House Speaker Contest Uncertain as Five GOP Dissenting Members Tap Leverage

Jobs report | FOMC minutes | FAO food price index | WOTUS rule reaction

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January 01, 2023 05:57 PM

Jobs report | FOMC minutes | FAO food price index | WOTUS rule reaction

Washington Focus

The House GOP heads into 2023 without yet knowing who the Speaker will be, signaling some early questions about whether the party can effectively govern the chamber. The House speaker dictates the agenda for the body and what bills make it to the floor. The position is responsible for shepherding must-pass legislation, such as spending bills, and negotiating with Senate leaders and the White House. The Speaker needs 218 votes, or the majority of those present and voting on Jan. 3.

House Republicans are heading into the majority with 222 seats to 212 for Democrats and one vacancy. No Speaker vote has gone to a second ballot in a century — If a candidate doesn’t get 218 votes on the first ballot, another roll-call vote is taken. Both front-runner Kevin McCarthy’s (R-Calif.) supporters and opponents have indicated they think the vote could go to a second ballot, which hasn’t happened since 1923. That year, it took nine ballots.

McCarthy, 57, can’t lose more than four from his conference, if all Democrats back their leadership, as they traditionally do.

Some Republican members have withheld support for McCarthy as they push for commitments on governing priorities and rules changes that would empower individual members. McCarthy has most of the GOP Republicans’ support, but five or more libertarian-like members are trying to get as much as they can from McCarthy before they lift their opposition. About two dozen members haven’t said how they would vote, and as noted, five are firmly against McCarthy.

McCarthy reportedly offered to change the rules to allow five House lawmakers to bring a “motion to vacate the chair” action, a procedure that could lead to a no-confidence vote on the floor. Under current rules, only party leaders can bring such a motion.

McCarthy was selected by House Republicans to be the speaker candidate in November, in a 188-31 vote over his GOP challenger, Rep. Andy Biggs of Arizona. Besides Biggs, Reps. Matt Gaetz of Florida, Bob Good of Virginia, Matt Rosendale of Montana and Ralph Norman of South Carolina have all indicated they would vote against McCarthy.

If McCarthy can’t sway his detractors, an alternative candidate could emerge. Many say that could be Rep. Steve Scalise of Louisiana, the current minority whip who is set to be majority leader in the new Congress and who has frequently said he is firmly behind McCarthy.

The revised EPA definition of Waters of the U.S. (WOTUS) was released by EPA on Friday (link). It reverts to language from before 2015, when the Obama administration made big changes that led to a multitude of legal challenges and the new rule revokes past changes made by President Trump to lessen the EPA’s regulating ability. In a statement, the agency said the changes imposed by the Obama administration, a subsequent reversal by the Trump administration and several legal battles in between, had “harmed communities and our nation’s waters.”

This rule (link) comes while an important case regarding the EPA is being heard by the Supreme Court.

But With the Supreme Court expected to rule in June in a major case that could reduce the government’s authority to regulate wetlands, some called the Biden administration’s move strategic. Getting a rule on the books now gives EPA a greater chance of locking in, at least for a while, a broad definition of which waterways qualify for federal protection under the Clean Water Act. “If the Supreme Court goes first, then the agency can’t finalize a rule that goes beyond it,” Kevin S. Minoli, a partner at Alston & Bird who served as an EPA counsel in the Clinton, Bush, Obama and Trump administrations, told the New York Times. By issuing a rule first, he said, the government has “more room to interpret” the court decision when it comes.

The new rule excluded from regulation wetlands converted to croplands prior to December 1985. Other exclusions: irrigated fields, ditches, water-filled depressions, artificial ponds, reflecting or swimming pools, waste treatment systems.

The rule also aims to simplify a test to determine whether a stream or wetland is subject to federal jurisdiction based on its distance from a tributary of a larger body of water.

