President Biden on Saturday Signed Debt Limit/Budget Reform Bill

Farm bill hearings return in House and Senate

•

June 04, 2023 11:14 AM

Farm bill hearings return in House and Senate

Washington Focus

The debt-limit/budget reform package was signed into law Saturday. Congress now turns to lingering business, including farm bill hearings in both the House and Senate. USDA on Friday releases updated supply and demand forecasts.

President Biden Friday evening lauded a bipartisan agreement that suspends the $31.4 trillion debt ceiling as a crucial step in averting an unprecedented U.S. default, thus safeguarding the country’s economic progress. “No one got everything they wanted but the American people got what they needed,” he said during an address from the Oval Office, acknowledging that the compromise helped prevent an economic crisis. This came after Congress passed legislation to suspend the debt limit and reduce federal spending, following lengthy discussions with House Speaker Kevin McCarthy (R-Calif.).

Biden signed the measure into law Saturday before Monday’s deadline when the Treasury Department anticipated the government will exhaust its funds to pay all of its bills.

Biden praised the bipartisan cooperation, specifically crediting McCarthy and their teams for their honesty and fidelity throughout the process.

The Fiscal Responsibility Act, passed as part of the agreement, suspends the debt ceiling until January 1, 2025. In exchange, it prescribes cuts in unspecified domestic programs and a 3% cap on military spending increases in fiscal 2024. It also allocates $45 billion for a program expanding coverage for veterans exposed to toxic burn pits, ends a three-year freeze on student-loan payments, accelerates energy and infrastructure projects, and raises the eligible age for able-bodied, low-income adults without dependents to receive food aid to 54.

The new debt-ceiling deal has sparked controversy due to a provision that mandates work for some SNAP participants in exchange for welfare benefits. Critics argue it would adversely affect America’s most vulnerable families. The debate resembles those following the passing of the 1996 Personal Responsibility and Work Opportunity Act, which implemented similar requirements, according to an opinion item in the Wall Street Journal (link).

The article draws attention to Robert Doar, president of the American Enterprise Institute (AEI), who supports work requirements coupled with public assistance, labeling it a “path out of poverty.” He uses his experience running safety-net programs in New York City to illustrate the potential benefits of such policies, citing a significant decrease in the number of individuals receiving cash welfare following the application of a work-focused policy.

Doar suggests that shifting focus from providing benefits towards promoting work resulted in positive change, such as increased labor force participation rates. He adds that welfare reform helped lower poverty rates in single-parent households by over 60%. However, Doar notes that the emphasis on work has been lost over the years.

He criticizes the lack of proper implementation of work requirements for the Supplemental Nutrition Assistance Program (SNAP), with states often granting waivers despite labor shortages. Doar also points out that states have little incentive to change this approach because SNAP is federally funded.

While recognizing that many SNAP recipients do work, Doar highlights AEI research showing that only about a quarter of able-bodied adults without children at home worked while receiving food stamps. He also mentions how some individuals cobble together benefits from various sources, which can contribute to dependency.

The article discusses the new debt deal’s provisions, including a raise in the maximum age for the food-stamp work requirement and some exceptions for veterans and the homeless, which Doar critiques. He suggests that the bill could encourage states to increase their work-participation rates by offering bonuses and praises a provision to update SNAP’s “mission statement” to focus more on employment and earnings.

Doar also criticizes Democrats for viewing welfare programs as universal entitlements and opposes the idea of a permanent cash allowance for parents. He insists that a lack of a human connection can lead to more profound problems in struggling families, left unchecked.

The article ends by stating that Doar’s stance aligns with public opinion, as most Americans, including Democrats, reportedly support work requirements for food stamps and Medicaid. It suggests that this could be an advantageous position for Republicans and that the resistance against work requirements portrays a pessimistic view of low-income Americans. Doar also dismisses misconceptions about poverty in America, pointing out that the official poverty rate fails to account for all benefits provided. He suggests that acknowledging progress can be challenging due to political and ideological biases.

