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National

A U.S. diplomatic offensive to counter China's growing clout in the Pacific Islands appears to be paying dividends, with three agreements sealed within 48 hours.

The big picture: The Biden administration has focused far more attention on the Pacific islands — new embassies, more aid, several high-level visits — since a security pact between China and the Solomon Islands spooked Washington last year.

The recent agreements with Papua New Guinea (PNG), Palau and Micronesia underscore that, for now, "it's still a heavily U.S.-leaning region," says Derek Grossman, a senior defense analyst at the RAND Corporation.

Driving the news: Secretary of State Tony Blinken and PNG Prime Minister James Marape signed a security pact Monday under which the U.S. will provide training and funding to help PNG's military respond to threats like drug trafficking and natural disasters.

President Biden intended to sign it himself in what would have been the first U.S. presidential visit to a Pacific Islands country, but he flew home from the G7 summit in Japan to deal with the debt ceiling crisis instead.

Between the lines: The U.S.-PNG agreement hasn't been published, but it's expected to give the U.S. military conditional access to bases, ports and airports in the country.

Ahead of the signing, student protesters and rival politicians in PNG accused Marape of sacrificing sovereignty and putting the country at the center of U.S.-China rivalry.

Marape pushed back, arguing that the agreement will strengthen PNG's defenses and won't stop the country from doing business with China, which has developed roads and other infrastructure projects in the country in recent years.

Beijing's Foreign Ministry didn't directly object to the deal but said Beijing opposes the "introduction of any geopolitical games" in the region.

This is virtually a mirror image from one year ago, when China signed an opaque security pact with the Solomon Islands.

That agreement "kind of let the genie out of the bottle," says Grossman, with China trying to replicate it elsewhere, so far unsuccessfully, and the U.S. negotiating its own deal with PNG.

Even if competition with China is driving the U.S. into the region, the Biden administration knows it has to address local concerns — climate change, protecting fisheries, sustainable development — to make real inroads, says Charles Edel, Australia Chair at the Center for Strategic and International Studies.

Countries in the region, meanwhile, face the challenge of capitalizing on competition between the superpowers without being burned by it.

Blinken oversaw another signing ceremony on Monday as Palau extended its Compact of Free Association (COFA) with the U.S. for another 20 years. Micronesia will follow suit tomorrow.

A third agreement, with the Marshall Islands, is expected later this year, though talks are ongoing about compensation for those affected by U.S. nuclear testing in the islands in the 1940s and 1950s.

The U.S. covers large chunks of the three countries' budgets, provides for their defense, and allows their citizens to live and work freely in the U.S. In return, the U.S. military gets unfettered access to a swath of the Pacific larger than the continental U.S.

Flashback: In an extraordinary letter last year, then-Micronesia President David Panuelo accused Chinese officials of bribery and intimidation and warned that Beijing wanted to dominate the region. Beijing denied the claims.

The incident underscored the trust gap Beijing faces in some regional countries, Grossman says, though China has made inroads in Kiribati in addition to the Solomon Islands.

What to watch: The level of attention being paid to Pacific island countries may seem surprising given their tiny populations and economies.

Many Americans may have only heard of countries like the Solomon Islands because of major battles fought on their territory between the U.S. and Japan. But with fears rising of a U.S.-China conflict over Taiwan or in the South China Sea, that history provides some sense of the region's strategic significance.

"This is all about planning for the future," says Grossman. "If the balloon goes up, who's got friends in the region to allow for military access?"

Biden seals 3 deals in Pacific islands as U.S. competes with China

China's moves in the region spurred Biden to action.

Secretary of State Tony Blinken (L) at the signing ceremony with Papua New Guinea Prime Minister James Marape (C) and Defence Minister Win Bakri Daki. Photo: Adek Berry/AFP via Getty

China

World

Hill Leaders

Axios Hill Leaders

Treasury Secretary Janet Yellen warned on Monday that the U.S. government is "highly likely" to run out of money as early as June 1.

Why it matters:  The date leaves President Biden and House Speaker Kevin McCarthy less than 10 days to find an agreement — and the votes — for a compromise to cut spending and raise the debt ceiling.

As the debt ceiling X-date approaches, Treasury is monitoring inflows and outflows to provide a more precise estimate of when the U.S. will run out of money.

