The bond market is panicky over that GOP bill
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Repeat after me, people. Watch the bond market from American public media. This is Marketplace. In Los Angeles, I'm Kyle Risdell. It is Wednesday, today, 21 May. Good as always to have you along, everybody.

You know, the politics of whatever's happening inside the House Republican caucus about the big tax cut bill they're working on, that is, thankfully, somebody else's story to cover. The economics of it, though, is smack in our sweet spot. And we will begin today with the observation that adding, according to the nonpartisan Congressional Budget Office, $3.8 trillion to the national debt deficit over the next decade is

Has the bond market more than a little bit concerned? The yield on the 10-year Treasury note hasn't been this high since February. It's up half a percentage point since early April, which I know doesn't sound like a lot, but in bond market speak is a boatload. So Marketplace Justin Ho is going to get us going by explaining the mechanics of what's going on and more importantly, why it matters.

The Federal Reserve controls plenty of interest rates, especially short-term interest rates on government bonds. But rates on long-term treasuries, as in 7 or 10 or 30-year bonds, those are determined by the market, by supply and demand. Definitely supply right now is front and center. Randy Vogel is head of fixed income at Wilmington Trust. He says the bond market is concerned that the GOP's tax and spending package will pile on debt, meaning the government will issue more bonds. Sorry?

Bond investors are saying, you know, if you're going to continue to spend money that you don't have and issue more supply into the market, then we're going to want to be compensated with higher yields for that.

Higher bond yields are nice for bond investors, but they also push mortgage rates higher. They make credit cards and auto loans more expensive. They also mean that the federal government is paying more on its debt. That's Ernie Tedeschi, director of economics at Yale's Budget Lab. He says the interest payments the government makes as a percentage of GDP have almost tripled over the last 10 years, and the Congressional Budget Office expects them to keep growing for the next decade.

That would be well above any levels that we've seen in post-World War II history in the United States. Tedeschi says investors are sending a message to the government with their demand for higher interest rates. I mean, call them what they are, customers for our debts. If a customer has concern about a product,

That should be a worrying anxiety for the company that makes that product. There will always be demand for U.S. treasuries from banks, insurance companies, and the Federal Reserve itself. Guy Labar, chief fixed income strategist at Janie Montgomery Scott, says that means investors will always be in a position to send a message to Washington. If the cost of debt issuance were to rise so much...

in response to fiscal adventurism. That would be a signal the federal government is reaching the end of its ability to spend. The question, LeBas says, is whether Congress or the White House would respond to that feedback. I'm Justin Howe for Marketplace. A question indeed. Wall Street today? Well, let's see. Stocks sold off, bonds sold off, the dollar sold off, and oil sold off. Let me know when you've heard enough.

We'll have the details when we do the numbers. So what do you do if you run a good-sized American retail company and you're worried about tariffs? Specifically, what those higher prices are going to mean for how your American customer base spends, which is likely to be less. What you do is you diversify geographically. Pottery Barn said this week it's going to launch in the UK this fall. One of not a few retailers...

that are focusing more on business outside the United States. Marketplace's Kristen Schwab has the story.

Brands have been increasingly eyeing markets outside of the U.S. for years. That's because Aaron Cheris at Bain & Company says it's getting harder to capture the attention of American consumers. U.S. market is mature and heavily stored. Too many retailers are chasing too few consumers who are quite loyal to their favorite brands. So tariffs have only given companies a reason to double down on diversifying their customer base, says Cheris.

This has taught everybody that there is a stroke of the pen risk, that somebody can take power in the U.S. and dramatically change the economic conditions. Expansion or redirection is not a strategy for every company, though, especially those that manufacture or assemble goods here in America, says Jean-Pierre Dubé, a marketing professor at the University of Chicago.

I mean, this idea that I can avoid tariffs by expanding elsewhere starts with the premise that that other place that I'm going to invest is in no way exposed to tariffs. As in reciprocal tariffs that have been placed on American goods in the trade war. It's why industries with supply chains primarily abroad are best positioned to sell abroad. Apparel certainly would be one of them. Most mass market clothing is made in Asia and upscale brands in Europe.

But Natalie Cutler at BDO says it's not as easy as just rerouting stuff bound for one country to another. Everything has its nuances. If you go to skincare, for example. Different governments have different regulations on ingredients. Electronics, obviously, there's the voltage difference. The plugs in Europe are different from the plugs in the U.S. And the biggest difference of all might be cultural, style and taste.

What may sell in the U.S. will not automatically sell in the U.K. or in Asia or in South America. It's why Cutler says many American brands' first international stop is just across the border in Canada. I'm Kristen Schwab for Marketplace.

