WSJ What’s News - Can Lower Fed Rates Help Fix the Government’s Debt Problem?

Episode Date: September 19, 2025

P.M. Edition for Sept. 19. Since the U.S. government spends about $1 trillion annually on interest for its debt, a lower interest rate should reduce those costs… right? WSJ tax policy reporter Richard Rubin discusses why the answer is more complex than it may initially seem. Plus, President Trump announced today that he and Chinese leader Xi Jinping have reached a deal over TikTok’s U.S. operations. We hear from the Journal’s tech policy reporter Amrith Ramkumar about what we know about the deal, including which American investors are getting involved. And in the midst of an artificial intelligence boom, the lowly hard drive is making a comeback. Investors are starting to take notice, but as WSJ Heard on the Street writer Asa Fitch explains, hard drive companies’ future prospects could be even greater. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

What's in the TikTok deal that President Trump says he's reached with China? Plus, can a lower rate from the Fed help reduce the U.S. government's debt problem? When investors are thinking, oh, we want to lend money to the U.S. for the long term, they're looking at factors that go well beyond what the federal funds rate is right now. And why in the middle of an AI boom, good old hard drives are making a comeback. It's Friday, September 19th. I'm Alex O'Sulli. for the Wall Street Journal.

This is the PM edition of What's News, the top headlines and business stories that move the world today. President Trump announced today that he and Chinese leader Xi Jinping approved an agreement for a group of investors to take control of TikTok's U.S. operations, capping off months of tense negotiations that put the video-sharing app at the center of trade talks between the two sides. WSJ Tech Policy reporter Amrith Ramkumar is here now with more. Amrith, what details do we know about this deal? There aren't a ton of new details here.

Some people thought that the deal was totally done. In reality, it seems more like the preliminary agreement is done for the structure and what the deal will look like and generally who's involved. So what they're talking about is a consortium of predominantly U.S. investors, including cloud computing firm Oracle, private equity firm Silver Lake. and others, they would be roughly 50% owners of this new entity that would run TikTok in the U.S. and the existing investors would own roughly 30%. And then TikTok's parent in China bite dance, its ownership stake would drop below 20%. Other big investment firms like

Andres and Horowitz and Blackstone are no longer part of the group is our understanding. And then with the algorithms, it's a bit squishy and complicated, but generally the idea was be that this new entity would be using algorithms licensed using BightDance's technology, and they would still be expected to comply with U.S. security rules and all that sort of stuff. Does that satisfy the legal requirements that forced the sale in the first place? It's a complex situation. They would actually be using essentially new algorithms is the best way to think about it, that were re-engineered for the U.S. market, using technology licensed by BightDance. They are having to get creative to comply with the law and make

everyone happy with the national security restrictions that they're being fulfilled. What is the timing on a potentially finalized deal? The timing on finalizing everything is very unclear. It sounds like Trump and she are going to meet soon in the fall at the APEC summit and continue discussing broader trade issues. And even though there's this preliminary agreement finalized, it sounds like there will still be some nuances to flesh out. What has TikTok said about this? TikTok, like a lot of the other players in this agreement, as being very careful about what they say publicly. They put out a brief statement basically saying they thank both leaders and look forward to working to make sure they satisfy the law and can achieve a compromise that satisfies everyone.

That was WSJ Tech Policy Reporter, Amrith Ramkumar. Thank you, Amrith. Thanks for having me. Major U.S. indexes closed higher today. led the gains, adding about 0.7%. The S&P 500 was up about half a percent, and the Dow rose about 0.4%. For the week, the S&P 500 added 1.2% while the Dow was 1.1% higher. The tech-heavy NASDAQ rose 2.2%. Senate Democrats have blocked Republican stopgap measure to keep the government funded until late November. The vote in the Republican-controlled Senate was 44 in favor and 48 against,

short of the 60 votes required. Democrats are demanding more than $1 trillion in health care subsidies as the price of their support, including extending enhanced Affordable Care Act subsidies and restoring cut Medicaid funds. The GOP-led House narrowly passed the measure earlier in the day, and now party leaders will have to go back to the drawing board. The move sets up a down-to-the-wire negotiation

over how to avoid a government shutdown in two weeks. We're exclusively reporting that the Trump administration is seeking congressional approval to sell nearly $6 billion in weapons to Israel. That's according to people familiar with the request. The weapons likely wouldn't be delivered for two or three years, one of the people said. The administration is moving forward with the plan, despite Israel's missile strike on Hamas in Qatar and intensifying offensive in Gaza City, which have drawn strong condemnation in Europe and in the region. The State Department and Israel's Defense Ministry declined to comment.

