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America Races to Dodge Catastrophic Default
Also: Is AI an existential threat, a real one — or both? And convicted Theranos founder Elizabeth Holmes spends her first night in prison.
U.S. Races to Dodge Catastrophic Default
If debt ceiling deal does not pass, America will run out of funds by Monday.
While Americans were cooking hot dogs and hitting the beach over the long Memorial Day weekend, President Biden and U.S. House Speaker Kevin McCarthy were working the phones, rustling up as many congressional lawmakers as possible to back their newly minted deal to slash spending and raise the debt ceiling before the country literally runs out of money.
The date when that happens was revised by the U.S. Treasury last Friday from June 1 to June 5, which would be Monday. That leaves scant time for Congress to work out its differences (of which there are many), honor the deal hashed out over the weekend, and pass a bill.
In a vote of 7 to 6, the House Rules Committee narrowly agreed to send the proposed bill, dubbed the Fiscal Responsibility Act, to the House floor Wednesday for a debate and passage vote. The deal will then require approval by the Senate. Both require a majority vote and Biden and McCarthy have expressed optimism they can ram it though. “I strongly urge both chambers to pass that agreement,” Biden said. “Let's keep moving forward.” McCarthy says he expects a majority of Republicans to support the bill. “We can raise the debt ceiling if we limit what we're going to spend in the future,” he said.
With the House controlled by Republicans and the Senate controlled by Democrats, there has been plenty of moaning from both sides about the final deal which, put simply, will suspend the nation’s $31.4 trillion debt ceiling for another two years, allowing the nation to pay its bills through January 2025, in exchange for slashing U.S. spending by $1.5 trillion over the next decade.
While the details of the deal are complex, the agreement effectively caps non-defense spending for fiscal 2024 and boosts it by 1 percent in 2025. Among other items, the deal claws back government Covid-19 relief funds, increases work requirements for people aged 49 to 55 receiving food stamps and reduces funding to the U.S. Internal Revenue Service, which seeks to use tens of billions of dollars of new funding to beef up enforcement in hopes of catching more tax cheats.
One highly vociferous opponent of the bill, Rep. Chip Roy, a Republican from Texas and member of the conservative House Freedom Caucus, labeled the deal a “bad bill” and sounded a warning. “I want to be very clear: Not one Republican should vote for this deal. Not one. If you’re out there watching this, every one of my colleagues, I’m gonna be very clear: Not one Republican should vote for this deal. It is a bad deal.”
As if that was not sufficiently threatening, Roy added: “No matter what happens, there’s going to be a reckoning about what just occurred.”
There’s crushing pressure on Republicans to pass the legislation by a resounding majority — ideally with more votes than Democrats — lest they appear to not support the deal they so aggressively pursued. As of this writing, dozens of House Republicans had indicated they would vote against the bill, which could make for a fairly turbulent week.
Democrats have been cool to the bill as well, with none on the 13-member House Rules Committee voting in favor of moving it to the floor for a debate. In order to pass both chambers, the bill will need strong support from Democrats to make up for the opposition from GOP lawmakers.
The debt ceiling crisis, which threatens the nation’s economy, finances and reputation, was triggered by a standoff in Washington this spring when GOP House members led by McCarthy, a Republican from California, demanded more than $4 trillion of spending cuts in exchange for raising the debt ceiling.
Biden initially refused to negotiate, but eventually was forced to the table as the U.S. economy was pushed to the brink. That said, it’s hard to argue that the U.S. should not take a closer look at its profligate spending. (Full backgrounder on this from Power Corridor here, here and here.)
It’s safe to say Americans now know far more about the nation’s bills — and how we pay for them — than we ever imagined or, frankly, wanted to hear. In the latest update from the U.S. Treasury indicating the country will run out of funds by next week, Treasury Secretary Janet Yellen explained the U.S. has to make $130 billion in scheduled payments in the first two days of June for veterans, Social Security and Medicare recipients. That leaves the Treasury with “an extremely low level of resources,” she said.
The funds likely will run out when Treasury has to make $92 billion in payments scheduled for the week of June 5 that affect investments in the Social Security and Medicare trust funds.
The fact America even got to this place remains a staggering embarrassment, says James Angel, an associate professor of finance at Georgetown University. Especially since it is not the first time Congress has courted ruin during a debt ceiling standoff.
“We are seeing continuous circuses in Washington of people not thinking about the long-term interests of the United States, but about scoring points in a political football game,” Angel says.
“And what does the rest of the world see? They see a bunch of children, threatening, ‘If I don’t get my way, I am going to destroy everything.’ It is treasonous and I don’t use that word lightly.”
Another Threat to Human Existence
Humans are facing extinction. Because of humans. Again.
Speaking of destroying everything, innovators, activists, academics and even celebrities banded together to issue a warning this week that the wipeout of the human race may be closer than it appears if urgent measures aren’t taken to rein in artificial intelligence.
A brief, 22-word statement, signed by a long list of tech luminaries, CEOs and executives, instantly set off alarm bells. “Mitigating the risk of extinction from AI [artificial intelligence] should be a global priority alongside other societal-scale risks, such as pandemics and nuclear war,” it said.
Among the signatories were Sam Altman, the chief executive of OpenAI, maker of the wildly popular AI app ChatGPT; Geoffrey Hinton, the so-called “godfather” of AI; Kevin Scott, Microsoft’s chief technology officer, in addition to a growing list of top executives, researchers, cryptographers, environmentalists and academics from around the world, as well as from companies such as Google DeepMind, Asana and Anthropic.
The statement, posted on the website of the Center for AI Safety, a San Francisco nonprofit organization, was kept short for a reason: Many people still disagree on exactly how to talk about the dangers of AI.
