Kamala Harris Interviews Some Potential VP Nominees as Decision Nears

The Week Ahead: Aug. 4, 2024

The House and Senate are on their August summer recess and will return the week of Sept. 9. Spending bills, again, will be the focus. The Senate Appropriations Committee has advanced 11 of the 12 bills, but none has received floor votes.

— The Congressional Budget Office (CBO) as expected late Friday, Aug. 2, released an official House farm bill cost estimate (link) indicating that the House Agriculture Committee’s farm bill would increase the federal budget deficit by $33 billion over the next decade.

The CBO’s report estimates that the farm bill will cost $1.25 trillion over the 2025-2033 period, with a net increase in the federal budget deficit by $33 billion. The primary driver of this increase is the cost of several commodity program provisions, which are expected to rise significantly due to higher reference prices in the Price Loss Coverage (PLC) program and other enhancements.

Commodity Credit Corporation (CCC) provision

A contentious provision in the bill aims to suspend USDA’s use of Section 5 under its Commodity Credit Corporation (CCC) spending authority. This section essentially acts as a revolving fund used by the USDA to address various agricultural challenges. House Agriculture Committee Chair GT Thompson (R-Pa.) proposed reallocating this authority to boost farm subsidies and crop insurance premium subsidies by between $50 billion and $53 billion over ten years.

However, CBO estimates potential savings from suspending this authority to be between zero and $8 billion, far short of the needed amount. The CBO’s skepticism stems from the provision’s ambiguous language, which could be interpreted in multiple ways, making it unclear whether it would effectively prevent USDA from spending funds under Section 5.

Political and legislative Implications

The funding gap highlighted by the CBO could force House Republican leaders to either direct the CBO to revise its budget estimate or modify the legislation to align with budget constraints. Any attempt to direct CBO could lead to political backlash and is unlikely to be accepted by the Democratic-controlled Senate.

The House bill includes several enhancements to existing programs:
• PLC and Agricultural Risk Coverage (ARC) programs: Expected to increase payments by $34.9 billion and $9.7 billion, respectively.
• Dairy Margin Coverage Program: Costs would rise by $300 million due to updates in eligible production amounts.
• Federal crop insurance program: Costs would increase by $3.5 billion due to higher premium subsidies and administrative funding.

Conversely, the bill proposes cuts to the nutrition title, saving an estimated $29.4 billion by imposing restrictions on future updates of the Thrifty Food Plan, which sets Supplemental Nutrition Assistance Program (SNAP) benefits.

Of note: CBO’s analysis of the House farm bill language would zero out the sugar program over time. “There was a technical, clerical error in the introduced bill that will be fixed prior to the bill moving to the floor,” said Rob Johansson, Director of Economics and Policy Analysis at American Sugar Alliance. Farm bill writers say efforts will be made to correct any misunderstanding if the House farm bill gets to the floor for debate and votes. The CBO score would then be $58 million.

Reaction:
Thompson expressed dissatisfaction with the CBO’s scoring, particularly regarding the savings from suspending Section 5 of the CCC Charter Act. Thompson believes the CBO’s methodology underestimates the potential savings and has criticized the CBO for what he sees as a history of underestimating CCC outlays. He argues that the House farm bill is designed to provide significant investments in various agricultural sectors, including the farm safety net, biosecurity, and trade promotion. Thompson insists that more work is needed to ensure the bill is financially sound and can be passed into law.
Senate Ag Chairwoman Debbie Stabenow (D-Mich.) has been critical of the House Republican proposal. She argues the CBO score reveals the bill is not financially viable, relying on what she describes as “magic math and wishful thinking.” Stabenow emphasizes the need for a bipartisan agreement that includes realistic negotiations on funding investments for various components of the ag sector. She has called for her Republican colleagues to engage in serious discussions to find viable funding solutions and has expressed her willingness to explore creative funding options outside the traditional farm bill framework. Republicans stress that unlike the House, Stabenow has not officially filed a new farm bill in the Senate, just pages of summaries.