"[W]e have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June," Yellen warned in a letter to McCarthy on Monday. 

"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests."

Driving the news: McCarthy and Biden were scheduled to meet Monday to discuss a potential deal on raising the debt limit in exchange for spending cuts.

Before the meeting, McCarthy told reporters: "We can get a deal tonight, we can get a deal tomorrow.

“Decisions have to start being made,” he said.

Negotiators for McCarthy and the White House met at the Capitol for approximately three hours on Monday, after meetings on Sunday that lasted almost four hours.

Go deeper: Uncertainty hangs over the meeting, with neither Biden nor McCarthy (R-Calif.) convinced the other side is willing to compromise.

Yellen triples down on debt ceiling deadline

President Biden and Speaker McCarthy are scheduled to meet tonight.

Photo: Nathan Howard/Bloomberg via Getty Images

Debt ceiling

2024 will be an election year like no other, as President Biden seeks re-election amid economic uncertainty, two wars and questions about his age. His likely foe, former President Trump, faces felony charges and vows revenge on his political enemies. Meanwhile, Americans generally are dissatisfied with those choices and are divided over immigration, race, education and more.

Politics & Policy

Capital

Axios Capital

One of the Fed's most notorious financial statistics is its "$400 emergency expense" question. This year, however, the answers to that question show something important.

Why it matters: For the first time since the survey began, the proportion of Americans who say they would cover a $400 emergency expense completely using cash or its equivalent dropped from the previous year. 

That's in large part a function of pandemic-era cash assistance programs ending.

Be smart: It is incorrect to subtract 63% from 100% and declare, as many pundits are wont to do, that the result is the percentage of Americans who don't have enough money to pay a $400 emergency expense.

That said, the question does shed light on an important facet of overall financial well-being and, generally, how liquid American households are.

The exact size of the $400 figure doesn't matter: The Fed also asked the same question with a $500 number and got almost identical results.

Between the lines: The largest decline was among parents. The percentage who would use cash for an emergency expense dropped from 64% to 57% after their monthly child tax credit payments expired in 2021.

The bottom line: In 2020 and 2021, most Americans received substantial amounts of cash directly from the government. When that cash stopped flowing in 2022, it stopped being available for emergency use.

The golden age of liquidity comes to an end

The end of pandemic-era cash assistance programs affected the proportion of Americans who say they would cover a $400 emergency expense using cash.

Macroeconomics

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Ahead of their debt ceiling meeting Monday afternoon, neither President Biden nor House Speaker Kevin McCarthy (R-Calif.) know whether the other side is willing to compromise at the 11th hour.

Why it matters: Treasury Secretary Janet Yellen repeated her warnings Sunday — which she had made in public and in private – that June 1 is a “hard deadline” to raise the debt ceiling.

While Biden is keeping the 14th Amendment as a viable option, he made it clear in Japan that it’s not his preferred course of action, citing the certain legal challenges.

Driving the news: After on-again-off-again talks over the last 72 hours, Biden and McCarthy spoke Sunday when the president was flying home from Japan. Their top negotiators reconvened Sunday night. 

McCarthy described his call with Biden as “productive” but he wasn’t overly optimistic. “There’s no agreement,” he told reporters Sunday on Capitol Hill. “We’re still apart.”

Before their Air Force One call, accusations — and doubts about a deal — filled the airspace.

"I'm hoping that Speaker McCarthy is just waiting to negotiate with me when I get home, " Biden said before leaving Japan where he attended a G-7 summit, “I don't know whether that's true or not.”

At his closing press conference, Biden demanded that Republicans move off their “extreme positions.”

McCarthy was quick to counter on Fox News. “I do not think it’s extreme that we simply say we should spend less than we spent this year."

What we’re watching: McCarthy’s point man – Rep. Garret Graves (R-La.) – says top line spending levels are the key to a potential deal.

Republicans are insisting on spending less money in FY 2024 than FY 2023, with Graves calling it a “red line.”

The White House has proposed keeping spending between this year and next year flat, but they want the Pentagon to share some of those cuts.

Biden seems pretty far from accepting the GOP's spending cuts.

Go deeper: Even if the two leaders reach an agreement early this week, they'll still face a difficult — and shared — problem of shepherding it through the House.