The artificial intelligence news of this day is that OpenAI, kind of the big dog in that space, is buying an AI hardware company started by one-time Apple design guy Johnny Ive. So picture really good-looking AI gadgets, I guess.

The AI reality for most of us, though, is that we're trying to figure out how to use it in our working lives. And that is kind of all over the map. The Federal Reserve says somewhere between 20 and 40 percent of workers use AI and 5 to 40 percent of firms have brought it into their workplaces. Those are big spreads, obviously, at least in part, because the way some industries use AI is completely different from how others use it. So how better to get a sense of where things might be at now?

than by just asking people about it. Maren Kogan did just that for Bloomberg Businessweek. Welcome to the program. Thanks so much for having me, Ty. So the theory of the case here in this piece is you went out and talked to actual people doing jobs and how they were feeling about AI. I did not have the first one on my bingo card, a hairdresser, a hairstylist.

Yeah, absolutely. So she's starting her own hair salon. And I talked to a number of hairstylists and people who work in salons about how AI is impacting their work. And it's really interesting because they say for certain things, it can be really useful. Say, if you want to estimate the cost of doing some work in your salon, for example. But a big thing they're seeing in recent months is people coming in with images that are AI generated and expecting results that look exactly like the photo. So if

They're having these issues explaining to people, like, I can't actually give you this hair because this hair is not found on a human head. It's AI generated. Also, and I thought this was really interesting, a little bit off topic, but she worries very much about how it's going to affect our standards for beauty, which really I thought was just, I mean, spot on, no? Yeah, absolutely. And I can say as a woman on the Internet,

That is very real. I mean, you are just bombarded, particularly on social media, with images of people who look impossible. And often, you know, it's because it is impossible. Yeah. Next one up that hit me was the teacher. The common conventional wisdom with AI and classroom stuff is that it's the kids who are going to be using it and actually...

The person you talked to kind of flipped that on its head and said it has extended his ability and time to teach, she thinks. Yeah, I found this really interesting, too, because I think you're right. I mean, the conventional wisdom about AI and how it's affecting students is that it's negative almost all around. Students are using AI to write their essays and it's really taking away the sort of critical thinking faculties.

But actually, I talked to this teacher, Will Page, in Los Angeles, and he was saying it has helped him so much. He has so many students coming from all over the world. He is able to take his course material and do something called text leveling, where he uses the same content, but makes sure that every student in his class can understand no matter where they are on their English learning journey. And he said that's been really helpful. And he said that he feels that

Now with AI, he's going to be able to continue teaching for another 10 or 20 years. He thought before he would have to leave because it's just too much without the help of AI. Can we talk about, you know, something that's in the zeitgeist about AI right now? Regulation, who's going to be in charge of it? A couple of your folks that you talked to, there were eight in total, we should say, did express some concerns.

Yeah, absolutely. So I think a lot of it is really contextual. But I think one of the things that really stuck out to me about this is that with many of the technological advances of the last 20, 30 years, a lot of the sort of feeling at the time was the technology is here and we all have to run and sort of get on board. So if you think about social media, if you think about the iPhone, there's always been this sense of inevitability. That is

certainly here with AI, but there's also the sense of, let's be thoughtful about this. Let's try to foresee what the potential pitfalls of this could be. And let's try to do this in a smarter way so that we don't end up with some of these negative unintended consequences. The difficulty is no one seems to know who should be regulating or whether it should be

industry-wide. I don't think there's a ton of faith in Congress right now to be regulating these things, but people have a sense that at least my industry, we should get some experts together and really think about this, because if we don't, then we're going to be caught flat-footed. Well, that was kind of my takeaway from this survey that you did, admittedly unscientific and anecdotal, was that people have very specific concerns about their specific fields, and they worry that

about the larger comprehensive regulation. I guess I wonder if that was your takeaway after talking to these people. Absolutely my takeaway. And a big part of why I wanted to do this story is that, you know, if you go on the internet, there is so much conversation about AI and how it's going to change everything. And a lot of it feels like there's this

distant future where everything will be different, right? And a lot of that commentary, by the way, feels like it was written by AI itself. Like a lot of it seems really generic in the way that you're like, did AI write? Is the entire internet just AI writing posts? But yeah, the reality is that, you know, this distant future is here for many people in many professions. And I think as you can see from this, some people think it's great and some people think it's really not so good.

Maren Kogan, writing Bloomberg Businessweek. The piece is called How AI Has Already Changed My Job. Maren, thanks. I appreciate your time. Thanks so much. Coming up.

When interest rates fall, that's an immediate necessity for me is to refinance. I mean, yeah. Have you seen mortgage rates lately? But first, let's do the numbers. Big sell-off today with that U.S. budget bill and rising bond yields casting a very long shadow. Dow Industrial is down 816, 1.9%, 41,860. The Nasdaq down 270 points, 1.4%.