Criticism: U.S. Rep. Ron Estes of (R-Kan.), who serves the 4th District in southcentral Kansas, said the Biden version improperly increased government control over private land and water, including agricultural ponds and isolated wetlands. He described the WOTUS rule issued by EPA and the U.S. Corps of Engineers as “detrimental government overreach into ponds and puddles a thousand miles from the D.C. swamp.”

Members of the Congressional Western Caucus released a statement condemning the EPA’s last-minute rule change, arguing that it gives the EPA far too much discretion and power. “This rule is yet another bureaucratic attack on rural America,” said Caucus Chairman Dan Newhouse (R-Wash.).

Incoming House Ag Chairman G.T. Thompson (R-Pa.) said: “Simply recognizing long-standing agriculture exemptions that have been too narrowly applied for decades does not make up for, once again, plunging our rural communities into ambiguity.”

Senate GOP Whip John Thune (R-S.D.) called the new rule a “thinly veiled land grab.” (Link to statement.)

Sen. Shelley Moore Capito (R-W.Va.), the top Republican on the Senate Environment and Public Works Committee, said the rule would subject more infrastructure projects to “federal permitting requirements and adding more bureaucratic red tape.”

American Farm Bureau Federation President Zippy Duvall said the Farm Bureau is “extremely disappointed in the EPA and Army Corps of Engineers’ new Waters of the United States Rule. Farmers and ranchers share the goal of protecting the nation’s waterways, but they deserve rules that don’t require a team of attorneys and consultants to identify ‘navigable waters’ on their land. EPA has doubled down on the old significant nexus test, creating more complicated regulations that will impose a quagmire of regulatory uncertainty on large areas of private farmland miles from the nearest navigable water. Even more puzzling is the administration’s insistence on moving forward with a new rule while the Supreme Court is about to issue a decision on the scope of the Clean Water Act. A ruling in the Sackett case could send WOTUS back to the drawing board, so it makes no sense for EPA to issue a rule that will only cause more disruption and uncertainty. We appreciate the agencies’ attempt to provide needed clarifications of the prior converted cropland exclusion and exemptions for irrigation ditches and stock ponds, but the overall rule is still unworkable for America’s farm families. The back and forth over water regulations threatens the progress made to responsibly manage natural resources and will make it more difficult for farmers and ranchers to ensure food security for families at home and abroad.”

The National Cattlemen’s Beef Association (NCBA) issued the following statement on the Biden administration’s finalized Waters of the U.S. (WOTUS) rule:

“For too long, farmers and ranchers have dealt with the whiplash of shifting WOTUS definitions. Today, the Biden administration sought to finalize a WOTUS definition that will protect both our nation’s water supply and cattle producers across the nation.” said NCBA Chief Counsel Mary-Thomas Hart. “While the rule retains longstanding, bipartisan WOTUS exclusions for certain agricultural features, it creates new uncertainty for farmers, ranchers, and landowners across the nation.” NCBA previously called for the Environmental Protection Agency (EPA) to retain agricultural exclusions for small, isolated, and temporary water features that commonly appear on farms and ranches. These exclusions have broad support and were included in WOTUS rules under both Republican and Democratic administrations. The rule fails to clearly exempt isolated and ephemeral features from federal jurisdiction and relies on “case-by-case” determinations to assess whether a feature is federally regulated. Today’s rule is a far cry from the regulatory certainty provided by the Navigable Waters Protection Rule, creating a significant and costly burden for agricultural producers.

“The timing of this rule could not be worse,” added Hart. “The Supreme Court is currently considering Sackett v. EPA, which will provide much-needed clarity related to the WOTUS definition. Today’s final rule seeks to directly preempt ongoing Supreme Court litigation, leaving farmers and ranchers with more questions than answers.”