Debt ceiling talks enter make-or-break phase

With less than two weeks to go before a potential debt default.

Machine learning can bring us cancer diagnoses with greater speed and precision than any individual doctor — but it could also bring us another pandemic at the hands of a relatively low-skilled programmer. 

Why it matters: The health field is generating some of the most exciting artificial intelligence innovation, but AI can also weaponize modern medicine against the same people it sets out to cure. 

Driving the news: The World Health Organization is warning about the risks of bias, misinformation and privacy breaches in the deployment of large language models in healthcare. 

WHO officials worry that datasets which do not fully reflect the population can generate misleading or inaccurate information.

There is a 1 in 300 chance of an individual being harmed throughout the patient journey, most often through data error, per WHO research.

The big picture: As this technology races ahead, everyone — companies, government and consumers — has to be clear-eyed that it can both save lives and cost lives.

What’s happening: AI in health is delivering speed, accuracy and cost dividends — from quicker vaccines to helping doctors outsmart killer heart conditions. 

Next, it's set to help beat the trickiest cancers and boost rates of IVF success. 

But disaster is sometimes only one click or security breach away.

1. Escaped viruses are a top worry. Around 350 companies in 40 countries are working in synthetic biology. 

With more artificial organisms being created, there are more chances for accidental release of antibiotic resistant superbugs, and possibly another global pandemic. 

The UN estimates superbugs could cause 10 million deaths each year by 2050, outranking cancer as a killer. 

Through tolerance to high temperatures, salt, and alkaline conditions, escaped artificial organisms could overrun existing species or disturb ecosystems.

What they're saying: AI models capable of generating new organisms "should not be exposed to the general public. That's really important from a national security perspective," Sean McClain, founder and CEO of Absci, which is working to develop synthetic antibodies, told Axios. McClain isn't opposed to regulator oversight of his models.

2. One person's lab accident is another's terrorism weapon. 

Researchers in 2022 proved they could create 40,000 new chemical weapons compounds in just six hours. 

They used AI models meant to predict and ultimately reduce toxicity, and trained them to increase toxicity instead.

3. Today's large language models make things up when they don't have ready answers. These so-called hallucinations could be deadly in a health setting. 

Arizona State University researchers Visar Berisha and Julie Liss say clinical AI models often have large blind spots, and sometimes worsen as data is added.

Some medical research startups have started working with smaller datasets, such as the 35 million peer reviewed studies available on PubMed, to avoid the high error rate and lack of citations common with models trained on the open internet.

System CEO Adam Bly told Axios the company's latest AI tool for medical researchers "is not able to hallucinate, because it’s not just trying to find the next best word." Answers are delivered with mandatory citations: when Axios searched causes of stroke, 418 citations were offered alongside the answer.

On top of the dangers of weaponizing medical research, AI in healthcare settings poses a risk of worsening racial, gender and geographic disparities, since bias is often embedded in the data used to train the models.

German kids with Type 1 diabetes from all backgrounds are now achieving better control of glucose levels: because patients are provided smart devices and fast internet. That's not a given in the U.S., per Stanford pediatrician Ananta Addala.

Yes, but: The FDA's current framework for regulating medical devices is not equipped to handle the surge of AI-powered apps and devices hitting the market, a September FDA report found.

CDC still points healthcare facilities to a guide from 1999 for tips on avoiding bioterrorism. There's no mention of AI.

What we're watching: Updated CDC and FDA guidance would be a first line of defense. 

The Department of Health and Human Services is consulting on a proposed rule on algorithm transparency, including patient demographics.

create 40,000 new chemical weapons compounds in just six hours

Medical AI's weaponization

Intentionally deadly bugs and toxins and misinformation are some key fears.

Illustration of a warning sign with a skull and crossbones style robot head and arms

Axios

Monday's top stories

Biden seals 3 deals in Pacific islands as U.S. competes with China

Yellen triples down on debt ceiling deadline

The golden age of liquidity comes to an end

Debt ceiling talks enter make-or-break phase

Medical AI's weaponization

Biden teases 14th Amendment "authority" on debt ceiling

Smoke from Canada's wildfires prompts air quality alerts across U.S.

Ukraine's Zelensky denies that Russian forces are occupying Bakhmut

Trump's 2025 vision, revealed

GOP turned down White House offer to freeze spending