FirstFT: Mounting US debt risks Liz Truss-style crisis, warns watchdog

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The US faces a Liz Truss-style market shock if the government ignores the country’s ballooning federal debt, the head of Congress’s independent fiscal watchdog has warned.

Phillip Swagel, director of the Congressional Budget Office, said the mounting US fiscal burden was on an “unprecedented” trajectory, risking a crisis of the kind that sparked a run on the pound and the collapse of Truss’s government in the UK in 2022.

“The danger, of course, is what the UK faced with former prime minister Truss, where policymakers tried to take an action, and then there’s a market reaction to that action,” Swagel told the Financial Times.

The US was “not there yet”, he said, but as higher interest rates raise the cost of paying its creditors to $1tn in 2026, bond markets could “snap back”. Read the FT’s full interview with Swagel.

Here’s what else I’m keeping tabs on today:

• Economic data: GfK has results from its consumer confidence survey for Germany, while the Conference Board publishes its consumer confidence index for the US. Kantar releases its grocery market share and price inflation figures for the UK.

• Israel-US ties: Israel’s defence minister Yoav Gallant meets his US counterpart Lloyd Austin in Washington. Yesterday, the Jewish state cancelled a separate high-level visit to the US capital after the UN Security Council passed its first resolution demanding a ceasefire in Gaza.

• Companies: Results are due from gambling companies 888 Holdings and Flutter Entertainment, British beverage groups AG Barr and Fever-Tree, and YouGov and Bellway. Ocado and Asos have trading updates.

• UK Parliament: MPs on the liaison committee will question Prime Minister Rishi Sunak on issues including the economy and the government’s ability to plan strategically, while the work and pensions committee warned today that a regulatory push could “finish off” traditional pension plans that offer millions of workers a secure retirement income.

For more on British politics, sign up for Stephen Bush’s Inside Politics newsletter here.

Five more top stories

1. Exclusive: Russia has started supplying oil directly to North Korea in defiance of UN sanctions, further cementing ties between the authoritarian regimes. At least five North Korean tankers travelled this month to collect oil products from Vostochny Port in Russia’s Far East, according to satellite images shared with the FT by the Royal United Services Institute, a UK think-tank. Read the full story.

• Moscow attack: Russian President Vladimir Putin has blamed “radical Islamists” for Friday’s deadly concert hall attack while also attempting to pin responsibility on Ukraine.

• FT View: Using the horrific attack as a pretext to intensify its war in Ukraine would be an outrage, writes the FT’s editorial board.

2. Adam Neumann has submitted a conditional bid of about $600mn for WeWork, the bankrupt co-working company he led until 2019, according to three people briefed on the matter. Flow, Neumann’s new property company confirmed that “a coalition of half a dozen financing partners . . . submitted a potential bid” two weeks ago. Here are more details about the co-founder’s plans.

3. Two law professors claim Sullivan & Cromwell put its own interests before that of FTX’s stakeholders, reviving criticism over the law firm’s role in the bankrupt cryptocurrency exchange’s rise, collapse and unwinding. The firm’s “apparent conflicts of interest permeated FTX’s bankruptcy filing and every aspect of the case”, wrote Jonathan Lipson of Temple University and David Skeel of the University of Pennsylvania. Here’s more from their paper published this month.

4. A New York court has cut Donald Trump’s bond amount to $175mn to delay enforcement of a $464mn fraud judgment. The order gave the former US president a reprieve as he was at another courthouse yesterday attending a hearing related to his criminal trial over the alleged cover-up of “hush money” payments to an adult film star. Read the latest on Trump’s legal troubles.

5. Newcastle United football club director Amanda Staveley faces paying a Greek shipping magnate almost £3.5mn after London’s High Court threw out her attempt to prevent Victor Restis from pursuing bankruptcy proceedings against her. Judge Daniel Schaffer said he had “sympathies” for Staveley in the “unfortunate” case, but here’s why he ruled against her bid.

The Big Read

On the surface, Donald Trump’s campaign often seems chaotic, marked by his angry rhetoric about revenge and never-ending legal woes. But behind the scenes, there is a streak of ruthlessness and determination in the former president’s new bid for the White House. Narrowly ahead in the polls against Joe Biden, Trump now has the backing of a small group of seasoned campaign operatives and former officials eager to apply his ideas. Who is in this tightly knit inner circle preparing for his second term?

We’re also reading . . . 

Chart of the day

The UK said it was “reaffirming” its commitment to its nuclear deterrent yesterday. But the cost of maintaining the programme has mushroomed as consecutive governments have struggled to keep on top of a crucial project to replace an ageing fleet with four new Dreadnought-class ballistic missile submarines, which are under construction.

Take a break from the news

Marc Jacobs is a true fashion maverick, constantly changing tack in unexpected ways, but his motivation remains the same: to be an entertainer. Read Alexander Fury’s interview with the designer, who celebrates his brand’s 40th anniversary this year.

Additional contributions from Benjamin Wilhelm and Gordon Smith