“AI experts, journalists, policymakers and the public are increasingly discussing a broad spectrum of important and urgent risks from AI,” the nonprofit wrote. “Even so, it can be difficult to voice concerns about some of advanced AI’s most severe risks.” In keeping the statement short, the signatories hoped to “overcome this obstacle and open up discussion.”
Depending on who you’ve been listening to, the rise of artificial intelligence is the greatest thing since the internet or it is what is going to do us all in. It is also possible that it can be both – although, as AI gets increasingly smarter, many are asking, what does that mean for the future of humans?
An earlier warning letter went out in March signed by more than 1,600 people, including Apple co-founder Steve Wozniak and Elon Musk, chief executive of Tesla, Twitter and SpaceX, who has long stated that AI could doom the human race. The letter urged the U.S. government to pause the development of any AI system more powerful than the ChatGPT-4 app. But confusion has abounded over just how to ascertain the breadth and depth of AI’s potential dangers.
In an interview this spring, Musk said that if AI is not well-regulated, tested and developed with clear guardrails, it could be like a black hole or a “singularity” that, once unleashed, could be impossible to rein in. In tech-speak, a singularity is a hypothetical point in the future where a technological event becomes uncontrollable or irreversible, leading to unexpected or unforeseen changes to human civilization.
Specifically in the conversations surrounding AI, the moment of singularity is understood as when AI transcends all of human intelligence, potentially leading to the end of human existence.
In other words, if humans aren’t extremely careful with their innovations, they could annihilate themselves. (You’d think we would have learned all this by now with nuclear arms, climate change and, possibly, the pandemic.)
As Musk put it in the interview, “We want pro-human. Let’s make the future good for the humans. Because we’re humans.”
Ding Dong, Elizabeth Holmes Just Went to Prison
Last night was the first night the fraudster CEO spent in jail. Just a few thousand more days to go.
Elizabeth Holmes, one-time billionairess, Silicon Valley darling and fraudster CEO of the now-defunct biotech startup Theranos, reported to prison this week to serve out a 135-month sentence.
For now, this marks the end of Holmes’s seemingly interminable battle to bamboozle, outfox, outsmart and sidestep the U.S. justice system, so she would not have to do any time.
This consisted of, among other things: repeatedly lying about her company’s capabilities to investors and the patients who used her blood-testing technology to check for disease, monitor pregnancies and keep tabs on a wide range of truly sensitive health issues; insisting she should not have to go to prison until she was done appealing her convictions; purchasing a one-way ticket to Mexico to whisk her out of the country after a jury found her guilty of multiple crimes; and making the unconscionably self-serving decision to marry and get pregnant twice ahead of going to prison, in what appeared to be a last-ditch effort to avoid her fate.
Throughout her trial, Holmes maintained her innocence and even tried to argue that claims she made about her company’s capabilities were not crimes, because they were almost true. “I wanted to convey the impact the company could make for people and for health care,” she said. “I talked about what we created and what it could do, what was possible.”
In a sign of how long the process to see her to prison has actually taken, Holmes’s company was shut down nearly five years ago and she was convicted more than a year back. She has been dancing around reporting to prison ever since. A San Jose, Calif., jury found her guilty in January 2022 on four federal charges of fraud, three counts of wire fraud and one count of conspiracy to commit wire fraud. Holmes gave birth to her first child just before her trial began in 2021 and her second child just before going to prison this week.
Holmes’s convictions arose from defrauding investors out of hundreds of millions of dollars by actively misleading them about her company’s blood-testing technology. More disturbingly, the frauds stemmed from Holmes aggressively promoting “revolutionary” fingerstick blood tests she knew provided inaccurate and unreliable results to patients, risking their health and their lives. (For the full Holmes story, please see Power Corridor’s Big Read here.)
For a time, Holmes was feted as the youngest self-made billionaire on the planet, as the valuation of her Palo Alto, Calif., company climbed to $9 billion. By September 2018, Theranos shut down, awash in scandal, as the U.S. Securities and Exchange Commission filed charges against Theranos and Holmes claiming an “elaborate, years-long fraud.” Before shuttering, Theranos even tried to sell itself to another company, but there were no buyers.
As Holmes entered the Bryan, Texas, low-security federal prison camp Tuesday, she could be seen wearing white sneakers and jeans and one of her signature casual beige sweaters. She was filmed from a distance, her long hair mostly covering her face, so one might be forgiven for wondering whether the blurry person in the video was really Holmes or perhaps just a stunt double, another one of Holmes’s clever escape-and-delay tricks.
Holmes’s arrival at the prison was hotly anticipated by both inmates and staff alike. One inmate told The Wall Street Journal, “Some people are like, ‘I want to be her friend.’ But other people are like, ‘I can’t believe that’s all she got for taking all that money.’”
Others said some of the guards took a particular interest in high-profile inmates, with one corrections officer excited to order Holmes to scour pans.
Apparently, a copy of the bestselling book about Holmes’s fraud and the collapse of Theranos, “Bad Blood,” can also be taken out at the prison library.
Journalists watching Holmes reporting to prison reacted too, mostly by marveling at the irony of seeing such a widely celebrated Silicon Valley wunderkind rise so fast and fall so hard.
“Elizabeth Holmes was named one of the most influential people in the world by Time in 2015,” wrote Rebecca Jarvis, chief business, technology and economics correspondent for ABC News. “Today, she’ll become one of the 655 inmates at this Bryan, Texas, minimum security prison, where most of her peers have been convicted for white collar crimes and low-level drug offenses.”
Notably, the reason Holmes was sent to the Texas facility was because Judge Davila, who presided over her federal trial, thought sending her there would make family visitation easier.
As it turns out, Holmes grew up in Houston, where her father was an executive at that other paragon of corporate financial integrity: Enron.