of forbearance since the beginning of the pandemic in March 2020. Federal student loan borrowers have not had to make student loan payments during that period, but that deferral period will end on January 31, 2022.
Undisputed. The Biden administration issued an interim regulation that may help protect consumers from surprise medical billing. The regulation would work in conjunction with the No Surprises Act, legislation passed in December, 2020, which attempts to shield patients from surprise medical bills from out-of-network providers. Millions of such bills reportedly saddle consumers with unexpected medical expenses annually.
- The takeaway: The new rule would require medical providers and health insurance companies to settle the cost of disputed services through arbitration, or an independent resolution system. This is the second new rule to stem from the No Surprises Act, which will go into effect at the beginning of 2022. In July, the Biden administration issued another rule that would protect patients seeking emergency medical care from receiving surprise bills.
There’s a pill for that. Pharmaceutical company Merck & Co. said last week that it’s developed an experimental pill that’s proven to reduce the risk of hospitalization or death from Covid-19 infection by 50%. The drug, which is known as Molnupiravir, shook up the markets, with vaccine makers BioNTech and Moderna losing about $84 billion in value collectively. Investors sold off their shares of those companies as the news of the success of Merck’s pill raised hopes for an easy, at-home treatment for Covid-19. Merck is now seeking regulatory approval for the drug after seeing promising results in clinical trials.
- The takeaway: A simple, one-pill treatment for Covid-19 could disrupt the biotech industry, which has been dominated by vaccine development since the beginning of the pandemic. Through an initiative known as Operation Warp Speed, the U.S. government invested $10 billion in vaccine development, with the goal of manufacturing hundreds of millions of doses. Since the rollout of mass vaccination began in 2021, more than 6.2 billion doses of the Covid-19 vaccine have been administered worldwide. As of the end of September 2021, the U.S. had administered 393 million shots, averaging more than 725,000 per day. However, the U.S. is still reporting more than 100,000 new cases of the virus per day. Shares of Moderna have increased 1,590% since the beginning of 2020, while shares of BioNTech and Novavax have experienced 600% and 4,000% increases, respectively.
Here’s what we covered in last week’s Scan:
- Congress battles over raising the debt ceiling.
- Stock markets tumbled in response to trouble at Chinese company Evergrande.
- Prices for Cheerios, and other consumer goods, are expected to rise.
- The Federal Open Market Committee held its latest meeting.