World Bank Warns Global Economy Could Easily Tip Into Recession in 2023 

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The World Bank slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies, Russia’s war in Ukraine continues, and the world’s major economic engines sputter.

The development lender said it now expected global GDP growth of 1.7% in 2023 — the slowest pace outside the 2009 and 2020 recessions in nearly three decades. In its previous Global Economic Prospects report, in June 2022, the bank had forecast 2023 global growth at 3.0%

The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could foreshadow a new global recession less than three years after the last one.

“Given fragile economic conditions, any new adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions — could push the global economy into recession,” the bank said in a statement accompanying the report.

The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years — less than half the pace of the past two decades.

“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands from climate change,” World Bank President David Malpass said in a statement.

China’s growth in 2022 slumped to 2.7%, its second slowest pace since the mid-1970s after 2020, as zero-COVID restrictions, property market turmoil and drought hit consumption, production and investment, the World Bank report said. It predicted a rebound to 4.3% for 2023, but that is 0.9 percentage-point below the June forecast due to the severity of COVID disruptions and weakening external demand.

The World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, with lower energy and commodity prices, but warned that risks of new supply disruptions were high, and elevated core inflation may persist. This could cause central banks to respond by raising policy rates by more than currently expected, worsening the global slowdown, it added.

The bank called for increased support from the international community to help low-income countries deal with food and energy shocks, people displaced by conflicts, and a growing risk of debt crises. It said new concessional financing and grants are needed along with the leveraging of private capital and domestic resources to help boost investment in climate adaptation, human capital and health, the report said.

The report comes as the World Bank’s board this week is expected to consider a new “evolution road map” for the institution to vastly expand its lending capacity to address climate change and other global crises. The plan will guide negotiations with shareholders, led by the United States, for the biggest revamp in the bank’s business model since its creation at the end of World War II.
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House GOP Kicks Off Majority With Vote to Slash IRS Funding

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House Republicans began their tenure in the majority Monday by passing a bill that would rescind nearly $71 billion that Congress had provided the IRS, fulfilling a campaign promise even though the legislation is unlikely to advance further.

Democrats had beefed up the IRS over the next decade to help offset the cost of top health and environmental priorities they passed last year and to replenish an agency struggling to provide basic services to taxpayers and ensure fairness in tax compliance.

The money is on top of what Congress provides the IRS annually through the appropriations process and immediately became a magnet for GOP campaign ads in the fall, claiming that the boost would lead to an army of IRS agents harassing hard-working Americans.

The bill to rescind the money passed the House on a party-line vote of 221-210. The Democratic-controlled Senate has vowed to ignore it.

Shortly before the vote, the nonpartisan Congressional Budget Office projected that rescinding the extra IRS funding would increase deficits over the coming decade by more than $114 billion. That created an awkward moment for Republicans, who have been saying that addressing deficits would be one of their top concerns in the majority.

Still, the CBO’s projection didn’t appear to dampen Republican support. Rep. Jeff Duncan, R-S.C., said the extra IRS funding Democrats provided last year was for one purpose.

“To go after small businesses, hard-working Americans to try to raise money for reckless spending, reckless spending that has caused $31 trillion in debt in this nation,” Duncan said.

Duncan and other GOP lawmakers routinely say the extra funding will be used to hire 87,000 new agents to target Americans, but that’s misleading. The number is based on a Treasury Department plan saying that many IRS employees would be hired over the next decade if it got the money. But those employees will not all be hired at the same time, they will not all be auditors and many will be replacing some 50,000 employees who are expected to quit or retire in coming years.

“This debate about IRS lends itself to be the most dishonest, demagogic rhetoric that I have seen in the Congress at any point in time,” said Rep. Steny Hoyer, D-Md.

Charles Rettig, the former commissioner of the IRS, said in a final message to the agency in November that the additional money would help in many areas, not just beefing up tax enforcement. He said the investments would make it “even less likely for honest taxpayers to hear from the IRS or receive an audit letter.”

Additional funding for the agency has been politically controversial since 2013, when the IRS under the Obama administration was found to have used inappropriate criteria to review tea party groups and other organizations applying for tax-exempt status.