Outlook: Thompson has indicated a willingness to work with CBO and the Budget Committee to clarify the interpretation of the CCC provision and address the funding gap. However, the top Democrat on the House Ag Committee, David Scott (D-Ga.), and Senate Ag Chairwoman Debbie Stabenow (D-Mich.) have called for abandoning the current version of the bill due to its budgetary implications.

— U.S. rejects Vietnam’s bid for ‘market economy’ status in blow to trade ties. The classification would have boosted exports and reduced tariffs on goods from country that is rising supply chain alternative to China.

The U.S. Department of Commerce cited several reasons for maintaining Vietnam’s classification as a “non-market economy” (NME):
• State intervention: Despite economic reforms, the U.S. Commerce Department noted that there is still extensive government involvement in Vietnam’s economy. This includes control over pricing, currency, and trade practices, which distort market prices and costs.
• Anti-dumping concerns: The NME status allows the U.S. to use prices and costs from third countries to calculate anti-dumping duties on Vietnamese imports. This practice is used to counteract what the U.S. sees as unfair trade advantages stemming from Vietnam’s economic structure.

The decision has several consequences:

• Tariffs and duties: Without market economy status, Vietnamese goods are subject to higher anti-dumping duties, making them less competitive in the U.S. market.
• Investor uncertainty: The rejection introduces uncertainty for foreign investors, potentially impacting foreign direct investment (FDI) in Vietnam.
• Negotiation power: Vietnam may find it challenging to negotiate favorable tariff rates and trade terms with the U.S.

The U.S. remains cautious about Vietnam’s economic practices and the potential for Chinese companies to use Vietnam as a backdoor to circumvent U.S. tariffs.

The Vietnamese government expressed regret over the decision, highlighting the positive economic reforms and policy commitments it has made. Vietnam’s Ministry of Industry and Trade argued that the upgrade would have been a fair recognition of these efforts.

— China’s government unveiled a comprehensive action plan aimed at boosting domestic consumption and stimulating economic growth in response to persistent weak domestic demand. On Saturday, Aug. 3, 2024, the State Council, China’s cabinet, released a statement outlining 20 key measures to spur consumer spending.

The plan focuses on several key areas:

Expanding basic consumption. The government aims to explore the potential for growth in fundamental consumer sectors, including:
• Catering
• Home services
• Elder care

These areas are seen as having significant untapped potential for increasing domestic spending and improving quality of life for Chinese citizens.

Promoting specific consumer sectors. The plan also emphasizes boosting consumption in particular areas:
Digital products and services
• Environmentally friendly goods
• Health-related products and services
• Intelligent connected new-energy vehicles
• Electronic products
• Other big-ticket items

Improving the consumption environment. To facilitate increased spending, the government plans to launch a year-long program aimed at stimulating consumption. This initiative is likely to include measures to enhance consumer confidence and create a more favorable environment for spending.

Increasing government investment. The plan includes a commitment to increase effective investment. Specifically, 700 billion yuan has been earmarked in the central government budget for investment purposes. This injection of funds is intended to stimulate economic activity and create a multiplier effect on consumer spending.

Supporting low- and middle-income households. The government has pledged to focus on supporting low- and middle-income households, which aligns with promises to establish a more robust social safety net. The goal is to enable families to spend more rather than saving excessively for healthcare, education, and elder care.

Addressing rural poverty. The plan acknowledges the need for increased assistance to rural areas and farmers to “prevent a significant return to poverty among the rural populace”. This suggests targeted measures to boost rural consumption and economic development.

Reforming inefficient sectors. While promoting consumption, the government also aims to eliminate “outdated and ineffective production capacity” and encourage a “survival of the fittest” approach in various industries. This indicates a dual focus on stimulating demand while also improving supply-side efficiency.

Tackling real estate challenges. The plan includes measures to address issues in the real estate sector, partly by promoting apartment purchases to ensure affordable housing and adjusting monetary policy to stimulate spending and investment.