The National Association of State Departments of Agriculture issued the following statement:

“The EPA’s latest rule on defining “waters of the United States” is a statement of federal overreach that ignores states’ authority to regulate intrastate water quality and the Clean Water Act’s statutory mandate for cooperative federalism. In turn, although we recognize EPA’s attempt at clarifying through a roster of exemptions, its rule ignores the voices of nearly all in American agriculture who have long been seeking clarity on this issue, especially regarding the debate over what is and is not a navigable water,” NASDA CEO Ted McKinney said.

“Farmers are committed to being responsible stewards of the land and water that they use to grow food, and the effectiveness of WOTUS should be taken with the same seriousness,” McKinney said.

“As NASDA previously stated in multiple sets of comments and input throughout this regulatory process, the Clean Water Act establishes limits on federal jurisdiction and the role of the federal government to regulate interstate commerce, thus recognizing the role of states in regulating non-navigable waters. Further, the release of this ruling ahead of the U.S. Supreme Court ruling on Sackett v. EPA wastes tremendous federal, state and private sector resources as the decision of SCOTUS will invariably shift water regulations across the United States yet again significantly. This is in stark contrast to the comments previously made by Administrator Regan to the U.S. House Appropriations Subcommittee on Interior and the Environment that the EPA’s rule would “be in a position to respond and adjust to the Supreme Court ruling.”

Rule approval. Stuart Gillespie, senior attorney with Earthjustice, said the Biden rule rejected Trump’s approach, which “unlawfully and unscientifically rolled back Clean Water Act longstanding protections.” Earthjustice filed a pair of lawsuits challenging Trump-era water policy. “This rule tracks the familiar framework that the agencies have applied for decades to protect our nation’s waters,” Gillespie said. “The agencies grounded their approach in the scientific record, which underscores that many waters are connected and thus must be protected to safeguard downstream communities and the environment.”

“It’s a smart move to take this off the books,” Jon Devine, director of federal water policy for the Natural Resources Defense Council, said in a statement. “Eliminating the anti-science Trump ‘Dirty Water Rule’ and codifying longstanding practices is a sensible, good-government action. And this comes at a time when we’re seeing unprecedented attacks on federal clean water protections by polluters and their allies.”

The National Wildlife Federation said the new rule reinstates water protections that existed prior to the 2020 rule. The “new rule will help protect the streams, wetlands, rivers, and lakes people and wildlife depend upon from pollution and other threats,” said Jim Murphy, director of legal advocacy for NWF.

EPA assistant administrator Radhika Fox explained the rationale for these changes in a New York Times interview (link). “I think we have found a middle ground that creates as much clarity as possible,” she said. “I am hopeful that this is the one that will stand the test of time.” By simplifying the definition to its pre-Obama status, it would lessen the legal conflicts over what waterways are federally protected by the Clean Water Act according to the EPA’s reasoning. EPA’s Fox said the rule would not be followed by extensive further revisions and that while the agency may propose “refinements,” she said, the administration is not currently planning a major second phase.

EPA Administrator Michael Regan has long pledged the new rule would be a “pragmatic” approach to water rules. We will now see if the rule lives up to Regan’s vow.

Economic Reports for the Week

Friday brings the important December jobs report. Despite some high-profile announcements of job layoffs in recent months, the unemployment rate in the U.S. has only ticked up to 3.7%. A stronger-than-anticipated jobs report could lead to even more hawkishness from the Federal Reserve. Several FOMC members have speeches scheduled for near the end of the week that could also impact investor sentiment.

Monday, Jan. 2

Holiday: Markets around the globe, including in the U.S., Canada, China, Japan, and the United Kingdom, were closed in observance of New Year’s Day.

Tuesday, Jan. 3

Census Bureau reports construction spending statistics for November. The consensus estimate is for total construction spending to decline 0.4%, month over month, to a seasonally adjusted annual rate of $1.79 trillion. Despite the slowdown in the housing market, construction spending remains near its record peak of $1.82 trillion, hit last July.
S&P Global releases its final purchasing managers index for U.S. manufacturing in December. The flash estimate showed manufacturing activity fell to a 31-month low in December as factories struggled with weak demand.