18,872. The S&P 500 down 95 points, 1.6%, ended at 58.44. Beset by numerous problems, Target fell 5.2%. Today, the Minneapolis company says quarterly sales declined 3.8%, more than was expected by people in the know. You got your softer spending on discretionary items. You got your falling consumer confidence. You got your boycott over ending some diversity programs. You got Target lowering its estimates for full year results.

Bond prices down as well. The yield on the 10-year T-note up 4.59%. Justin was talking about this. You're listening to Marketplace. Recruitment.

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This is Marketplace. I'm Kai Risdahl. Education Secretary Linda McMahon was on Capitol Hill today getting an earful from Democratic members of the House of Representatives. It was technically a budget hearing, but McMahon's directives two or so months ago, cutting the department's workforce by nearly half, took up a whole lot of the oxygen.

There are close to 2,000 fewer people working at the Department of Education now than there were on Inauguration Day, and their absence is being felt. See also a survey out today from the National Association of Student Financial Aid Administrators showing that since the reaping, both students and colleges are having problems getting answers to questions about financial aid. Marketplace's Stephanie Hughes has more on that one.

Before noon today, Robin Thompson had already had three phone calls with different people at the Department of Education. She works in financial aid at Harvey Mudd College in Southern California and is in the process of getting the school recertified.

That's showing it's on the up and up to participate in federal financial aid programs. And she wanted a checklist of all the paperwork she needed to submit. It seemed like a pretty simple ask. But Thompson says even after multiple phone calls, no one could give her that information. She says this takes time away from her helping students understand the beast that's financial aid. And this is a big difference from what it was like to deal with the agency prior to the job cuts.

I'm finding more and more I'm not actually talking to folks that are experts, but they are folks that can search the website and search the resources. And I can do that. According to the new survey, about a third of colleges report that students are also frustrated about not getting quick answers from the agency on their financial aid situations.

The Department of Education said in a statement that it's streamlined operations after the Biden administration, quote, botched the revised FAFSA rollout that began in 2023. That's the Free Application for Federal Student Aid. And students had trouble accessing the website and submitting the application. Luckily, none of that is happening this year. Jill Dajon is with the National Association of Student Financial Aid Administrators.

But according to its new survey, since the layoffs, nearly a third of colleges have dealt with delays in getting FAFSA information from the agency. And that's a requirement to provide students with answers about how much it'll cost for them to go to college. What we're hearing is longer processing time for that application to make its way to schools. Some people who've already taken on student loan debt are also feeling frustrated with the agency, says Betsy May, president of the Institute of Student Loan Advisors.

She says since the layoffs, it's taken a lot longer for borrowers to get errors on their accounts fixed. Borrowers in schools need more help, not less help. And she says the workforce reduction, it got rid of a lot of the people she considered to be helpers. I'm Stephanie Hughes for Marketplace. When you think about entrepreneurs, you think mostly about them being in cities, right? Or at least urban adjacent places where there are critical masses of people and money and energy.

Turns out, though, that rural parts of the country can be really fertile grounds for startups, too. Places where smaller communities are supporting their local founders. Ray Solomon from KUNC reports. Ever been to a pitch competition? It's a good show. Founders on stage making the case for their fledgling businesses. It's entrepreneurship a spectacle. My name is Sarah Berkley. I'm the founder of Symbiosis Gear. We make backpacking gear for people with boobs.

Berkeley has the numbers down cold. Sales, margins. But here on the pitching stage, it's storytelling that grips the imagination. Her pitch deck starts with a selfie. I was hiking the Pacific Crest Trail when I took this photo with this particular backpack squishing my boobs. And that motivated me to do something about this problem. Next thing you know, she was designing backpacking gear for femme bodies.

The straps on her signature pack are narrow and S-shaped to address that chest squishing. It accommodates a really wide range of body shapes and sizes. Pitch competitions where founders publicly vie for investment are a growing trend in the buzzy world of entrepreneurship. This event in rural northeast Colorado is unusual in its focus on rural businesses.

Contenders from small communities across the state plug their apps and inventions for a panel of judges with expertise in rural economic development. The nonprofit startup Colorado organized the evening. Entrepreneurship is not just for metro areas. Executive Director Brittany Romano helped launch this pitch series last year to tap into small-town ingenuity. In rural, we innovate out of necessity, and so rural is a great landscape for

for finding great founders and great ideas and great companies. In Colorado, startups and small businesses make up more than 99% of all enterprises, employing nearly half the workforce. That's why rural communities are pouring resources into new entrepreneurs. Romano says it's a strategy to build more resilient local economies.