Monday, Aug. 5
· Federal Reserve. San Francisco Fed President Mary Daley scheduled to speak.
· EPA rural advisory panel. Environmental Protection Agency meeting of the Farm, Ranch, and Rural Communities Advisory Committee to provide recommendations that will inform the agency’s decisions regarding how to improve the implementation of the Clean Water Act National Pollutant Discharge Elimination System Concentrated Animal Feeding Operation permitting program; runs through Tuesday.

Tuesday, Aug. 6
· EPA rural advisory panel. Final day of EPA meeting of the Farm, Ranch, and Rural Communities Advisory Committee to provide recommendations that will inform the agency’s decisions regarding how to improve the implementation of the Clean Water Act National Pollutant Discharge Elimination System Concentrated Animal Feeding Operation permitting program.
· U.S./Africa relations. The Wilson Center’s Africa Program discussion on “U.S./Africa Relations.”
· Carbon neutral fusion. Atlantic Council virtual discussion on “Carbon Neutral Fusion Energy.”
· Elections. Washington Post Live virtual discussion on “Election Security, Disinformation and Threats to Democracy.”
· ITC role in patent cases. Federalist Society for Law and Public Policy Studies virtual discussion on “What is the Role of the ITC (International Trade Commission) in Patent Cases?”
· Organized crime in Mexico. Wilson Center’s Mexico Institute virtual discussion on “Organized Crime and Violence in Mexico: Considerations for Future Nearshoring Foreign Direct Investment (FDI).”

Wednesday, Aug. 7
· Weather threat to utilities. United States Energy Association virtual media briefing on “Extreme Weather: The Existential Threat to Utilities.”
· Red Sea commerce. Center for Strategic and International Studies discussion on “Preserving the Free Flow of Commerce in the Red Sea and Beyond.”
· Social Security. Politico forum in New York on “Finding Balance: What’s Next for Social Security.”
· Global supply chains. The Brookings Institution holds a discussion on “Navigating Global Challenges,” focusing on kinetic and cyber threats, shipbuilding delays and budget constraints, and protecting global supply chains.
· U.S./Australia relations. The Center for Strategic and International Studies (CSIS) holds a virtual discussion on “The Future of the US-Australia Alliance.”
· Middle East uncertainty. The Carnegie Endowment for International Peace virtual discussion on “The Middle East on the Cusp of a Regional War.”
· Global antitrust issues. Competitive Enterprise Institute discussion on “A Global Antitrust Paradox?” focusing on “the effects of heightened antitrust scrutiny on U.S. industry and national security.”

Thursday, Aug. 8
· Federal Reserve. Richmond Fed President Thomas Barkin scheduled to speak.
· Agriculture water quality panel. Environmental Protection Agency holds a meeting of the Farm, Ranch, and Rural Communities Advisory Committee (FRRCC) Animal Agriculture and Water Quality Subcommittee (AAWQ) to provide recommendations that will inform the agency’s decisions regarding how to improve the implementation of the Clean Water Act National Pollutant Discharge Elimination System Concentrated Animal Feeding Operation permitting program; runs through Friday.
· Beginning farmers and ranchers. Farm Credit Administration meeting to discuss the annual report on the Farm Credit System’s Young, Beginning, and Small Farmers and Ranchers Mission performance.
· Education advisory panel. Final day of the Department of Education virtual meeting of the National Advisory Committee on Institutional Quality and Integrity to review of applications for renewals of recognition, including for the American Veterinary Medical Association and other entities.
· U.S. investment in Asia. Center for Strategic and International Studies virtual discussion on “U.S. Investments in Asia: Catalyzing Sustainable Growth Through Strategic Partnerships.”
· Earthquake readiness. Final day of the National Institute of Standards and Technology meeting of the Advisory Committee on Earthquake Hazards Reduction (ACEHR) for the committee to discuss the National Earthquake Hazards Reduction Program (NEHRP) agency activities presented in June and focus areas for the Committee’s 2025 ACEHR Biennial Report on the Effectiveness of NEHRP.
· U.S./China conflict. Center for a New American Security virtual discussion on “Over the Brink: Escalation Management in a Protracted U.S./PRC (People’s Republic of China) Conflict.”
· U.S./South Korea relations. Wilson Center’s Hyundai Motor-Korea Foundation Center for Korean History and Public Policy, the Wilson Center’s Indo-Pacific Program and the Wilson Center’s History and Public Policy Program virtual discussion on “One Year Later: The Path Forward for US-ROK-Japan Trilateral Relations.”
· Postal service meeting. Postal Service meeting to discuss committee reports, quarterly financial report, and quarterly service performance report.