Wednesday, Jan. 4

MBA Mortgage Applications
Motor Vehicle Sales
Federal Open Market Committee (FOMC) releases the minutes from its mid-December monetary-policy meeting. The FOMC raised the federal funds rates at its last seven meetings in 2022, for a total of 4.25 percentage points, the most since 1980. At its December meeting, central bankers voted to raise short-term interest rates by 0.5 percentage point. The minutes will provide more details on the discussions over the decision.
Bureau of Labor Statistics (BLS) releases the Job Openings and Labor Turnover Survey (JOLTS). Economists forecast 10 million job openings on the last business day of November, 334,000 fewer than in October. There are currently 1.7 job openings for every person seeking employment, something that Federal Reserve Chairman Jerome Powell has stressed needs to come into better balance.
Institute for Supply Management releases its Manufacturing Purchasing Managers’ Index for December. Expectations are for a 48 reading, one point lower than in November. The index fell below 50 in November for the first time since May of 2020, indicating that the U.S. manufacturing sector is contracting.

Thursday, Jan. 5

Labor Department reports the number of worker filings for unemployment benefits in the week ended Dec. 31. Initial jobless claims rose modestly the prior week but remained historically low, suggesting that employers are still holding on to workers.
ADP releases its National Employment Report for December. The economy is expected to add 145,000 private-sector jobs, after a 127,000 gain in November. Job growth has slowed from first-half 2022’s rapid pace.
Commerce Department releases data on November’s trade flows, which are expected to show that the deficit narrowed as imports of goods fell more than exports.
Fed Balance Sheet
Money Supply
Federal Reserve Bank of Atlanta President Raphael Bostic speaks.
Federal Reserve: James Bullard. president and CEO of the Federal Reserve Bank of St. Louis, speaks.

Friday, Jan. 6

BLS releases the jobs report for December. The consensus estimate is for an increase of 217,500 nonfarm payrolls, following a gain of 263,000 in November. The unemployment rate is seen remaining unchanged at a historically low 3.7%. Average hourly earnings are expected to increase 5%, year over year, after rising 5.1% in the previous month.
ISM releases its Services PMI for December. The consensus call is for a 54.5 reading, two points lower than in November. The services sector has held up better than the manufacturing sector, as shown by the respective PMIs, as consumers reverse the pandemic stay-at-home trend of spending more on goods than on services.
Factory orders are expected to fall 0.6% in November that would follow a strong 1.0% rise in October.
Federal Reserve: Tom Barkin. president and CEO of the Federal Reserve Bank of Richmond, discusses economic outlook. Federal Reserve Bank of Atlanta President Raphael Bostic also speaks.

Key USDA & international Ag & Energy Reports and Events

The U.N.’s FAO releases its monthly food price outlook on Friday.

Tuesday, Jan. 3

Ag reports and events:

Export Inspections
Cotton System
Fats & Oils
Grain Crushings
Purdue Agriculture Sentiment
EU weekly grain, oilseed import and export data
Holiday: Japan

Energy reports and events:

Bloomberg due to publish OPEC production survey

Wednesday, Jan. 4

Ag reports and events:

Broiler Hatchery
State Stories

Energy reports and events:

API weekly U.S. oil inventory report
Genscape weekly crude inventory report for Europe’s ARA region

Thursday, Jan. 5

Ag reports and events:

Port of Rouen data on French grain exports
Malaysia’s Jan. 1-5 palm oil exports

Energy reports and events:

U.S. weekly ethanol inventories
EIA weekly U.S. oil inventory report
EIA natural gas storage change
Insights Global weekly oil product inventories in Europe’s ARA region

Friday, Jan. 6

Ag reports and events:

CFTC Commitments of Traders report
Weekly Export Sales
Peanut Prices
Dairy Products
FAO Food Price Index

Energy reports and events:

Baker Hughes weekly U.S. oil/gas rig counts

KEY LINKS

Policy Updates