In the ensuing years, the IRS was mostly on the losing end of congressional funding fights, even as a subsequent 2017 report found that both conservative and liberal groups were chosen for scrutiny.

In April, Rettig told lawmakers the agency’s budget has decreased by more than 15% over the past decade when accounting for inflation and said the number of full-time employees — 79,000 in the last fiscal year — was close to 1974 levels.

But Rep. Nicole Malliotakis, R-N.Y., and other Republicans weren’t buying the argument that the funding would be focused on auditing the wealthy.

“This is meant to nickel-and-dime, audit and harass America’s small businesses and families, who they know cannot afford the legal fees to fight this army,” Malliotakis said.

Sen. Ron Wyden, the Democratic chairman of the Senate Finance Committee, said a decade of Republican-led budget cuts gutted the IRS.

“The only way that House Republicans could make it any more obvious that they’re doing a favor for wealthy tax cheats is by coming out and saying it in exactly those words,” Wyden said. “This bill is going nowhere in the Senate.”

And the White House said President Joe Biden would veto the bill if it gets to his desk, saying that the wealthiest 1% of Americans hide about 20% of their income so they don’t have to pay taxes on it, shifting more of the tax burden to the middle class.

“With their first economic legislation of the new Congress, House Republicans are making clear that their top economic priority is to allow the rich and multibillion-dollar corporations to skip out on their taxes, while making life harder for ordinary, middle-class families that pay the taxes they owe,” the White House said.
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US House Adopts Rules Sought by Hardliners to Control McCarthy

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The Republican-led U.S. House of Representatives on Monday adopted a package of internal rules that give right-wing hardliners more leverage over the chamber’s newly elected Republican speaker, Kevin McCarthy.   

Lawmakers voted 220-213 to approve the legislation. One Republican, Representative Tony Gonzales, joined all 212 Democrats in voting against the rules package. Another Republican did not vote.   

The rules package, which will govern House operations over the next two years, represented an early test of McCarthy’s ability to keep his caucus together, after he suffered the humiliation of 14 failed ballots last week before finally being elected speaker on Saturday.   

The legislation includes key concessions that hardliners sought and McCarthy agreed to in his quest for the speaker’s gavel. The changes include allowing a single lawmaker to call for his removal at any time. Other changes would place new restrictions on federal spending, potentially limiting McCarthy’s ability to negotiate government funding packages with President Joe Biden, whose fellow Democrats control the Senate.   

Democrats denounced the legislation as a rules package for “MAGA extremists” that would favor wealthy corporations over workers, undermine congressional ethics standards and lead to further restrictions on abortion services. 

“These rules are not a serious attempt at governing. They’re essentially a ransom note to America from the extreme right,” Representative Jim McGovern said.   

Gonzales, the lone Republican to oppose the legislation, said he objected to potential limits on U.S. defense spending at a time of growing tensions with Russia and China.   

His vote came despite an earlier warning from the grass-roots conservative group FreedomWorks, which said on Twitter: “If Tony’s a ‘NO’ on the House Rules Package he should not be welcomed into the 119th Congress.”   

Republicans have a narrow majority of 222-212 in the House, after winning fewer seats than expected in November’s midterm elections. This has amplified the hardliners’ power and raised questions about how the divided Congress will function.   

Lawmakers face critical tasks in the year ahead including addressing the federal government’s $31.4 trillion debt limit. Failure to do that, or even a long standoff, would shake the global economy.   

Other changes include a 72-hour waiting period between when a bill is introduced and when it can get a vote, a cap on government spending at 2022 levels, and the creation of a committee to investigate the Justice Department. 
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Meet the Clerk Who Kept Order While the House Chose Its Leader

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Standing up to nominate Rep. Byron Donalds for House speaker, Republican Rep. Chip Roy addressed the woman presiding over the chamber as “Madam speaker.”

The third-term congressman quickly corrected himself. “Madam clerk,” he acknowledged with a smile.

The flub, coming on the second day of voting, illustrated the rising stature of House clerk Cheryl Johnson, a central figure in the drama that became a dayslong effort to select a speaker. Round by round, she called for the start of each vote and announced at the end that, once again, no speaker had been elected.

That is, until early Saturday morning, when she named Rep. Kevin McCarthy the victor after the 15th vote.