Wednesday is a key day for ag-related hearings, including:

The House Ag Committee’s first hearing this year on farm bill nutrition programs.
Senate Agriculture subcommittee will focus on specialty crop programs in the horticulture title.
Senate Budget Committee hearing “Cultivating Stewardship: Examining the Changing Agricultural Landscape.”

Other ag-related hearings of note include:

Tuesday: House Ag Committee hearing on “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets.”
Tuesday: House Education and the Workforce meeting to consider the Whole Milk for Healthy Kids Act and other bills.
Thursday: Senate Energy and Natural Resources Committee hearing on wildfires, land management and wildland firefighter recruitment and retention.

A Peterson Institute for International Economics event Monday and Tuesday is on “The macroeconomic implications of climate action.” Jason Furman, former chair of the Council of Economic Advisers in the Obama administration, and Jennifer Harris, the former National Security Council’s senior director for international economics under the Biden administration, are among the panel members.

The Bloomberg Invest conference takes place Tuesday through Thursday. Notable speakers on the agenda include Bank of America Corp. CEO Brian Moynihan, Nasdaq Inc. Chair and CEO Adena Friedman and TIAA CEO Thasunda Brown Duckett, all speaking on Wednesday, and former Securities and Exchange Commission Chairman Jay Clayton, who speaks on Thursday.

Acting Director of the Department of Labor Julie Su will testify before the House Committee on Education and the Workforce in a Wednesday hearing, titled “Examining the Policies and Priorities of the Department of Labor.” Su will likely face a grilling from Republicans, who have mounted a campaign against her confirmation as head of the department.

The Commodity Futures Trading Commission will hold an open meeting Wednesday where it will consider a final rulemaking on Governance Requirements for derivatives clearing organizations.

On the international trade front, the U.S. is escalating its efforts to persuade Mexico to ease restrictions on genetically modified (GM) corn imports, requesting dispute-settlement consultations under the United States-Mexico-Canada Agreement (USMCA). This represents the U.S.’ most forceful move yet in a year-long dispute over Mexico’s attempt to significantly ban GM corn.

U.S. Trade Representative Katherine Tai stated that Mexico’s biotechnology policies aren’t scientifically based and are causing disruptions in U.S. exports to Mexico, detrimental to agricultural producers. U.S. officials have been working to convince Mexican President Andrés Manuel López Obrador’s administration to abandon plans for banning GM corn imports.

Mexico’s Economy Ministry responded that it will defend its position while seeking a mutually acceptable agreement. Mexican officials have disputed the U.S.'s claim that shifting to non-GM corn for industry and livestock would restrict trade. They argue that they are preserving heirloom varieties of corn and have health concerns regarding a weedkiller frequently used with GM corn.

Over 90% of corn grown in the U.S. is genetically modified, per the National Corn Growers Association. As per the USMCA agreement, consultations between the U.S. and Mexico must begin within 30 days. U.S. farming representatives have been pressuring the administration to take this action, citing a threat to U.S. corn farmers and a disruption of bilateral trade relationships.

Background. In 2020, López Obrador signed a decree to phase out GM corn use in Mexico by January 2024. Mexican officials maintain that their objective is to protect native corn varieties and that their policies align with the USMCA trade agreement. In February, Mexico banned GM corn for human consumption in dough and tortillas and declared a gradual ban on GM corn for animal feed.

Mexican officials claim that the country produces more white corn for tortillas than it consumes, while imported U.S. corn is used for livestock feed and industrial purposes. U.S. officials contend that GM crops are safe for consumption.

Mexico is the largest agricultural trading partner of the U.S., with 14.5% of U.S. agricultural exports going to Mexico in 2022.

On the Russia/Ukraine war, Ukraine’s President Zelenskyy says the country is ready for a counteroffensive. In an hourlong discussion with the Wall Street Journal, Ukrainian President Volodymyr Zelensky said he was now ready to launch a long-awaited counteroffensive against Russia but tempered a forecast of success with a warning: It could take some time and come at a heavy cost. Ukraine’s military is now girding for what could be one of the war’s most consequential phases as it aims to retake territory occupied by Russia. Ukraine would have liked to have more Western-supplied weapons for the coming campaign, Zelenskyy said, but the country is still ready to move.