Friday, Aug. 9
· Agriculture water quality panel. Final day of the Environmental Protection Agency meeting of the Farm, Ranch, and Rural Communities Advisory Committee (FRRCC) Animal Agriculture and Water Quality Subcommittee (AAWQ) to provide recommendations that will inform the agency’s decisions regarding how to improve the implementation of the Clean Water Act National Pollutant Discharge Elimination System Concentrated Animal Feeding Operation permitting program.

Chinese merchandise trade estimates come Wednesday are expected to show a steady and noticeable surplus with a strong rise for exports.

Monday, Aug. 5

• PMI Composite Final
• ISM Services Index
· Federal Reserve. San Francisco Fed President Mary Daley scheduled to speak.

Tuesday, Aug. 6

• International Trade
• The Reserve Bank of Australia is expected to hold policy steady for a sixth straight meeting.

Wednesday, Aug. 7

• MBA Mortgage Applications
• Consumer Credit
• Chinese merchandise trade estimates

Thursday, Aug 8

• Jobless Claims
• Wholesale Trade
• Fed Balance Sheet
• Money Supply
• Federal Reserve. Richmond Fed President Thomas Barkin scheduled to speak.
• The Reserve Bank of India is expected to hold policy steady for a ninth straight meeting.

Friday, Aug. 9

• Canada: A moderate rebound for Canadian employment with, however, an uptick in the unemployment rate.

Tyson Foods Inc. will report quarterly earnings on Monday. The French agriculture ministry is also due to update its production estimates for key crops later in the week.

Monday, Aug. 5

Ag reports and events:

• Export Inspections
• Dairy Products
• Crop Progress
• Earnings: Tyson Foods

Energy reports and events:

• Saudi official selling prices expected (September)
• Earnings: ONGC, Diamondback Energy Inc.
• Holiday: Australia, Canada

Tuesday, Aug. 6

Ag reports and events:

• Purdue Agriculture Sentiment

Energy reports and events:

• Earnings: Aramco, Marathon Petroleum Corp., Devon Energy Corp.

Wednesday, Aug. 7

Ag reports and events:

• Livestock and Meat International Trade Data
• Broiler Hatchery

Energy reports and events:

• EIA Petroleum Status Report
• Weekly Ethanol Production
• Genscape weekly crude inventory report for Europe’s ARA region
• Earnings: Tullow Oil Plc; Suncor Energy Inc.; Occidental Petroleum Corp

Thursday, Aug. 8

Ag reports and events:

• Export Sales
• U.S. Agricultural Trade Data Update
• Port of Rouen data on French grain exports

Energy reports and events:

• EIA natural gas storage change
• Insights Global weekly oil product inventories in Europe’s ARA region

Friday, Aug. 9

Ag reports and events:

• CFTC Commitments of Traders report
• Peanut Prices
• France agriculture ministry crop estimates
• FranceAgriMer’s weekly crop condition report

Energy reports and events:

• Baker Hughes weekly U.S. oil/gas rig counts
• ICE weekly Commitments of Traders report for Brent, gasoil

WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | California phase-out of gas-powered vehicles | RFS | IRA: Biofuels | IRA: Ag | | Russia/Ukraine war, lessons learned | | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | New farm bill primer | | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |