On The Money: Fed chief warns of 'unthinkable' harm if debt ceiling breached | Powell basks in bipartisan praise amid Trump attacks | Federal deficit jumps to $747 billion

On The Money: Fed chief warns of 'unthinkable' harm if debt ceiling breached | Powell basks in bipartisan praise amid Trump attacks | Federal deficit jumps to $747 billion
© Greg Nash

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THE BIG DEAL--Fed chairman warns of 'unthinkable' harm if debt ceiling isn't raised:

Federal Reserve Chairman Jerome Powell said Thursday that the global economy could suffer "unthinkable" damage if the White House and Congress fail to raise the federal debt limit.

Testifying before the Senate Banking Committee, the Fed chairman said it was "essential" for Congress to raise the legal limit on the federal debt before the U.S. government defaults on its loans.


"We've always paid our bills, and it simply must happen that Congress raises the debt ceiling in time to allow that to happen," Powell said.

The consequences of inaction "would be highly unpredictable," Powell added, warning that "no one should assume that the Fed or any other agency can be relied upon to shield our economy from the short-, medium- and long-term negative consequences of such an act."  


The background: Powell's remarks come as lawmakers and the Trump administration face growing pressure to strike a deal to avoid mandatory budget cuts and lift the debt ceiling, which was automatically reimposed March 1.

  • While the federal government is legally barred from taking on more debt, the Treasury Department has been able to stave off a default through "extraordinary measures," such as delaying and prioritizing certain investments and debt payments.
  • Treasury's ability to delay a default was expected to last until at least early October. But a forecast released this week by the Bipartisan Policy Center projected extraordinary measures to run out by early or mid-September.
  • The House is set to break for summer recess on July 26 with the Senate leaving a week later, giving lawmakers much less time than initially expected to complete difficult negotiations.

You can read more here about how Powell's past advocacy for raising the debt ceiling helped him land at the Fed and build up bipartisan support, which was on full display during congressional testimony Wednesday and Thursday.


Powell basks in bipartisan praise: Powell found a safe harbor on Capitol Hill from President TrumpDonald John TrumpGOP senators balk at lengthy impeachment trial Warren goes local in race to build 2020 movement 2020 Democrats make play for veterans' votes MORE's blistering attacks on the central bank and its chief. 

Republicans have been loath to denounce Trump as he rips Powell and pressures the Fed to cut interest rates. While few GOP lawmakers endorse Trump's attacks, most have accepted or defended the president's right to criticize the central bank. 

But Powell himself enjoyed an impressive amount of bipartisan support at his Wednesday and Thursday appearances before the House Financial Services and Senate Banking committees respectively.



Federal deficit jumps to $747B, likely to exceed $1T by September:  Growing fiscal pressure is also prompting concern among lawmakers rushing to raise the debt ceiling.

The federal deficit rose to $747 billion over the past nine months, a 23 percent increase compared to the same period in the previous fiscal year, according to Treasury Department figures released Thursday.

The Treasury Department said in the same report that the deficit is expected to exceed $1 trillion by Sept. 30, the end of the fiscal year. Revenue was up 2.5 percent, failing to keep pace with the 6.6 percent rise in outlays.

While the largest spending categories remained Social Security, defense, Medicare and health, the sixth-highest expenditure was for servicing the debt.


Trump: China 'letting us down' by not purchasing US agricultural product: President Trump on Thursday lamented that China has not purchased agricultural products from the U.S. as he claimed they agreed to do as part of restarted trade negotiations.

"Mexico is doing great at the Border, but China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would. Hopefully they will start soon!" Trump tweeted.

Trump asserted after a meeting last month with Chinese President Xi Jinping that Beijing would begin purchasing agricultural products from the U.S. as part of an agreement to not impose further tariffs.

But The New York Times reported Wednesday that Chinese officials do not believe they made an explicit commitment regarding agricultural purchases. The Hill's Brett Samuels has more here.



  • The Dow Jones Industrial Average rose to a record high on Thursday after testimony from Federal Reserve Chairman Jerome Powell hinted that the central bank will cut interest rates later this month.
  • Numerous charities and hospitals that financier Jeffrey Epstein, who was arrested on sex trafficking charges over the weekend, claimed to have showered with donations never received the funds, according to an NBC News investigation.
  • Two senators are pressing the IRS about guidance it issued last year that reduces donor-disclosure requirements for certain tax-exempt groups, expressing concern that it could hinder criminal investigations.