U.S. firms raise corruption concerns in legal battle over Ukraine grain deal. The Wall Street Journal reports (link) that a dispute has pitted American investors against a Ukrainian firm and comes amid longstanding questions about Kyiv’s commitment to battling corruption. U.S. firms say their efforts to recover $130 million in assets have been hampered by parts of the Kyiv government. The Ukrainian company involved alleges the American firms are using the continuing war as pretext for taking over their grain-trading business.

Economic Reports for the Week

No Fedspeak this week as we have entered the blackout period ahead of the Federal Open Market Committee meeting June 13-14.

Monday, June 5

Census Bureau reports factory orders, which include durable and nondurable goods, for April. Total orders are expected to increase 0.9% month over month after a 0.4% gain in March.
Institute for Supply Management releases its Services Purchasing Managers’ Index for May. The consensus estimate is for a 52.1 reading, roughly even with the April data. Resilient consumers, aided by a healthy labor market, have helped the index post only one reading below the expansionary below of 50 since May of 2020.
Earnings: Gitlab reports first-quarter fiscal-2024 earnings.

Tuesday, June 6

Reserve Bank of Australia announces its monetary-policy decision. Traders are pricing in a 33% chance that the central bank will raise its cash-rate target a quarter of a percentage point, to 4.1%. The RBA has raised its key interest rate 11 times since April of last year, bringing the cash-rate target from 0.1% to 3.85%.
Earnings & other events: Ciena, Ferguson, and J.M. Smucker report quarterly results. BorgWarner hosts its 2023 investor day in New York.

Wednesday, June 7

MBA Mortgage Applications
Federal Reserve reports consumer credit data for April. In the first quarter, total consumer credit increased at a seasonally adjusted annual rate of 5.4%, to a record $4.85 trillion. Nonrevolving credit, such as home mortgages and auto loans, rose 3.1%. Revolving credit — mostly credit-card debt — jumped 12.3%, as consumers’ excess savings from the pandemic continue to dwindle.
A deficit of $75.4 billion is expected in April for total goods and services trade which would compare with a $64.2 billion deficit in March. Advance data on the goods side of April’s report showed a very large $12.1 billion deepening in the deficit.
Earnings: Brown-Forman, Campbell Soup, GameStop, and Trip.com announce earnings.
OECD releases latest global economic outlook.

Thursday, June 8

Department of Labor reports initial jobless claims for the week ending on June 3. Claims averaged 229,500 in May and have normalized to historical averages after an 18-month period of being below trend. Despite this, job openings surprised Wall Street this past week by surging past the 10 million mark after two months below than that level.
The second estimate for April wholesale inventories is a 0.2% decline, unchanged from the first estimate.
Federal Reserve releases the Financial Accounts of the United States for the first quarter. The report details the net worth of U.S. households. At the end of 2022, the net worth of households and nonprofits stood at $147.7 trillion, about $4 trillion less than the peak hit in the first quarter of 2022. With the S&P 500 up 7% in the first quarter a new high might be in sight.
Fed Balance Sheet
Money Supply
Earnings & other events: DocuSign and Vail Resorts hold conference calls to discuss quarterly results. Cardinal Health hosts an investor day in New York. The company will discuss its long-term financial outlook and growth strategies.

Friday, June 9

Earnings: NIO reports first-quarter fiscal-2023 earnings.

Key USDA & international Ag & Energy Reports and Events

USDA will likely raise its forecasts for old- and new-crop ending stocks for both corn and soybeans on June 9, Pro Farmer predicts. It expects cuts to old-crop use, which will push up carryover and likely trickle down through the 2023-24 balance sheet. Changes to the new-crop wheat balance sheet will be largely driven by any adjustment to USDA’s winter wheat crop estimate.

Monday, June 5

Ag reports and events:

Export Inspections
Crop Progress
County Estimates: Poultry
Dairy Products
Holiday: Greece, Malaysia, New Zealand, Thailand