Who is Cheryl Johnson?

According to her official bio, Johnson is the 36th person to serve as clerk and was first sworn in by then-Speaker Nancy Pelosi in 2019. She is the first Black woman to preside over the House chamber.

A New Orleans native, Johnson has worked for the House for nearly two decades, serving as chief investigative counsel and spokesperson for the Committee on Education and the Workforce. She was also counsel for the committee with oversight over the Library of Congress and the Smithsonian Institution, where she worked for 10 years liaising with congressional committees with jurisdiction over its funding.

A journalism and mass communication graduate of the University of Iowa, Johnson earned her law degree from Howard University and graduated from the senior management program at Harvard University’s John F. Kennedy School of Government.

On Friday, in nominating Democratic House leader Hakeem Jeffries — whom Democrats unanimously supported throughout every round of voting — outgoing House Majority Whip Jim Clyburn addressed Johnson, thanking her for her service during a contentious week.

“Madam clerk, I want to begin by thanking you for your contribution to maintaining the dignity and honor of this august body,” said Clyburn, who as the No. 3 House Democrat had been the chamber’s highest-ranking Black member. “The eyes of the country are on us today. Let us consider what they will remember.”

What does the clerk do?

Until a speaker is chosen and members-elect are officially sworn in, the clerk oversees the chamber, tasked with calling each day’s session to order, calling the roll and deciding procedural questions that may arise.

It’s also up to the clerk to maintain order in the House chamber, which at times has involved using her gavel to tamp down a dull roar of chatter during the debate.

After there’s a speaker in place, the clerk’s role becomes more procedural, keeping records of floor activity, preparing, printing and distributing the daily journal, and certifying the passage of bills and resolutions.

The clerk also acts as a go-between for the House and the Senate, as well as the White House when the chamber isn’t in session, receiving and delivering messages. He or she also supervises the staff of any member who dies, resigns or is expelled, until a replacement is elected.

In addition to duties inside the chamber, there are several other offices whose jurisdiction falls under the clerk, including those tracking legislation, transcribing floor proceedings, and processing and retaining House records until they are transferred to the National Archives.

John Beckley of Virginia was chosen as the first clerk of the House in April 1789. The clerk also served as librarian of Congress until 1815, when that became a separate position.

How are clerks selected?

The clerk is a professional employee of Congress, one of the House officers elected every two years when the House organizes a new session.

Each caucus nominates candidates for those positions. Those elections happen after the session’s new speaker is selected.
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Ant Group Founder Jack Ma to Give Up Control in Key Revamp

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Ant Group’s founder Jack Ma will give up control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown that was triggered soon after its mammoth stock market debut was scuppered two years ago.

Ant’s $37 billion IPO, which would have been the world’s largest, was cancelled at the last minute in November 2020, leading to a forced restructuring of the financial technology firm and speculation the Chinese billionaire would have to cede control.

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the changes announced by the group on Saturday, however, are likely to result in a further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

A former English teacher, Ma previously possessed more than 50% of voting rights at Ant but the changes will mean that his share falls to 6.2%, according to Reuters calculations.

Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd (9988.HK), but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that own a combined 50.5% stake of Ant, the prospectus showed.

Ma’s ceding of control comes as Ant is nearing the completion of its two-year regulatory-driven restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.

The expected penalty is part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits.

But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster a $17-trillion economy that has been badly hurt by the COVID-19 pandemic.

“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech, private sectors are key to that as we know,” said Duncan Clark, chairman of investment advisory firm BDA China.

“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Clark, who is also an author of a book on Alibaba and Ma.

REGULATORY SCRUTINY

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Ant, whose businesses also span consumer lending and insurance products distribution, said Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights, and would only vote independently.

It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ant also said it would add a fifth independent director to its board so that independent directors will comprise a majority of the company’s board. It currently has eight board directors.

“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and give up control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could cede control by transferring some of his voting power to Ant officials including Chief Executive Officer Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Ma publicly criticized regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Once outspoken, Ma has largely remained out of public view since the regulatory crackdown that has reined in the country’s technology giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of the Chinese economy.”

As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in the Alibaba Partnership, a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started mid-last year.
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