The White House didn't respond to requests for comment. Today, a federal judge struck President Trump's $15 billion defamation suit against the New York Times, characterizing the president's legal complaint as a vitriolic screed that violated basic court requirements for suing someone. The judge, whose order came four days after the president filed the complaint, gave Trump's lawyers 28 days to file. a new version. A spokesperson for the New York Times welcomed the quick ruling. A lawyer for Trump didn't immediately respond to a request for comment. Coming up, will the Fed's most recent rate cut reduce the U.S. government's interest payments for its national debt? The not-so-straith answer? After the break.

spends about $1 trillion every year on interest on its national debt. The Federal Reserve just lowered interest rates. That should lower the amount that the U.S. government pays, right? Turns out the answer isn't so simple. WS.J tax policy reporter Richard Rubin joins me now. Richard, how will this interest rate cut help or not with the federal debt? Maybe a little bit. As you said, the interest on the debt is this huge expense, a trillion dollars a year.

But you have to look at how that's composed. The bulk of that is long-term debt. And so when the Fed lowers interest rates, it doesn't necessarily affect the rates on long-term debt. The other thing is that Treasury's interest rate that it pays on long-term debt is just different from what the Fed's short-term rates are. Short-term rates can show up relatively quickly in four-week treasury bills, that kind of thing. But when investors are thinking, oh, we want to lend money to the U.S. for the long term, they're looking at factors that go well beyond what the federal funds rate is right now. So what other options does the government have to lower the amount that it's paying an interest? The biggest thing that's going to affect the interest costs in the long run are how much debt the U.S. continues to rack up, right?

So we've got this persistent gap between spending and revenue. That's because we've cut taxes, increased spending on entitlements, done emergency borrowing for the pandemic, that kind of thing. And we're paying for that now and continuing to have those gaps. There are some things on the margins you could do. You could issue more short-term debt when rates are lower. So right now, about 80% of the U.S. debt is in longer-term things. Or when you see long-term rates go down, you could change that ratio, that 80-20, and put even more in long-term debt, locking in some lower rates. even those changes aren't going to make all that much difference.

The U.S. has a $30 trillion, roughly, debt held by the public. And the kinds of changes we're talking about here are really just on the edges. That was WSJ reporter Richard Rubin. Thank you, Richard. Thanks. In an AI boom that has made investor darlings of companies like NVIDIA and OpenAI, the lowly hard drive is enjoying a resurgence that investors are only starting to reward. Hard drive makers Western Digital and Seagate, the two largest players in the industry,

both reported around 30% higher revenue in their latest quarters, growth that would have been unthinkable a few years ago. For more, I'm joined now by WSJ Hurd on the street writer, Asa Fitch. Asa, what's driving this growth? Basically one thing, AI. You know, people are using AI a lot, and it's consuming a lot of data, it's producing a lot of data, and that data needs to go somewhere, and it goes generally on hard drives. people in the past number of years have been shifting more to using flash drives or flash storage

rather than these spinning disks that contain people's data. But those disks, those old school hard drives still have a big place in the world, and especially in the AI era. It sounds like investors are just now starting to get a little more interested in these hard drive companies. Does that reflect the prospect of their future? Not fully. There are two big, hard drive makers, Seagate and Western Digital. It's effectively a duopoly. They have done very well in the past number of quarters. As you mentioned in the latest quarter, they both saw revenues rise 30%. Their stocks have also around doubled in the past year or so. But if you look at how they're valued on a priced earnings basis, they're actually not incredibly expensive. These companies both

trade at valuations well below what the NASDAQ average is. So from an investment, perspective, these companies are still pretty attractively valued despite their recent uptick and price and their prospects as businesses going forward. That was WSJ heard on the street writer, Asa Fitch. Thank you, Asa. Thank you.

And that's what's news for this week. Tomorrow you can look out for our weekly markets wrap-up, What's News and Markets? Then on Sunday, we're bringing you an episode of bold names, where co-hosts Christopher Mims and Tim Higgins speak with IBM CEO, Arvin Krishna, about how IBM plans to compete against

rivals in the quantum computing space and how to ensure that it doesn't get there too early. That's in what's new Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Pierre Biennameh at Rodney Davis with supervising producer Michael Cosmides. Michael LaValle

wrote our theme music. Icha Al-Muslim is our development producer. Jana Harren is our deputy production editor. Chris Zinsley is our deputy editor. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osala. Thanks for listening.