You can find local capital and you can accomplish your business goals within the region that your business operates in. Contestant James Matyszynski has grand business goals for Craft Crate, his startup in Bailey, Colorado. It's a small mountain town with lots of potential. There's a ton of hard workers. There's a lot of great people. At this point, Matyszynski is still developing the prototype for his invention, a bag that keeps beer keg fresh for months at a time.

As the liquid is dispensed, the packaging collapses, so it actually will stay carbonated start to finish. Eventually, he dreams of expanding to other beverages, cosmetics, even medical supplies.

Put Bailey on the map really boosts the local economy there and build Craft Crate to be a global powerhouse of not just beer distribution, but all liquid distribution. You can forget the cities. Rural areas are the true hotbeds of entrepreneurship, according to Colorado State University economist Stephan Weiler. In rural areas, there are more entrepreneurs and they tend to be more successful than their urban counterparts. More successful, meaning they survive longer.

And while rural entrepreneurs face more challenges, smaller local markets and less access to capital, Weiler says they also have advantages like tight-knit supportive communities that give them a better shot for the long haul. The economy is in pretty uncertain shape right now.

And I'd like to believe that rural entrepreneurs can be a bright spot in pulling us out of a potential downturn. At the Colorado competition, Sarah Berkley and her boob-friendly backpacks are the big winners with a $5,000 zero-interest loan. Yeah, I'm so excited. It sounds like there's going to be a lot of support. She'll bring the money back home to rural Leadville to design a couple new backpack models and expand her product line. In Sterling, Colorado, I'm Rae Solomon for Marketplace.

Between high mortgage rates and the general economic ennui of late, the spring home buying season's been pretty much a bust this year. That said, sometimes, whether it's a good time to buy or not, life happens, and you gotta do what you gotta do. Here's today's installment of our series, Adventures in Housing, looking at first-time homebuyers. I'm Tiffany DiCola, I'm 42, and I just bought my first home outside of Birmingham, Alabama.

I started my home buying journey in March after a divorce. I thought a loft or an apartment downtown would be perfect because I'm single and starting over. I wasn't sure what the market was going to be and what that meant from a finance perspective. But in my head, I had this number of like 275,000. It's kind of just that random arbitrary number I had in my mind. I was like, I'm going to buy a house.

The more we looked, the more I started seeing things that I really loved that were a little more expensive. And so where I ended up, I ended up spending about $50,000 more. But that got me so much more than what I anticipated. ♪

I was able to get a larger yard. I was able to get a larger patio. It was just a bigger space. It was a newer home. My home's only four years old. It was just more what I thought was me versus some of what we were looking at before.

The market is interesting. We're in a very interesting time in general. And so interest rates are higher than what I would have liked for them to have been. And so one of the things I've really thought about is how to continue to prepare so that when interest rates fall, hopefully when they fall, I can immediately refinance to get a better rate.

Because the situation that I was in, I needed to do this for myself, but I also needed to do this out of necessity, right? So I didn't really have an option not to do this. And so when interest rates fall, that's an immediate necessity for me is to refinance. I was able to move in the week of April 28th. I closed on the 28th and I started moving in on the 29th.

I almost hate to admit this, but I did squeal a little. I did have that moment where I jumped up and down and I mean, I was by myself. So I was super excited. It felt really good to be able to say this was mine and to know that I did this by myself for myself to start my journey. I was beside myself excited.

Tiffany DiCola outside Birmingham, Alabama. Whether you just got the keys to your forever home or you are spending your weekends cruising Zillow, we need your stories to make this series work. Hit us up, marketplace.org slash adventures in housing. This final note on the way out today, I know most of you know this in your gut, but sometimes data does help crystallize things.

Allianz, the big German insurance company, did a survey of American businesses. 54% of them said they are going to raise prices because of President Trump's tariffs. And that number could climb. Only 22% of American companies said they could absorb the cost of the import taxes. Related, by the way, in that survey,

This is a global economy kind of way. A German economic advisory group said today that Europe's biggest economy is going to have flat growth this year. One guess as to why. Our media production team includes Brian Allison, Jake Cherry, Justin Duhler, Drew Jostad, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torado, and Becca Weinman. Jeff Peters is the manager of media production. And I'm Kai Risdahl. We will see you tomorrow, everybody. This is APM.

This Old House has been America's most trusted source for all things DIY and home improvement for decades. And now we're on the radio and on demand. I think you're breaking into this wall regardless. I was hoping you wouldn't say that. I need to go and get some whiskey, I think. I would get the whiskey for sure. Subscribe to This Old House Radio Hour from LAist Studios, wherever you get your podcasts.